31Oct

Financial Action Task Force: October 2024 update to Grey List jurisdictions

31st October 2024 Chris Biggs 33

The Financial Action Task Force’s (“FATF”) Plenary concluded on 25 October 2024, with the announcement of changes to its list of Jurisdictions under Increased Monitoring (“Grey List”).

The changes to the Grey List are as follows:

Senegal is no longer subject to increased monitoring by the FATF, following a successful on-site visit. The removal was due to “significant progress” in addressing the strategic anti-money laundering (“AML”), counter-terrorism financing (“CTF”) and counter-proliferation financing (“CPF”) deficiencies previously identified during its mutual evaluation. Senegal will continue to work with the FATF and the Inter Governmental Action Group against Money Laundering in West Africa to continue improving its AML/CTF/CPF regimes.

The FATF has added Algeria, Angola, Côte d’Ivoire and Lebanon to the Grey List. These jurisdictions will now work with the FATF to address the strategic deficiencies in their AML/CTF/CPF regimes and have each committed to implement an action plan to resolve swiftly the identified strategic deficiencies within agreed timeframes.

The FATF again made no changes to its list of High-Risk Jurisdictions subject to a Call for Action (“Black List”), which at the time of writing includes the Democratic People’s Republic of Korea (“DPRK”), Iran and Myanmar.

A full list of high-risk third counties on the FATF’s Grey and Black Lists can be found on its website.

Holders of casino operating licences issued by the Gambling Commission are required by regulation 33(3)(a) of The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 to conduct enhanced customer due diligence and enhanced ongoing monitoring in any business relationship with a person established in a jurisdiction named on the Grey or Black Lists (a ‘high-risk third country’).

Next steps

We recommend that all licensees review their AML/CTF/CPF policies, procedures and controls, including business risk assessments, to ensure that they reflect the changes to the Grey and Black Lists.

In addition, licensees should diarise the dates of the next FATF Plenary meeting, so they can check if there are further updates. The FATF’s next meeting will take place between 17 – 21 February 2025.

Please get in contact with us if you require assistance reviewing your AML/CTF/CPF policies, procedures or risk assessments or with any other AML/CTF/CPF compliance matters.

31Oct

Gambling Commission Annual Report 2023-2024

31st October 2024 Ting Fung 36

The Gambling Commission’s latest Annual report and accounts (the “Annual Report”) for the reporting period 1 April 2023 to 31 March 2024 (the “Period”) was published on 17 October 2024. Key focuses during the Period include the implementation of the Gambling Act Review and the Gambling Commission’s award of the Fourth National Lottery Licence, which led to the first ever change of licensee in the history of the National Lottery.

Performance report

The Annual Report contains a performance report in which the Gambling Commission provides a detailed overview of its delivery during the Period against the five strategic objectives from its 2021-2024 Corporate Strategy. We have summarised some key information from this performance report below, along with other highlights from the Annual Report.

Protecting children and vulnerable people from being harmed or exploited by gambling

Following the publication of the Gambling Act Review White Paper, there were a number of consultations in the Period in relation to proposed changes to the Licence Conditions and Codes of Practice (“LCCP”) and the Remote gambling and software technical standards. Proposals included: (a) improving consumer choice on direct marketing; (b) strengthening age verification on premises; and (c) reviewing socially responsible incentives to ensure incentives such as free bets and bonuses do not encourage excessive or harmful gambling. The issue that proved most controversial related to financial risk checks, with the Gambling Commission reiterating in the Annual Report that this a complex area as it aims to “protect vulnerable people from harm whilst respecting the freedom of others to gamble freely”. Therefore “ committed to a step-by-step approach to implementation and a pilot on the enhanced financial risk assessments to test the process and impacts on consumers.”

The Gambling Commission sets out the several changes it made to the LCCP during the Period including by: (a) setting out its approach to ‘vulnerability’; (b) extending the requirement to participate in GAMSTOP to all gambling licensees that make or accept bets by telephone and email; and (c) adding an additional reportable event that requires all gambling licensees to inform it when they become aware that a person who has gambled with them has died by suicide.

Gambling Commission publications in the Period aimed at improving the breadth and quality of data included:

The Gambling Survey for Great Britain: Statistics on gambling participation – Annual report Year 1 (2023): Official statistics (See Other highlights below for further detail);
Evidence Gaps and Priorities 2023-2026 (July 2023); and
Young People and Gambling Report (November 2023).

2. A fairer market and more informed consumers

The Gambling Commission points out that it has reviewed its approach to tackling non–compliant terms and practices, including the processing of customer withdrawals. Delays to the withdrawal of funds from accounts, (more than 2,400 complaints during 2023) remained the primary consumer complaint during the Period. The Gambling Commission has previously worked with the Competition and Markets Authority and updated the LCCP to clarify licensees’ responsibilities, including the requirement that licensees do not seek to verify information at the point of withdrawal that they had the opportunity to do earlier in the process. In the Annual Report the Gambling Commission reiterates that “Where such practices are identified, we will continue to hold licensees to account.” Please see our blog Account withdrawals: The mask operators cannot hide behind for more information.

In addition to initial outputs from the Consumer Voice research programme, the Gambling Commission has completed 58 website reviews, with 51 websites found to be either complaint or to have minor issues relating to things such as promotional bonus offer terms. The remaining websites reviewed raised more significant issues requiring further investigation and/or escalation.

Keeping crime out of gambling

The Gambling Commission explains that it has continued to work with partners to undertake intelligence-led disruption and enforcement initiatives to contribute to a reduction in crime associated with gambling, stating that “our collection, analysis and sharing of intelligence with other regulators and agencies remains a cornerstone of our work.” It has held discussions with search engine providers to discuss referrals and further action on search results and talks are ongoing to improve its ability to disrupt unlicensed operators.

