22Feb

Chambers Global 2021 – Four Lawyers Ranked

22nd February 2021 Ting Fung 245

Harris Hagan continues to have four lawyers individually ranked for Chambers & Partners’ Global Market Leaders Rankings (Gaming & Gambling).

We are proud to have the quality of our work in the gambling industry recognised by the prestigious legal directories and will always strive for the highest standards.

Julian Harris (Band 1), recognised as one of the leading gaming specialists in the UK, was also praised for his “wealth of experience advising a broad range of operators and regulators on complex international gaming and gambling law issues.”

In turn, John Hagan (Band 1), was recognised not only for his “extensive experience advising on a wide range of international gaming and gambling matters” but for the breadth of his influence in “ a fantastic job being an advocate through the industry”, which has left market sources “impressed”.

Bahar Alaeddini (Band 2) has had her clout similarly marked by market sources who praise her “for her considerable expertise in advising major international clients on UK gambling law matters.” She moved up to Band 2 from Up and Coming in 2020.

Last but not least, Hilary Stewart-Jones occupies the esteemed position of Senior Statesperson. Commentary on her “extensive experience advising an array of land-based and online operators in the gaming and gambling sector” is further highlighted by the agreement that “everyone in the market knows her.”

02Feb

The Affordability Debate: Protection, Responsibility and the Right to Choose

2nd February 2021 Julian Harris 283

That affordability checks are a critical issue for the British gambling industry is undeniable; they place a yet further onerous burden on an already stretched gambling industry. However, without fear of exaggeration, they also raise a question about the rights of British adults to make their own free choices, both good and bad and to have responsibility for their own actions. Other industry commentators have written at length on this controversial issue, but its importance is such that it bears further examination, not least as to the way in which this line of regulation is developing.

Where’s the evidence?

In its Consultation and call for evidence – Remote customer interaction requirements (the “Consultation”), the Gambling Commission identify the problem leading to the consultation and proposed new measures as being that some operators have inadequate customer interaction processes and triggers which are set too high, as evidenced by research, casework and “lived experience” evidence. They conclude that the resolution of this will be defined affordability assessments at thresholds set by the Gambling Commission.

Ultimately, the Gambling Commission seeks to reform the way that operators are required to identify customers who may be at risk of gambling harms, by imposing mandatory triggers for activity that should flag such customers to the operator, what action must be taken by operators when such triggers are identified, and how operators must ensure that they evaluate the effectiveness of their approach to interacting with customers. A new customer interaction ‘manual’ is proposed as part of the customer interaction reforms, which will explain the new requirements of the Licence Conditions and Codes of Practice and how operators are expected to meet these requirements. This would replace the current guidance, Customer interaction – formal guidance for remote gambling operators (July 2019). The actual spending limits on which the Gambling Commission will settle, remain to be determined following the Consultation. However, the references in the Raising standards for consumers – Compliance and enforcement report 2019-20 (the “Enforcement Report”) and the Consultation suggest very low figures indeed before intervention is mandated and evidence required: the Gambling Commission have referred to “firm requirements”.

We are concerned that the Gambling Commission is not adopting a risk based and proportionate approach, combined with the fact that the evidential basis for this Consultation includes research in which customers admit to having sometimes lost more than they can afford, rather than their gambling being unaffordable. Have not we all sometimes had more to drink than is good for us, without being harmed by alcohol any more than we choose to be? Further, the Gambling Commission cite the Enforcement Report, as evidence in support of these measures, when in fact the Enforcement Report deals with “clearly unaffordable’ gambling, whilst the proposed affordability constraints go far beyond customers losing tens of thousands, extending to affordability checks after lifetime losses of as little as hundreds of pounds. The Gambling Commission seems intent on eliminating any harm at all from gambling, seemingly believing all gambling to be inherently bad.

It is unfortunately the case that, as the Gambling Commission’s casework demonstrates, some operators are having insufficient regard for the existing requirements as to intervention and triggers at appropriate levels, leading to licence reviews and sanctions. This, however, is manifestly a problem which the Gambling Commission is addressing as regulator. Operators may not all have adapted to the tsunami of changes and additional requirements as quickly as they should, but progress has been made, and the cases referred to in the Enforcement Report are not sufficient evidence for a de facto penalty against the industry as a whole. Better surely to educate, persuade and, where necessary, take action to ensure compliance with current measures.

A further cogent reason for adopting this approach is that by prescribing fixed thresholds, the Gambling Commission would be moving away from the risk based system of regulation which is the basis of the legislation and regulation.

One additional word of caution; currently the Consultation is expressed to apply only to the online gambling industry. Do not take from this. In our opinion it will inevitable be applied to the land based sector as well; indeed the signs are that it already is.

Does the end justify the means?

One of the stated objectives of the Government’s Response to the House of Lords Gambling Industry Committee Report (the “Report”) is to “ensure balance between consumer freedom and preventing harm to the vulnerable”. We share the concern of others, that these fine words, stating a noble aim, may not reflect genuine intent. As yet, there is no new legislation, the Gambling Review has only just commenced, but already draconian new measures requiring affordability checks are effectively in force. Support for this approach is to be found as early as paragraph 5 of the Report’s introduction, which states:

“The Committee is also right to say that further progress to make gambling safer does not need to wait for the outcome of the Act Review.”

