31May

White Paper Series: “Hurry up and wait”

31st May 2023 John Hagan 241

As the dust settles (at least temporarily) following the publication of the White Paper, we have “take time to think” so that we may share our insights in a series of blogs and vlogs on the many and varied aspects of the proposed gambling reforms. With the Gambling Commission already seeking to manage expectations by saying that the implementation of the White Paper “will likely take a number of years to fully complete” and urging “more haste, less speed”, this may be a long running series… We will focus on what we consider is important or interesting, ideally both, and our content will be concise and hopefully thought provoking.

Speaking about the White Paper recently in the House of Lords, Lord Grade referred to a saying in the film industry – “hurry up and wait” (also a song by Stereophonics and a military motto) – describing where you get to the location after being forced to spend a lot of time waiting, everybody is standing around, ready, but nothing happens. Having waited nearly 30 months for the publication of the White Paper, coupled with the latest (estimated) indication from the Gambling Commission that the first wave of consultations will not be seen until mid-July, this saying seems apt.

1. Spirit and intention of the White Paper

Throughout our White Paper Series, we will have as our touchstone the aim of the Gambling Review when it was published on 8 December 2020:

“The Government wants all those who choose to gamble in Great Britain to be able to do so in a safe way. The sector should have up to date legislation and protections, with a strong regulator with the powers and resources needed to oversee a responsible industry that offers customer choice, protects players, provides employment, and contributes to the economy.”

The White Paper is true to that laudable aim. As the Secretary of State says in her Ministerial Foreword, at the heart of the Government’s Review is making sure it has the balance right between consumer freedoms and choice on the one hand, and protection from harm on the other. The Government seeks to achieve this balance through an extensive package of measures across all facets of gambling regulation. If it is to be successful, the Government – and Gambling Commission – will need to retain an unerring focus on this balance, essentially the spirit and intention of the White Paper, as it is inevitably buffeted by vested interests through consultation, regulation, and legislation.

2. All things to all people

The first thing to say about the White Paper is that it has been broadly well received; when it was delivered in Parliament, within all sectors of industry, by the NHS, in the third sector and at the Gambling Commission. This was equally broadly unexpected, given the acrimony and divergence of views between stakeholders during the “hurry up” phase, so why has the White Paper been such a resounding success? At the risk of oversimplifying, but not wishing to overlook the obvious (including the lack of detail and long grass kicking), it is precisely because the Government has achieved a healthy balance in its proposed reforms, for which it deserves enormous credit, and it is because there is something valuable in the White Paper for everyone.

Responding to its publication, and demonstrating some of the “wins” for the respective stakeholders, comments on the White Paper included:

“Given the correct powers and resources, the Gambling Commission can continue to make gambling safer, fairer and crime free. This White Paper is a coherent package of proposals which we believe can significantly support and protect consumers, and improve overall standards in the industry.” Gambling Commission CEO, Andrew Rhodes.
“BGC members will now work with Government and the Gambling Commission to deliver targeted and genuinely ‘frictionless’ enhanced spending checks to further protect the vulnerable, a new Ombudsman to improve consumer redress, and overdue plans to modernise the regulation of UK casinos.” Betting & Gaming Council CEO, Michael Dugher.
“..it should not be left to the health service to pick up the pieces left behind by a billion-pound industry profiting on vulnerable people, so I fully endorse the statutory levy set out in today’s White Paper and look forward to reading the proposals in detail.” NHS Mental Health Director, Claire Murdoch.
“At GamCare, our priority is making sure that people who need help receive it as quickly as possible. We therefore welcome the clarity the Government has provided on how research, education and treatment will be funded.” Gamcare CEO, Anna Hemmings.
“As chair of the all-party parliamentary group on gambling related harm, I welcome this long overdue White Paper. In the APPG’s 2019 interim report, we asked for affordability checks, parity between land-based and online stakes, an independent ombudsman, a curb on advertising and, most importantly, a statutory levy. Job done.” Carolyn Harris MP.

The introduction of a statutory levy paid by licensees and collected and distributed by the Gambling Commission under the direction and approval of the Treasury and DCMS ministers, is a flagship reform. The long debate as to whether there should be a statutory levy is at an end, there will be a DCMS consultation on the details of its design and, critically, the total amount to be raised. The statutory levy will fund research, education and treatment of gambling harms and is a load-bearing pillar of the reforms for those advocating the “polluter pays” principle.

