Andrew Tait Consultant Solicitor
UK Gambling Commission enforcement: a blessing in disguise?
This article was first published in EGR Compliance September 2018.
Earlier this week Andrew Tait debated whether the Commission’s uplift in enforcement activity could be perceived as perhaps a step too far; click here to see the article. Today he discusses the flip side, with the question: is it actually a blessing in disguise?
One thing all industries and their investors welcome is certainty. Despite the sometimes-overwhelming tide of gambling regulation updates, new guidelines, consultations, reports, etc., the one thing the Commission cannot be accused of is lack of transparency and uncertainty over the compliance requirements and expectations.
In other jurisdictions the gambling regulations and guidelines are high level, vague or sometimes completely absent, leaving the operator to guess where the line of acceptable compliance operation is. Italy is an example of this, where the focus is on technical integration with SOGEI to monitor player interactions in real time but with very little guidance on social responsibility, money laundering and marketing.
The drive to improve standards forces operators to examine and understand player behaviour and interaction with the gambling oﬀers and products. This is at the core of problem and underage gambling prevention, as well as ensuring that customers are treated fairly. The Commission gives examples and illustrations of best practices to help operators achieve this level of understanding, often involving use of analytical technological tools and sophisticated training programs.
By following this guidance, operators will really get to know their customers. This will in turn help them predict and intervene against problem gambling or potential money laundering before it reaches a point of no return. Truly knowing your customers is of course key to successful tailored, segmented marketing campaigns. Therefore, raising compliance standards will eventually lead to extended player lifetimes, more eﬀective marketing campaigns and a build-up in player trust and loyalty, thereby reducing churn.
The Commission does not discriminate between types and sizes of operators within the same licence categories. For instance, Maltese based .com type operators addressing many unregulated markets as well as Great Britain will be expected to conform to the same standards as companies with a large, predominately land based and online British presence.
These British centric operators may appreciate this uniform approach, so long as the Commission actually monitors, audits and enforces regulatory breaches across the board, rather than always targeting those with the largest British customer bases. Given that the Commission has an ongoing investigation into potential AML failings of 22 operators, it’s likely that some of the culprits will be the smaller, non-British focused operators, which may have up until now kept under the radar. This equal treatment will no doubt help stem the ‘race to the bottom’ mentality which catches out the more responsible operators who have unintentionally become trapped in the never-ending cycle of keeping pace with the aggressive marketing tactics of less scrupulous competitors in an attempt to maintain their market share.
The Commission has put many resources and eﬀorts into monitoring its operators and the British gambling market as a whole, using analysis of real data from quarterly regulatory reports, annual assurance statements,
independent reviews and reports into: problem and underage gambling; unfair marketing; and consumer practices. This has created a rich data set, especially from the past 3 years, allowing trends and the impact of its regulation and enforcement to be seen.
The Commission is therefore in a unique position to advise other jurisdictions, particularly those starting out on the gambling regulation journey, on how to draft their regulations for maximum eﬀect. It is not unforeseeable that the rapidly emerging US online market may be largely based on the British regulatory regime. No doubt for those looking to enter this and other jurisdictions where the Commission may or may not have exported its expertise, an already compliant operator meeting the perceived gold British standard will be well placed to meet all necessary requirements and be compliant almost anywhere.
The Commission is very helpfully consolidating a lot of associated regulations into its LCCP, the next version of which will be out in December this year (2018). It will incorporate relevant updates following recent changes to CAP and BCAP advertising codes by ASA and consumer law led changes following the recent investigation and enforcement by CMA. It also updated its AML guidance late last year following implementation of the 4AMLD by the UK. An example of how useful this will be to all operators, wherever they are based, can be seen in the Italian geo-sector. Here, money laundering is supervised centrally by the Bank of Italy, so industry-specific guidelines don’t exist.
The Commission allows operators to keep ahead of intended changes by engaging them in consultation exercises and hosting industry or sector-specific days at its Birmingham HQ. This is an attempt to both educate and warn the industry and advisers of what is coming down the line and to highlight areas of concern. Indeed, those attending the Raising the Standards conference in November 2017 would have had a good heads-up on the impending CMA-led changes to bonus schemes, giving them a three-month head start on the mandated changes which were later announced in February 2018. The Commission compliance and enforcement regime, therefore, allows operators to keep ahead of the curve .
Unpalatable as regulatory compliance and enforcement is, there is a feeling of inevitability about it. Across the world, regulators are taking a tougher stance on issues like misleading or unduly compelling marketing. Italy is banning most forms of gambling adverts, Australia is also bringing in restrictive measures. Therefore, adherence to British standards will prepare most operators to the inevitable wave of more stringent compliance and enforcement spreading globally.
In summary, a combination of transparency and preparedness brought about by the Commission’s unapologetic high standards means that operators are forced to change their culture from a short-term money generation relationship with their customers to a long-term relationship built on trust and loyalty. Operators need to treat the British market as a serious investment in compliance to give them the foundation to grow revenues, albeit more slowly than they may like, but nevertheless in a more sustainable way.
What’s the answer?
It is up to individual operators to decide what is best for them. They will ultimately fail if they do not invest in a pre-emptive and multi-disciplinary compliance culture, imposed from the top down. Given the frequency and scale of the Commission’s enforcement and in light of the political, social and media pressures in Great Britain and elsewhere, operators seeking to avoid the increasing tide of gambling compliance will be forced out into the margins and the unpredictability of the grey markets. Examples can be seen in France and more recently in Australia, where online casinos were shut down overnight.
Operators and their investors still see regulated markets as a long-term and sustainable business proposition, where the Commission is highly respected and seen as a leader in regulatory oversight, thereby driving the change to a regulated model across the globe.
Notwithstanding the perceived over-zealous nature of the Commission’s enforcement, there are far more stringent, volatile and unbalanced regulatory and enforcement regimes out there. Given the dwindling number of “easy” gambling jurisdictions, operators are left with the base choice of whether regulated gambling regimes are “per se” a step too far. Alternatively given the inevitability of global gambling regulatory expansion, changing now to be compliance-centric may be an actual blessing in disguise, enabling them to meet the challenges of the future.
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