We have written previously of the Gambling Commission’s worrying foray into creating what is in effect new law and regulation without due process or consultation, commenting then that the Gambling Commission was “taking a novel approach that facilitates prescriptive changes to its regulatory framework without consultation or notice” (our blog on 18 May 2020: “New Gambling Commission Guidance for Online Operators: Changing the Basis of Regulation?”). Now that approach is apparently beingsanctioned by Government. Not that the Gambling Commission even waited for that rather pale green light; in the Enforcement Report, the Gambling Commission stated that operators must interact with customers early on to set adequate affordability triggers to protect customers from gambling related harm, threatening that “failure to do so could render the operator non-compliant.” Customers wishing to spend more than the national average disposable income should, according to the Gambling Commission, be asked to provide evidence to support a higher trigger. The Enforcement Report was published on 6 November 2020, just three days after the Gambling Commission launched its consultation on further checks.

Without being unduly cynical, once again the Gambling Commission has jumped the gun. It appears, as has been previously established with such consultations, that they are little more than a box ticking exercise; at worst, with no real intention to entertain alternative opinions and suggestions, or even expertise.

In this case, the emperor truly has been shown to have no clothes; the Gambling Commission has not simply disregarded the results of the Consultation, it has pre-empted it, demonstrating that the exercise is a sham. In effect, the word of the Gambling Commission is now law. We do not need to question their motives, which may be all to the good, with a genuine desire to protect the vulnerable. However, the end cannot always justify the means. The idea that the Gambling Commission has the power, in effect, to regulate by decree, an instrument reminiscent of autocracy or totalitarianism, is abhorrent.

Where’s the balance?

Tim Miller of the Gambling Commission has expressed the intention of having “an open discussion with the gambling industry, consumers, people with lived experience and other stakeholders, to ensure we strike the right balance between allowing consumer freedom and ensuring that there are protections in place to prevent gambling harm.”

Operators will no doubt do their utmost to challenge as part of the Consultation, the levels at which these inevitable new requirements are to be set. However, the evidence on which the Gambling Commission is likely to rely, will almost certainly not include the views of the silent majority of consumers who safely enjoy gambling; they are not included in the group of “people with lived experience”, which is made up solely of those adversely affected by gambling. But the real issue of liberty here is the principle that adults should be free to make their own choices: even bad ones. Most people would regard as unacceptable, the suggestion that their spending should be questioned by any authority; for example when buying alcohol. Nor do most consider it right that anyone, and certainly not a commercial enterprise, should demand private financial information from them. The fact that this is coming to pass in this industry perhaps illustrates the strength of the anti-gambling lobby and its sympathisers, if not supporters, within the regulatory authority. This is a threat to us all.

What are the implications? It does not need a Sherlock Holmes, or even an Inspector Clouseau to understand that in the absence of operators adopting affordability checks now, their licences are at risk of review, and consequently, of suspension or revocation. Indeed, we have already seen the Gambling Commission requiring such checks of those numerous operators currently the subject of regulatory action. Inevitably this, temporarily at least, places them at a disadvantage to their competitors. The means to protect the vulnerable are already in place. We do not need to assume that all gamblers, or all drinkers or any other class of consumer, is inherently and automatically at risk of harm. We must preserve the principle of freedom of choice.

20Jan

Covid-19: Gambling Commission reminder to online operators

20th January 2021 Ting Fung 274

Gambling Commission CEO, Neil McArthur, issued a reminder on 11 January 2021 on the continued need for online operators to provide their customers with additional protection.

The latest national lockdown, which began on 5 January 2021, is one of the primary reasons for the regulator’s call for extra vigilance. Its reasoning being that:

“Most people will be spending more time at home and many people are likely to be feeling more isolated and vulnerable as a result of the length of the pandemic period, the new restrictions and further uncertainty about their personal or financial circumstances.”

The reasoning also relates fundamentally to operators’ licence requirements under the social responsibility code provisions of the Licence Conditions and Codes of Practice (“LCCP”), Part 3 – Protection of children and other vulnerable persons. This includes helping customers to gamble safely and responsibly by:

helping customers to not spend more time or money than they can reasonably afford; and
recognising behaviours which may be indicative of risk or harm.

The other reasons given for the reminder relate to Phases 1 and 2 of the Gambling Commission’s research on the impact of Covid-19 on UK gambling, the evidence of which was published in its National Strategic Assessment 2020. Both phases indicated that:

consumers, such as highly engaged gamblers who play a range of products, are likely to spend more time and money gambling;
the continuation of sports provides greater opportunities for betting customers to gamble; and that
some people may gamble for the first time as a result of the current circumstances.

The Gambling Commission will continue to assess the impact of Covid-19 on gambling and asks online operators in the meantime to:

Continue following its “additional formal guidance”, in particular, ensuring that close interest is given to data which indicates that customers are expanding their games portfolio and/or spending more time or money than before;
Interact directly with customers where triggers are reached and increase email engagement with customers more generally;
Ensure that marketing remains compliant and non-exploitative of the current situation; and proceed very cautiously when cross-selling products;
Take particular care when on-boarding new customers and carefully consider affordability information and checks, especially in light of any recent or subsequent changes to financial circumstances.

In turn, the Gambling Commission has stated that it will continue to:

Permanently strengthen regulatory requirements in respect of RTS and LCCP updates to further protect customers; and
Monitor both operator and consumer behaviour closely as well as conducting compliance assessments during the latest lockdown.

For a full reminder of the additional steps that online operators should be taking, please see our blog post from last May regarding the Gambling Commission’s “additional formal guidance”.

01Dec

Chambers Gaming Law 2020 Global Practice Guide

1st December 2020 Ting Fung 303

Harris Hagan is pleased to contribute once again to the Chambers and Partners Gaming Law Global Practice Guide.

