David Clifton: Licensing Expert – UKGC views on “getting the balance right”

davidclifton

Two developments have occurred over the last month that have provided some considerable insight into the Gambling Commission’s present and future regulatory priorities.

The first is publication of the Commission’s Annual Report for 2015/16. The second is a speech entitled “Gambling: Getting the balance right” given by Philip Graf at the Royal Society of Arts as he comes to the end of his five-year term as Chairman of the Commission.

Not surprisingly, common themes arise in both, although Philip Graf’s speech was understandably rather more personalized in both its tone and its content. He focused on the challenges facing both (a) the gambling industry and (b) the politicians and regulators who seek to protect the consumer. He described “achieving a balance between enabling the consumer and protecting the consumer” as “the central dilemma” for the regulator.

What is clear from both the Annual Report and the Chairman’s speech is that all operators licensed by the Commission need to ensure that an ongoing focus on the risks of gambling-related harm and money laundering is located at the heart of their business strategies.

On the subject of money laundering, all remote and non-remote casino operators need to take note that on 28 July the Commission published the 3rd edition of its AML guidance. It has come into force with immediate effect. This new edition can be accessed on the Commission’s website or at http://cliftondavies.com/new-aml-guidance-remote-non-remote-casinos/. An updated version of the Commission’s POCA 2002 advice to non-casino operators is to be published later in the year.

As is clear from public statements published on the Commission’s website recording the voluntary settlements concluded:

  • this year with the likes of Gala Coral, Paddy Power and Betfred and
  • last year with various casino operators,

the Commission places responsibility with operators at board and owner level to (a) put in place and maintain effective AML controls and (b) fulfill their obligations to minimize gambling-related harm.

In relation to gambling-related harm, in his RSA speech Philip Graf spoke of the need for the industry not to kid itself that fairly static problem gambling figures are simply a measure of problem gambling. He said that the industry should instead:

  • think about those at risk and
  • understand what gambling-related harm means and the breadth of impact it has in an environment where the growth of gambling advertising has resulted in a “normalization of gambling”.

In the same vein, he warned of the likelihood that in future the Commission will look at an increased impact of penalties on individual PML holders if it remains of the view that lessons are not being learned by the industry from the interventions that have resulted in all such voluntary settlements.

The Chairman’s overview statement at the beginning of the Annual Report says that important insight into how industry leaders are stepping up to the above challenges will be provided by:

  • the new social responsibility code requirements – the updated version of the LCCP that will come into force on 31 October 2016 have just been published and can be accessed on the Commission’s website or at http://cliftondavies.com/gambling-commission-publishes-updated-lccp/ – and
  • the recently introduced annual assurance statements which in his RSA speech he described as being “very much about changing peoples’ behaviour”, adding that the evidence of the first year’s pilot scheme has illustrated that it is likely there is “some way to go” – the Commission has since announced its intention to hold workshops in August and September, which will include guidance on best practice, including answering the difficult question posed to operators on “revenue from problem or at risk gambling”.

The Commission is expecting both Heads of Compliance and Chief Executives to attend those workshops, underlining its commitment to holding to account boards and owners of licence-holding companies. Its Annual Report warns that all such persons “need to accept the risks to consumers and the risk from criminal activity as just as fundamental a part of the culture of their business as commercial risk”.

Philip Graf went further in his speech, describing it as fundamentally important that the Commission holds to account chairs of boards, audit & risk committees and remuneration committees, commenting that all too often the engagement with the Commission is instead at Compliance Manager level. He made it clear that he believes that a focus on such senior personnel will provide a “chance to see real change occurring in their approach to regulation”.

In terms of challenges facing (and future focus on the part of) the Commission, Philip Graf spoke of:

  • the need for better evidence and a broader understanding of gambling-related harm in the context of it being a public health issue,
  • the need for greater funding of the Responsible Gambling Strategy Board strategy, resulting in more credible research,
  • the need for the Commission to build greater fintech expertise,
  • an increased focus on consumer protection, advertising, bonuses and offers, terms and conditions and management of customer funds,
  • the “increasingly important” need for the Commission to build partnerships and to develop the “agility” to respond quickly to change and its regulatory implications, and
  • his plea that the Government adopts a “coherent approach” towards gambling, including a need for (a) some strategic joined-up thinking within the Department for Culture, Media and Sport and (b) the three DCMS ministers with responsibility for digital strategy, child protection and gambling respectively to sit in a room together to talk about gambling issues and to engage with the Department of Health.

He also echoed a comment by Sarah Harrison, the Commission’s Chief Executive (in the Annual Report) that eSports represents an area for continuing future focus. The Annual Report described the growing market in eSports and computer gaming as having “the scope to present issues for regulation and player protection”, described as ranging “from the emergence of real money eSports betting markets to trading in-game items which blur the lines between gambling and social gaming”.

At the conclusion of his speech, Philip Graf touched on what he believes to be the challenges facing the industry, including:

  • the concerns raised in relation to gaming machines (principally the lack of real evidence about FOBTs and “the legitimate concern about harm” that they raise, although he commented that, in his opinion, “stake reduction is not the answer on its own”)
  • a perceived reduction of trust in gambling
  • increasing pressures on land-based gambling businesses seeking to compete with the digital world
  • in terms of maintenance of business reputation in relation to social responsibility, the need for “real leadership” and “ownership engagement” to bring about “a culture change from the top”, which he said involves:
    • role modeling at the top,
    • training and development,
    • systems and processes that allow for such change and
    • incentives in the broadest sense

All in all, both the Annual Report and Philip Graf’s speech effectively present to the UK gambling industry an end of term report that says: “some progress but more can, and must, be achieved”.

__________________________

__________________________

David Clifton – Director – Clifton Davies Consultancy Limited

clifton

Check Also

Betting on Sports Europe - Digital agenda

Betting on Sports Europe – Digital agenda to confront the challenges shaping sports betting industry’s future

The Betting on Sports Europe – Digital virtual conference and exhibition will see 120 of …

SBC Summit Barcelona – Digital: The rise of live casino and the lessons to be learnt 

The rise of live casino has become a highlighted topic in the gambling industry particularly …

Flutter renews legacy partnership with Scientific Games to lead critical enlargement  

Scientific Games has secured a further tier-1 operator commercial agreement after FTSE100 betting group Flutter …