26Jul

Account withdrawals: The mask operators cannot hide behind

26th July 2024 Jessica Wilson 81

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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24Jul

White Paper Series: UK Gambling Act Review: What Now? VIXIO Webinar

24th July 2024 Harris Hagan 76

On 23 July 2024, Bahar Alaeddini appeared as a panellist on a VIXIO Regulatory Intelligence webinar titled “UK Gambling Act Review: What Now?” together with Tim Miller from the Gambling Commission, Sarah Fox from the Department for Culture, Media and Sport and Dan Waugh from Regulus Partners, and moderated by Joe Ewens, Global Managing Editor from Vixio. This was the third webinar on the White Paper organised by Vixio. The panellists had an insightful and lively discussion about the current status of the White Paper proposals following the General Election:

Two earlier webinars took place on 16 May 2023, titled “The End of the Beginning”, 15 September 2023, titled “Defining the Future”. Please click on the dates to watch the earlier webinars.

27Mar

Harris Hagan promotes David Whyte to Partner

27th March 2024 John Hagan 117

Harris Hagan is delighted to announce that David Whyte will be promoted to Partner with effect from 1 April 2024.

David has been an enormous asset to the firm since joining in 2019, having previously worked in-house within the online and land-based sectors and for nine years at the Gambling Commission in both the enforcement and legal departments. His practical operational experience and unique insight into the gambling regulatory framework, aligned with his legal expertise and highly personable approach, has been invaluable to the firm and our clients, particularly on high-profile compliance and enforcement mandates, including some of the most significant cases in the recent history of the UK gambling industry.

David is recognised in the legal directories as “not only technical excellence to the firm but, importantly, an excellent understanding of the regulatory environment. His wider experience provides an invaluable contribution to strategic discussions.”

Bahar and I look forward to working in partnership with David as the firm continues to go from strength to strength in its 20^th year and enters a post-White Paper era for our clients.

11Mar

The Gambling Commission’s emerging money laundering and terrorist financing risks: February 2024 update

11th March 2024 Chris Biggs 123

The Gambling Commission released its most recent update on emerging money laundering and terrorist financing risks on 9 February 2024. This update covers five emerging risks that we set out in detail below.

Multiple cards and innovative payment methods

The Gambling Commission indicates that there are an increasing number of instances of “multiple stolen debit cards” being used to fund online gambling activities. Alongside virtual debit card products that allow multiple virtual debit cards to be linked to one bank account, these instances pose a significant money laundering and terrorist financing (“ML/TF”) risk.

The Gambling Commission points out the following (non-exhaustive) red flag indicators of which licensees should be mindful:

- the operator is unable to match the customer’s personal details with the card details;
- the operator does not have the ability to verify the card holder’s identity information; and
- there are multiple bank accounts being used to fund a customer’s gambling activity.

The Gambling Commission reminds licensees that they are required to have “robust customer due diligence and onboarding checks” in place. It points out that in accordance with Licence Condition (“LC”) 12 of the Licence Conditions and Codes of Practice (“LCCP”), licensees must review their ML/TF risk assessments as necessary in the light of “any changes of circumstances, including the introduction of new products or technology or new methods of payment by customers.” It also reminds licensees that they must consider whether checks on customer ID documents are sufficient to identify false, stolen or “mule” (third party) ID documents, in accordance with the identification and verification requirements set out in LC 17.1.1(1) and (4).

Risks associated with access to third party funds

The Gambling Commission states that customers who are in functions, roles or responsibilities that give them access to third party funds should be considered to present a higher inherent ML/TF risk. Such roles may include access to:

- the funds of vulnerable people;
- customer funds, in the case of banking, accounting or finance (for example);
- company funds; and
- charitable funds.

It points out that licensees should consider these risks at the start of the customer relationship and before any deposits are made, noting that in order to sufficiently identify these risks customer monitoring should be an ongoing process.

Updated FATF ‘grey list’

In stating that the Democratic Republic of the Congo, Mozambique and Tanzania have been added to the list of jurisdictions that are under an increased level of monitoring by the Financial Action Task Force (“FATF”), the Gambling Commission points out that these jurisdictions are placed on the FATF’s ‘grey list’ due to “strategic deficiencies in their regimes to counter money laundering, terrorist financing and proliferation financing.”