Key figures in the Period in this area include:

384 cease and desist and disruption notices were issued to unlicensed operators resulting in 136 website restrictions through suspension or IP blocking; and
122 compliance assessments of online and land-based operators, 77 website reviews and 182 security audits were conducted.

In addition, from April 2023, the Gambling Commission also assumed responsibility for collecting the Economic Crime Levy from licensed casino operators.

Optimising returns to good causes from the National Lottery

Returns to good causes which were derived from a combination of the Third and Fourth Licence period totalled £1.7 billion at the end of the financial year. The Period saw the transition of the National Lottery licence from Camelot to Allwyn, who were formally granted the Fourth Licence to operate the National Lottery on 1 February 2024. Subject to the resolution of the legal challenges this licence will run for 10 years.

Key changes to the Fourth Licence include:

A new ‘Incentive Mechanism’ so that all National Lottery products will now make returns to good causes at the same level (meaning Allwyn will only see profits rise if returns to good causes increase); and
A move to an outcomes-based approach that will give Allwyn greater responsibility to fulfil its obligations, while retaining the Gambling Commission’s powers to intervene if they fail to do so.

Improving gambling regulation

The Gambling Commission recognises the need for an upgrade to existing systems in order to “serve the needs of the business more efficiently” and expects this to be completed during 2024 to 2025. Its requirement that licensees send returns quarterly is intended to ensure the information it receives is relevant and timely, and enables it to identify issues arising as early as possible.

Further information on the Gambling Commission’s plans for gambling regulation are set out in its Corporate Strategy 2024 to 2027 published on 8 April 2024, with commitments to be detailed in annual business plans and outcomes published in future annual reports.

Other highlights

Gambling Commission research

In respect of other datasets referred to in the Annual Report, the Gambling Commission’s Cost of Living (2023) research found that:

“1 in 5 gamblers who reported changes in their gambling behaviour (either increased or decreased) said this was entirely due to increased cost of living. In addition, 8.5 per cent of gamblers reported using gambling to supplement their income on a regular basis.”

The Gambling Commission therefore continues to stress the need for operator vigilance during these times of heightened consumer vulnerability.

Gambling Survey for Great Britain

In respect of the Gambling Survey for Great Britain (“GSGB”), which focuses on the types of gambling activities that people take part in and the reasons why people gamble, the Annual Report emphasises that because the GSGB is a new survey, it does mean that it cannot compare GSGB data to data from previous alternative surveys and that, with time, the data collected will grow and enable it to look at trends and comparisons across this data source.

Enforcement?

The Annual Report notes that in 2023 – 2024, enforcement action led to the suspension of one operating licence and £13.4 million in fines or regulatory settlements: a reduction on the previous year. The Gambling Commission acknowledges that it has seen a significant increase in compliance from larger operators at the point of their assessment, with the rate of operators achieving compliant first-time outcomes doubling and the rate for the largest operators almost trebling in the past two years.

In terms of other operational activities, 133 operator licenses were processed and 122 compliance assessments were conducted for online and land-based operators in the Period.

Industry figures and statistics

Gross Gambling Yield (“GGY”) for the British gambling industry in 2022-2023 was £15.1 billion (a 6.8% increase when compared to April 2021 – March 2022) and GGY for the British remote and/or online sector was £6.5 billion in 2022 – 2023 (a 2.8% increase when compared to April 2021 to March 2022).

For the Period, the Gambling Commission’s fee income comprised:

£1.21 million from operator applications (down from £2.05 million in 2022-2023)
£0.75 million from personal licence fees (down from £0.76 million in 2022-2023)
£23.86 million from operator annual licence fees (up from £22.89 million in 2022-2023)
£0.36 million from miscellaneous sources (down from £0.39 million in 2022-2023)

In terms of expenditure, gambling regulation costs in the Period totalled £21.07 million (up from £19.33 million in 2022-2023), and National Lottery functions accounted for £19.34 million (down from £21.58 million in 2022-2023), of which £17.03 million was spent on the National Lottery Fourth Licence competition. Overall, the Gambling Commission’s table of year-on-year expenditure for gambling and National Lottery regulation shows an increase in operational costs since 2019-2020.

What’s next?

In the Foreword of the Annual Report, Gambling Commission Chair, Marcus Boyle and its Chief Executive Officer, Andrew Rhodes, both agree that:

“The next few years provide a once-in-a-generation opportunity to make gambling safer, fairer and crime free.”

The Gambling Commission’s next steps are set out in its Corporate Strategy 2024 to 2027. For further details on the Corporate Strategy 2024 to 2027, see the previous blog from Gemma Boore.

08Oct

Reminder: Changes to specified management offices come into force on 29 November 2024

8th October 2024 Chris Biggs 46

Licensees are reminded that on 29 November 2024, the Gambling Commission will update licence condition (“LC”) 1.2.1 of the Licence Conditions and Codes of Practice (“LCCP”) to clarify and extend the roles captured as ‘specified management offices’ (“SMOs”) under this requirement. Licensees impacted by this change should take action now to ensure relevant individuals are granted personal management licences (“PMLs”) before the new requirements come into effect.

Background

Earlier this year, the Gambling Commission published its response to the Summer 2023 consultation (“Consultation Response”) in which it confirmed that it would proceed with changes to the LCCP to clarify and extend the roles captured as SMOs, which from 29 November 2024 will include:

Chief Executive Officers, Managing Directors or equivalent positions;
Chairs of Boards – unless that person only holds the position on a transient and short-term basis for individual meetings; and
Those responsible for AML and CTF, including the Money Laundering Reporting Officer and Nominated Officer.

