Laundering FF points

[medhead]

Umm, speculation on foreign currencies. Does anyone remember where that got NAB.

Sure you are probably not going to lose the money but be able to sit on those T/Cs for a long time.

 

[rezzadogs]

A few additional factors missing from the model:

Taking money from the mortgage is not free. You are either paying additional interest, or missing out on offset interest. Based on $30K withdrawn on each day over 7 business days to build the $200K stake, and a home loan interest rate of approx 7%, the cost of moving the money into the bookies account is around $182.

Given that you place the bet on the Friday before the election. You need to wait for the result on the Saturday, and then your bank to recognise the transfer from the bookie to your account. You won't receive the money until Monday, so there's another $81 in interest.

Another factor is that these $30K transactions will be reported to Austrac, and the tax office will be alerted. You now need to declare your winnings as income as the ATO will define you as a professional gambler, so at the top marginal rate, you need to set aside $970 in taxes.

In all fariness, that interest expense I calculated earlier should now become a tax deduction, so you can now have $127 back on your tax return.

I wonder what else is missing from the model?

 

[medhead]

Some good points on the interest. I might have thought it would take a bit longer to get the payout for the bookie on an election.

Another factor is that these $30K transactions will be reported to Austrac, and the tax office will be alerted. You now need to declare your winnings as income as the ATO will define you as a professional gambler, so at the top marginal rate, you need to set aside $970 in taxes.

Are you sure about that, I would have thought that it would be pretty easy to argue that the gambling is not occurring to earn a living. The ATO did have a few huddles to jump over to be considered a professional gambler last time I looked into it. Surely those huddles work in both directions, otherwise there would be a lack of transparency and all that.

Take Kerry Packer as an example, I'm pretty sure he wasn't being taxed on his winnings.

 

[harvyk]

as the ATO will define you as a professional gambler

Unlikely, you would need to be earning a larger percentage than say %2 of your total yearly earnings (assuming your earning $100,000 pa from your day job) for the ATO to consider you a professional gambler. Further more there would need to be a pattern, eg you won $2000 per month every month. One off wins are simply counted a winnings and are not taxed.

The interest you'd pay on withdrawing $200,000 on your home loan will eat into your winnings, even if the tax man doesn't.

You'd probably have more issues with large FX transactions (buying US$200,000 would make the US gov't ask why your doing it, if it's the first time you've brought that qty)

 

[Bunty]

A couple of questions:

1. What would have happened to the bet if Gillard had been "hit by a bus" during the election period and was unable to complete the election on the polling day? I assume the bet would be off and the money returned to your betting account in full.

2. Which credit cards (other than the NAB card already mentioned) do not treat this transaction as a cash advance? Does it depend on the card issuer or the merchant?

With regard to the costs incurred in this transaction, some loans and/or banks may charge a redraw fee from the loan which should also be included.

 

[Alanslegal]

Bunty,

I have operated two betting accounts and from my experience 1) usually the bet would be cancelled and refunded and 2) I use an ANZ QF FF card which doesnt treat this as a cash advance (even though the two betting accounts that I operate states that credit card deposits will be treated as cash advances). I cant answer the 3rd question as I dont use that facility, and rely on the up to 55 interest free days from my credit card.

 

[medhead]

With regard to the costs incurred in this transaction, some loans and/or banks may charge a redraw fee from the loan which should also be included.

I would guess that with that level of equity on your home loan then one would use a mortgage based line of credit type facility. These type of accounts that I have charge the same interest rate as my mortgage. But normally charge a higher interest rate.

 

[PineappleSkip]

Another factor is that these $30K transactions will be reported to Austrac, and the tax office will be alerted. You now need to declare your winnings as income as the ATO will define you as a professional gambler

I think they (and no doubt others) would be more interested in what is going on behind all this money laundering, given that such activity is usually associated with proceeds of crime.

The law enforcement connection made me smile. Others may recall the points hound who had 'mules' travelling back and forth on cheap fares in Thailand just to earn vast sums of ff points and faced a lot of questions when picked up as a suspected drug dealer.

Cheers skip

 

[quality]

An interesting discussion, and one which prompts me to post my first comment.

Akin to an earlier reference saying "There is also the bookies margin":

The "sure" bet is to cover all outcomes, and using the example of Gillard being re-elected in her home turf, you would need to also cover the alternate candidates being elected.

As an ex-gambler though, I can explain my point simply enough using the roulette table as the example. To cover all outcomes, you need to bet on more than just "red" or "black" as a possible result, as there is also the "0" to spoil your fun (add the "00" if you are a little US-centric).

Without the 0, all bets are covered, you launder your cash and (if credit cards were accepted), you'd have your FF brownies. Regretfully, there is the bookies or the house edge. To cover that as well (the 0), you will be losing around 2.7% (1/37 to be specific).

I'm comfortable with my belief that the bookies (or Sportsbet or Centrebet or whatever) will ensure they have an overall edge, so it comes down to how desperate you are for points. Don't throw away or risk good money for points that can easily enough be equated with money.

 

[stuartfaz]

This is a little shifty. I like it

The Virgin Flyer cards are blocked from most gambling sites, but I found one where things like this are possible. I've purposefully set myself a low credit limit on that card though so it's not something I'd readily explore.