The publication is now available as a free eGuide and covers the regulatory position in over 30 jurisdictions. The guide discusses the types, availability and duration of licences; application fees; premises licensing; affiliates; white labels; B2B and B2C licences; responsible gambling requirements; gambling management tools; AML; advertising; enforcement; and tax.

The eGuide is a transition away from the original hardcopies and provides for additional functions such as a tool comparing jurisdictions.

Partners, Julian Harris and Bahar Alaeddini both resume their roles as Contributing Editors to the publication, as well as co-authors of the UK chapter. In addition to Julian’s thought-provoking Introduction, Bahar also provides an update and overview of the gambling regulatory position in Alderney.

Please use the above links to review the new eGuide at your leisure.

24Nov

Gambling Commission – AML Guidance Update and Advice

24th November 2020 Ting Fung 317

Updates have been made to The prevention of money laundering and combating the financing of terrorism Guidance for remote and non-remote casinos: fifth edition. The revised edition was published on the 13 November 2020 and includes amendments to paragraph 1.55 to incorporate the new licence conditions 15.2.3(2) and (3). The new licence conditions came into effect under the updated Licence Conditions and Codes of Practice (“LCCP”) on 31 October 2020 and introduced the following reporting requirements:

Licensees must, within 14 days of the appointment, notify the Commission of the identity of the individual appointed as:
the officer responsible for the licensee’s compliance with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on Payer) Regulations 2017 (regulation 21(1)(a)),
the nominated officer (regulation 21(3)),

and any subsequent appointment to either of those positions.

Licensees must, within 14 days of the departure or removal of any individual appointed to the positions mentioned in 2 above, notify the Commission of such departure or removal.

A minor typographical correction was also made to paragraph 6.120.

In addition, the Duties and responsibilities under the Proceeds of Crime Act 2002: fourth edition was also revised at paragraph 5.2 to highlight new reporting requirements in the latest LCCP, and correct a typographical error at paragraph 20.54.

Both of the documents came into effect immediately.

24Nov

The Gambling Commission’s First National Strategic Assessment

24th November 2020 Ting Fung 320

On 6 November 2020 the Gambling Commission published its first National Strategic Assessment (“NSA”) alongside its annual, Raising Standards for consumers – Compliance and Enforcement report 2019 to 2020.

What is it?

The NSA is a document comprised of the latest available evidence with the aim of assessing the issues and risks associated with gambling related harm. Gambling Commission Chief Executive, Neil McArthur has stated:

“We will use our National Strategic Assessment as the foundation for prioritising our work over the coming months and years.”

In the accompanying press release, Neil McArthur adds:

“We look forward to working with the government on the forthcoming review of the Gambling Act and alongside that work we will be working hard to address the issues that we have identiﬁed in our Strategic Assessment.
We have demonstrated that we are willing and able to respond quickly to emerging issues and risks and that we will use the full range of our powers to protect consumers. We and have made considerable progress in many areas to make gambling safer – but we want to go further and faster.”

The report outlines the Gambling Commission’s assessment of the key issues faced in making gambling fairer, safer and crime free, and sets out the priority actions and an overview of progress that has been made since 2019.

The Gambling Commission acknowledges that whilst neither gambling participation nor problem gambling rates are increasing, the continually evolving landscape of gambling presents new risks and ongoing challenges. In the Executive Summary the Gambling Commission states:

“We must see the industry doing more to proactively identify and address the risks within their businesses. An approach to raising standards for consumers which is heavily dependent on the Commission using its formal regulatory powers will continue to damage the industry’s reputation, restrict activities and result in escalating penalties.”

The regulator maintains that the best and most sustainable way forward is for operators to allow the distinction between regulatory and commercial considerations to diminish if not disappear altogether.

How will it work?

The Gambling Commission will use “priority actions” to target relevant risks and issues whilst highlighting areas where significant progress has been made. Assessment is built on four “pillars” relating to:

the Person gambling (Chapter 1);
the Place gambling occurs (Chapter 2);
the Products available to customers (Chapter 3); and
the Provider of facilities for gambling (Chapter 4).

The NSA is structured around these pillars, which are coupled with sections on measuring the effectiveness of gambling regulation (Chapter 5), Covid-19 and its impact on gambling consumers (Chapter 6) and the timeline for action (Annex 1).

The NSA is essential reading for any Gambling Commission licensee. Unsurprisingly, the content is closely aligned to the Compliance and Enforcement Report (see our blog on 18 November 2020), published on the same day, and there is a strong emphasis on affordability (Chapter 1, pages 14-18). We strongly encourage B2Cs to review this section carefully, particularly figure 7 and the “clearly unaffordable gambling” case studies.

The NSA’s scope of evidence aims to be wide ranging, drawing on:

the Gambling Commission’s own compliance and enforcement work;
its advisory bodies, the Advisory Board for Safer Gambling as well as the Digital Advisory Panel;
the Interim Experts by Experience Group (involving those with direct experience of gambling related harm);
industry colleagues and representatives; and
the findings of recent Parliamentary reports (see here).

Why now?

Such a document is no doubt in line with the Gambling Commission’s licensing objectives and follows on from regulatory action and research that the Gambling Commission has already performed (see Annex 1 of the NSA for a timeline of action). However, it is also arguable that the speed and depth of their action is partially motivated by the House of Commons’ Public Accounts Committee assessment in June this year that more and faster action was needed by the Gambling Commission to protect vulnerable customers and consumers’ rights to redress. Neil McArthur seems to echo this in his above statement that “ to go further and faster” with its progress.

What to expect next?

