11Mar

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

11th March 2024 Chris Biggs 157

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 140

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 167

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 156

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 169

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 172

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 159

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.

19Oct

Gambling Commission publishes response to consultation on changes to the LCCP

19th October 2023 Adam Russell 177

On 17 October 2023, the Gambling Commission published a response to their consultation which proposed changes to the Licence conditions and codes of practice (“LCCP”) in relation to: (1) the scope of the requirement for gambling operators to participate in GAMSTOP; (2) events explicitly listed by the Gambling Commission as “reportable” in the LCCP; and (3) the technical wording of an LCCP provision in relation to payment method services.

Background

The consultation opened on 28 February 2023 lasted 12 weeks, closing on 23 May 2023. As outlined in our blog in March 2023, the Gambling Commission proposed the following changes to the LCCP:

Change social responsibility code provision 3.5.5 – Remote multi operator self-exclusion to extend the requirement to participate in the GAMSTOP multi-operator scheme to all gambling licensees that make and accept bets by telephone and emails.
Add a requirement to licence condition 15.2.2 – Other reportable events that would require all gambling licensees to inform the Gambling Commission when they become aware that a person who has gambled with them has died by suicide.
Amend the text of licence condition 5.1.2 – Payment methods services to ensure that the condition reflects the current legislative provisions, plus a further amendment to ensure that the condition also reflects any further legislative amendments that might come into force in the future.

Consultation response

Having received 77 written responses to the consultation (including 29 from gambling businesses), the Gambling Commission have decided that they will implement each of the three proposed LCCP changes. The Gambling Commission’s rationale for the forthcoming changes, the timeline for implementation and the final wording of the provisions are outlined below.

1. Extend the multi-operator self-exclusion scheme to all gambling businesses that make and accept bets by email

The Gambling Commission’s decision to extend the requirement emanates from their “focus…on assessing the risk of harm (in particular for consumers who are vulnerable) as well as the benefits to consumers of clarity and uniformity of approach to self-exclusion…alongside the additional costs faced by gambling businesses.”

Specifically, they considered that the extension would yield the following benefits:

Consistency with the current approach applied to online gambling services;
Simplicity for consumers, gambling business, the Gambling Commission and GAMSTOP;
Providing the most comprehensive protection for vulnerable consumers.

The amended wording to social responsibility code provision 3.5.5, which is set to come into force on 1 April 2024, will read as follows:

“Applies to: All remote licences except: any remote lottery licence the holder of which does not provide facilities for participation in instant win lotteries, ancillary remote betting when relied upon to provide facilities for betting via a machine (commonly known as self-service betting terminals) on premises where a betting or track premises licence has effect, remote general betting (remote platform), remote betting intermediary (trading room only), gaming machine technical, gambling software, host, ancillary remote bingo, and ancillary remote casino licences.

1. Licensees must participate in the national multi-operator self-exclusion scheme.”

2. Reporting deaths by suicide to the Gambling Commission

The Gambling Commission considers that their decision to require gambling businesses to inform them upon becoming aware that a customer has died by suicide is “both reasonable and proportionate”. The Gambling Commission has clarified that they “are not expecting gambling businesses to determine whether the person’s death was caused by or connected to their gambling activity”, which is the responsibility “for a coroner or the police to determine”. Nonetheless, the Gambling Commission will “require notification as early as possible”.

The Gambling Commission cited further reasons for their decision, including in relation to data integrity, privacy and/or data protection issues and economic impact.

The added requirement to licence condition 15.2.2, which is set to come into force on 1 April 2024, will read as follows:

“Applies to: All operating licences.

2. The licensee must notify the Commission, as soon as reasonably practicable, if it knows or has reasonable cause to suspect that a person who has gambled with it has died by suicide, whether or not such suicide is known or suspected to be associated with gambling. Such notification must include the person’s name and date of birth, and a summary of their gambling activity, if that information is available to the licensee.”