For further background and discussion please see our previous blogs: White Paper Series: Transforming corporate culture by “driving personal accountability and responsibility” for lookers-on seeing most of the game? and Gambling Commission publishes Summer 2023 Consultation Response and Betting & Gaming Council announces New Industry Voluntary Code.

New Requirement

From 29 November 2024, LC 1.2.1 (2) will read:

1.2.1 (2). The specified management offices are those offices (whether or not held by a director in the case of a licensee which is a company, a partner in the case of a licensee which is a partnership or an officer of the association in the case of a licensee which is an unincorporated association) the occupier of which is by virtue of the terms of their appointment responsible for:

a) the overall management and direction of the licensee’s business or affairs (this is likely to be the Chief Executive Officer, Managing Director or equivalent).

b) chairing the Board (where the licensee has such a body) where that appointment is held for a fixed or indeterminate term of office, unless:

1. 1. 1. the position is held only on a transient and short-term basis for individual meetings; and
    2. the licensee retains evidence in support of point 1.

….

i) the licensee’s anti-money laundering and counter-terrorist financing function as head of that function his is likely to include the following:

a) for holders of casino licences, the person responsible for compliance with the relevant regulations (and appointed in accordance with those regulations); and the person responsible for submission of reports of known or suspected money laundering or terrorist financing activity under the relevant legislation (and appointed in accordance with the relevant regulations)

b) for holders of licences other than casino licences, where an individual has been appointed to submit reports of known or suspected money laundering or terrorist financing activity under the relevant legislation, that individual.

As regular readers will be aware, the Gambling Commission consulted on the proposal that the Board Chair be required to hold a PML “to ensure that those responsible for scrutiny, strategy and leadership at the most senior level within the organisation”. This means that, where licensees sit within corporate groups, the obligation to hold a PML could be extended to the Board Chair of the top parent company, and CEOs or Directors of parent companies, due to the level of influence those individuals are able to exercise over the licensee. It is therefore important that licensees with extended group structures: (1) consider which individuals within their wider group may be impacted by the new requirement so any necessary PML applications can be made as soon as possible; and (2) if there is uncertainty, proactively contact the Gambling Commission for clarification in advance of the requirements coming into effect.

Next Steps

The changes come into force on 29 November 2024, meaning PML applications for these positions must have been granted before this date. On the basis that it can take eight weeks for the Gambling Commission to process a PML application (assuming there are no issues with the application), PML applications need to be submitted as soon as possible. If affected individuals do not hold a PML before 29 November 2024, the licensee will be in breach of LC 1.2.1 (2).

Please get in touch with us if you have any questions about PMLs, if you would like assistance with PML applications, or if you are interested in our PML training services.

30Sep

Harris Hagan promotes Jessica Wilson to Senior Associate

30th September 2024 Harris Hagan 52

Harris Hagan is delighted to announce that Jessica Wilson will be promoted to Senior Associate with effect from 1 October 2024.

Jessica has been a tremendous asset to the firm since joining as a newly qualified solicitor in 2019, working on the specialist due diligence and licensing aspects of some of the largest M&A transactions in the gambling sector in recent years, as well as advising our clients generally on gambling law and regulatory matters.

We congratulate Jessica on her achievement and we are confident that she will contribute enormously to the continued success of the firm.

09Sep

Harris Hagan speaks at the Backing The Punt conference

9th September 2024 Harris Hagan 64

Harris Hagan is delighted to join the leading Australian gambling law firm Senet, virtually, for their two-day conference, Backing the Punt. The conference will focus on the issues, challenges and opportunities facing the betting and racing industry in Australia.

The event will take place on 11-12 September 2024 at the RACV City Club & Conference Centre in Melbourne. Partner, Bahar Alaeddini, will be joining virtually on 11 September 2024 to speak on the panel, International showcase – what are the trends and developments in international wagering, racing and sports betting?.

The panel will be moderated by Julian Hoskins, Principal at Senet, and the other panellists will include:

Ben Haden, Director of Research and Statistics at the British Gambling Commission
Scott Scherer, Shareholder at Brownstein Hyatt Farber Schreck
Joseph Borg, Partner, WH Partners

For full details and tickets, see Senet’s website.

30Jul

Baroness Twycross announced as new Gambling Minister

30th July 2024 Chris Biggs 70

On 26 July 2024, the Government announced that Baroness Fiona Twycross was appointed Minister for Gambling, in addition to her roles as Baroness in Waiting (Government Whip) and Parliamentary Under-Secretary of State at the Department for Culture, Media and Sport (“DCMS”).

Baroness Twycross has been a member of the House of Lords since November 2022 and previously held the roles of Opposition Whip and Shadow Spokesperson (Education) from February 2023 until the election. Prior to this appointment, Baroness Twycross had not contributed to gambling-related parliamentary debates, nor voted on any gambling-related legislation in the House of Lords.

However, in yesterday’s parliamentary debate on the Horseracing and Bloodstock Industries, Baroness Twycross made her first comments on the new Labour Government’s position regarding the horseracing betting levy, stating:

“… the previous Government undertook a review that concluded only in April. I am committed to working with noble Lords across the House to make sure that we get the right arrangements for the industry and the levy is administered efficiently to best support racing. It is too soon, however, for me to commit to the shape of future policy.”

Baroness Twycross also briefly addressed the topic of gambling reform and gambling-related harm:

“As stated in the Government’s manifesto, we are absolutely committed to strengthening protections for those at risk. The Gambling Commission’s new survey which came out last week really helps to show the wider picture of gambling behaviour across Great Britain, and we will consider its findings very carefully.”

