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Alderney, the unlikely hub for a global, online gambling industry	Alderney, the unlikely hub for a global, online gambling industry
2013-05-10 22:01:11 UTC	2013-05-20 19:45:12 UTC (10 days later)
Alderney is the most northerly and remote of the Channel Islands. To get to the island there are 12 spaces on a passenger ferry from Guernsey, but the most common route is via a short flight on an ageing, 18-seat, triple-propeller Trislander from Guernsey or Southampton. The airport is a small box building, resembling a well-worn prefab classroom.	Alderney is the most northerly and remote of the Channel Islands. To get to the island there are 12 spaces on a passenger ferry from Guernsey, but the most common route is via a short flight on an ageing, 18-seat, triple-propeller Trislander from Guernsey or Southampton. The airport is a small box building, resembling a well-worn prefab classroom.
Three square miles of windswept heathland, overrun with rabbits, gently cresting out of the waters about eight miles west of the Cherbourg peninsula in Normandy, Alderney has a secret. It might not look it, but, according to the website of the Alderney Gambling Control Commission (AGCC), this is the a hi-tech internet hub for a multibillion-pound global online gambling industry.	Three square miles of windswept heathland, overrun with rabbits, gently cresting out of the waters about eight miles west of the Cherbourg peninsula in Normandy, Alderney has a secret. It might not look it, but, according to the website of the Alderney Gambling Control Commission (AGCC), this is the a hi-tech internet hub for a multibillion-pound global online gambling industry.
Punters playing poker, slots, bingo and placing all manner of sports bets are routed through Alderney from almost all corners of the world – including some where such activity is considered illegal.	Punters playing poker, slots, bingo and placing all manner of sports bets are routed through Alderney from almost all corners of the world – including some where such activity is considered illegal.
Near the centre of Alderney rises a microwave transmission mast through which communication with the outside world is conducted. Alderney's energy needs are provided by a diesel-powered generator.	Near the centre of Alderney rises a microwave transmission mast through which communication with the outside world is conducted. Alderney's energy needs are provided by a diesel-powered generator.
The regulator's website has been closed for maintenance for several days recently but, when it is working, it tells readers: "Alderney transmits more internet e-gambling traffic than any other location on the globe and is in fact much larger than the combined activity of its three European offshore rivals [Gibraltar, the Isle of Man and Malta]."	The regulator's website has been closed for maintenance for several days recently but, when it is working, it tells readers: "Alderney transmits more internet e-gambling traffic than any other location on the globe and is in fact much larger than the combined activity of its three European offshore rivals [Gibraltar, the Isle of Man and Malta]."
Hunting down these online companies and their internet servers on the islands quickly leads to frustration. The island's company register is held at the modest court house, run by the friendly greffier, or official records-keeper, Sarah Kelly. She has just been updating the register and says there are now 498 companies incorporated in Alderney.	Hunting down these online companies and their internet servers on the islands quickly leads to frustration. The island's company register is held at the modest court house, run by the friendly greffier, or official records-keeper, Sarah Kelly. She has just been updating the register and says there are now 498 companies incorporated in Alderney.
According to an IMF report published in January last year, the majority of companies on the island are online gambling firms. "E-gambling licence holders in Alderney had over 3m customers and conducted £2.1bn worth of transactions in 2009," the report found.	According to an IMF report published in January last year, the majority of companies on the island are online gambling firms. "E-gambling licence holders in Alderney had over 3m customers and conducted £2.1bn worth of transactions in 2009," the report found.
There is no requirement to file accounts at the Alderney court house, but official addresses and the names of directors are on the register. Poring through the files many of the same addresses come up repeatedly. One is a former hotel, converted into offices, another is an office above the island's popular Nellie Gray curry house.	There is no requirement to file accounts at the Alderney court house, but official addresses and the names of directors are on the register. Poring through the files many of the same addresses come up repeatedly. One is a former hotel, converted into offices, another is an office above the island's popular Nellie Gray curry house.
One company above the restaurant is Lochaber Highland Estates (CI), which runs a website www.highlandtitles.com, selling plots of Scottish land as small as one sq ft which it says entitle the owner to use the courtesy title of Laird, Lord or Lady.	One company above the restaurant is Lochaber Highland Estates (CI), which runs a website www.highlandtitles.com, selling plots of Scottish land as small as one sq ft which it says entitle the owner to use the courtesy title of Laird, Lord or Lady.
In many cases, the register shows Alderney companies have just one director, who gives an overseas address. The declared shareholder can be masked behind nominee companies.	In many cases, the register shows Alderney companies have just one director, who gives an overseas address. The declared shareholder can be masked behind nominee companies.
