Written by Andrew Tait
With so much happening in the sector recently, our betting and gaming team has put together a succinct overview of the pertinent developments, alongside practical suggestions to help operators stay ahead of the curve.
In the news
1. Marketing & Consumer Protection
BGO, Ladbrokes, William Hill & Titan Bet have all made undertakings following a Competition and Markets Authority (“CMA”) investigation ending in late 2017 to ensure they use fair and transparent terms in all their online advertising going forwards. This requires operators to take into consideration consumer law obligations as well as acting responsibly to prevent problem or underage gambling. The additional considerations include removing any restrictions on the withdrawal of player’s deposits, such as completion of wagering. These CMA requirements came into effect on 1 March 2018 and will need to be adhered to, or else operators will face joint enforcement action by the CMA and the Gambling Commission (“GC”).
The CMA has also initiated a new investigation into unfair withdrawal restrictions, such as limits on how much can be withdrawn and unnecessary verification requirements.
The above action by the CMA is backed up by the GC in its latest enforcement action against Electraworks (a £350,000 penalty), LeoVegas Gaming Ltd (a £600,000 penalty) (1) and in its recently published Online Review, where it proposes amendments to Licence Conditions and Codes of Practice (“LCCP”) to bring it into line with the CMA’s requirements and recent updates by the Advertising Standards Authority (“ASA”) on the Committees of Advertising Practice (“CAP”) and UK Code of Broadcast Advertising (“BCAP”) gambling advertising codes of conduct.
In the latest regulatory settlement the GC also held LeoVegas responsible for misleading advertisements published by its affiliates (1). The financial penalty in the settlement also reflected significant breaches of social responsibility codes relating to self-exclusion.
2. Responsible Gambling
Skybet, Tabcorp, 888 have all recently fallen foul of failures in their self-exclusion systems, by allowing excluded players to re-register and continue playing.
The GC has been very forceful in penalising any operators whose self-exclusion systems fail, irrespective of the fact that players will go out of their way to find any means to re-register, including using fictitious names and fake ID. 888’s penalty package was £7.8M.
This is coupled with the GC’s recently announced intention, in its Online Review, to strengthen customer interaction requirements in order to ensure operators more actively monitor and intervene when players show signs of problem gambling. The GC’s recent guidance on this should act as a useful tool and reference point for operators looking to build and automate their own detection systems.
The GC is keen to reduce credit card use as means of facilitating and encouraging customers to play beyond their means. The GC also wants to keep underage players away from the temptation of gambling by proposing measures to age-verify all customers before they can even play for free. This follows up action taken by the GC last year to remove any child-appealing images from online advertising and marketing material which is accessible to children.
There are ongoing investigations by the GC into 17 online operators in addition to the recently published enforcement action against William Hill for anti-money laundering (“AML”) failures (which resulted in a £6.2M penalty). Key results are due to be reported by the GC in the following months, and it is expected that one of the 5 operators under investigation will have its license revoked or suspended.
With 12 operators in the past 4 years already subject to GC enforcement action due to AML failures, the GC’s patience has now clearly run out. Operators will be expected to have learnt from those failings and to have implemented robust controls.
Indeed, in the GC’s own recently published AML risk assessment of all gambling sectors it had this to say about the online casino sector: “Having recently conducted thematic compliance assessments of the remote casino sector, the Commission is not assured by the [remote casino] sector’s compliance with the Act, POCA, TACT, the Regulations, LCCP and Commission guidance. The evidence gathered during the assessments demonstrated frequent and systemic failures in complying with the legal requirements. This non-compliance significantly increases the likelihood of vulnerabilities being exploited in the sector.
“The Commission will take action where it identifies non-compliance. This may range from action plans through to formal review and / or revocation of personal and /or operating licences. Failure to follow good practice as advised by the Commission through guidance under ordinary code 2.1.1 (2) will be a material factor in any action we take in relation to the review and / or revocation of personal and/or operating licences.”
4. Global Regulatory Landscape
Enforcement action taken by a government body in one jurisdiction will have a negative impact on any gambling business’s existing licenses in its host jurisdictions. This enforcement action can be of a regulatory nature leading to criminal or administrative measures (fines, ISP or payment blocking, blacklisting, imprisonment) or tax proceedings (large fines and imprisonment).
Any such action will need to be reported to the GC as a key event and may lead the GC to re-assess the operator’s suitability to hold a licence. The action itself, particularly if initiated by a body based in an EU jurisdiction, may result in large fines, as has been the case with The Netherlands. Tax enforcement is however the most problematic as EU tax cooperation treaties make this relatively easy to do, where the penalties or tax disclosure payments are significant. Indeed 888 made a $45M contingency for their pre-2105 tax liability in Germany.
The recent change to the GC’s licence condition 15.2.2 also means that operators will need to report to the GC any instances where their group companies advertise gambling facilities in jurisdictions generating more than 3% or 10% of the group’s overall revenues. If those jurisdictions are in grey or black markets, then as the GC already made clear in the consultation process leading to this change, it will take a dim view as these revenues may be unfairly used to improve marketing spending power in Great Britain.
Tools to use and steps to take
1. Compliance Assessment
Now is the time for operators to undertake a full internal audit to measure their existing systems, policy and procedures against the present and upcoming GC, CMA, ASA and other relevant regulations and requirements. This may reveal weaknesses in not only the controls themselves but also the organisational and operational capacity to handle the ever increasing raft of new requirements. Only by doing this assessment will operators be made aware of the necessary improvements which are needed, or in some cases the radical overhaul of their current compliance systems and operations which is needed.
2. AML Risk Assessment
Since October 2016 there has already been a requirement under Licence Condition 12.1.1 for all operators to conduct a full AML risk assessment of their business, which must be reviewed on at least an annual basis . Guidance has been issued by the GC to both remote and non-remote casinos (compliance required under Code 2.1.1) (2) and to other sector operators (compliance under Code 2.1.2) (3). Additionally the 2017 Money Laundering Regulations (4) further supplement this requirement for both remote and non-remote casinos.
The risk assessment is the foundation for all the policies and procedures which need to stem from and be adapted by the results of the assessment. Furthermore its needs to be continually updated and reviewed in light of technology and business changes.
3. Global Regulatory Landscape Report
It is extremely important for global operators to safeguard their business by continually monitoring the regulatory and tax (particularly VAT) landscape across all jurisdictions where their players deposit from. This enables them to be forewarned of material risks and take preemptive measures to mitigate them.
Gordon Dadds Solutions
(2) Gambling Commission, The prevention of money laundering and combating the financing of terrorism, Guidance for remote and non-remote casinos, Fourth edition, March 2018
(3) Gambling Commission, Duties and responsibilities under the Proceeds of Crime Act 2002, Advice to operators (excluding casino operators), Fourth edition, October 2017
(4) The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017
Contact the Author
I have over 20 years of experience in betting & gaming, regulation & compliance, intellectual property and commercial contracts. Prior to joining Gordon Dadds regulatory solutions team in 2017, I was General Counsel & Chief Compliance Officer at Mansion Group for 10 years. My key specialisms are gambling law and regulation, compliance, governance and risk management, AML policies and procedures, IT contracts and technology licensing, entertainment and media contracts and copyright licensing, sports sponsorship agreements, ecommerce and internet law. I am a member of IMGL (International Masters of Gaming Law), GBGA (Gibraltar Betting & Gaming Association) and ICA (International Compliance Association).