David Clifton – Licensing Expert – Remember this November as the month that changed gambling

David Clifton

November 2018 what a month! So let’s start with some good news – This year’s Responsible Gambling Week represented the biggest ever industry-wide campaign to promote responsible gambling. Involving every major operator in the UK and Ireland and supported by the two biggest gambling charities, it was rounded off with the encouraging news that, even before its official launch, 38,000 people have already registered with GamStop to self-exclude from online gambling. Bearing in mind the time it can take to fully integrate with the live GamStop platform, online operators who have not yet registered with GamStop should do so immediately in order to minimise the risk of non-compliance with LCCP social responsibility code provision 3.5.5 once it comes into force, quite conceivably in the New Year.

On the political front, the last month has seen the exit from the UK Government of more than one Minister, but the non-Brexit related departure of Tracey Crouch from her position as Gambling Minister more than left its mark on a key element of gambling policy. Members of Parliament from all political parties joined with charities, religious and other pressure groups in supporting the former Minister’s call for an earlier reduction in the maximum stakes of Category B2 gaming machines (otherwise known as fixed-odds betting terminals) than had been announced in the Chancellor’s Budget. In a dramatic about-turn the Government confirmed that it was bringing forward from October 2019 to April 2019 the date of implementation of the maximum stake reduction from £100 to £2. As a consequence, to compensate for the loss of revenue from FOBTs, the rate of remote gaming duty payable by UK licensed online gaming operators will now increase from 15% to 21% in April, rather than October, next year.

Parliamentary attention has also been attracted on the ongoing gambling advertising debate. Following on from last month’s announcement by Ladbrokes owner, GVC Holdings PLC, that it supports a pre-9pm watershed gambling advertising ban, the UK broadcaster Sky UK has announced that it will substantially reduce the number of gambling advertisements that it shows by imposing a limit of one gambling advertisement per commercial break on its channels from the start of the next Premier League season in August 2019. In addition, with effect from 2020, new technology will enable Sky viewers to exclude gambling advertising completely from the ads viewed by them during commercial breaks. DCMS Secretary of State, Jeremy Wright MP, has described this announcement as “a welcome move to protect vulnerable people from the impact of problem-gambling harms” and has called on other UK broadcasters to follow suit.

Signalling the direction in which the advertising debate may move next:

  • Steven van Rooyen, Chief Executive of Sky UK, has drawn attention to gambling advertising on online social media, saying (in a recent Telegraph article) “There is still a real danger online – and there will be until online platforms are regulated as tightly as TV” and
  • reinforcing that concern, new financial analysis by Regulus Partners, commissioned by GambleAware, has estimated that the total spend by gambling companies on marketing has gone up by 56% since 2014 to reach £1.5billion, with marketing spend five times more online than on television.

Central to the gambling advertising debate is the oft expressed fear that a bombardment of such advertising normalises gambling for children. That concern will have been exacerbated by the Gambling Commission’s newly published Young People and Gambling Report 2018 that has revealed an increase in gambling participation by 11 to 16 year-olds. This report was published just days after the Commission announced that a test purchasing exercise conducted in English pubs had shown that nearly 90% of the pubs tested had failed to prevent children from gambling on their Category C gaming machines. The other most common gambling activities undertaken by children are identified in the report as lottery scratch cards purchased by parents and bets between, and playing cards for money with, friends. Expressing concern that all of these activities present risks to young people, the Commission is calling on parents, business and regulators to collaborate in working together to protect children from gambling-related harm.

“Collaboration” is certainly the Commission’s current buzzword. Neil McArthur, Chief Executive of the Commission, once again placed great emphasis on it in his speech at the regulator’s annual Raising Standards Conference when he called on the gambling industry to work together to make sure they are “the best – the fairest, safest – gambling operators in the world”. There was nothing new in principle to that message, but responsible operators will have welcomed his acknowledgment that progress has already been made in relation to “markers of harm” indicators that customers are experiencing, or are at risk of developing, problems with their gambling. Great emphasis was also placed in McArthur’s speech on customer interaction, something that is to be the subject of a consultation early next year (according to the Commission’s website) which will no doubt result in further toughening up of the LCCP. In a lightly veiled criticism of the differing stances taken historically by some of the gambling sectors’ trade associations, McArthur also indicated that the Commission would in future be “engaging more directly with operators and groups of operators” rather than having to “cut through the maze of trade bodies”. It is abundantly clear that, in terms of addressing gambling-related harm, the Commission now expects collaboration between different sectors within the gambling industry instead of each sector seeking to defend its own corner.