The NSA includes numerous “GC actions” throughout. We have summarised these, by chapter, as follows:

Chapter 1: the Person gambling

In response to the key issues and risks regarding:

ineffective KYC approaches including affordability checks;
delayed and ineffective responses to at-risk behaviours;
inadequate controls for more engaged gamblers;
underage gambling; and
gaps in evidence and understanding of gambling-related harms.

The Gambling Commission proposes to act on the following:

Consultations regarding more effective KYC and early identification and effective responses to at-risk behaviour, to include: responding to and implementing the Gambling Commission’s customer interaction consultation on themes of affordability, vulnerability and identifying and acting on harm indicators, including the management of high value customers. In addition, the Gambling Commission will issue a consultation on streamlining the approach to tracking of gambling participation and prevalence of at-risk and problem gambling, with the aim of implementing consultation outcomes in 2021. The Gambling Commission also intends to publish a statement setting out the principles and key areas of work in its approach to vulnerability.
Developing first-rate evidence to inform regulation and legislation, including but not limited to: added questions to the Gambling Commission’s quarterly online omnibus survey to understand the public’s experience of gambling-related harms; longitudinal study of gambling behaviours and problem gambling to inform future improvements to gambling research; a permanent advisory body (Experts by Experience) to build on the Gambling Commission’s interim arrangements.
Developing risk-based approach to harm minimisation in response to more engaged gamblers, such as, developing solutions to provide a ‘single customer view’, and including an updated approach to and use of technology.
Regulatory powers: continued regular investigation of operators’ adherence to social responsibility code provisions and review of its commitment to Annual Assurance Statements; ensuring compliance with strengthened age verification controls and supporting industry bodies generally in their legal and regulatory oversight.

Chapter 2: the Place gambling occurs

In response to the key issues and risks regarding:

the accessibility of online gambling;
the anonymity associated with premised-based gambling; and
socially responsible advertising.

The Gambling Commission will take action in the following ways:

Partnership and industry engagement, to include: partnership with key regulators to ensure gambling is fair, safe and crime free; working with product design groups to challenge the industry to implement better consumer protections; engaging the non-remote sector and promoting initiatives that reflect the Gambling Commission’s compliance and enforcement activity elsewhere.
Research and knowledge, to include: increasing knowledge on digital industries and emerging technologies to ensure regulation remains fit for purpose and responsive to emerging risks; gathering evidence on the most effective ways to prevent bonuses being offered to consumers displaying indicators of harm; building on its interim guidance issued during the first Covid-19 lockdown; monitoring progress on the use of ad-tech to proactively target online marketing for gambling away from children, young people and those who are vulnerable to harms.
Regulatory powers: targeted actions using the Gambling Commission’s regulatory powers to continue to raise standards; monitoring the effectiveness of the Gambling Industry Code for Socially Responsible Advertising which came into effect on 1 October 2020.

Chapter 3: the Products available to customers

In response to the key issues and risks regarding:

potential harms associated with online game and platform design
regulatory risks presented by gaming machine product characteristics and environments
matching controls to the risks presented by product characteristics such as speed of play, accessibility and return to player; and
making consumer and regulatory outcomes equivalent to commercial outcomes.

The Gambling Commission will work on the following:

Consultations and responses, to include: publishing a response to the Gambling Commission’s consultation on safer game design; publishing a response to its proposal to ban reverse withdrawals.
Research and knowledge, to include: publishing the findings of the randomised controlled trials with three large operators into anchoring and commitment devices; active engagement in research programmes including the GambleAware-funded project on online patterns of play, led by NatCen.
Testing: implementing the enhanced test house framework and ensuring that the United Kingdom Accreditation Service assessments of test houses are robust and effective.

Chapter 4: the Provider of facilities for gambling

In response to the key issues and risks regarding:

transparent cooperation regarding ownership and governance;
the evolving risks presented by illegal gambling; and
upholding the licensing objective of keeping crime out of gambling.

The Gambling Commission will take the following action:

Consultations and responses, to include: publishing the response to the consultation on the Gambling Commission’s corporate governance including its approach to regulatory panels.
Research and knowledge, to include: publishing clear metrics to measure the effectiveness of regulatory interventions; increasing understanding of the scale of illegal gambling and exploring disruption techniques.
Daily operations, to include: improving data systems and capacity to ensure quicker identification of and response to consumer issues; expanding capacity and availability of accredited online investigators and necessary software tools respectively, in order to tackle illegal gambling.
Regulatory powers, to include: upholding stringent processes to assess the suitability of prospective licensees and taking swift enforcement action against non-compliant licensees; updating the Gambling Commission’s money laundering risk assessment; and continuing to support the sport and sports betting integrity action plan.

With regards to the impact of Covid-19 on gambling consumers (Chapter 6), the Gambling Commission has stated that it will continue to collect and publish data to inform on the ongoing impact and associated risks.

As stated in relation to the providers of facilities for gambling (Chapter 4), the Gambling Commission is preparing key metrics on the impact of its regulation and where it is making progress in changing the behaviours of operators. It will use these metrics along with the four pillars of assessment to help prioritise its responses to harm minimisation in the short and long term. With its evidentiary emphasis, the NSA is a foundational document for the Gambling Commission to continue to develop its regulatory approach and impact and help inform stakeholders. The Gambling Commission itself states:

“Good regulation is informed by good evidence. We continually seek to improve the evidence base; to have access to better data, to move away from just counting problem gamblers to understand more about specific gambling-related harms.”