It reminds licensees to conduct robust customer due diligence checks in relation to any customer relationships associated with the jurisdictions on the FATF’s grey list in order to mitigate the risk of ML/TF, including proliferation financing.

The above-listed countries were added to the FATF’s grey list on 27 October 2023. However, it is important licensees note that following the Gambling Commission’s February 2024 update, the FATF announced on 23 February 2024 that Barbados and Gibraltar have been removed from the grey list. The FATF’s recent announcement and full grey list can be found here.

Funds originating from crypto-assets

The Gambling Commission states that it is aware of cases of licensees “not sufficiently” considering the risks associated with customer funds where the funds have originated from crypto-assets. It reminds licensees that it considers crypto-assets to be high risk and it expects licensees to “appropriately scrutinise transactions throughout the course of customer and business relationships.”

Common operator failings

The Gambling Commission states that there continues to be numerous instances of customers being able to deposit large amounts of money before the first anti-money laundering (“AML”) review can be undertaken by the licensee against a customer, due to insufficient and/or ineffective source of funds (“SOF”) checks and enhanced customer due diligence or KYC triggers.

It states that licensees have been identified as “failing to critically review SOF documentation” instead relying on electronic checks, which includes relying solely on open-source information, such as Companies House records, to verify SOF information. Other issues include licensees failing to provide sufficient guidance to staff on how to review and verify SOF information and to determine what supporting documents should be requested.

To mitigate these risks, the Gambling Commission recommends:

- setting realistic and effective monetary and non-monetary thresholds/triggers for determining when customer interactions should take place;
- carrying out such interactions earlier on in the customer relationship;
- ongoing customer monitoring (including monitoring all transactions or activity). The monitoring of customer activity should be carried out using a risk-based approach. Higher risk customers should be subjected to a frequency and depth of scrutiny greater than may be appropriate for lower risk customers; and
- considering geographical, customer, transactional and product risk in all customer relationships.

Next steps

As a reminder to licensees, LC 12.1.1(3) of the LCCP requires that all operating licence holders (with the exception of gaming machine technical and gambling software licences) ensure that their policies, procedures and controls for the prevention of money laundering and terrorist financing are “implemented effectively, kept under review, revised appropriately to ensure that they remain effective, and take into account any applicable learning or guidelines published by the Gambling Commission from time to time”.

We recommend that all licensees review their ML/TF risk assessments as soon as possible in the light of the Gambling Commission’s update. In addition to any necessary updates to their risk assessments, licensees must update their policies, procedures and controls to take into account any changes made.

Please get in contact with us if you require assistance reviewing your ML/TF risk assessment and/or your AML policies, procedures and controls.

07Mar

Is the cookie finally crumbling? ICO caution to UK websites on harmful online choice architecture

7th March 2024 Gemma Boore 109

On 31 January 2024, the UK’s Information Commissioner’s Office (“ICO”) published an update on its progress working with some of the UK’s top websites to ensure they comply with data protection law. The ICO also warned other organisations they must take steps to proactively ensure their use of advertising cookies and similar technologies are compliant.

This update follows the publication of an open letter by the ICO (which can be found here), in which it wrote to the Data Protection Officers (“DPOs”) of 53 of the UK’s top 100 websites (based on active time spent by UK users) warning that they would face enforcement action if they failed to ensure their website users had fair choices over whether or not to be tracked for personalised advertising within 30 days (the “Call to Action”).

In its January update, the ICO confirmed that there has been an “overwhelmingly positive response” to the Call to Action, with 38 of the 53 organisations contacted correcting their cookie banners and a further four committing to reach compliance within a month. In addition, several others are working to develop alternative solutions, including contextual advertising (which allows advertisers to target ads based on the page, app, video, or audio content being consumed, or the context in which it is being consumed, by the user without the use of cookies) and subscription models (which encourage the user to subscribe or sign-up to receive content / advertising), and the ICO promises to provide further clarity on how these models can be implemented in compliance with data protection law (at the time of writing, we are still awaiting this update).

In the meantime, and most importantly, the key message from the ICO is:

“We will not stop with the top 100 websites. We are already planning to write to the next 100 – and the 100 after that.”

In this article, we discuss the background to the Call to Action and consider what steps companies in the gambling sector (including both operators and affiliates) can take to ensure their websites are compliant with data protection and other relevant laws.