The news of Baroness Twycross’ appointment followed a fortnight of industry speculation that Stephanie Peacock MP, who has also been appointed as a Parliamentary Under Secretary of State in DCMS, would also be appointed the gambling ministerial portfolio. Peacock was tipped for the role, having previously been the Shadow Minister for Media, Gambling and Sport and having recently contributed to parliamentary debates on the topic of gambling, including on the Football Index collapse and gambling advertising in sport, and having made a speech at the AGM of the Betting and Gaming Council in February.

Baroness Twycross’ comments in yesterday’s parliamentary debate come ahead of the House of Lords recess at the close of business today. The House of Lords will return on 2 September 2024.

26Jul

Account withdrawals: The mask operators cannot hide behind

26th July 2024 Jessica Wilson 75

On 18 July 2024, the Gambling Commission published a blog by Chief Executive, Andrew Rhodes, on its expectations on account withdrawals, which comes a year after it published its concerns regarding delays customers were experiencing when attempting to withdraw funds.

Whilst the Gambling Commission has seen a reduction in customer complaints regarding withdrawals, they remain the number one subject of complaints the Gambling Commission receives across all operator sizes. As stated in its previous blog, the Gambling Commission reminds operators that it is not acceptable to introduce friction when a customer tries to withdraw from their account, rather than when they deposit into the account, nor should they place their commercial interests over those of their consumers. The Gambling Commission’s blog details several issues it has encountered as part of its compliance work.

Issue 1: Explaining the reason for requesting additional information from the customer or the reason for not paying out

The Gambling Commission has seen operators requesting additional information from customers, as part of the withdrawal process without explaining to the customer the reason for requiring such information.

Under licence condition (“LC”) 17.1.1, operators must obtain and verify a customer’s identity before the customer is permitted to gamble. A customer request to withdraw funds must not result in a requirement for additional information to be supplied as a condition of withdrawal, if the operator could have reasonably requested that information earlier.

The Gambling Commission has reminded operators that it wants transparency for consumers on withdrawals, meaning operators “should make proper efforts to explain to customers what the checks and restrictions are” and that “customers should be informed of the reasons why their withdrawal has been delayed”.

The Gambling Commission has issued a warning that “where we find evidence that an operator has deliberately misled a customer in its communications with them, we will consider the need for regulatory action”.

However, the Gambling Commission does acknowledge that, where there is a knowledge or suspicion of money laundering offences being committed, operators must ensure customers are not tipped-off, which could result in committing an offence under the Proceeds of Crime Act 2002 (“POCA”).

Issue 2: Timing of requests for additional information

The Gambling Commission has seen cases where operators have asked a customer to provide source of funding information after a withdrawal request has been made, with the operator withholding the account balance until the source of funding requests have been satisfied.

Operators are expected to monitor customers’ accounts on an on-going and risk-sensitive basis. The lack of source of funding evidence, in this case, did not prevent the customer from being allowed to make deposits and gamble their funds.

The Gambling Commission has reminded operators that that if they do not have any regulatory concerns about a customer (such as suspicions of money laundering), then there is no valid reason to delay the payout of the withdrawal. Operators “should not…continue to accept deposits indefinitely and then seek to rely on their anti-money laundering procedure to frustrate a withdrawal request”.

Issue 3: Third-party payment methods

The Gambling Commission is aware of instances where an operator has suspected customers funding their accounts through third party payment methods, but only verifying that payment method after a withdrawal request has been made.

The use of third-party payment methods is classified as high risk in the Gambling Commission’s money laundering and terrorist financing risk assessment for the British gambling industry. It is therefore usual for operators to have terms and conditions in place to prevent customers using such payment methods. Where there is suspicion that an account may be funded by a third party, operators should ensure that any investigation is conducted promptly. The Gambling Commission considers it unfair to customers if operators accept deposits from third-party payment methods, but only makes enquiries when a withdrawal request is made.

Issue 4: Confiscation of customer deposits

The Gambling Commission has been made aware that operators sometimes seek to confiscate a customer’s deposit balance, either due to money laundering suspicions or because of a suspected breach of terms and conditions.

The Gambling Commission reminds operators of the offences and statutory requirements under POCA and the Terrorism Act 2000, and that confiscating or returning account funds where there is knowledge or suspicion of money laundering or terrorist financing could result in committing an offence, unless a defence has been sought.

The Gambling Commission further reminds operators of LC 7, which requires operators to ensure that the terms on which gambling is offered are not unfair. The Competitions and Markets Authority has published guidance on unfair terms, with one principle being that consumers should be allowed to withdraw their deposit balance at any time without restriction (except to comply with general regulatory obligations, including anti-money laundering and fraud prevention).

Other reminders

The Gambling Commission’s blog ends with some other useful reminders for operators:

Operators should not have terms that give them undue discretion as to when and how those terms are applied, as such terms could be unfair, as set out in the Gambling Commission’s guidance. For example, they should not have terms that say the operator “may” or “reserves the right” to void or withhold winnings in situations.
Operators must comply with consumer protection laws and treat customers in a fair, open and transparent way.
There may be reasons for an operator to seek further information from a customer for safer gambling purposes as part of a customer interaction, but operators should be transparent with their customers that the reason for requesting more information is for safer gambling purposes. However, the Gambling Commission confirms that it would not be “fair, transparent or necessary to delay or prevent withdrawals purely for customer interaction purposes”.

The Gambling Commission lastly states, “it is imperative that operators review their terms and practices on withdrawals on an ongoing basis, to ensure they are acting compliantly and are treating their customers fairly.”

