Brazil’s Secretariat of Prizes and Betting (SPA) has sent formal notifications to 33 financial and payment institutions that processed transactions with unauthorised betting platforms. This is one of the biggest enforcement actions since the country’s new gambling regulation came into effect this year.

The SPA gave these institutions 10 days to respond to the notifications. The main issue under investigation is whether these entities failed to detect, prevent or report financial transactions related to illegal betting. If the authorities find out that any of these companies broke the law by doing these transactions, they could be fined up to 2 billion reais (around US$355 million).

The government has not said which banks or financial companies are part of this investigation. ABFintech, a representative body for a segment of the payment processing industry, reiterated that payment service providers should only process transactions for operators fully authorised and regulated in Brazil. The group said that fintech companies will only work with platforms that comply with the country’s gambling laws and regulatory framework.

Febraban also weighed in, worried about the social and economic impacts of gambling. Febraban pointed out the risks of betting, including the personal indebtedness of users, and emphasised the need for strict control.

This follows a SPA directive in March that asked payment institutions to be more vigilant and report any suspicious financial activity related to betting. If a betting operator is suspected of not being authorised, the institution must notify SPA within 24 hours. The report must have all the details: CNPJ of the operator, start date of the financial relationship, bank account or Pix key and all transaction records.

Under these rules, financial institutions are not allowed to have accounts for unlicensed betting companies or facilitate deposits and withdrawals for them. Already several payment providers have removed many illegal operators from their platforms. One of the fintechs, Pay4Fun, has cut ties with over 600 unauthorised gambling sites.

Leonardo Baptista, CEO of Pay4Fun, said the company has a “know your merchant” (KYM) protocol to verify each betting platform before establishing any business relationship. “We check the SPA to see if the operator has a valid license and is listed in the approved entities to operate betting in Brazil,” he said.

Brazil’s clampdown on unauthorised operators has intensified this year with the government introducing a formal framework for the industry. Fernando Vieira, president of the Brazilian Institute for Responsible Gaming (IBJR), says while the regulatory system is good, enforcement against illegal operators is still a big challenge. Vieira estimates 50% of the betting market in Brazil is still outside the legal framework.

To support the government’s enforcement, the IBJR has filed around 150 complaints with the SPA, targeting both illegal operators and suspicious transactions linked to them. These are submitted every two weeks to keep the pressure on illegal activity in the gambling space.