Michael Ellen, the AGCC's director of licensing and strategy, works at the gambling regulator's offices, directly opposite the court house. He explains why there is little to see. All the hi-tech infrastructure has grown up on neighbouring Guernsey: "We do not have the power, the juice, the electricity to power the data centres."	Michael Ellen, the AGCC's director of licensing and strategy, works at the gambling regulator's offices, directly opposite the court house. He explains why there is little to see. All the hi-tech infrastructure has grown up on neighbouring Guernsey: "We do not have the power, the juice, the electricity to power the data centres."
A report by KPMG three years ago found that for every pound the e-gambling firms contribute to the Alderney economy, they contribute almost £10 to Guernsey.	A report by KPMG three years ago found that for every pound the e-gambling firms contribute to the Alderney economy, they contribute almost £10 to Guernsey.
Back on Guernsey the online gambling industry has become a significant employer. One of the biggest firms is London-listed Sportingbet, which is the shirt sponsor for Guernsey football club. Island ministers opening their arms to the industry have boasted of bandwidth capacity greater than that available across South Africa.	Back on Guernsey the online gambling industry has become a significant employer. One of the biggest firms is London-listed Sportingbet, which is the shirt sponsor for Guernsey football club. Island ministers opening their arms to the industry have boasted of bandwidth capacity greater than that available across South Africa.
Robin Le Provost, who leads Alderney's drive to attract gambling firms, claims the industry is now the third largest economic contributor to Guernsey after finance and tourism, though this claim cannot be confirmed by island statistics officials.	Robin Le Provost, who leads Alderney's drive to attract gambling firms, claims the industry is now the third largest economic contributor to Guernsey after finance and tourism, though this claim cannot be confirmed by island statistics officials.
The principal attraction of Alderney to gambling groups is that there are no gambling or corporation taxes. So firms targeting punters in countries such as the UK, where online gambling is legal but tax rates are 15%, are drawn to the island in large numbers. In 2007 even the then-state-owned Tote began running online operations through an Alderney licence which meant it avoided UK tax.	The principal attraction of Alderney to gambling groups is that there are no gambling or corporation taxes. So firms targeting punters in countries such as the UK, where online gambling is legal but tax rates are 15%, are drawn to the island in large numbers. In 2007 even the then-state-owned Tote began running online operations through an Alderney licence which meant it avoided UK tax.
Boyd Kelly, husband of the greffier, is a retired West Midlands police officer who moved to the island 13 years ago now sits in Alderney's parliament. He was briefly involved in the early stages of gambling regulation on Alderney and recalls how islanders' first ambition in 1998 had been to build a casino. "That didn't take off but as a result of the negotiations with the business people it ended up with two sports betting companies that were licensed here – Sportingbet and Surrey Sport, which eventually became part of Sky."	Boyd Kelly, husband of the greffier, is a retired West Midlands police officer who moved to the island 13 years ago now sits in Alderney's parliament. He was briefly involved in the early stages of gambling regulation on Alderney and recalls how islanders' first ambition in 1998 had been to build a casino. "That didn't take off but as a result of the negotiations with the business people it ended up with two sports betting companies that were licensed here – Sportingbet and Surrey Sport, which eventually became part of Sky."
At its peak the telephone betting operations of these firms brought almost 100 jobs to the island. Some of the new workforce had to speak several languages, as bets came in from the Far East and around the world. These jobs faded away, however, as companies switched to focus online.	At its peak the telephone betting operations of these firms brought almost 100 jobs to the island. Some of the new workforce had to speak several languages, as bets came in from the Far East and around the world. These jobs faded away, however, as companies switched to focus online.
Explosive growth in internet gambling from the start of the millennium saw even more business arriving in Alderney. Today, well-known names to hold licences are Gala, Unibet, SkyBet, Mecca, PKR, Partygaming.bwin, Boylesports and Playtech, a joint venture partner to William Hill.	Explosive growth in internet gambling from the start of the millennium saw even more business arriving in Alderney. Today, well-known names to hold licences are Gala, Unibet, SkyBet, Mecca, PKR, Partygaming.bwin, Boylesports and Playtech, a joint venture partner to William Hill.
But by far the largest group actively operating from servers on Guernsey, under an Alderney licence, was, until 15 April last year, Full Tilt Poker.	But by far the largest group actively operating from servers on Guernsey, under an Alderney licence, was, until 15 April last year, Full Tilt Poker.