The Gambling Commission’s blog makes it clear that a delay in processing a customer withdrawal could unmask other areas of non-compliance, including failing to conduct customer due diligence correctly, allowing a customer to gamble without sufficient identity or source of funding checks taking place or failing to verify third-party payment methods before being allowed to gamble

Attempting to correct these mistakes at the point a customer withdraws funds is a mask operators cannot hide behind, as the Gambling Commission has shown that it can see through these actions. Operators should review the Gambling Commission’s guidance in its blog and review their practices to ensure they do not make similar errors. The Gambling Commission’s confirmation that it is not afraid to take regulatory action is a clear warning to operators.

However, operators should not lose sight of their anti-money laundering responsibilities and obligations under POCA, the Terrorism Act 2000, the Licence Conditions and Codes of Practice, the Gambling Commission’s anti-money laundering guidance for casino businesses and for non-casino businesses, and the Money Laundering and Counter-Terrorist Financing (Information on the Payer) Regulations 2017.

If you have any questions or concerns regarding account withdrawals, your policies and processes, your terms and conditions, or your anti-money laundering and counter-terrorism financing responsibilities and obligations, please do reach out to your usual Harris Hagan contact, or get in touch with us here.

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15Jul

Unlicensed gambling: Is the Gambling Commission winning the “whack-a-mole” game?

15th July 2024 Gemma Boore 64

As regular readers will recall, in our blog: Unlicensed gambling – growing threat or exaggerated myth? which was published in November 2023, we:

discussed the threat of unlicensed gambling in Great Britain, along with steps the Gambling Commission had – as at that date – been taking to disrupt illegal, unlicensed operators;
advised businesses on the steps to take if they discover their intellectual property is being used on illegal gambling sites; and
provided a helpful checklist of actions for licensees to take, if they receive communications from the Gambling Commission regarding illegal gambling activity.

In this next instalment, we explore recently published research regarding the extent of unlicensed gambling in Great Britain, discuss the different ways in which gambling is illegally being made available to consumers, and comment on some of the newer methods the Gambling Commission is using to tackle unlicensed gambling – pending the introduction of its new powers under the Criminal Justice Bill.

What do we mean by unlicensed gambling?

As noted in our previous blog, it is an offence to provide facilities for gambling to customers in Great Britain from anywhere in the world, without holding an operating licence from the Gambling Commission – unless a relevant exemption applies.

Gambling is defined in the Gambling Act 2005 (the “2005 Act”) as including “gaming”, “betting” and “participating in a lottery”. Accordingly, anyone who provides facilities that allow British consumers to (a) take part in gaming (which typically includes casino products such as slots – but also extends to more novel and even free-to-play products if the player is “playing a game of a chance for a prize”), (b) bet (which includes peer-to-peer and pool betting, as well as fixed odds); or (c) enter a lottery, without holding the appropriate Gambling Commission licence / benefitting from an exemption, will commit an offence under the 2005 Act.

Is it really that bad?

A report published by the International Betting Integrity Association (“IBIA”) in March 2024, which considered the channelisation rate (i.e. the proportion of gambling taking place with licensed vs unlicensed operators) of sports betting, seems, at first blush, to indicate that black market gambling is less of a threat in Great Britain than elsewhere.

The study, which is entitled: The Availability of Sports Betting Products: An Economic and Integrity Analysis analysed channelisation rates in a range of jurisdictions:

Great Britain, which permits a wide range of sports betting products (including in-play bets) had the highest channelisation rate across the surveyed jurisdictions, of 98% in 2022.
Italy, which has minimal restrictions on pre-match and in-play betting, was a close second with a channelisation rate of 93%.
By contrast, in markets such as Australia and Germany, where access to sports betting markets is more tightly controlled, the rates were 78% and 59%, respectively.

The IBIA study hypothesised that these statistics indicate a strong correlation between the wide availability of sports betting products and the proportion of consumers who place bets with onshore regulated sports betting operators. Citing Canada as a case in point; the authors noted that channelisation in Ontario, a province that introduced an online sports betting licensing system in 2022, is expected to reach 92% in 2024. This figure is a stark contrast to the channelisation rate for the rest of Canada combined, which continues to operate a limited monopoly model, and is forecast to have an onshore rate of 11% in 2024 and lose an estimated $2bn in taxable sports betting gross gambling revenue between 2024 and 2028.

So Great Britain must be doing something right when it comes to sports betting… but is this the whole story?

To work out the answer, it is important to remember that sports betting makes up only a fraction of licensed gambling in Great Britain. In fact, according to an interactive dashboard published by the Gambling Commission in February 2024, only 31.5% of GB gross gambling yield (“GGY”) during the 2022/2023 financial year derived from remote and non-remote betting (which also includes non-sports betting, for example, on politics) – with the lion’s share of the remaining proportion being derived from casino, bingo, lottery and licensed amusement arcades.

Putting non-remote gambling to one side, the Gambling Commission’s interactive dashboard reveals that the percentage of industry GGY from remote betting dips to 15.1% (or £2.29bn) – with the largest contribution to remote gambling actually deriving from online casino, which made up an impressive 26.7% (£4.04bn) – or just over one quarter of total industry GGY – during the 2022/2023 financial year.

Surely it follows, therefore, that a significant percentage of money staked by British customers in the unregulated black market, ought to be on online casino?

At the time of writing, we are unaware of any studies that have recently considered the channelisation rate for online casino only, in Great Britain. However, research in other jurisdictions has indicated that casino channelisation tends to be lower than for other verticals. For example: in Sweden, AB Trav och Galopp estimated that the channelisation rate for remote casino in Q3 2023 was 74% vs 82% for remote sports betting.

