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David Clifton: Licensing Expert – Return of the Enforcer!

David Clifton

Some of you may remember “The Enforcer”, the third in the Dirty Harry film series, starring Clint Eastwood as Inspector “Dirty” Harry Callahan. The critic’s reviews were initially poor – Eastwood was named “Worst Actor of the Year” by the Harvard Lampoon – but the film was a major commercial success.

Now, 41 years later, Sarah Harrison, Chief Executive of the Gambling Commission, steps forward to make the role of “Enforcer” very much her own, albeit in a style, I should make clear, that bears no resemblance whatsoever to that adopted by Dirty Harry! You have an opportunity to publish your own critical review by responding to the Commission’s latest consultation Changes to our enforcement strategy: putting the consumer first”, that was published on 26 January.

Both the consultation paper and the Commission’s consultation responses template can be accessed via our website at http://cliftondavies.com/gambling-commission-publishes-enforcement-strategy-consultation/ Responses should be sent by post to the Commission or by email to consultation@gamblingcommission.gov.uk so that they are received by 21 April 2017.

According to the Commission, the consultation paper sets out the its proposals for “a new vision for [its] enforcement action which will guide how [it uses its] powers” and “emphasises [its] expectations that gambling businesses put consumers first, and sets out proposals for credible deterrence”.

It is driven by the Commission’s new enforcement mission statement, that sets out its reinforced focus on protection of consumers and the general public and Its intention to improve standards across the industry by:

  • driving a consumer-first culture,
  • improving compliance with the licensing objectives,
  • reducing gambling related harm and
  • deterring operators from behaving in a way which is inconsistent with these goals.

Sarah Harrison gave due warning of all of this in her “Raising Standards” conference speech in November 2016, when she said: “One of the principles in the Commission’s existing statement for licensing and regulation is a preference for pursuing compliance through means that stop short of a licence review, in favour of a regulatory settlement. We propose to remove this bias in favour of settlement. We will put access to all tools, including licence review (both of the operator and personal management licences), on an equal footing”.

What is abundantly clear from the consultation is that the Commission has completely reappraised its approach to enforcement in line with its intention to:

  • place a renewed focus on consumers,
  • put access to all of its enforcement tools on the same footing,
  • emphasise to licensees the importance of timeliness and speed on their part during enforcement proceedings,
  • impose higher penalties for breaches, particularly where the Commission sees systemic and repeated failings,
  • give credit, in the form of reduced financial penalties, where licensees co-operate and make early admissions and
  • treat repeat behaviour by licensees and within the industry, as a significant aggravating factor at the enforcement stage.

Included as annexes to the consultation document are the key changes that the Commission proposes to make to its:

  • Statement of principles for licensing and regulation,
  • Licensing, compliance and enforcement, policy statement and
  • Statement of principle for determining financial penalties.

and it has also produced a new document called “Indicative sanctions guidance”, in which it sets out a framework for decision-making about regulatory enforcement and the sanctions that might follow.

It’s quite clear that Sarah Harrison is prepared to come out with all guns blazing. Describing the consultation to delegates at the World Regulatory Briefing on 7 February, she said that the new enforcement strategy “represents the strongest message from the Commission of our determination to use all our powers, as Parliament intended, to protect consumers and safeguard the integrity of the market”.

However, she also said in her “Raising Standards” speech that “operators who spot an issue, declare it to [the Commission], implement a quick and effective improvement plan, focussed on preventing reoccurrence, and who make redress to consumers, should be credited. In this instance, we would certainly consider resolution through settlement rather than licence review”.

Such an approach was adopted last month by Isle of Man based (but Gambling Commission licensed) betting operators TGP Europe Limited and Fesuge Limited who:

  • promoted bonus offers during the Cheltenham festival last March for new sign-ups and for existing customers,
  • assessed that a large number of bets had been placed in contravention of clause 15.2 of their terms that provided that “in the event that we suspect that you or any other player is abusing or attempting to abuse a bonus or other promotion, or is likely to benefit through such abuse we may block, deny or suspend, withhold or cancel the account of any such player, including your account if we determine that you are involved in such”,
  • decided to suspend over 5,000 accounts (resulting in a very large number of complaints to both the Commission and IBAS) and
  • notified the Commission, via a key event submission, of their concerns relating to suspected bonus abuse and that they had suspended players accounts.

TGP and Fesuge co-operated with the Commission, acknowledging that their handling of the matter had been inefficient and accepting that their terms were unfair (being unclear and ambiguous) and did not provide a clear definition of bonus abuse. They identified serious shortcomings in their original assessment and acted promptly, after the initial suspension on withdrawals, and began to release funds to affected customers on a case-by-case basis.

Accordingly, although the Commission found that there had been breaches of licence condition 7.1.1B (General ‘fair and open’ provisions) as well as Social Responsibility code provision 5.1.1.1a (Rewards and bonuses), it agreed to conclude the matter by way of a voluntary settlement, pre-empting the need for commencement of a formal licence review.

The settlement was on the following terms:

  • agreement by the operators to the publication of a public statement outlining their failings for industry and wider learning,
  • changes to their terms in order to address the failings identified, including providing clearer information about the definition of “bonus abuse”,
  • implementation of a wide package of measures to improve compliance in this area including, but not limited to:
    • engaging a firm of solicitors to undertake a full review of terms to ensure compliance with the Consumer Rights Act 2015,
    • appointing an Operations Manager based in the Isle of Man to oversee changes to their processes and controls,
    • improving anti-fraud processes and staff training and
    • changes in their business structures,
  • agreement to contribute £7,000 to the Commission’s costs of investigating the matter.

The Commission has said that it considers that operators should learn from this case and:

  • take a proactive approach in assessing their policies and procedures to ensure that the terms and conditions of their bonus promotions are fair and that consumers can easily understand those terms, and
  • act quickly when evidence of consumer detriment is identified, especially in response to complaints.

Operators should take note before The Enforcer comes calling!

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David Clifton – Director – Clifton Davies Consultancy Limited

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