Financial risk checks, maximum stakes for online slots and the creation of an independent gambling ombudsman have also been very warmly received by key stakeholders and will all be consulted upon by DCMS. The new non-statutory ombudsman will be the subject of our next blog in this White Paper Series.

The Gambling Commission most certainly did not get everything its own way, with Government not religiously following the advice from the regulator, but the Gambling Commission will be the recipient of powers and resources intended to make sure that all gambling is overseen by a “beefed up, better funded and more proactive” regulator. Licence fees will be reviewed (upwards of course) to ensure it has the resources to deliver the commitments across the White Paper. When Parliamentary time allows, it will even get greater power to set its own fees. Detailed analysis of the Gambling Commission’s additional enforcement powers will be the subject of one of our early blogs in this White Paper Series, including some which may have passed below the radar in all the excitement.

The industry positives from the White Paper are more nuanced. The land-based industry can certainly look forward to the long overdue modernisation of casinos and bingo clubs – including greater machine entitlements, credit in casinos for non-UK resident customers, sports betting in all casinos, and additional opportunities for customers to win on the main stage bingo game – and cashless payments across all land-based gambling sectors (following consultation by the Gambling Commission on the player protections which would be required).

From an online industry perspective, the White Paper is arguably as good as could reasonably have been expected in the present political, media and regulatory environment. The Government has resisted calls for bans on advertising, rejected demands for blanket and intrusive low-level affordability checks, and will consult on maximum stakes for online slots at higher levels than leaked previously. However, in outlining the Government’s vision for the future of gambling in moderately business-friendly terms, the White Paper does provide policy direction to which to hold the Gambling Commission accountable, the beginnings of some certainty and a glimpse of what political and regulatory stability might look like, not to mention the hope that the next gambling review might be a generation away.

3. The upcoming consultations

Yes of course everyone wishes the White Paper had gone further (in their direction, naturally). Yes of course there is a lot of work to be done to implement the reforms, once we are no longer “waiting”. Yes of course the devil will be in the detail. But as even the Gambling Commission and the Betting and Gaming Council (the “BGC”) agree in their welcoming press releases, the White Paper is a “once in a generation” opportunity for change. All the key stakeholders will now be seeking to secure their respective prize and imploring Government to prioritise their interests and deliver on its promises at the earliest opportunity, not least through Government and Gambling Commission consultations.

If the risk of the reform process descending into warring factions and reaching a standstill is to be mitigated, and this would not be in anybody’s interests, it is imperative that the process itself remains balanced and that all the key stakeholders see comparable progress in relation to their interests. From an industry perspective, this means engaging positively, constructively, and wholeheartedly with the upcoming consultations, proposing pragmatic and sensible solutions to the difficult challenges the Government and the Gambling Commission face, not least in relation to cashless solutions and frictionless checks, substantiated by evidence wherever possible. It also means holding the Gambling Commission to account on what is expected of it by the Government in the White Paper, with fair prioritisation of its (no doubt stretched) resources and no reforms being left far behind, even when the Gambling Commission is not in favour of them. It means focusing on its prize and not seeking to “re-litigate” settled issues or actively seeking to frustrate other stakeholders, or indeed otherwise antagonising Government which has delivered upon a balanced vision.

The proposed reforms are going to take longer than any of the stakeholders want as they seek to claim their prizes, but they are worth waiting for, the consultation phase will be critical, with both Government and the Gambling Commission under immense pressure to listen, and we will of course be happy to assist clients with their responses where that would be helpful, as we did in the last once in a generation opportunity in 2005!

28Apr

Gambling Commission Advice to Government

28th April 2023 Harris Hagan 219

The Gambling Commission has published its advice to Government (the “Advice”), as part of the review of the Gambling Act 2005 terms of reference and call for evidence, providing advice on each of the following topics:

effectiveness of the regulatory system;
online protections, players and products;
safer gambling and public health messaging;
advertising, marketing and sponsorship;
the Commission’s powers and resources;
wider funding for research, prevention and treatment;
consumer redress;
age limits and verification;
protections for young adults; and
land-based gambling.