Applying this rationale in Great Britain suggests that 98% channelisation rates for sports betting are unlikely to also apply in respect of other verticals. Pending regulatory changes in Great Britain impacting the online casino market may also detrimentally impact the licensed sector – with reforms proposed in the Government’s White Paper: High stakes: gambling reform for the digital age (the “White Paper”) including lower stake limits (£5, with a lower £2 limit for young adults aged between 18 and 24), game design changes and financial vulnerability checks, all due to come into force in the near future. For further information please see our blogs: White Paper Series: DCMS announces online slots stake limits and Gambling Commission publishes Summer 2023 Consultation Response and Betting & Gaming Council announces New Industry Voluntary Code.

Trying to fit a square peg in a round hole?

Even when properly measured, traditional methods for calculating channelisation might not reveal the whole story.

A more modern phenomenon that must be considered in the round, is the growing popularity of pay-to-enter competitions that often incorporate a question and free entry route to mitigate the risk that they are an illegal lottery. These arrangements can, if properly structured, lawfully be operated in Great Britain without an operating licence. However, the Gambling Commission actively monitors these competitions – and has recently been increasing its enforcement action in relation to arrangements that cross the line and are, in fact, illegal lotteries.

Similarly, many other new and disruptive product types run the risk of constituting gambling (and may thus be illegal gambling) in Great Britain. These include mystery, or loot boxes, where participants pay for a chance to win a prize that is allocated to them at random; and even traditional prize competitions such as crosswords or sudoku, where the underlying activity is presented as involving an element of chance.

The bottom line is that if a new product falls within the statutory definitions of “gaming”, “betting”, or “participating in a lottery” under the 2005 Act then, unless the person offering it in Great Britain does so in reliance upon an operating licence or exemption under the 2005 Act, they may be conducting illegal gambling in Great Britain and could face enforcement action by the Gambling Commission.

In addition, it is less likely that lost revenue from such products will be considered in the calculation of channelisation rates in Great Britain, which has historically focused on more traditional product verticals.

What is the Government doing to curb unlicensed gambling?

Within the White Paper, the Government acknowledges that estimating the size of black market gambling is difficult. Unlicensed gambling sites can appear, disappear and change without warning and until recently, the Gambling Commission’s resources for responding to unlicensed gambling have been concentrated on acting on complaints and intelligence with a risk-based approach.

Accordingly, one of the solutions presented by the Government in the White Paper was to increase the Gambling Commission’s powers, with the aim of creating a safety net and versatility for the Gambling Commission to “apply to court as a last resort” if required. However, the relevant legislation remains pending: although the Home Office’s Criminal Justice Bill contains provisions to confer new powers on the Gambling Commission to apply to court for an application to suspend an IP address or domain name if it is being used for the purposes of serious crime connected with unlicensed gambling, the Bill is still at the Commons Report stage and certain onlookers have queried whether, as currently drafted, the Bill goes far enough. Particularly given that equivalent powers are not granted to the regulator and competition authority for UK communications industries, Ofcom, which could be well placed to work alongside the Gambling Commission in taking action against unlicensed gambling websites.

We also note that, from a political perspective, Labour’s recent election has cast doubt over the timing of the Bill’s enactment, as newly elected members of Parliament will need time to get up-to-speed on the Bill and settle into their new roles.

What can the Gambling Commission do in the meantime?

At the Westminster Media Forum on the future for the betting and gaming industry in the UK, which took place online on 13 May 2024, Ben Dean, director for Sport and Gambling at the Department for Culture, Media and Sport commented that tackling illegal gambling continues to be an arduous process, akin to a game of “whack-a-mole”. He attributed this in part to the flexible nature of unlicensed organisations in circumventing restrictions, but stressed that:

“Working with internet service providers and payment agencies is key.”

Indeed, Andrew Rhodes, Chief Executive Officer and Commissioner of the Gambling Commission, confirmed at the same event that whilst the Commission awaits its new powers, a significant portion of its work in this sphere has been with third parties such as Google, resulting in the removal of over 7,000 URLs from search results in the last six months.

In addition, Rhodes confirmed that the Gambling Commission has:

in January 2024, issued 98 cease and desist and disruption notices with 39 successful disruption outcomes; and
more than trebled the number of successful positive illegal website disruption outcomes – from 25 in FY21/22, to 79 in FY22/23.

Rhodes explained that the Gambling Commission is focussing on identifying and undertaking high impact interventions with a view to “making it difficult to provide illegal gambling at scale”. Notably, and in addition to the measures outlined in our November 2023 blog (e.g. the Gambling Commission’s work with web hosting companies, registrars, internet search providers, social media firms and payment providers – as well as international regulators and its own licensees), recent efforts have included:

using intelligence and software programmes to identify those websites with the largest British footprint or profile and focus on those which pose the highest risk, especially websites and affiliates which target vulnerable consumers such as GAMSTOP self-excluded players;
engaging with banks to raise awareness and identify consumer protection protocols to identify and stop payments to illegal websites;
agreeing protocols with search engines to remove illegal websites from search results; and
actively identifying UK-facing online advertorial articles and engaging strongly with publishers (for example, by threatening public prosecution) to get these articles, and the marketing affiliates that are posting them, removed.

Rhodes also confirmed that the Gambling Commission has been working in conjunction with other bodies and regulators, such as the National Crime Agency, Police Intellectual Property Crime Unit and His Majesty’s Revenue and Customs (“HMRC”):

“For example, our work with HMRC where we have been tackling illegal Facebook lotteries has not only seen those lotteries shut down by the Gambling Commission, but the organisers have found themselves paying £600,000 in penalties to HMRC as well.”