18Nov

Gambling Commission Compliance and Enforcement Report 2019-2020

18th November 2020 Bahar Alaeddini 329

On 6 November 2020 the Gambling Commission published its annual Raising Standards for consumers – Compliance and Enforcement report 2019 to 2020 (the “Enforcement Report”). The Enforcement Report has been expanded this year and is laid out in the following eight sections:

Chief Executive’s message;
Triggers and customer affordability;
Customer interaction and social responsibility failings;
Anti-money laundering and counter terrorist financing;
Personal management licence (“PML”) reviews;
Illegal gambling;
White label partnerships; and
Betting exchanges.

Chief Executive’s message

In the very first sentence of his message, Gambling Commission Chief Executive, Neil McArthur, reminded readers that:

“Holding an operating licence or a personal licence is a privilege, not a right, and we expect our licensees to protect consumers from harm and treat them fairly.”

He goes on to summarise the Gambling Commission’s compliance and enforcement work in the last financial year (April 2019 to March 2020), in which:

49 section 116 licence reviews were commenced against PML holders;
5 operating licences were suspended;
11 operating licences were revoked;
12 financial penalty packages or regulatory settlements, totalling over £30 million, were imposed; and
350 compliance assessments (land-based and online) were conducted.

Neil McArthur also emphasised:

“Those in boardrooms and senior positions need to live up to their responsibilities and we will continue to hold people to account for failings they knew, or ought to have known, about…Regulatory settlements are a way of resolving enforcement cases which we have used to good effect. Frankly, however, there are too many occasions where settlement proposals are made at a late stage of our investigation process or approached as if a licence review is a commercial dispute to be negotiated. That is not acceptable…Settlements are only suitable where a licensee is open and transparent, makes timely disclosures of the material facts, demonstrates insight into apparent failings and is able to suggest actions that would prevent the need for formal action by the Commission. Only licensees who meet those criteria need make settlement offers; licensees who choose to contest the facts before conceding at a later stage need not make offers of settlement…Everyone has a part to play to make gambling safer and learning the lessons from the failings identified in this report is one way of doing that.”

Summary of other key points from the Enforcement Report:

Triggers and customer affordability

“Customer protection has continued to be a priority for the Commission and consideration of affordability should be a significant driving factor in customer risk assessments.”

Affordability is a top priority and the Gambling Commission remains dissatisfied by industry progress. Open source information remains an important element of an affordability framework, because “it is a parameter to consider when setting benchmark triggers that will drive early engagement with customers”. Open source information shows:

median gross weekly earnings* for full-time employees in the UK of £585;
50% of full-time employees in the UK receive less than £30,500 gross earnings* per year;
50% of full-time managers, directors and senior officials (the highest weekly earners) in the UK receive less than £45,000 gross earnings* per year.

*These are gross earnings before expenses such as income tax, national insurance, mortgage/rent payments, travel, food etc. are deducted. The Gambling Commission expects expenses to be considered “so the starting point adequately reflects the true level of available disposable income for that individual.”

Further, the Gambling Commission is concerned that:

affordability frameworks “are not being implemented at pace despite guidance and advice”;
“complex and convoluted matrices and mappings” are being developed based on gross earnings before disposable income is factored in;
“trigger groups are set without any sort of customer interaction to influence their true affordability determination”; and
operators are not interacting early on to set “adequate, informed affordability triggers to protect customers from gambling related harm”, which it goes on to say “could render the operator non-compliant”.

Most notably, the Gambling Commission adds that:

“Customers wishing to spend more than the national average should be asked to provide information to support a higher affordability trigger such as three months’ payslips, P60s, tax returns or bank statements which will both inform the affordability level the customer may believe appropriate with objective evidence whilst enabling the licensee to have better insight into the source of *those funds and whether they are legitimate or not.”

Operators should review lessons in the Enforcement Report and re-assess affordability triggers whilst preparing for any new requirements that may emerge from the Gambling Commission’s consultation on remote customer interaction. We will publish a blog on this consultation next week.

Customer interaction and social responsibility failings

“We have set out clear expectations for operators in relation to safer gambling. We expect operators to actively work and accelerate cooperation with each other to prevent, mitigate and minimise harm, collaborating to accelerate progress and evidence impact. We want a focus on ‘what works’ and we expect operators to empower and protect consumers.”

The scope of social responsibility is broad and includes identification and engagement with those who may be at risk of or experiencing harms.

The responsible teams for social responsibility should be adequately resourced.

Operators are encouraged to consider whether they can evidence the following:

effective safer gambling policies and procedures in place which are tested and periodically reviewed and updated to reflect impact assessments and new research;
policies and procedures that are truly implemented in the business and are being acted upon;
appropriate safer gambling triggers in place that lead to meaningful customer interactions, which are regularly reviewed by management to critically assess their impact on customers and overall effectiveness;
effective challenge and oversight by senior management with clear accountability throughout the organisation; and
teams responsible for conducting social responsibly interactions are adequately resourced so that at-risk customers are not missed or identified too late.

Licensees are strongly encouraged to review the Gambling Commission’s notable enforcement cases, helpful case studies and good practice guidelines.

Anti-money laundering and counter terrorist financing

“Work to ensure gambling stays free from crime and the proceeds of criminal finance continues to be a major area of concern for the Commission. Significant and substantial assessment continued for both land-based and online gambling businesses, including money service businesses activities offered by the casino sector.”

The Gambling Commission continues to see operators falling down on the following:

insufficient depth of knowledge demonstrated by PML holders, leading to competency and integrity concerns;
deficient Risk Assessments leading to ineffective policies, procedures and controls;
operators and PML holders failing to learn lessons from the Gambling Commission’s compliance and enforcement activity; and
failure to provide regular, quality training to staff.

