Mastercard and Visa linked to illegal gambling sites accused of scamming UK customers

London: Mastercard and Visa are processing payments for illegal gambling websites accused of scamming UK customers out of thousands of pounds.

An investigation has found that the payment giants are failing to stop their networks being used to make transactions on unlicensed sites despite a previous pledge to do so.

Last week, Mastercard was offered alongside cryptocurrency as a payment method on nine websites targeting UK customers with deals for casino games and live sports betting.

Visa was also offered on two of those sites. Both companies are understood to profit from the arrangements, earning a small fee each time a transaction is made.

The card companies’ links to the unlicensed sites are revealed in the wake of an investigation coordinated by Investigate Europe into a network of gambling sites operating in parts of Europe despite being banned.

One customer said they were left suicidal after losing about £60,000 unwittingly gambling on an unlicensed site. In another case, a man successfully pursued an operator in the German courts after ­losing more than £200,000. “Those who run these casinos have stolen my life,” he said.

The nine websites operating in the UK do not hold gambling licences, which are required by law, but appear in search listings and are promoted on social media. The five most popular sites drew about four million UK visits between last October and December.

They have been accused of failing to pay winnings and spamming problem gamblers. FatPirate, which advertises a welcome bonus of up to £425, has been the subject of several complaints that it prevented users from withdrawing money they had won. One UK customer claimed they had won £6,000 after spending £3,270 with their bank card but were unable to withdraw it.

A customer of another of the unlicensed sites, Gransino, claimed their account had been deleted after they complained about being unable to withdraw winnings. When they contacted support they were told that it was the end of the matter. “They take your money and never pay out,” they said, adding that they were “devastated”. Both of the sites were offering Mastercard payment last week.

The operators of the websites, based overseas, did not respond to requests for comment. Mastercard and Visa said they prohibited illegal activity on their networks and would investigate. The Gambling Commission, which regulates gambling in Great Britain, said it was aware of the sites and would “continue to take action against them”.

The findings raise questions about the role of the payment giants in facilitating unlicensed gambling transactions – and about the apparent failure of regulators to tackle the sites in the first place.

The Gambling Commission is understood to have received complaints about at least five of the nine websites identified in the analysis. But they remained accessible last week – accepting card payments from UK customers and offering deals in sterling, including welcome bonuses of up to £1,800 and hundreds of free spins.

Mastercard and Visa had agreed to block payments linked to unlicensed operators, entering into a voluntary arrangement alongside PayPal with the Gambling Commission in 2014. The companies are legally obliged to take steps to prevent the use of their networks for criminal activity. But the Observer found them facilitating payments for illicit websites with high traffic, which in some cases have been publicly linked to alleged scams, raising questions about the robustness of their due diligence.

Separately, records of complaints to the gambling watchdog reveal the scale of the illicit market in Britain – there were at least 922 complaints about unlicensed operators in the two years to December, according to documents obtained by Investigate Europe under freedom of information laws. Several complaints mention Mastercard and Visa by name. One person indicated that they had won about £70,000 on an unlicensed gambling site, which allowed transactions with Mastercard but were only able to withdraw a fraction of that.

Iain Duncan Smith, chair of the all-party parliamentary group on gambling reform, said the findings were “deeply concerning”. The former Conservative leader said that while most online gambling harm was caused by licensed firms, regulators “must do more to clamp down on abuses by unlicensed operators”.

He said Mastercard and Visa risked lending unregulated sites credibility. “These companies must immediately up their game and start blocking all unlicensed gambling site transactions,” he said.

Mastercard said it had “zero tolerance for illegal activity” on its network and that when issues were identified, it investigated them so it could “work with partners to take the appropriate action”. “We will now do that with the sites you noted,” a spokesperson said.

The company said it did not have a direct relationship with the gambling sites and that it was down to banks to ensure that merchants were acting lawfully and in line with Mastercard’s rules. Neither it nor Visa commented on the previous agreement with the Gambling Commission to block unlicensed gambling transactions.

Visa said illegal activity on its network was “explicitly and unequivocally” prohibited. “We take this very seriously and investigate all reports of illegal activity,” a spokesperson said, adding that the company has “no direct relationship with merchants” but works with partners to terminate those selling illegal services, and “constantly invests” in “best-in-class technology” to enforce compliance.

During the Observer’s testing, the payments were made via a payment tool called PaymentIQ embedded in the gambling websites. The “payment orchestration” tool is widely used by businesses in high-risk sectors to route transactions via different financial institutions, maximising the chance of them being approved.

French payment services company Worldline, which owns PaymentIQ, said it was a “neutral” software solution that did not control customer funds or process payments. “PaymentIQ has no responsibility for ensuring that scheme rules and the acquiring partners of the merchant fulfil their obligations,” a spokesperson said.

Professor Heather Wardle, an expert in gambling harms at the University of Glasgow, said the findings were evidence of the “wide and complex commercial ecosystem” underpinning unlicensed gambling. She said “every actor” in the chain should be accountable. “They should not be complacent about how their actions enable these harms,” she said.

The Gambling Commission said it was working hard to disrupt the unlicensed market, including issuing “over 770 cease and desist notices” and referring more than 100,000 URLs to Google for removal in the past 11 months. Chief executive Andrew Rhodes has previously cited “phoenixing” as a key challenge for the watchdog – where duplicate websites are created after illegal ones are taken down.

A spokesperson said customers could easily check if sites were licensed by searching its website, adding that those gambling on unlicensed ones were “putting themselves at risk”. “Your financial data could be stolen, harvested or misused and you may not even be paid out if you win,” they said.

The Betting & Gaming Council, an industry lobby group representing licensed operators, says gamblers in Great Britain spend more than £2.7bn on unlicensed sites each year. It said the “illegal and growing gambling black market” posed a “significant threat”.