In the Introduction, the Gambling Commission explains:

“In forming our advice, we have considered the widest range of evidence and applied a rigorous, consistent, and transparent evidence assurance process. The evidence assurance process enabled us to determine the strength of the evidence base and the weight that could be applied to the formulation of our recommendations. Where there was a lack of conclusive evidence, we took the position that this did not automatically mean that conclusions could not be reached or that action should not be taken. In some of our recommendations we have applied the precautionary principle where the potential for harm existed. We have, however, been transparent in our advice where we are advocating a precautionary approach.”

Andrew Rhodes, Gambling Commission CEO, said:

“The gambling industry has changed significantly since 2005 and our advice sets out changes that will ensure Britain is the safest and fairest place to gamble in the world. The review is a once-in-a-generation opportunity to deliver positive change for gambling in Great Britain and for all people impacted by it. Everyone at the Commission welcomes today’s publication of the White Paper and is determined to work with Government and partners to make these changes a reality. Given the correct powers and resources, the Gambling Commission can continue to make gambling safer, fairer and crime free. This White Paper is a coherent package of proposals which we believe can significantly support and protect consumers, and improve overall standards in the industry. As the detailed implementation of the review now begins, we will also be reiterating to all operators that the Commission will strongly maintain its focus on consumer protection and compliance.”

The Advice was published very shortly after the long-awaited publication of the Gambling White Paper on 27 April 2023.

We will review the Advice in detail and will be publishing our insights over the coming weeks and months.

Download the Advice to Government

10Nov

The Legal 500 Country Comparative Guide 2022 – Gambling Law

10th November 2022 Adam Russell 193

Partner Bahar Alaeddini acted as the contributing editor, and together with Associate Francesca Burnett-Hall jointly contributed the UK chapter, to The Legal 500: Gambling Law Comparative Guide (the “Guide”).

UK Chapter Download

The esteemed publication (which currently spans 16 jurisdictions) provides an overview of gambling law, regulatory and licensing requirements in the UK, including: key gambling legislation; types of gambling licences with the associated application procedures; prohibited gambling products; gambling advertising; marketing affiliates; penalties for unlawful gambling; Licence Conditions and Codes of Practice; relevant anti-money laundering requirements; responsible gambling requirements; shareholder reporting and approval thresholds; enforcement powers; and tax rates. A critical commentary on key trends affecting the gambling industry is also covered.

The Guide provides readers with the opportunity to compare jurisdiction here.

21Sep

New remote customer interaction requirements take effect…in part

21st September 2022 David Whyte 214

On 12 September 2022, the Gambling Commission’s new Social Responsibility Code Provision (“SRCP”) 3.4.3, partly came into effect. For now, however, the Customer interaction guidance – for remote gambling licensees (Formal guidance under SR Code 3.4.3 (the “Guidance”) will not take effect.

Background

In its update of 2 September 2022, the Gambling Commission states that the delay in the implementation of parts of SRCP 3.4.3, and the Guidance, takes into account a request from the industry for “an extension to the timeframe for implementing these new measures”. Further, it “considers it would be beneficial to use the time now available to conduct further consultation on matters to be addressed in the guidance associated with SR Code 3.4.3 by way of a consultation on the guidance document itself”: something which, as we pointed out in July, it should have done in the first place.

The Gambling Commission describes the Guidance as a “living document which is intended to be amended over time”: we have previously set out our concerns about the Gambling Commission’s introduction or amendment, without consultation, of guidance that has the effect of a licence condition. The Gambling Commission states it is “particularly interested to hear about good practice in implementing the requirements, based on the lessons learned by operators during the period between April and September and to hear about any implications arising out of recent research, evidence and casework”. A cynic may suggest that its focus on good practice implementation is indicative that, following the consultation, any revised guidance issued is likely to be very similar to the Guidance, irrespective of any consultation responses submitted: a cycle that has become commonplace in recent times.

The Gambling Commission states that the consultation is “set to be launched during late September and will last six weeks” (rather than the usual 12). Its provisional intention is to “publish the guidance on requirements in December 2022 with it taking effect approximately 2 months after publication”. Whether it meets that deadline remains to be seen.

We strongly encourage all licensees to respond to the Consultation when it is launched.