What will have been firmly in his mind when making his speech was the further round of financial penalties that has seen nearly £17million in total imposed on four operators within little more than a month. However, the £500,000 penalty imposed on the Rank Group for failing to protect a VIP gambler, the £94,000 incurred by bookmaker Mark Jarvis for customer interaction failure and even the £2.2million incurred by Paddy Power Betfair for failing to protect customers and stop stolen money being gambled were dwarfed by the £7.1million fine imposed on Daub Alderney (part of the Stride Gaming Group of companies) for failing to follow Gambling Commission rules aimed at preventing money laundering and protecting vulnerable consumers. That is the second highest financial penalty ever imposed by the Gambling Commission, second only to the £7.8million suffered by 888 last year. Not only that, but this has now been followed up by the £5.85 million and £1 million penalties incurred by Casumo and Videoslots respectively.

Three very important issues emerge from these latest sanctions:

  1. The fact that the Daub Alderney and Casumo matters were determined by the Commission’s Regulatory Panel, rather than being dealt with by way of a regulatory settlement, underlines the seriousness with which the regulator regarded these yet further AML breaches and social responsibility failings. These will not be the last of such cases.
  2. As I have long forecast, the Commission is now holding individuals to account where they are responsible for an operator’s failings. Further heads will roll.
  3. The most recent enforcement action has been taken against operators based in foreign jurisdictions. I recommend that, in particular, all overseas based online operators licensed by the Gambling Commission very urgently read its Remote enforcement public statement – lessons to be learned“. However, UK based operators should definitely do the same too.

On the subject of AML, you are probably aware that the Fifth Anti-Money Laundering Directive (5AMLD) will come into force on 10 January 2020, addressing a number of weaknesses in the European Union’s AML/CFT regime that have come to light since enactment of the Fourth Anti-Money Laundering Directive (4AMLD) on 26 June 2017. But did you know that, following its recent publication in the EU’s Official Journal, we now have the Sixth Anti-Money Laundering Directive (6AMLD) to look forward to as well? Aimed at harmonising money laundering laws at national level and enabling swifter and more efficient cross-border information sharing between competent authorities, 6AMLD must be transposed into national law by early December 2020. That is likely to present even more of a problem for the 21 EU member-states that became the subject of European Commission (“EC”) infringement proceedings for failing to introduce by 26 June 2017 domestic legislation that complies with the obligations imposed by 4AMLD, including (notably from the perspective of its many licensed gambling operators) Malta. Within the last month, not only was that country’s AML Supervisor (the Financial Intelligence Analysis Unit) required by the EC to take additional measures to fully comply with its obligations under 4AMLD but also the Times of Malta revealed that Malta’s own risk assessment had found that the country was at “high-risk” of money laundering.

Sticking with regulatory developments, as I made clear in a news item for SBC News last month, implemented alongside the newest round of LCCP changes that took effect on 31 October 2018 was the Gambling Commission’s Complaints and disputes: procedural, information provision and reporting requirements” guidance note that all B2C operators should familiarise themselves with, if they have not already done so. Unfortunately, it seems that the complaints process adopted earlier this year by Betfred failed to resolve its dispute with a customer to whom it refused to pay out £1.7million winnings. The dispute has now reached the stage of a preliminary hearing in the High Court with Betfred maintaining that “a new game release by Playtech … suffered a software malfunction in January this year and no legitimate jackpot win occurred”. I imagine Betfred is relying on the “Events outside our control” and “errors or omissions” provisions in its terms and conditions. Given the interest of the Competition and Markets Authority (“CMA”) in such clauses as part of its ongoing investigation into the fairness of contractual terms relied upon by online gambling operators, it will be very interesting to see how this case pans out.

On the subject of the CMA, George Lusty, its Senior Director for Consumer Protection, signalled at the Gambling Commission’s Raising Standards conference that more is required still from online gambling operators, saying: “We’ve seen gambling operators making changes to promotions and withdrawal practices, and this is a great start, but it’s only one aspect of achieving compliance and clearly much more needs to be done by the sector to win back customer trust. The best operators going forward will be those who lead by example, those who build on the work we’ve done and treat their consumers fairly and responsibly.”

Finally, back to the High Court where judges have been kept busy within the last month by other gambling industry operators beyond just Betfred alone. I am referring to EU Lotto, Lottoland Europe and Multi Lotto UK, who have failed in their attempt to successfully challenge the recently introduced operating licence condition that prohibits betting operators from accepting bets in relation to a EuroMillions draw or the outcome of a EuroMillions lottery. That is not necessarily a disaster for Lottoland, as it had already come up with a product back in April described as “the brand-new replacement for Euromillions”. Called “EuroMillionaire”, it takes its numbers from the Swiss Loto Express draw. It was little surprise therefore that Lottoland’s CEO, Nigel Birrell, responded to the court decision by saying that his company will “aim to move on and will not appeal the court decision.” It may be that he has bigger things in mind, amidst rumours that Lottoland is involved in a potential consortium bid for the National Lottery licence in response to the Gambling Commission’s recent call for the “best ideas, innovations and experiences” to create a lottery fit for the future.

 So, all in all, it has been a month full of events to report. I have a feeling that this next month may be no less eventful

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Article by David Clifton – Director of Clifton Davies Consultancy

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