Licensees are strongly encouraged to review the Gambling Commission’s notable enforcement cases, helpful case studies and good practice guidelines.

PML Reviews

“The Commission has been signalling for the past few years that we will increasingly focus on the role played by Personal Management Licence holders (PML) when undertaking Compliance and Enforcement investigations.”

Common failings have emerged from:

Failures to assess if decisions being made at Executive level are being implemented within businesses.
Overly complicated lines of decision making and accountability.
Lack of technical knowledge and oversight of areas that PML holders have specific responsibility for, especially in respect of AML.
Prioritising commercial outcomes over regulatory responsibility.

This section ends with a stark reminder, which we always provide to our clients and training subjects, “businesses do not make decisions – people do.” The Gambling Commission adds that “icensees can expect us to continue to take action against accountable individuals to ensure standards are raised to the levels required, whether in relation to the business or individual capability.”

Illegal gambling

“Part of our statutory remit and a key licensing objective is to keep crime out of gambling. We are particularly focused on identifying and disrupting those illegal websites which are targeted at the young and vulnerable gamblers and which often provide little, or no, customer protection. When consumers access illegal gambling sites, they expose themselves to many risks and are not afforded the protections in place in the regulated sector.”

The Gambling Commission’s focus has been on investigating unlicensed gambling facilities and unlicensed advertising, with 59 instances of remote unlicensed operators and 245 illegal lotteries referred by Facebook for closure. Its investigations have shown:

consumers identified as users of the websites have in the main been vulnerable with some having previously self-excluded via GamStop;
consumers often contact the Gambling Commission because they have been unable to withdraw funds;
when consumers have complaints with unlicensed operators these are often not dealt with, and consumers have no right to appeal;
the protection of consumers’ personal information cannot be relied upon; and
such websites may be linked to organised crime.

The Gambling Commission urges licensees to remain vigilant as to the risk of illegal sites using their software without authorisation and to report any such instances immediately

White label partnerships

“The white label operating model continues to be popular within the GB market with there being over 700 white label partners within the industry at present. One of the reasons this model is becoming increasingly popular is that this type of arrangement can bring global exposure to an operator’s products, via the arrangements their white label partners have in place with sports teams for example. However, there is a concern that unlicensed operators who would potentially not pass the Commissions’ initial licensing suitability checks, are looking to use the white label model to provide gambling services in Great Britain.”

White labels have been a key area of focus for the Gambling Commission in the last year. It showed that licensees were failing to appropriately mitigate the risks to the licensing objectives, including:

a failure to properly scrutinise the ownership of white label partners;
ineffective AML controls with individual white label partners or across the customers’ activity; and
poor oversight of activities performed by white label partners, particularly in relation to customer interactions.

Responsibility for compliance always sits with the licensee. In accordance with social responsibility code provision 1.1.20 (responsibilities for third parties) safeguards should always be implemented before committing to contractual obligations to ensure compliance with the LCCP. Failure to do so is likely to bring into question the suitability of the licensee.

Operators are encouraged to:

Conduct risk-based due diligence with a view to mitigating risk to the licensing objectives before entering a relationship with a white label partner;
continually manage and evaluate its white label partner relationships;
ensure service agreements between the licensee and white label partner explicitly articulate where overall responsibly for regulatory functions lie;
ensure white label partnership contracts contain a clause permitting the licensed operator to terminate the business relationship promptly where the partner is suspected of placing the licensing objectives at risk or fails to comply with the requirements contained in the LCCP;
provide training to their partners and conduct ongoing oversight of the activities which should be clearly documented and retained for the life of the business relationship;
ensure that any system the licence holder has in place to manage or detect multiple accounts for individual customers, works across all white label partners so they will have a holistic view of customer activity; and
ensure that source of funds, affordability or markers of harm triggers are based upon this holistic view and not solely on an individual domain basis.

Licensees are strongly encouraged to review the Gambling Commission’s notable enforcement cases, helpful case studies and guidance on white labels.

Betting exchanges

“This year has seen increased regulatory activity related to betting exchanges; an area of growing complexity as operators expand the breadth of markets available and the jurisdictions from which they draw their customers.”

The Gambling Commission reminds betting exchanges that they must apply “critical risk-based thinking” and must not assume that something good enough for one regulator will be acceptable to another. Due diligence should be undertaken for each individual customer. In particular, source of funds and source of wealth must be monitored by adequate checks and controls, particularly where these may be obscure, unconventional and/or especially large – for instance, in relation to account to account transfers or syndicates.

Licensees are strongly encouraged to review the Gambling Commission’s notable enforcement cases.

We strongly encourage all Gambling Commission licensees and applicants to read the Enforcement Report carefully.

30Oct

Harris Hagan retains Band 1 ranking in Chambers and Partners

30th October 2020 Francesca Burnett-Hall 303

We are delighted to announce that Harris Hagan has been ranked in Band 1 of Chambers and Partners UK for the 18^th consecutive year for gaming in the UK, with Chambers describing us as:

“…world class in all areas of gambling law”.

The firm now has five lawyers individually ranked, with partners Julian Harris and John Hagan retaining their Band 1 rankings, and partner Bahar Alaeddini her Band 2.

Francesca Burnett-Hall, an associate, has received her debut mention as an Associate to Watch, with Hilary Stewart-Jones ranked as a Senior Statesperson.

