“It is the financial risk aspect. The industry, as a moral responsibility, should say that we will not allow anyone under the age of 18 to play a real-money game.” Dhruv Garg, a lawyer associated with the All India Gaming Federation (AIGF), said at an event on draft online gaming rules organised by Medianama. Garg was speaking during the session which dealt with the impact of the draft rules on the gaming industry at large.
He was responding to a comment by Nikhil Pahwa, Founder and Editor, MediaNama, on how the KYC norms in the gaming rules disenfranchise kids playing tournaments for money. The deadline to submit feedback on the rules has been extended to January 25, 2023. You can submit your comments here.
What was the industry reception: “…these rules serve both [the gaming industry & users] as it gives a lot of protection to users because there were no standardised practices that companies or platforms were deploying so users didn’t know what these measures are, and whether they are protected. The rules are reasonably balanced,” Garg opined.
- He explained that the rules offer industry players stability with which they can innovate without the fear of being banned so long as they have robust protection measures for users.
What do the rules stipulate: The rules clarify that online gaming intermediaries are required to host only registered games and display verification marks. They also have to do the following—
- Set up a grievance redressal system, appoint a grievance officer, publish their contact details, build a mechanism to file and track complaints, and acknowledge them within a specified timeline.
- Publish random number generation (RNG) and no-bot certificates procured from a reputed certifying body.
- Appoint a chief compliance officer, a nodal contact person, and a grievance officer. The chief compliance officer will be legally liable for non-compliance.
- Possess a physical contact address in India and respond to government orders or requests within 24 hours.
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What was discussed on KYC at the session?
A majority of the session focused on Know Your Customer (KYC) requirements laid down in the draft rules. The rules mandate that the platform must identify the user and verify his identity as per the norms laid down by the Reserve Bank of India (RBI) when users create an account with a gaming platform.
What does it mean: Pahwa asked Garg to shed light on what the government means by KYC norms laid down by the RBI because there are multiple types of KYC norms prescribed by it. Garg said that he was not sure about the implication of the rules, and the industry will ask the government to clarify KYC thresholds.
- Lack of clarity: “I don’t know what the term ‘account-based relationship’ means [in the rules]. Do they mean a bank account or a PPI relationship? I’m still trying to figure out what they mean,” Garg said.
What would the industry like: Garg said that the industry asks for KYC at the time of registration, and not at the time of deposit or withdrawal. He said that mobile number verification should be there, and there will be a need for ID proof because of the age-gating requirement. Furthermore, he added that there will be a need for PAN verification because TDS has to be deducted for winnings over Rs. 10,000.
How does money laundering in gaming work: A speaker explained that an individual carries out money laundering by either depositing large sums of money consecutively for different games or they deposit low amounts for a significant period of time. “It could be from a spurious source [because] you don’t know where the money is coming in from,” she added.
- “The other way is through offline cash collections. We’re seeing cash being collected [from users] and then somebody deposits the money into your game account. You play the game against somebody, and make sure that you lose,” an attendee said.
Role of KYC: “…there needs to be a digital trail to capture money laundering at any stage. It is the reason why KYC is important,” an attendee explained. Another attendee suggested that things can be managed without having a full-fledged KYC wherein somebody needs to go to a centre and give his biometrics. The rules will also help if somebody is defrauded because they make sure that if a crime happens, then there are intermediaries who can function as a source of information.
What if the user is a child: A speaker said that minors shall play games through “adult supervision” and “adult consent so one uses a parent’s account to play the game. “The problem with KYC is that an intermediary also has the duplicity of collecting sensitive personal information,” he said. However, another speaker disagreed by pointing out that one cannot withdraw winnings if they do not have a PAN and if they are not above 18.
No safety of data: Pahwa said that the number of things requiring KYC at present was a matter of concern. “The places where your KYC data is going to get stored are going to become honey pots which is a personal safety, security risk. Your information can get leaked, it can get scammed. KYC seems to be an integral part of government regulations now. KYC has not helped prevent spam. So what is KYC solving for? KYC is an abdication of responsibility,” he said.
Clearing the air on verification: The presence of mobile verification and the RBI KYC caused some confusion but Garg said that most gaming companies do a mobile number verification at the time of account creation and then the ID check for KYC takes place at the time of deposit or withdrawal.
KYC during deposit or registration: “It will not be ideal at the time of registration because you may play the game for free to test it out whether you like it then you can put in some money. Why do you want KYC data when someone just wants to test it out? There should be no KYC when they deposit within Rs. 10, 000. It might be a good threshold, if you deposit more than Rs. 10,000 or withdraw more than Rs. 10,000, then KYC is good,” Garg said.
KYC at deposit or withdrawal or both: “…it could be both because one can deposit more than Rs.10,000 and do KYC. But it could happen that you come with Rs. 500, but you’re so good at a game that you might win Rs. 1 lakh so one KYC could be done at both stages,” Garg suggested.
Note: The headline was updated on January 20th, 2023 at 11:57 PM to say “Gaming Rules”
Update: The post was edited on January 20, 2023, at 17:05 to include details about where to submit feedback on the rules.
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Also read:
- Online gaming platforms ask IT Ministry to allow self-certification of games and relaxation of KYC norms
- Why the gaming industry wants regulatory distinction between video games and real money games
- How big is online gaming in India and which states and cities top the charts?
- Government Should Clearly Differentiate ‘Online Games’ From E-sports: E-sports Players