Background to the Call to Action

In November 2023, the ICO issued a public statement confirming that in its view, some UK websites were not ensuring that it was as easy for users to ‘reject all’ advertising cookies as it was to ‘accept all’: a topic upon which the ICO had recently published guidance. See:

joint blog from Stephen Almond, ICO’s Executive Director for Regulatory Risk and Will Hayter, the Competition and Markets Authority’s (“CMA”) Senior Director in the Digital Markets Unit: It’s time to end damaging website design practices that may harm your users; and
the ICO’s joint position paper with the CMA: Harmful design in digital markets: How online choice architecture practices can undermine consumer choice and control over personal information,

both of which cited those recovering from gambling addiction as examples of consumers that may see unwanted advertisements for gambling, particularly if they are “steered to accept all cookies” and that this may “encourage them to gamble, in turn leading to financial loss and possible negative impact on their mental health”.

In the ICO’s November 2023 public statement, Almond further explained:

“We’ve all been surprised to see adverts online that seem designed specifically for us – an ad for a hotel when you’ve just booked a flight abroad, for instance. Our research shows that many people are concerned about companies using their personal information to target them with ads without their consent… Many of the biggest websites have got this right. We’re giving companies who haven’t managed that yet a clear choice: make the changes now, or face the consequences.”

and once again, cited the targeting of gambling addicts as an example of bad practice.

Accordingly, it seems clear that gambling advertising is a subject already firmly caught within the crosshairs of the ICO, but what exactly do gambling operators and their marketing affiliates need to do?

The Call to Action

On 19 December 2023 (four weeks after the warning was first published), the ICO decided to publish a template version of its Call to Action letter to DPOs, to enable other UK website operators to understand its concerns, and proactively take action to address potential areas of non-compliance.

In the Call to Action letter, the ICO confirmed that it had assessed the relevant website’s cookie banners against three areas of concern:

Non-essential advertising cookies are placed before the website user has the opportunity to provide consent

This concerns instances where non-essential advertising cookies are placed either without any consent from users completely or before consent is requested. In each case, the ICO considers that this is unlikely to comply with consent requirements under the Privacy and Electronic Communications (EC Directive) Regulations 2003 (“PECR”) and the UK retained EU law version of the General Data Protection Regulation (“UK GDPR”) because the user’s personal data would be processed without / before they had given valid consent.

Users can reject non-essential advertising cookies as easily as they can accept them

Some website operators display cookie banners with a button allowing users to immediately consent to all cookies (i.e. an ‘Accept All’ button that provides consent in one click), but do not incorporate a similar (i.e. equally prominent) mechanism for the user to refuse the placement of non-essential cookies as easily or in one click. The ICO’s concern is that, without such a mechanism, any consent obtained by a user clicking ‘Accept All’ on the cookie banner cannot be regarded as having been freely given, specific or informed (requirements for valid consent under the UK GDPR) in relation to each processing activity. Failure to obtain valid consent to the placement of non-essential marketing cookies and thus the processing of personal data, is unlikely to comply with PECR and UK GDPR.

Non-essential advertising cookies are placed even if the user did not consent to such cookies

Lastly, the ICO assessed whether website operators respect the choices of their users. In the ICO’s view, placement of non-essential advertising cookies and/or processing of personal data obtained via such cookies, in circumstances where the user has previously indicated that such cookies should not be placed, is unlikely to comply with PECR and UK GDPR.

Website operators were given one month to bring their website’s cookie banner into compliance or respond to the ICO, setting out: (a) the steps they plan to take; (b) why they are unable to take those steps within one month; and (c) the expected timescale for the implementation of those steps.

The Call to Action confirmed that the ICO would conduct a further assessment of the cookie banners on the recipient’s website in one month’s time to establish whether steps had been taken to improve compliance with PECR and UK GDPR.

Online Choice Architecture

As noted above (and in the Call to Action), on 9 August 2023 the ICO published a joint position paper with the CMA, which considered how online choice architecture (“OCA”) (i.e. the way information is presented and choices are structured online) could lead to data protection, consumer and competition harms.

The OCA position paper helpfully gave examples of OCA practices that the ICO and CMA jointly considered had the potential to harm consumers and explained how such practices could breach applicable laws including PECR, UK GDPR, and UK consumer protection laws including the Consumer Rights Act 2015.