Conclusion

Dean and Rhodes’ comments highlight the importance of and continued need for cooperation and unity in efforts to tackle illegal gambling, to maximise their effectiveness. Pending the introduction of the Gambling Commission’s new powers under the Criminal Justice Bill, there is still much that can be done to deter unlicensed operators from targeting customers in Great Britain – and ultimately protect the businesses (and revenue) of those that have invested the time, money and resources in obtaining, and complying with, operating licences issued by the Gambling Commission.

Please get in touch with us if you have any questions about the lawfulness of new gambling products in Great Britain, the process for obtaining a gambling operating licence from the Gambling Commission and/or if you require assistance with licensing and compliance matters generally.

With sincere thanks to Yue-Ting Fung for her invaluable co-authorship.

20Jun

Reminder: Quarterly regulatory returns in force for all licensees from 1 July 2024

20th June 2024 Chris Biggs 82

On 1 July 2024, the Gambling Commission will update licence condition 15.3.1 of the Licence Conditions and Codes of Practice (“LCCP”) to require all licensees to submit their regulatory returns on a quarterly basis, within 28 days of the end of each quarterly period.

The Gambling Commission will also update its regulatory returns guidance from 1 July 2024, to remove guidance that applies to questions that will be removed from regulatory returns and amend the wording of guidance “in some cases” to clarify what data is required, based on feedback from licensees.

As we discussed in our previous blog, Quarterly regulatory returns across the board from July 2024, this change to the LCCP follows the Gambling Commission’s publication of its Frequency of regulatory returns: Consultation Response in March, and will harmonise regulatory return reporting dates across the industry.

The Gambling Commission has published information on its website to explain how it will transition licensees from their current regulatory returns reporting period, in addition to information about the questions it will be removing from regulatory returns from 1 July 2024, split by reference to licence type.

The first set of regulatory returns that will relate to the quarterly return period 1 July 2024 to 30 September 2024 must be submitted by 28 October 2024.

Importantly, licensees with current regulatory return periods containing 30 June 2024 will have their reporting period end date changed to 30 June 2024. In such cases, licensees may have shortened reporting periods and due dates. The Commission has published worked examples on its website, to illustrate how the reporting periods for different licence types will align.

The guidance also contains a reminder that once these changes have taken effect, licensees’ reporting periods will not, in most cases, reflect the regulatory year applicable to their licences, which will continue to be used to calculate the correct fee category, and thus annual fee, for operating licences.

If a licensee believes that they will exceed their fee category limit at any time after they have paid their annual fee, they must submit an application to vary their fee category to the Gambling Commission. Details of how to submit applications to vary licence fee categories can be found in the Gambling Commission’s guidance on how to make changes to your operating licence.

Please get in touch with us if you have any questions about regulatory returns and your obligations, licence fee categories, or if you would like assistance with any compliance or enforcement matters.

10May

Gambling Commission Corporate Strategy for 2024-2027

10th May 2024 Gemma Boore 91

On 8 April 2024, the Gambling Commission released its new Corporate Strategy for 2024 to 2027. The 20-page document, which is entitled ‘Gambling Regulation in the Digital Age’ highlights the most important work the Gambling Commission intends to deliver over the next three years (the “Corporate Strategy”).

Accompanying the release of the Corporate Strategy is a short video, in which the Gambling Commission states:

“We’re making better use of data and analytics to make our gambling regulation more effective, enhancing our core operational functions to provide best practice licensing, compliance and enforcement work, setting clear evidence-based requirements for licensees, being proactive in our approach and address potential problems at the earliest opportunity. And finally regulating a successful National Lottery.”

You can watch the Gambling Commission’s video here:

Introduction

The Corporate Strategy is introduced by a foreword from Marcus Boyle, Chair, and Andrew Rhodes, Chief Executive Officer and Commissioner of the Gambling Commission.

In the foreword, Boyle and Rhodes note that the way people gamble continues to evolve, and that, since the COVID-19 pandemic, studies have shown that fewer people report that they gamble regularly but consumers are collectively spending more money gambling than in 2019. Coupled with the accelerating development of new technologies, increasing globalisation of gambling business models and significant reforms to the regulation of gambling, Boyle and Rhodes declare that this is a “transformative period for the industry”.

The “ambitious” Corporate Strategy is thus underpinned by two main motivations focused on making gambling safer, fairer and free from crime:

Delivering on the decisions taken to bring about significant and lasting change to how gambling is provided, and the National Lottery is operated; and
Investing in key areas to improve how the Gambling Commission delivers its work for consumers, the public and licensees.

The Corporate Strategy sets out how the Gambling Commission commits to achieving these objectives in five areas of strategic focus, which it considers will have the biggest impact in delivering better outcomes for consumers, the public and licensees. Namely:

Using data and analytics to make gambling regulation more effective.
Enhancing core operational functions.
Setting clear evidence-based requirements for licensees.
Being proactive and addressing issues at the earliest opportunity.
Regulating a successful National Lottery.

We summarise the Gambling Commission’s commitments in each of these five areas below.

Using data and analytics to make gambling regulation more effective

Key Commitments

The Gambling Commission commits to:

significantly increasing the depth of its understanding of the gambling market and consumer behaviour;
using data science methods to improve early identification of issues and its understanding of industry compliance;
building a leading understanding of gambling-related harm; and
developing its internal capability to embed the effective use of data across all aspects of its work.

By making progress against its published evidence gaps and priorities, undertaking the Gambling Survey for Great Britain (about which we have written in a previous article) and investing in its own people, the Gambling Commission states that consumers, the wider public and licensees will benefit from better outcomes resulting from the Gambling Commission’s better regulation.