We received many positive testimonials, including:

“The firm excels in what it does. It is highly skilled, supremely well informed about the sector, always responsive and has a consummate ability to translate regulation into effective advice”

“They are top of the league in their depth of knowledge”

“They are very customer service-oriented, approachable and knowledgeable about the industry”

“Julian Harris has a wealth of experience and is able to guide clients through complex issues…”

John Hagan “is a well-respected lawyer who has a wide reach in the industry. He takes time to ensure that he is engaged across the industry and remains focused on the international legal landscape.”

“Bahar Alaeddini is noted for her adept handling of regulatory matters concerning online and land-based gambling.”

“Francesca Burnett-Hall’s practice spans a broad range of online and land-based gambling matters.”

Hilary Stewart-Jones “is just fantastic – you couldn’t wish for better commercial and practical advice.” “I think very highly of the advice given by her, it is excellent. I appreciate her understanding of everything regulatory.”

We wish to thank our clients and friends of the firm for their continued input and recognition of our work.

22Oct

Betting and Gaming Council Announces Game Design Code of Conduct

22nd October 2020 Jessica Wilson 316

On 25 September 2020, the Betting and Gaming Council (“BGC”) announced the new Game Design Code of Conduct (the “Code”). The Code is a product of the industry’s Safer Products Working Group which was formed in January 2020 and tasked with pursuing the opportunity to reduce gambling harm through game and product design.

Compliance with the Code is to be undertaken by BGC members, including where operators use non-BGC game suppliers.

The Code applies to online slot products and is intended to be a “living document, evolving as the research base and understanding around game design continues to develop”. The Code sets out 14 principles to show a commitment to “transparency, player education, innovation and research with the overarching aim of enhancing player safety” which can be categorised into the following areas:

Game Characteristics:	Working with academics, regulators, consumers, individuals with lived experience of gambling related harm and other technical experts to identify and agree on features that are correlated to greater player risk.
Informed Player Choice:	Empowering customers to play more safely through the provision of clearer information on product and game rules, including mathematical properties such as risk, the chances of winning and optimal strategies.
Enhancing Control Innovation:	Improvements in safer gambling tools that help players both monitor and control their gambling, including spend, loss, win and time-based measures.
Governance and Continuous Improvements:	Process for reviewing and updating any Code of Conduct, in addition to transparency, disclosure and independent evaluation.

The Code is divided into two phases:

Phase 1

This phase introduces four standards of game design. The requirements are in line with the Gambling Commission’s recent consultation on online slots game design which aims to make these standards applicable to the whole industry. The Code of Conduct requires BGC members to have the measures in place by 30 September 2020, making BGC members “amongst the first to commit to these standards”.

The four standards are as follows:

1. Minimum game cycle speed of 2.5 seconds

A game cycle starts when a player has paid for an initial wager and depresses the ‘start’ or ‘spin’ button or takes equivalent action to initiate the game and ends when all money or money’s worth staked or won during the game has been either lost or delivered to, or made available for collection by the player and the start button or equivalent becomes available to initiate the next game. Where auto play or auto start is permitted then a game cycle is measured from the point at which the game is initiated by the system (equivalent to the player depressing the start button) to the point at which it is able to automatically start the next game.

2. Removal of turbo play

Turbo play or equivalent features will be not be allowed. Such features enable the player to speed-up the base game cycle speed of the game.

3. Removal of base game slam stops

Slam stops or equivalent features will not be allowed within the base game. This is the ability for the customer to interact with the base game to end it before it has naturally concluded e.g., by hitting or pressing a button whether online or on a physical machine. This includes promotional free wagers paid for by the operator.

4. Removal of multi-slot play within a single gaming client

Functionality that allow players to place multiple, separate stakes on multiple slots games within a single gaming client will not be allowed.

Phase 2

Phase 2 requires BGC members to implement additional measures for new games by 31 January 2021 to “enhance transparency and add friction for players”.

1. Wins below the stake size

Total wins below the stake will be informative and will be differentiated from wins that are equal to or greater than the stake. Specifically:

The win amount will be displayed
- The win line is displayed long enough for player to understand the impact of the bet (in line with existing RTS 7E)
- A brief sound can be used to make the player aware of the result (the return of funds to wallet)

In contrast, total wins equal to or greater than the stake may be celebratory and allow the following elements:

The win amount can be displayed in a differentiating manner e.g., the win display could be in a text size that is greater and could utilise dynamic win animations, for example coin showers
- The win line can be displayed with additional animation permitted
- Celebratory sound effects can be used.

2. Bonus game notifications

Bonus games outside the base game will not be automatically triggered without a customer intervention, e.g., clicking a button to acknowledge that a bonus game has been won and can now be entered. In addition, after the end of a bonus game, the player will receive a notification informing them the bonus game has finished before re-entering the base game. If Auto-play is used during the bonus game, it will automatically stop before re-entering the base game. In the exceptional case that a bonus game is not triggered before the platform would normally time out, the operator has the right to clear down the game with any winnings being added to the player’s balance.

The implementation timeframe of the following two measures will be agreed in the coming months:

1. Access to safer gambling information

While a player is playing a game, the display will include a link to safer gambling information that will be available to view within a prominent place on the gaming client. This will display a safer gambling icon and messaging and contain links to the customer account pages of the operator, with quick links to all limit setting functionality (e.g., deposit, loss, time, timeouts, and self-exclusion).

2. Mandatory player interaction

A mandatory player interaction will be initiated every 60 minutes or at the conclusion of the subsequent game cycle. This will require the customer to acknowledge the message.

The BGC has stated that it may recommend to the Gambling Commission that the Phase 2 measures are adopted as part of the Gambling Commission Remote Technical Standards.