Of relevance to the Call to Action, are the examples provided by the ICO / CMA in the OCA position paper, of “harmful nudges and sludge” techniques:

Harmful nudges (also called dark nudges): being when an organisation makes it easy or ‘nudges’ users to make inadvertent or ill-considered decisions; and
Sludge: being when an organisation creates unnecessary or unjustified friction or ‘sludge’ making it difficult for users to get what they want or do as they wish on the website.

The ICO and the CMA are concerned that the use of such techniques could encourage consumers to make choices they would not otherwise have made and that do not align with their best interests or preferences. This may include selecting less privacy-enhancing choices when personalising their privacy settings (e.g. by accepting all cookies including non-essential advertising cookies), thus allowing the organisation to process (and / or share) their personal data in ways that a user may not have intended or, in the absence of harmful nudges and sludge, have indicated to the organisation.

In the ICO’s view, use of these techniques is:

likely to infringe on Article 5(1)(a) of the UK GDPR, which requires that personal data is “processed lawfully, fairly and in a transparent manner in relation to the data subject (‘lawfulness, fairness and transparency’)”; and
in turn, likely to breach Regulation 6 of PECR, which requires that users are: (a) provided with clear and comprehensive information about the purpose of cookies and; (b) given the opportunity to refuse them. In the ICO’s view, this means being given the opportunity to refuse non-essential cookies with the same ease as they can be accepted (e.g. by providing a ‘Reject All’ option as well (and as equally prominently) as an ‘Accept All’).

The CMA is additionally concerned that harmful nudges and sludge may confer a competitive advantage to certain large platforms; and inhibit entry and expansion by smaller businesses.

Next steps

The ICO has stated that it will continue to “steadily” work through its list of UK websites and advises all organisations to take action to become compliant now.

We therefore strongly recommend that DPOs of those in the gambling industry review their organisation’s mechanisms for obtaining consent to personalised advertising, including consents obtained via cookie banners, proactively to ensure these comply with data protection, consumer and competition laws. This applies to gambling operators and affiliates alike; not least because:

Gambling Commission licensees

Gambling Commission licenses are required by social responsibility code 5.1.6 of the Licence Conditions and Codes of Practice (“LCCP”) to ensure that all marketing of gambling products and services is undertaken in a socially responsible manner.

Failure to obtain valid consent to the processing of personal data, particularly that used for marketing, may therefore be considered a breach of the LCCP and lead to enforcement action by the Gambling Commission.

It is also worth noting that any enforcement action taken by the ICO / CMA against such companies would likely also attract the interest of the Gambling Commission; and

Marketing affiliates

Even though affiliates are not themselves regulated by the Gambling Commission, the licensed operators with whom they do business are, and accordingly:

- will be held responsible under social responsibility code 1.1.2 of the LCCP for the actions of third parties (such as affiliates) relating to the provision of marketing of licensed gambling; and
- are required to ensure their contracts enable them to terminate if, in their reasonable opinion, the third party is in breach of contract or has otherwise acted in a manner that is inconsistent with the licensing objectives.

Any enforcement action against affiliates by the ICO / CMA could therefore jeopardize affiliates’ relationships and potentially lead to the termination of their contracts with licensed British gambling operators.

In addition to reviewing cookie consent practices, we also suggest that DPOs consider whether any of the other examples of harmful OCA in the ICO / CMA position paper, including ‘confirm shaming’, ‘biased framing’, ‘bundled consent’ and ‘default settings‘, are being used by their organisation. It is likely that future ICO / CMA enforcement action will centre on such techniques and, in the case of bundled consent, this is already subject to a recently closed Gambling Commission consultation. For further discussion, please see our recent blog: White Paper Series: Direct marketing and cross-selling in the crossfire.

For the meantime we, along with the industry, await to see whether formal ICO enforcement action will be taken against any bad actors. It will also be very interesting to hear the ICO’s views on contextual advertising and subscription models – we will write a further blog if we consider these of key relevance to the gambling sector.

Please get in touch with us if you have any questions regarding harmful OCA, data privacy and / or consumer protection compliance for gambling businesses, or if you require any other assistance.

With thanks to Chris Biggs for his co-authorship.

28Feb

White Paper Series: Parliamentary debate on affordability and financial risk checks

28th February 2024 Chris Biggs 121

On Monday 26 February 2024, the UK Parliament debated the petition Stop the implementation of betting affordability/financial risk checks (the “Petition”), formally addressing one of the Government’s (and the Gambling Commission’s) more controversial commitments from the White Paper.