The Guidance – delay and confusion

The Gambling Commission’s decision, at this late stage, to delay implementation of parts of SRCP 3.4.3 and consult on the Guidance is surprising, as is the fact that pending its consultation it will not require that remote licensees take into account any guidance whatsoever. It seems to us that the latter of these issues has largely been influenced by two factors. Firstly, the fact that the previous Customer interaction: formal guidance for remote gambling operators (the “Previous Guidance”) was issued under the old SRCP 3.4.1, which is also now no longer in effect. Secondly, the Gambling Commission is unable to amend the new SRCP 3.4.3 and require that licensees adhere to the Previous Guidance without further consultation.

This last-minute change creates a lacuna that will last until at least February 2023, which will confuse some remote licensees and infuriate others. Remote licensees are left in the unenviable position of being without any customer interaction guidance whatsoever at a time when, by its recent admission, the Gambling Commission’s “focus on customer interaction has been there for some time now and will certainly be continuing over the coming months”. There must surely also be a risk that consumers could be negatively impacted due to this lack of clarity.

The Guidance – fairness and reasonableness

It has been a requirement that remote licensees “take into account the Commission’s guidance on customer interaction” since 31 October 2019. As any licensee who has been subject to a compliance assessment or regulatory action will attest, in practice the Gambling Commission interprets “take into account” as “strictly adhere to”. This is clear not only from the actions of the Gambling Commission, but also from the affirmative language, such as “must” and “required”, that is contained in guidance it has issued in relation to customer interaction. The Previous Guidance has therefore, at least to some extent, had the effect of a licence condition.

Various regulatory sanctions have been imposed, or regulatory settlements agreed that can be linked, at least in part, to remote licensees’ failure to take into account the Previous Guidance. Those licensees may, rightly, feel aggrieved that a combination of convenient timing and poor regulatory governance, means that they were exposed to such sanctions when, contrastingly, their peers, who may be subjected to compliance assessments or regulatory action now, are no longer obliged to adhere to similar standards. Whether those licensees choose to challenge this unfairness remains to be seen and may depend on the Gambling Commission’s action during this hiatus.

Non-remote licensees remain subject to the requirement, by virtue of SRCP 3.4.1, to “take into account the Commission’s guidance on customer interaction”. This guidance, Customer interaction: formal guidance for premises-based operators (the “Non-remote Guidance”), sets out very similar requirements to the Previous Guidance. This difference in required standards is likely to aggravate non-remote operators, particularly if the Gambling Commission continues to take action against them based on a failure to take into account the Non-remote Guidance. They will also likely be concerned that their already diminishing pool of customers will continue to migrate to the remote sector, which, at least in the short term, is held to a lower standard or can justify non-compliance more easily.

We question whether the Gambling Commission has given adequate thought to the possible impact of this last-minute U-turn and the consequential risk of challenge:

What will the position be for those licensees currently subject to regulatory action for failing to adhere to the Previous Guidance, or for those subjected to a compliance assessment in a period that straddles the change? What standards will they be held to?

Will the Gambling Commission now expect licensees to adhere only to the literal wording of SRCP 3.4.3, ignoring not only the delayed Guidance but also the Previous Guidance?

What are the current affordability requirements? Those requirements, in particular the requirement to consider ONS data and national average salaries when assessing affordability, were set out in the Previous Guidance and repeated in the Guidance. On what basis does the Gambling Commission propose to hold remote licensees who fail to meet those standards to account during this period?

The Gambling Commission has almost certainly opened a can of worms through this seemingly haphazard change. Licensees, consumers, stakeholders, and Government are all likely to have varying concerns. Whilst it is pleasing to see that the Gambling Commission has identified the risks linked to bringing all the requirements under SRCP 3.4.3 and the Guidance into effect without consultation, these issues could have been avoided if the Gambling Commission had given earlier credence to comments made by licensees, or industry stakeholders and advisors. The lateness of this change is embarrassing and the consequential complexities that now follow should be carefully navigated or the Gambling Commission may be exposed to challenge.

Next steps and SRCP 3.4.3

It is the Gambling Commission’s intention, subject to consultation, to introduce the remaining requirements of SR Code 3.4.3 and the associated guidance on 12 February 2023.

In the meantime, we encourage remote licensees to ensure that their policies, processes, and procedures comply with the existing requirements.