Innovation and Testing Lab

The BGC have created a work programme for the BGC Innovation and Testing Lab to use an evidence-based approach to development of the Code and to inform future changes. The BGC intends to be “transparent in the reporting of findings, methodology and data”.

The Innovation and Testing lab will be focussing on the following projects:

Game labelling – work on creating a consistent safer gambling icon and a common game labelling scheme for key features such as volatility and persistence
Increased staking – work to assess the prevalence of increased staking in slots sessions, whether this behaviours correlates to a risk of harm and how safer gambling messaging can be incorporated to enhance player safety
Auto-play – work on the relationship between auto-play and staking behaviour and whether any risk mitigation is required
Display of net position and elapsed time – work on providing players with quick access to information on their net spend and time elapsed

BGC’s Game Design Code of Conduct has introduced significant changes to the design and functionality of online slots games. The industry should expect to see more changes due to ongoing work in the industry and the awaited Gambling Commission response to its consultation on online slots which closed on 3 September 2020. See our blog on 10 July 2020 for further details. BGC members, and those supplying BGC members, are reminded of the Phase 1 measures were implemented on 30 September 2020.

14Oct

Gambling Industry Code for Socially Responsible Advertising, Sixth Edition

14th October 2020 Ting Fung 298

“From ancient times in China, Egypt and Rome, it has been present as a pastime, affording enjoyment for many, corrupting some and harming not a few…”

Of gods and mortals

In his introduction in the Chambers and Partners Gaming Law Global Practice Guide, Julian Harris writes of Palamedes, the god to which the Greeks ascribed the invention of dice, as well as weights and measures. With the publication of the sixth edition of the Gambling Industry Code for Socially Responsible Advertising (the “Industry Code”), now under the custody of the Betting and Gaming Council (“BGC”), it is this dichotomy of play and balance that is held in mind.

As technology and its consumption changes and continues to advance, consumers across industries are more exposed to advertising than ever, maximising fun but also magnifying potential harm. With the scope of online advertising presenting the greatest influence, and arguably the most risk, it is unsurprising that one of the key areas of update in the Industry Code relates to social media, in respect of marketing and its use to promote consumer awareness.

What licensees need to know

From 1 October 2020, Gambling Commission-licensed operators are required to enforce the following:

Sponsored/paid-for social media advertisements must be targeted at consumers aged 25+. This requirement relates solely to prospecting campaigns where the targeted audience is not already verified through an operator’s own age verification processes;
Given improvements in identification technology if a social media platform can verifiably prove that its age gating systems can prevent under 18s from accessing the gambling advertising content, a possibility exists that the above age filter may be reduced to 18+;
Organic YouTube content produced by an operator as well an operator’s own YouTube channels must be age-restricted to 18+ to ensure users log in to age-verified accounts in order to view content;
Operators should undertake reasonable endeavours to exclude from their paid-for social media campaigns (a) customers with an active self-exclusion or cool-off period and (b) those assessed by an operator as ‘higher risk’;
Operators must use their own social media pages to post frequent safer gambling related information; and
Operators must provide information (in an easily accessible and sufficiently prominent manner) on how customers can limit their exposure to gambling advertising across social media platforms.

In other areas, further changes to the Industry Code include:

Search activity

Search advertisements must clearly contain 18+ messaging in the advertisement copy, along with safer gambling messaging within the core ad format;
The BGC will collate (and regularly update) a shared blacklist of negative keywords, against which no gambling advertising should be served. This blacklist will include keywords that (a) indicate vulnerability and (b) relate to children. Operators must, “in a timely fashion”, incorporate the keyword blacklist into all relevant campaigns where applicable;
These requirements will also apply to any affiliate marketing carried out on behalf of an operator.

Affiliate compliance

All affiliates must be subject to due diligence and PEPS/sanctions checks. KYC checks should also be conducted, wherever relevant.
Affiliates must comply with all relevant regulatory and legislative requirements including CAP’s guidance on ensuring advertisements are obviously identifiable as such. In order to promote consistency, all relevant affiliate ads should be clearly and prominently marked ‘#ad’;
Relevant affiliates must share safer gambling related content on a regular basis with each individual operator with whom that affiliate has an agreement;
It is expected that (a) compliance with the above requirements will be managed by way of contractual obligations imposed by operators and (b) operators will terminate relationships with affiliates that cannot or do not comply, the Industry Code adding that this will be “preferably on a one strike and you’re out rule” basis.

As many will already be aware, ordinary code provision 5.1.8 of the Licence Conditions and Codes of Practice states: “icensees should follow any relevant industry code on advertising, notably the Gambling Industry Code for Socially Responsible Advertising”.

The Industry Code states that it aims for the above changes to “better protect children and vulnerable consumers online”, with BGC Chief Executive, Michael Dugher, further adding:

“We have made excellent progress in recent times and the Industry Code for Socially Responsible Advertising is updated as technology evolves. The latest edition is further evidence of our determination to continue to ensure that standards are rising and are as high as they can possibly be”.

The measures are certainly timely in light of the Advertising Standards Authority’s findings published in August 2020, which revealed that four operators had breached age-restricted advertising rules.

Whistle-blowing at its finest

By contrast, in other avenues of advertising, the ‘whistle-to-whistle’ ban (introduced under John Hagan’s leadership as former Chair of IGRG) has proven markedly effective, with the BGC noting that betting advertisements seen by children has since fallen by 97% and that the amount of gambling advertisements viewed by children has fallen by 70% over the full duration of live sport programmes.