Background

Launched on 1 November 2023 by The Jockey Club Chief Executive Officer, Nevin Truesdale, the Petition reached more than 100,000 online signatures within 27 days, prompting Parliament’s Petitions Committee to schedule yesterday’s debate by Members of Parliament (“MPs”) including the Gambling Minister, Stuart Andrew (the “Debate”).

The Petition states:

“We want the Government to abandon the planned implementation of affordability checks for some people who want to place a bet. We believe such checks – which could include assessing whether people are ‘at risk of harm’ based on their postcode or job title – are inappropriate and discriminatory.”

On 16 November 2023, the Government responded to the Petition, stating it is “committed to a proportionate, frictionless system of financial risk checks, to protect those at risk of harm without over regulating”, also indicating that the Gambling Commission would set out its plans “in due course”.

Last week (and in advance of the Debate), the Gambling Commission’s Executive Director of Research and Policy, Tim Miller, published a blog entitled “Financial risk next steps – February 2024”, which provided an update on the Gambling Commission’s intended implementation of financial risk checks. We discussed these proposals in our recent blog: White Paper Series: Gambling Commission update on its implementation of financial risk checks.

The Debate

The Debate was attended by a large number of MPs, 27 of whom shared views in favour of both sides of the argument. In opening the Debate, MP for Neath, Hon. Christina Rees, stated “affordability checks are not about attacking consumer rights or curbing individual liberties, but about upholding consumer protections and curbing operator excess.” Whilst Rees acknowledged the concerns of industry bodies, operators and the horseracing community, she argued that the idea of introducing financial risk checks is not new, and that industry and consumers alike support the need for regulation against harmful betting. In Rees’ view, the issue rather seemed to be that:

“such checks need to be frictionless, without negative impact on punters or operator revenue, and without pushing vulnerable gamblers into the black market.”

Similar concerns about the proposed financial risk checks were raised by other MPs. Broadly, the major concerns from the industry (particularly horseracing) and consumers, as put forward by various MPs, were:

it is unclear if the financial risk checks would truly be frictionless;
it is inappropriate for the Government and/or the Gambling Commission to determine what is affordable for an individual;
financial risk checks would push more consumers to the black market; and
horseracing should be distinguished from other forms of gambling, such games of chance, in the implementation of financial risk checks.

Several MPs called for the Government to reconsider the proposals and start again, arguing that a one-size-fits-all approach would not work, and that a wider group of industry stakeholders and experts must be consulted in order to find the appropriate balance.

MP for Shipley, Hon. Philip Davies, on the other hand, took a slightly more nuanced approach, stating that “however much I would like the Government and the Gambling Commission to abandon the affordability check policy, I have not been here so long without accepting that some battles are impossible to win”. Davies suggested that, if they are to be introduced, the proposed “enhanced” financial risk checks should be based on data from the Steering Committee on Reciprocity (“SCOR”), instead of current account turnover data. Davies argued that the use of SCOR data would, crucially, ensure that the checks are “entirely frictionless and do not discriminate against any group, such as the self-employed”.

Amongst the arguments in support of the introduction of financial risk checks, several MPs emphasised that the lower, “light-touch”, financial vulnerability checks will be frictionless and that the enhanced financial risk checks would only require 0.3% of online gambling account holders to provide gambling businesses with additional financial information – the 0.3% being a reference to Andrew Rhodes’ (Chief Executive Officer for the Gambling Commission) blog entitled “Your questions answered on the financial risk checks consultation”, which was published on the Gambling Commission’s website on 7 September 2023. In his blog, Rhodes argued that, on the basis that nearly all gambling customers have a credit reference file which can be checked frictionlessly, only a small percentage (estimated at 0.3% by the Gambling Commission – although it is unclear on the basis of what data/research) would be asked to directly provide additional financial information to an operator in connection with a financial risk assessment.

MP for Sheffield Central, Hon. Paul Blomfield, stated that gambling addiction is a health issue which needs to have a prevention strategy. Noting gambling-related harm can occur at relatively low levels of spend, Mr Blomfield also considered that the 0.3% of customers likely to be affected by the enhanced checks is a “tiny number” in relation to the benefit that could be achieved through introducing the checks. Blomfield went on to downplay the argument that financial risk checks would cause customers to move to the black market. Blomfield cited similar concerns that were raised by the tobacco and payday lending industries, which he noted did not come to fruition after these industries were more stringently regulated.