3. Payment services – technical update

The Gambling Commission confirmed that the amendment “simply updates the existing licence condition to reflect the current legislative provisions and also ensures that the condition is suitably future proofed against any further simple legislative changes.”

The updated wording of licence condition 5.1.2, which is set to come into force on 31 January 2024, will read as follows:

“Applies to: All remote casino, bingo and betting operating licences, except ancillary, host and remote betting intermediary (trading room only) licences.

1. Licensees must only accept payment from customers using their gambling facilities in Great Britain by a method which involves the provision of payment services as defined in Schedule 1 Part 1 of the Payment Services Regulations 2017 (SI 2017 No 752) if the provider of those services is a ‘payment service provider’ within the definition of that term in regulation 2 of those Regulations (or the equivalent requirements of any UK Statutory Instrument by which those regulations are amended or superseded).”

The consultation asked an additional question regarding any potential equalities impacts that could arise from the proposals. There were very few responses to this question, and the Gambling Commission noted that the responses did not give rise to “themes or major areas of concern”.

Please get in touch with us if you would like assistance on any licensing matters.

19Oct

Gambling Commission reminder to licensees about timely payment of annual fees

19th October 2023 Chris Biggs 173

In its fortnightly E-bulletin of 25 September 2023, the Gambling Commission included two reminders to operating licence holders (“Licensees”). Firstly, about the requirement that they pay their annual fee before the anniversary date of their operating licence and secondly, that it is a condition of the licence that the gross gambling yield (“GGY”) does not exceed the fee category threshold of that licence.

Payment of annual fees

Requirement

Following the Gambling Commission’s grant of an operating licence, Licensees must pay their first annual fee within 30 days of the Gambling Commission issuing their licence. Licensees are then required to pay their subsequent annual fees each year before the anniversary date of their operating licence being issued (section 100(1) of the Gambling Act 2005 (“2005 Act”)).

Failure to make payment on time

The Gambling Commission is required by the 2005 Act to revoke an operating licence in the event of a Licensee’s failure to pay its annual fee before the licence anniversary (section 119(3) of the 2005 Act). However, the 2005 Act permits the Gambling Commission to disapply this requirement, if is satisfied that the Licensee’s failure to pay its annual fee is due to an administrative error. It is of note that there is no requirement that the Gambling Commission commence a licence review before revoking an operating licence for non-payment of the annual fee.

How to make payment

The Gambling Commission will issue an invoice to Licensees six weeks before the annual fee is payable. The invoice can also be found on each Licensee’s Gambling Commission eServices account, through which payment of the invoice can be made.

Annual fees are not refundable by the Gambling Commission, unless an overpayment has been made. For example, no refund would be given if a licence is surrendered the day after the licence anniversary date.

We recommend that Licensees diarise their own reminders, well in advance of the licence anniversary, to ensure the timely payment of annual fees.

Fee categories

It is condition of an operating licence that the gross gambling yield (“GGY”) (or annual gross sales for gambling software licences) does not exceed the upper threshold of the fee category for each licensable activity.

Licensees must therefore monitor their projected GGY or annual gross sales in line with their fee categories, which are displayed on their operating licence. It is of note that fee category thresholds follow the licence anniversary year and not the reporting year (which is stipulated by regulatory returns).

Licensees must apply to vary their operating licence to increase the fee category of a licensed activity before exceeding the upper threshold to avoid breaching the licence condition. Failure to do so may lead to regulatory action. The application to vary can be submitted through eServices, carries an application fee of £40, and must be granted by the Gambling Commission before the licence anniversary date. Licensees who have already exceeded the GGY threshold must regularise the position by submitting an application to vary immediately.

Next Steps

We encourage Licensees to set reminders to pay annual fees, and to ensure the accuracy of their licence fee categories. Further information can be found in the Gambling Commission’s annual fees guidance.

Please get in contact with us if you have any questions about your annual fees and/or fee categories.