Progress metrics

The Gambling Commission will measure its progress against these commitments by:

assessing itself against the Government Data Maturity Framework;
annually auditing its data science capacity and testing the progress of improvement in its data tools;
publishing regulator updates on changes in the gambling sector and its views for the future;
demonstrating improvement of its understanding of outcomes and approach to evaluation; and
evidencing how its assessment of risk has improved through timely, targeted and effective interventions.

Enhancing the Gambling Commission’s core operational functions

Key Commitments

The Gambling Commission commits to:

evolving its licensing, compliance and enforcement work including improving its core processes, technology and related approaches, which it intends will result in processes, approaches and systems being “digital by default”, and “a more responsive and automated experience for applicants and licensees”;
developing its approach to assurance including increasing transparency of industry compliance levels by theme and licensee – this means that the Gambling Commission will start routinely publishing findings from its work to assess compliance with requirements relating to fairness, protection from harm and crime prevention in 2024 – without identifying specific licensees; and
increasing investment, resources and capacity to tackle illegal gambling.

Progress metrics

The Gambling Commission will measure its progress in this focus area by:

publishing its improved performance against key operational performance indicators;
reporting on levels of industry compliance, building an initial benchmark and then demonstrating positive trends towards greater compliance; and
publishing the metrics on the impact of its disruption activities relating to illegal gambling operators and highlighting case studies.

The Gambling Commission will also explore the availability of reliable proxies to help estimate the scale and risk posed by the illegal market in Great Britain.

Setting clear, evidence-based requirements for licensees

Key Commitments

The Gambling Commission commits to:

delivering the measures it is responsible for in the White Paper, including improving player protections and product safety;
increasing its capacity to evaluate new requirements and policies; and
reviewing how it communicates its requirements and related guidance to licensees and the public.

Progress metrics

To measure its progress in this focus area, the Gambling Commission will continue to report on the progress of its White Paper commitments, publish the results of its evaluation and research outputs, and support the Government and others in their evaluation of the impact of the White paper reforms.

Being proactive and addressing issues at the earliest opportunity

Key Commitments

The Gambling Commission commits to:

investing in a programme of activities exploring how licensees can be supported to meet their responsibilities to consumers and the wider public; and
increasing the resource available to improve its understanding of issues which pose a risk to the fair and open licensing objective.

Progress metrics

The Gambling Commission states that the number of licensees demonstrating an understanding of standards and increased compliance rates will serve to measure its progress in this focus area, as will identifying key metrics such as consumer sentiment on whether gambling is fair and can be trusted. Notably, the Gambling Commission intends to reduce its reliance on formal enforcement tools to secure compliance and focus its efforts more on those who fail to comply.

Regulating a successful National Lottery

Key Commitments

The Gambling Commission commits to:

completing its oversight and assurance of the transition to, and implementation of, the Fourth National Lottery licence;
embedding its regulatory approach to the Fourth National Lottery licence; and
assessing how well the benefits from the new licence arrangements are realised.

So long as player protection is maintained and improved, the Gambling Commission will permit the new National Lottery licensee, Allwyn, to use more freedom and commercial judgement to innovate for the benefit of consumers and the wider public.

Progress metrics

The Gambling Commission will use a combination of qualitative and quantitative methods to assess both its progress in this focus area, and Allwyn’s performance against each of its duties, to ensure that performance does not diminish under the operation of the new licensee.

Next steps

The Gambling Commission’s progress in each of the five focus areas will be reported within its annual reports.

Insight

The objectives in the Corporate Strategy are clear. The Gambling Commission is committing to improving the way that it regulates, and it is doing this by: (1) making better use of data; (2) enhancing its own operational functions; (3) setting clear (and importantly, evidence-based) requirements; (4) being proactive; and finally (5) ensuring that the first transition to a new National Lottery licensee in the last three decades, goes smoothly.

All laudable aims, but from our perspective we will be particularly keen to see the Gambling Commission deliver on its commitment to create more efficiencies in its licensing, compliance, and enforcement work. By its own admission, the Gambling Commission’s “core technology and systems are reaching the limits of their capabilities”. Investing in new technologies (provided they are effective, economic, and properly utilised) can only be a positive step for a public body. After all, the gambling industry is often noted for being at the cutting-edge of technology – so it is only appropriate that its regulator should be, too.

We also welcome the announcement that the Gambling Commission will begin publishing the findings of its compliance work this year, without identifying individual licensees. While this is of course important in the context of sanctions and regulatory settlements; this sporadic means of communication can make it difficult for the wider industry to learn from others’ failings. By consolidating anonymised compliance findings relating to fairness, protection from harm and crime prevention into one report, say quarterly, the Gambling Commission is giving all of those that are licensed by it a fairer chance to (i) understand and (ii) comply with its requirements in the future.

The pressure is now on the Gambling Commission to deliver on extensive commitments, not just in the Corporate Strategy but also those imposed on it by the Government in the White Paper. Challenging times lie ahead, and it is in stakeholders’ interests that the Gambling Commission delivers (and is held to account) on its promises. Positive signs are plentiful under Andrew Rhodes’ now established leadership, not least with important new internal appointments in key positions, a genuinely consultative response to its critical summer 2023 consultation on proposed changes to the LCCP and RTS, trial and pragmatism in relation to financial risk checks and meaningful engagement with industry and other key shareholders. Stakeholders may therefore have reason to be optimistic that the Gambling Commission can deliver upon its ambitious corporate strategy, and we are sure its progress will be monitored closely!

With sincere thanks to Chris Biggs for for his invaluable co-authorship.

Please get in touch with us if you would like assistance with any compliance or regulatory matters.

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