MP for Swansea East and Chair of the All-Party Parliamentary Group on gambling related harm, Hon. Carolyn Harris, suggested that the logical way forward in protecting those gripped by gambling addiction is to introduce the financial risk checks on anyone gambling larger sums:

“Those would not stop anyone who can afford it betting as much as they choose, but it would stop those who cannot.”

Harris cited research by Dr Philip Newall from the University of Bristol and Dr David Zendle from the University of York using open banking data, which found that “unharmed” gamblers have an average monthly spend of £16.41, compared with £208.91 for the highest risk group. Harris went on to conclude that this research suggested that “risk-free” gamblers would very rarely trigger any affordability checks at the thresholds proposed by the Gambling Commission, being £125 net loss within a month for the light-touch financial vulnerability checks.

Gambling Minister, Hon. Stuart Andrew was last to respond in the Debate and did not provide any significant new information or details about the financial risk checks. Andrew appeared to attribute responsibility to the industry for its “onerous, ad hoc and inconsistent“application of financial checks under the current regime and to cite this as a basis for the Gambling Commission introducing consistent and less intrusive checks. An alternative argument might be that it is the Gambling Commission’s overreaching in its compliance and enforcement activity, particularly in relation to its application of its guidance, that provides the foundation for the proposed financial risk checks.

Andrew briefly addressed the issues raised regarding the black market and the horseracing industry, but largely focused on reiterating the Government’s position that it is not its “job to tell people how to spend their money”. Rather, and as outlined in the White Paper, the Government wants to balance individual freedom with the “necessary action to tackle the devastating consequences that harmful gambling can have on individuals and communities”. Andrew also stated:

“I believe that the proposals for financial risk checks will represent a significant improvement for both businesses and customers, compared with the current situation.”

In addressing the implementation of the financial risk checks, Andrew largely restated the Gambling Commission’s position from its blog of 22 February 2024 (referred to above). However, he emphasised that the Gambling Commission is “carefully listening” to concerns, demonstrated by its confirmation that gambling businesses will not be required to consider an individual’s personal details, such as their postcode or job title, as part of the financial risk checks. We question whether it is the Gambling Commission “carefully listening”, or the public and political traction created by the Petition that led to the Gambling Commission issuing a premature update on its intentions immediately before the Debate, and in doing so backtracking on its original proposal to obtain personal information, such as occupation, from customers. Had the Gambling Commission not so issued its update, Andrew would have had little new information to put forward.

Andrew also emphasised that the Government is supportive of the Gambling Commission’s intention to pilot the implementation of the financial risk checks, and that he hopes it is clear that:

“both the Government and the Commission want this to be a genuine pilot of how data sharing would work”.

Summary

In summary, the Debate uncovered many more questions than answers, and it is still unclear how the Government and Gambling Commission intend to ensure that the financial vulnerability and financial risk checks will truly be frictionless. What is clear, however, is that the Government and the Gambling Commission are working closely together to roll out these checks.

In terms of next steps, Andrew confirmed that the Gambling Commission will publish its full consultation response “very soon”, which reflects the Gambling Commission’s promise in its February 2024 blog that the consultation response would be published in March 2024. We, along with many other industry stakeholders, will eagerly be awaiting the publication of this response, in the hope that it will: (1) clearly set out full details of its proposals with regard to financial vulnerability and financial risk checks (including in relation to the proposed pilot phase); and (2) propose novel and well considered solutions to address some of the (we consider, genuine) concerns raised by MPs in the Debate, and by the wider industry.

Frustratingly, and despite the high number of signatories to the Petition, it is unlikely that the Government and the Gambling Commission will depart from their path as articulated in the White Paper. The Gambling Commission, it seems, is determined to establish the requirement for financial risk checks, ensure that technological developments are implemented, and only then consider and determine what the “vast majority” of customers having a “frictionless” experience actually means. To continue the theme of horse-based analogies enjoyed by several MPs during the Debate, by then, the horse will have bolted.

Watch the full Debate in Parliament here:

Please get in touch with us if you have any questions about financial risk checks or if you would like assistance with any compliance or enforcement matters.

With thanks to David Whyte and Gemma Boore for their co-authorship.