19Oct

White Paper Series: DCMS statutory levy consultation – polluters pay is the fairest way…

19th October 2023 Ting Fung 173

The Department for Culture, Media and Sport’s (“DCMS”) consultation on the statutory levy (the “Consultation”) was published on 17 October 2023.

The White Paper stated that the Consultation would consider:

the proposed total amount to be raised by the statutory levy;
how to construct the statutory levy in a fair and proportionate manner; and
consideration of the differing harm associations between sectors and/or associated fixed costs, for example, whether a “polluters pay” principle should be adopted.

We set out below the DCMS’ response to these and other key points of the Consultation.

Proposed total amount?

The Consultation indicates that the new gambling levy, which is expected to be in full force by 2026/2027, will raise an estimated £90 to £100 million per year for research prevention and treatment by 2027.

Construction of the levy

The levy will be calculated based on a percentage of gross gambling yield (“GGY”) and be applicable to both B2Cs and B2Bs. Where GGY is not applicable, percentages should be applied to gross profits instead.

Licensees with more than £500,000 GGY or gross profits will be expected to pay the levy.

Summary of proposed levy rates

Levy rates (% gross gambling yield) when fully in force (2026/27):
• 1% from all online operators (excluding society lotteries with remote licences)
• 1% from remote software licences
• 1% from remote machine technical licences
• 1% from remote pool betting licences
• 0.4% from land-based casino/betting
• 0.4% from non-remote software licences
• 0.4% from non-remote machine technical licences
• 0.4% from non-remote pool betting licences
• 0.1% from land-based arcades and bingo
• 0.1% from society lotteries (including External Lottery Managers and local authority lotteries licensed by the Gambling Commission)

Government emphasises that it is “committed to a proportionate, evidence-led approach” and states that the proposed rates may change depending on evidence received from the Consultation.

Subject to the Consultation response, payment of the levy will be either with the annual fee or on a fixed date, with Government priority being a streamlined process for levy payment and collection.

Government recognises in the Consultation that online providers of higher-risk gambling products “are associated with greater levels of ‘problem gambling’ and gambling-related harm” and therefore “can also reasonably be expected to contribute more to cover the costs of tackling and preventing gambling-related harms”. Nevertheless, Government acknowledges that a polluter pays principle would currently be difficult to implement by product, as the evidence base is not yet sufficient to confirm the particular share of harm by product. In addition, Government’s view of B2Bs as “a crucial part of the broader supply chain fundamental to the industry as a whole” has resulted in the same levy being applied between B2Cs and B2Bs.

Levy distribution

Oversight by:

A central Government levy board comprising the Department for Health and Social Care and Department for Science, Innovation and Technology;
Additional oversight by HM Treasury;
An expert advisory group comprising public bodies with relevant expertise and the third sector will also be established to help prioritise how funds should be used.

Administered by: the Gambling Commission, as directed by Government.

The proposed percentage allocations across the areas of research, prevention and treatment (“RPT”) respectively are:

10-20% to UK Research and Innovation for a Gambling Research Programme.
15-30% for a co-ordinated approach to prevention, early intervention, and education across Great Britain.
40-60% to the NHS, who will be the main commissioner of treatment in England, Scotland and Wales.

What about regulatory settlements and RET payments?

Subject to the final levy system, the Gambling Commission has indicated that it will review its process for approving the destination of settlements, should there be any, and consider how to avoid, as far as possible, a dual system or duplication of work alongside the levy.

Until the levy is implemented, licensees are expected to continue making RET payments as required by the Licence conditions and codes of practice.

Conclusion

Speaking on fairness, Gambling Minister Stuart Andrew has said that:

“Gambling firms should always pay their fair share and this new statutory levy will ensure that they are legally required to do just that.”

The Consultation lasts for 8 weeks, with a deadline of 14 December 2023. Responses should be provided via the Government’s online survey. If you cannot access the link, responses can be sent in PDF or Microsoft Word format to [email protected].

We encourage all to respond and let us know if you wish to discuss or require any assistance.