UPI brand name abused by offshore betting platforms to lure Indian users

With top sports and event IPs gaining traction in India, notorious illegal gambling platforms are misusing the brand names of the National Payments Corporation of India (NPCI)-led Unified Payments Interface (UPI), not only as their supposed partners but also for conducting illicit transactions.

In 2023, the Indian government identified 114 illegal betting and gambling platforms operating in the country. These platforms accept UPI payments through proxy bank accounts. Hawala networks, cryptocurrency, and other unlawful channels are being used to transfer funds collected through these proxy transactions.

Following multiple complaints from real-money gaming federations, the Directorate General of GST Intelligence (DGGI) and the Ministry of Electronics and Information Technology (MeitY) ordered the blocking of 138 offshore betting sites engaged in gambling in July. Some of the most notorious apps and websites operating in India included Lotus365, Dafabet, Betwaysatta, Parimatch, Fairplay, and 1XBET.

Jay Sayta, Technology & Gaming Lawyer, stated, "Many offshore gambling and betting platforms are using UPI to deposit and pay out customer funds. These UPI accounts are essentially 'mule accounts,' meaning they belong to third parties such as small shop owners, vendors, laborers, and others whose accounts are being used to process gambling and betting payments. In many cases, police in various states have filed FIRs against these apps and platforms for offenses such as forgery, cheating, breach of trust, copyright infringement, and illegal gambling."

Sayta added, “The threat of offshore gambling and betting remains prevalent. To curb this issue more effectively, in addition to increased monitoring by the Reserve Bank of India (RBI), banks, payment providers, and law enforcement agencies, it is crucial that unauthorized betting and gambling be categorized as a scheduled offense under the Prevention of Money Laundering Act (PMLA). This would allow the Enforcement Directorate (ED) to take swift action against these illegal activities, including seizing the assets of those operating or facilitating such platforms."

Roobet, a Cyprus-based illegal betting and gambling company endorsed by American rapper Calvin Cordozar Broadus Jr., better known as Snoop Dogg, falsely claims UPI as one of its partners. Similarly, Raja Bets, a Curacao-based betting firm, continues to misuse the NPCI-led UPI brand name to attract Indian users to its platform.

Akshat Khetan, Founder of AU Corporate Advisory and Legal Services, said, "Using UPI and NPCI brand names to promote betting and gambling platforms is illegal because it misleads users into believing these platforms are officially recognized or endorsed by India’s financial regulators. Under the Payment and Settlement Systems Act, 2007, and the Information Technology Act, 2000, such misrepresentation qualifies as fraudulent and deceptive."

Khetan further explained, "Illegal betting platforms exploit UPI by using multiple bank accounts, digital wallets, and layered transactions to obscure the origin of funds. They often channel money through shell companies, cryptocurrency transactions, or offshore accounts to evade detection. This not only facilitates tax evasion but also enables the flow of black money, making it harder for authorities to track illicit financial activities."

Storyboard18 reached out to NPCI for a comment regarding brand violations and the illegal use of UPI for transactions. However, the spokesperson was unavailable for comment.

Kinjal Champaneria of Solomon & Co. stated, “UPI transactions are linked to banks and systematically regulated by authorities, with transactions being processed solely through linked bank accounts. However, these platforms may use fake or inactive bank accounts to facilitate illegal transactions. In some cases, payment gateways may also be used to process transactions for money laundering purposes.”

Champaneria added, “To combat the misuse of UPI by illegal betting platforms, the Indian government should consider implementing stricter KYC norms for these apps, along with mandatory regulatory audits and increased accountability for such transactions.”

With growing menace of illegal betting and gambling platforms, experts suggest implementing stricter KYC norms, mandating regulatory audits, and enforcing penalties for non-compliance which will help deter illicit transactions. Moreover, public awareness campaigns can educate users about the dangers of engaging with unauthorized platforms.