16Feb

Chambers Global 2024 Legal Rankings

16th February 2024 Harris Hagan 114

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 for our valued clients.

John Hagan (Band 1) has been praised as a “leading practitioner” for gaming and gambling matters and recognised for often assisting with “high-value international transactions”.

Bahar Alaeddini (Band 2) has been recognised for her “specific expertise” with global gaming and gambling matters, including her frequent work on regulatory and licensing matters.

Julian Harris has been recognised with the esteemed position of Senior Statesperson and commended for his “wealth of experience” regularly assisting clients with licence reviews and compliance investigations. Commentary has praised Julian as “very switched on.”

Last, but certainly not least, Hilary Stewart-Jones also continues to occupy the position of Senior Statesperson and has been recognised as a “noted figure” in the industry. Commentary has emphasised her status as “very well connected and very knowledgeable for the UK market.”

18Dec

Bahar Alaeddini named in the top 10 Most Influential Women

18th December 2023 Harris Hagan 135

We are very proud to announce that Partner, Bahar Alaeddini, has been recognised in the top 10 Most Influential Women of 2023 by iGamingBusiness.

The award, now in its sixth year, highlights the outstanding contributions made by women who have not only excelled in their roles, but have also made a difference by influencing change within their workplaces and across the wider industry. This honour recognises Bahar’s continued exceptional impact on the gambling industry since joining Harris Hagan in 2012, and reflects the ethos and diversity of the firm, with 50% of both our partners and lawyers being female.

Bahar advises many of the world’s largest online and land-based gambling companies, regulators, financial institutions, and private equity firms on gambling law and regulation. Bahar is at the forefront of thought leadership in the gambling sector, sharing her extensive experience and insight by authoring many articles on a wide range of topics, including acting as the editor of the Chambers Global Practice Guide on Gaming Law. Bahar was named earlier this year as an Emerging Leader of Gaming 40 under 40 and is General Counsel of the International Association of Gaming Advisors and top-ranked in Chambers UK and The Legal 500.

29Nov

Chambers Gaming Law 2023 Global Practice Guide

29th November 2023 Harris Hagan 134

We are pleased to announce that Bahar Alaeddini has reprised her role as Contributing Editor to the Chambers Global Practice Guide for Gaming Law 2023, and Jessica Wilson has again contributed as a co-author. The latest edition of the Gaming Law 2023 guide is now live and describes the licensing and regulatory regimes in 35 jurisdictions, including many of the major global jurisdictions.

In a year that saw a number of significant developments and regulatory updates in the UK and abroad, Gaming Law 2023 is a helpful guide to lawyers, gambling businesses and others in the industry. It provides the latest legal information on a range of topics, including: land-based and online gambling; B2C and B2B licences; application requirements; affiliates; white labels; responsible gambling; AML legislation; restrictions on advertising; acquisitions and changes of control; trends in social gaming, esports, fantasy sports and blockchain; and taxation.

Harris Hagan contributed to the following parts of the publication:

Key trends are covered by jurisdiction under the Trends and Developments section, and the practice guide also provides users with the opportunity to perform jurisdiction comparisons using the Compare locations tool.

Please use the above links to review our contributions and use the practice guide.

27Nov

The Legal 500 Country Comparative Guide 2023 – Gambling Law

27th November 2023 Francesca Burnett-Hall 128

In its second year of publication, Partner Bahar Alaeddini and Associate Francesca-Burnett Hall have jointly contributed to the UK chapter of The Legal 500: Gambling Law Comparative Guide 2^nd Edition (the “Guide”), with Bahar once again acting as contributing editor.

UK-Chapter Download

The publication – which this year spans 19 jurisdictions – gives readers an overview of gambling law, regulatory and licensing requirements in various jurisdictions and the UK, on matters including:

key gambling legislation and the legal definition of gambling;
types of gambling licences available, with a headline of the application procedures;
prohibited gambling products;
information on gambling advertising and marketing affiliates;
penalties for unlawful gambling;
anti-money laundering and safer gambling requirements;
shareholder reporting and approval thresholds; and
the regulator’s enforcement and sanction powers.

Of particular interest in this year’s edition of the Guide are the key regulatory developments and proposals for reform expected over the next 12-24 months, including those set out in the White Paper, which we outline in the UK chapter.

You can read the Guide and compare jurisdictions here.