Foreign gambling providers and operators risk Italian corporate criminal liability

The Italian corporate criminal liability regime is now extended to gambling and betting related crimes and fraud in sports competitions, impacting also foreign operators and providers.

I already discussed the Italian corporate criminal liability regime for gambling and betting operators and providers in this blog post. And the scenario has now become even more relevant as a consequence of a law recently approved. But, here is a bit of background on the current regime and the introduced change.

The Italian corporate criminal liability regime for companies

Italian law provides a regime of corporate criminal liability and sanctions applicable to companies if the directors, managers, and employees commit certain types of crimes in the interest of, and or to the advantage of, their companies (or group companies).

The expansion of the Italian corporate criminal liability regime to gambling and betting crimes

Under the law recently approved, the regime mentioned above of corporate criminal liability also applies to the crimes of

1. frauds in sports competitions;
2. the illegal offering of games and bets, including the land-based and remote offering of bets and games with cash winnings without an Italian betting or gambling license; and
3. the advertising of offering of games with cash winnings performed in breach of gambling laws, such as the promotion of gambling or betting sites run without an Italian remote gambling or betting license.

These crimes are in addition to the already provided crimes of

1. corruption and bribery,
2. misappropriation to the detriment of the State,
3. informatics fraud (e.g., in case of notification of erroneous data to AAMS through the protocols of communication or installation of malware on the player’s pc) which also includes liabilities for a cybercrime,
4. money laundering (also because Italian licensed operators shall comply with Italian AML law even if they are foreign entities) and
5. breach of intellectual property rights.

In relation to such crimes, there will be a personal criminal liability of the managers of the company that committed the crime, but also a corporate criminal liability of the company itself that leads to fines, as well as the exclusion from public tenders which would prevent to continue holding a gambling/betting license.

As a result of the applicability of the corporate criminal liability regime, companies can now face fines up to € 774,000 for the above breaches, in addition to the seizure of assets used for the performance of the challenged crimes as well as the profits deriving from them that could include any revenue generated through the illegal conduct.

An issue also for foreign gambling operators and providers

Italian corporate criminal liability risks are relevant also for foreign online and land-based operators holding an Italian gambling license as well as gambling, payment and any sort of service suppliers and providers to the industry, including gambling affiliates.

Indeed, Italian law applies to crimes committed in Italy and such circumstance is met if

• either the action or the omission that constitutes the crime is entirely or even partially committed in Italy;
• or if the event or activity occurs in Italy.

This applicability of the Italian corporate criminal liability regime to foreign entities was emphasized by the Italian Supreme Court in a recent decision where they held that companies are liable for the offense committed by its representatives, “regardless of their nationality and the place where they have the registered office, as well as the existence or non-existence, in the State to which it belongs, of rules governing similar matters, also with regard to the preparation and effective implementation of organizational and management models designed to prevent the commission of offenses that are a source of administrative liability for the entity itself“.

Therefore, even in case of action/omission (or part of it) performed abroad, such conduct can trigger the applicability of the Italian criminal liability regime if it triggers an event occurring in Italy.

How to limit such liability risk?

The sole available defense against potential Italian corporate criminal liabilities is to adopt an internal corporate model of organization and management of the company (or of the group if more companies are involved), aimed at preventing the commission of crimes:

• identifying the potential risky areas/persons and their modalities of operation;
• implementing an appropriate internal monitoring system to exclude/limit the potential risks; and
• appointing an Audit Entity that shall monitor the proper adoption of the model.

The implementation of a corporate model of organization and management places the company in a stronger position. The company will be able to prove to have adopted any possible defense against liabilities and that the criminal conduct is just the result of the misconduct of a few individuals who by-passed the internal controls.

This model of organization is not like the Ethical Code that some companies might have adopted abroad but sets stringent internal rules of operation tailored to Italian case law. Therefore, tailored support will be needed.