At the time this was the world's second largest online poker firm, branded around star players Phil Ivey, Howard Lederer and Chris "Jesus" Ferguson – each of whom had a stake in the business. Controversially, however, it continued to offer poker to customers in the US where payments for gambling activities had been outlawed in 2006.	At the time this was the world's second largest online poker firm, branded around star players Phil Ivey, Howard Lederer and Chris "Jesus" Ferguson – each of whom had a stake in the business. Controversially, however, it continued to offer poker to customers in the US where payments for gambling activities had been outlawed in 2006.
In poker circles, 15 April 2011 is referred to as "Black Friday". It was then, after more than a year of rumours, the FBI seized the web address of Full Tilt and three other firms it said were illegally offering poker to US citizens.	In poker circles, 15 April 2011 is referred to as "Black Friday". It was then, after more than a year of rumours, the FBI seized the web address of Full Tilt and three other firms it said were illegally offering poker to US citizens.
One of America's most successful white-collar crime prosecutors, US district attorney Preet Bharara, charged senior executives, including Full Tilt's Dublin-based boss Ray Bitar, with bank fraud and money laundering on an industrial scale.	One of America's most successful white-collar crime prosecutors, US district attorney Preet Bharara, charged senior executives, including Full Tilt's Dublin-based boss Ray Bitar, with bank fraud and money laundering on an industrial scale.
Back in Alderney, the news was a bombshell, the AGCC's Ellen recalls – despite the views of US authorities on offshore internet poker firms being well known. The AGCC had been aware of the rumours of a sealed indictment against Full Tilt but had been satisfied, after speaking to company representatives, that they were unfounded.	Back in Alderney, the news was a bombshell, the AGCC's Ellen recalls – despite the views of US authorities on offshore internet poker firms being well known. The AGCC had been aware of the rumours of a sealed indictment against Full Tilt but had been satisfied, after speaking to company representatives, that they were unfounded.
One of the first responses to Bharara's move was to try to provide reassurance to players around the world, including thousands in the UK. Whatever the situation in the US, punters needed to know funds in their Full Tilt accounts were safe. Ellen, an experienced businessman with a background in auditing, led an emergency investigation, flying to Dublin to get sight of paperwork showing the situation regarding the security of player funds.	One of the first responses to Bharara's move was to try to provide reassurance to players around the world, including thousands in the UK. Whatever the situation in the US, punters needed to know funds in their Full Tilt accounts were safe. Ellen, an experienced businessman with a background in auditing, led an emergency investigation, flying to Dublin to get sight of paperwork showing the situation regarding the security of player funds.
Satisfied all was well, a statement was put up on the AGCC website. "There is no reason to believe player fund transactions are fundamentally threatened by any consequence of the US authorities' actions." It was a statement AGCC would later regret and has since been taken down.	Satisfied all was well, a statement was put up on the AGCC website. "There is no reason to believe player fund transactions are fundamentally threatened by any consequence of the US authorities' actions." It was a statement AGCC would later regret and has since been taken down.
Within weeks, whispers circulated that one of those arrested in the US had told the FBI that $60m held by poker players around the world in their Full Tilt accounts – either winnings or deposits into their accounts with Full Tilt – was missing.	Within weeks, whispers circulated that one of those arrested in the US had told the FBI that $60m held by poker players around the world in their Full Tilt accounts – either winnings or deposits into their accounts with Full Tilt – was missing.
In its literature and on its website, the AGCC had repeatedly stressed it attached "great importance to player protection" and that "transparency is paramount [in relation to] protection of player funds".	In its literature and on its website, the AGCC had repeatedly stressed it attached "great importance to player protection" and that "transparency is paramount [in relation to] protection of player funds".
Regulated firms, the AGCC had promised, had all been through a rigorous "fit and proper" test and companies were incorporated on the island only after sign-off by the Guernsey Financial Services Commission.	Regulated firms, the AGCC had promised, had all been through a rigorous "fit and proper" test and companies were incorporated on the island only after sign-off by the Guernsey Financial Services Commission.
In September, Bharara filed a revised indictment against Full Tilt bosses which seemed to confirm the worst fears about player funds. It said: "Not only did the firm orchestrate a massive fraud against the US banking system, as previously alleged, Full Tilt also cheated and abused its own players to the tune of hundreds of millions of dollars. Full Tilt was not a legitimate poker company, but a global Ponzi scheme."	In September, Bharara filed a revised indictment against Full Tilt bosses which seemed to confirm the worst fears about player funds. It said: "Not only did the firm orchestrate a massive fraud against the US banking system, as previously alleged, Full Tilt also cheated and abused its own players to the tune of hundreds of millions of dollars. Full Tilt was not a legitimate poker company, but a global Ponzi scheme."