Good going though

 

[acdc]

Bunty,

I have operated two betting accounts and from my experience 1) usually the bet would be cancelled and refunded and 2) I use an ANZ QF FF card which doesnt treat this as a cash advance (even though the two betting accounts that I operate states that credit card deposits will be treated as cash advances). I cant answer the 3rd question as I dont use that facility, and rely on the up to 55 interest free days from my credit card.

Don't the credit card providers (like ANZ) award 1 point per $2 spend and cap the points on a monthly basis? I like the scheme but think it would be very difficult to accumulate say 100,000 points as this would require $200,000 in bets.

 

[Flashback]

Don't the credit card providers (like ANZ) award 1 point per $2 spend and cap the points on a monthly basis? I like the scheme but think it would be very difficult to accumulate say 100,000 points as this would require $200,000 in bets.

Depending on card type, ANZ do cap so wouldn't be a very useful card for this. The ANZ QF card is one example of this.

 

[kingzac]

There's been some good bets on the Commonwealth games if anyone was keen to test the idea.
Australia were paying 1.001 to win the netball last night on centrebet.

 

[Alanslegal]

Don't the credit card providers (like ANZ) award 1 point per $2 spend and cap the points on a monthly basis? I like the scheme but think it would be very difficult to accumulate say 100,000 points as this would require $200,000 in bets.

Sadly that's the case, where you are required to spend $2 to earn each point.

Not too long ago (before ANZ decided to throw in an Amex branded card to their QF card range) it was 1:1.

 

[blueflamenco]

Depending on card type, ANZ do cap so wouldn't be a very useful card for this. The ANZ QF card is one example of this.

Whats the cap on the ANZ QF card?

 

[Alanslegal]

Sadly that's the case, where you are required to spend $2 to earn each point.

I'm correcting my above post, as above is incorrect.

The correct earn on my ANZ QF Platinum Card is $1:1 for the first $2,500 spent pm and $2:1 for $2500 to $10,000.

 

[pangwen]

Just an update to this, from 1 July 2011 NAB cards will stop earning points on "transactions for gambling or gambling purposes (as designated by American Express, Visa or Mastercard), examples include purchase of lottery tickets, purchases of gaming chips or tokens and online gambling".

It came in a brochure with my statement today.

 

[nickfromeastryde]

Yuri.Geller@freeenergy .com



Maybe your right I only got a distinction for probability and statistics at uni. very disappointing for a physics major and maths minor. But enough of that rubbish.

I think you have just stated exactly my point. The bookie is not going to pay out money that someone else hasn't bet on the contra position. If you are getting paid more than you bet then someone else has bet on the contra position, the bookie is not a charity just giving out free cash. Now that is the basis my wife's point (that I picked up), for you to win someone has lost. If no one else has bet the contra position then you will only get your money back i.e. $1.

Of course the TAB is different as they take a cut before determining the odds. But there was the famous case of Qld TAB having a minimum odds guarantee a few years ago which resulted in some pretty dodgy occurrences on certain secondary small time races.

BTW if I was being provocative I might even say that I know more about how odds work if you think that you are going to get paid more than you bet if no one else bet the contra position.

Medhead,

I worked for bookmakers for the first 20 years of my life so I base the following on a fair bit of experience

The bookies obviously like to balance their books and with the advantage of percentages (the odds adding up to more than 100%) like to keep some of the cash who ever wins the race. Unfortunately this almost never happens so they always end up standing something. They can't adjust odds after the event like the tote so they have to stand something. In a 2 horse race like this its obviously LAB or LIB, one will be a winner one won't. In a twenty horse melbourne cup it might be 5 horses with the other 15 running for you to varying degrees. There would be plenty of bookies keen to take 200K and only risk 2K because they know they will eventually get you if the price being offered is the right price. Who knows though, our punter here might be right and 1.01 actually is good value. There certainly are professional punters out there who have made good livings picking value off bookies and the tab.

There is an old saying though "odds on look on" and I wouldn't be comfortable doing what's suggested here. However from a straight probability perspective, our punter here might be onto quite a good value bet. If the odds are right (ie every 101 bets he loses only once) he should be dead square with the bookie after those 101 bets. What he is getting here is a cash benefit on the side which in this case is 132,000 ff points multiplied by whatever value you place on those points. I tend to value them at 3c a point and always strive to get better but based on 3c he is actually getting about $4,000 cash value each time. In effect, he is getting $1.05 for his money which might actually be a very good bet indeed

I think he is a mug because of his attitude that it is a sure thing. There is no such thing. However, he may have fluked a scenario where he is actually getting what's colloquially known as "over the odds" or mathematically speaking a greater return than the true probability of the event. It doesn't matter if you are the worlds worst judge/punter, if you can always get better than true value, you will win over the long term and maybe in this case he has managed to find a way to do that. There's a human element in this in the way he makes his selections and it may be that the rest of us can't identify the bets he makes so his system may not work for everyone but if it works for him then good luck

In saying that, I wouldn't mind being his bookie, there's been thousands of systems players and "bank tellers" come through the gates at Randwick and they all ended up losing the lot. The more they came the more they end up losing

 

[Cardinal]

Who would have thought that one could lose the house by backing Port Adelaide to beat the Gold Coast Suns when they were up by 40 odd points in the third quarter.

Easy come, easy go - I won the house backing Banglasdesh to beat Australia in the one day cricket in 2005.

 

[elbarto]

I haven't seen it mentioned her yet but wouldn't becoming a merchant on Paypal be just as effective an carry less risk? Ives been toying with it make money on currency movements with my cba travel cards. Could work just as easy to make points.