The untouchable cyber gaming industry

Hundreds of millions of ringgit are being splurged into Sabah's unregulated online gaming industry, which is allegedly managed by the well-connected.

KOTA KINABALU: On April 1, 2015 the goods and services tax, or GST, will come into effect. What are the odds that online gaming, a money-spinning industry in Sabah, escapes the 6% service tax?

The way the vast and lucrative online gambling industry in Sabah is being operated now right under the noses of the authorities, it appears it will continue its illegal ways unhindered.

Penampang is often referred to as the gaming capital of Sabah and it is here one can see the gaming juggernaut, both legal and illegal, reaping stupendous amounts of profits.

Hundreds of millions of ringgit are being splurged in this unregulated industry here, allegedly managed by the well-informed and well-connected.

The status quo, many believe, isn’t about to end anytime over the next 16 or so months.

A brief survey showed how a legal outlet can quickly change to a gambling den and back to a family entertainment centre and vice versa.

Many operating ‘online games’ in Penampang on the outskirts of this city fall into legal grey areas.

Issues of jurisdiction, licensing and privacy make law enforcement even murkier.

Some of those surveyed recently were offering cyber gambling games, including blackjack, various versions of roulette, at least a dozen slot games and video poker. Also connected were sites that offer online sports betting as well as for other events like political races.

Food and beverages are sometimes also part of the services.

Cybercafes turn gambling dens

Politicians, social activists and parents in Sabah have voiced alarm over the number of both legal and illegal gambling outlets that have sprung up in the state.

Newly elected parliamentarian Darell Leiking is among those who have questioned how online gaming outlets have been allowed to operate so openly in his constituency for well over a decade.

Penampang PKR deputy chief, Kenny Chua, said gambling has become a scourge in the district and wants the state’s Minister of Local Government and Housing to instruct the district council to conduct regular inspection of cybercafes in the district which are being turned into cyber gambling dens.

“Our PKR Kepayan Task Force has been inundated with numerous complaints from the people in Penampang relating to these cybercafes offering illegal cyber gambling.

“While we acknowledge that the police has been doing commendable job by raiding these illegal premises, we are shocked with the intractability shown by the masterminds behind this cyber-gambling by continuously operating their illegal business once the raid had slowed down,” Chua said.

Chua who is also Sabah’s representative of the NGO Malaysia Crime Watch Task Force (MyWatch) said that many of the complainants are worried to see that some of the patrons of these illegal cyber-gambling dens are even secondary school students.

“So, when your children whom you know always spend their time in cyber-cafes suddenly ask for more and more money from you, you have valid reason to be worried as to what they are doing,” Chua said.

He suggests that the district council of Penampang continuously conduct inspections on these cybercafes to see if they have valid trading licenses or not, something that the council do only periodically, to cripple the illegal industry.

“Who are the owners of the shophouses on which these illegal cyber-cafes are operating? Whether it is being owned by the masterminds or rented, the local authorities should have the records since the owners would have to pay the quarterly assessment to them,” Chua said.

Penampang has long been viewed as a gambling haven and a hotbed gang activity.

Festering problem

In August this year the drive-by shooting of 44-year-old Sarawakian businessman Tiong Choon Kwong sparked debate over whether his death was related to battle for control of the illegal gambling market.

There was talk that the order to kill Tiong, allegedly a former Restricted Residence detainee to Sabah, came from underworld figures in Sarawak.

Earlier the same month, state police announced the seizure of 351 modified computer sets from 15 cyber outlets in Penampang and neighbouring Putatan in an operation to curb illegal online gambling.

Fifty seven people were detained during the raids and RM5,717 in cash seized.

The case was investigated under Section 4B (a) of the Common Gaming House Act 1953, which carries a fine of between RM20,000 and RM200,000 or five years’ jail on conviction.

Chua said the raids revealed a festering problem that has not been tackled head-on by the state authorities despite having the necessary laws in place.

“Under Section 4B (a) of the Common Gaming House Act 1953, cyber gambling is an illegal business activity and there is no reason whatsoever for the district council of Penampang to shut their eyes and pretend that they don’t notice it,” he said.

The state government, he said, had made no effort “to curb this menace which is happening right under their nose” which only displayed a lack of will and courage to deal with the problem.

He added that if the state authorities believed that there was little more that they could do to put an end to the illegal activity then “they should resign and let others to take their place.”

The other option is legalisation and regulation. Some of the countries allow online casinos to operate under strict guidelines and regulations which also enable the government to derive a tax from the service.