The amount of money allegedly missing was not $60m but $350m (£220m). For 18 months, the FBI had been seizing millions from Full Tilt as it chased down alleged illegal poker payments involving US players. Bosses, the US allege, had responded by dipping into other players' funds to keep the business afloat. They were also alleged to have helped themselves.	The amount of money allegedly missing was not $60m but $350m (£220m). For 18 months, the FBI had been seizing millions from Full Tilt as it chased down alleged illegal poker payments involving US players. Bosses, the US allege, had responded by dipping into other players' funds to keep the business afloat. They were also alleged to have helped themselves.
Bitar flew to New York from Dublin this week and surrendered to the FBI. He has pleaded not guilty to nine charges including bank fraud, money laundering and running illegal online gambling operations.	Bitar flew to New York from Dublin this week and surrendered to the FBI. He has pleaded not guilty to nine charges including bank fraud, money laundering and running illegal online gambling operations.
In a statement he said: "I know that a lot of people are very angry at me. I understand why. Full Tilt should never have gotten into a position where it could not repay player funds."	In a statement he said: "I know that a lot of people are very angry at me. I understand why. Full Tilt should never have gotten into a position where it could not repay player funds."
The AGCC suspended or withdrew Full Tilt's licences, though the exercise was largely academic as the site has not been able to trade since and thousands of players today remain out of pocket.	The AGCC suspended or withdrew Full Tilt's licences, though the exercise was largely academic as the site has not been able to trade since and thousands of players today remain out of pocket.
When Full Tilt first set up in Alderney in 2007, above the Nellie Gray curry house, the regulator knew its business with US players involved what the American authorities regarded as illegal activities, though some lawyers had provided legal opinion that this view was incorrect. In the end the AGCC took the view – as they did with other licensees – that so long as there were not legal findings against them in the US, or elsewhere, Full Tilt should be welcome in Alderney.	When Full Tilt first set up in Alderney in 2007, above the Nellie Gray curry house, the regulator knew its business with US players involved what the American authorities regarded as illegal activities, though some lawyers had provided legal opinion that this view was incorrect. In the end the AGCC took the view – as they did with other licensees – that so long as there were not legal findings against them in the US, or elsewhere, Full Tilt should be welcome in Alderney.
Indeed, the regulator tried to accommodate Full Tilt, then estimated to account for close to 20% of the global online poker market. When the company proved reluctant to disclose in writing the identity of the ultimate owners of associate companies, AGCC officials were left struggling to satisfy themselves the company was "fit and proper".	Indeed, the regulator tried to accommodate Full Tilt, then estimated to account for close to 20% of the global online poker market. When the company proved reluctant to disclose in writing the identity of the ultimate owners of associate companies, AGCC officials were left struggling to satisfy themselves the company was "fit and proper".
A solution was found. Instead of demanding written certification of who owned Full Tilt companies, the regulator would allow the major shareholders to retain a degree of anonymity, in exchange for written assurances as to their good character submitted via the group's London lawyers, Jeffrey Green Russell.	A solution was found. Instead of demanding written certification of who owned Full Tilt companies, the regulator would allow the major shareholders to retain a degree of anonymity, in exchange for written assurances as to their good character submitted via the group's London lawyers, Jeffrey Green Russell.
Tony Coles from the law firm said the unusual arrangement had been entered into at the suggestion of the AGCC. He stressed Jeffrey Green Russell had acted only as an intermediary, offering no assurances itself.	Tony Coles from the law firm said the unusual arrangement had been entered into at the suggestion of the AGCC. He stressed Jeffrey Green Russell had acted only as an intermediary, offering no assurances itself.
In March, Peter Dean, former chairman of the UK's Gambling Commission, published an AGCC-commissioned review of the regulator's conduct, noting the "unusual, indirect means" the AGCC had used to satisfy themselves of the probity of Full Tilt. They were, he politely noted, "less than ideal". That said, he concluded, in the round the actions of the regulator had been "appropriate, timely and fair."	In March, Peter Dean, former chairman of the UK's Gambling Commission, published an AGCC-commissioned review of the regulator's conduct, noting the "unusual, indirect means" the AGCC had used to satisfy themselves of the probity of Full Tilt. They were, he politely noted, "less than ideal". That said, he concluded, in the round the actions of the regulator had been "appropriate, timely and fair."