SBC News Brazil Central Bank exposes gaps in shielding welfare funds from gambling
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Brazil Central Bank exposes gaps in shielding welfare funds from gambling

The Central Bank of Brazil (BCB) has recognised that there are technical obstacles for intervening in the use of welfare funds for ‘gambling purposes’ by beneficiaries.

On Monday, the National Institute of Social Security (INSS), the body responsible for social security and pensions in Brazil, formally asked BCB for support in the implementation of a strategy to prevent betting on online gambling activities for recipients of social benefits 

The request came directly from Alessandro Stefanutto, President of the INSS, who is currently leading research into the newly-launched Brazil Bets market, with a remit to analyse if the social funds delivered by the INSS are being used as intended or to fuel problem gambling behaviours. 

Stefanutto turned to the Central Bank for strategic oversight of the investigation, hoping to receive support in tracking down individual transactions by INSS on how welfare benefits are spent and monitored. 

Concerns trace back to the BCB report of last year, where the bank identified a total of BRL 3bn (€500m) funds given by Brazil’s poverty financial aid programme Bolsa Familia being spent on betting platforms.

The exposure of the Bolsa Família programme is of utmost concern to President Lula da Silva, who founded the welfare programme in 2004 during his first term in office, providing direct BRL subsidies to poor families in Brazil.

According to BCB, approximately three million impoverished families currently rely on Bolsa Família subsidies, representing around 50 million people – the majority of Brazilians living in poverty. Prior to the launch of the Brazil Bets market, Lula and the PT government stated that the safeguarding of Bolsa Familia funds for welfare recipients would be deemed as a principal criteria of regulation.   

The INSS was assigned to report back on current controls and safeguards to monitor  Bolsa Familia transactions, in which it detailed  a number of technical limitations in monitoring how funds are used by recipients.

As SBC Noticias Brazil  detailed, a previous report by the Brazilian newspaper Folha de São Paulo showed that while it’s easy to identify a sum’s origin when it enters a beneficiary’s bank account, there’s virtually no way to distinguish it once it mixes up with the other available funds in said account – which are free be used for any proposes, including gambling. 

This leads to the second obstacle – once the money is transferred into the bank account registered under a relevant social program, it becomes property of the account holder under current law, with the government losing all control over the funds. 

It remains to be seen what the government’s next step will be to resolve this issue as Brazil’s regulated market takes shape over the next months. 

In further developments, the Senate has approved a Commission of Inquiry (CPI) investigation to examine and report on the ‘economic threats and vulnerabilities’ of the Bets market, led by Soraya Thronicke (Podemos-MS).

The CPI’s report is expected in the first half of 2025, during which it will review the monitoring of financial transactions by the 68 operators licensed by the Secretariat of Prizes and Bets (SPA).

Thronicke informed the Senate that the inquiry would propose new measures to restrict or prohibit gambling by individuals receiving state-provided social welfare assistance, such as Bolsa Familia.

Meanwhile, Lula stands firm on previous warnings that the government will take the toughest measures against online gambling licences, expelling operators from the market if they fail to meet their economic and sports integrity duties.

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