To assist licensees, we set out below SCRP 3.4.3 with deletions for those requirements not brought into effect on 12 September 2022.

Customer interaction 

All remote licences, except any remote lottery licence the holder of which does not provide facilities for participation in instant win or high frequency lotteries1, remote gaming machine technical, gambling software, host, ancillary remote bingo, ancillary remote casino, ancillary remote betting, remote betting intermediary (trading rooms only) and remote general betting limited licences.

Licensees must implement effective customer interaction systems and processes in a way which minimises the risk of customers experiencing harms associated with gambling. These systems and processes must embed the three elements of customer interaction – identify, act and evaluate – and which reflect that customer interaction is an ongoing process ~~as explained in the Commission’s guidance (see paragraph 2)~~.
~~Licensees must take into account the Commission’s guidance on customer interaction for remote operators as published and revised from time to time (‘the Guidance’).~~ 
Licensees must consider the factors that might make a customer more vulnerable to experiencing gambling harms and implement systems and processes to take appropriate and timely action where indicators of vulnerability are identified. Licensees must take account of the Commission’s approach to vulnerability as set out in the Commission’s Guidance.
Licensees must have in place effective systems and processes to monitor customer activity to identify harm or potential harm associated with gambling, from the point when an account is opened. 
Licensees must use a range of indicators relevant to their customer and the nature of the gambling facilities provided in order to identify harm or potential harm associated with gambling. These must include: 
- customer spend
- patterns of spend
- time spent gambling
- gambling behaviour indicators 
- customer-led contact 
- use of gambling management tools
- account indicators.
In accordance with SR Code Provision 1.1.2, licensees are responsible for ensuring compliance with the requirements. In particular, if the licensee contracts with third party business-to-business providers to offer any aspect of the licensee’s business related to the licensed activities, the licensee is responsible for ensuring that systems and processes are in place to monitor the activity on the account for each of the indicators in paragraph 5 (a-g) and in a timely way as set out in paragraphs 7 and 8.
A licensee’s systems and processes for customer interaction must flag indicators of risk of harm in a timely manner for manual intervention, and feed into automated processes as required by paragraph 11. 
Licensees must take appropriate action in a timely manner when they have identified the risk of harm. 
Licensees must tailor the type of action they take based on the number and level of indicators of harm exhibited. This must include, but not be limited to, systems and processes which deliver:
- tailored action at lower levels of indicators of harm which seeks to minimise future harm
- increasing action where earlier stages have not had the impact required
- strong or stronger action as the immediate next step in cases where that is appropriate, rather than increasing action gradually
- reducing or preventing marketing or the take-up of new bonus offers where appropriate
- ending the business relationship where necessary. 
~~Licensees must prevent marketing and the take up of new bonus offers where strong indicators of harm, as defined within the licensee’s processes, have been identified.~~
Licensees must ensure that strong indicators of harm, as defined within the licensee’s processes, are acted on in a timely manner by implementing automated processes. Where such automated processes are applied, the licensee must manually review their operation in each individual customer’s case and the licensee must allow the customer the opportunity to contest any automated decision which affects them.
Licensees must implement processes to understand the impact of individual interactions and actions on a customer’s behaviour, the continued risk of harm and therefore whether and, if so, what further action is needed.  
Licensees must take all reasonable steps to evaluate the effectiveness of their overall approach, for example by trialling and measuring impact, and be able to demonstrate to the Commission the outcomes of their evaluation.
Licensees must take account of problem gambling rates for the relevant gambling activity as published by the Commission, in order to check whether the number of customer interactions is, at a minimum, in line with this level. For the avoidance of doubt, this provision is not intended to mandate the outcome of those customer interactions.

05Jul

Lexology – Getting the Deal Through, Gaming 2022

5th July 2022 Harris Hagan 256

As Harris Hagan continues its contribution to the Lexology GTDT Gaming publication, we are pleased to share with our subscribers, complimentary access to the full reference guide which is now available online.

Our Associate, Jessica Wilson, remains the author of the United Kingdom report, which covers a range of British regulatory insights including land-based and remote gambling and quasi-gambling activities, including legal definition; anti-money-laundering regulations; director, officer and owner licensing; passive/institutional ownership; responsible gambling; taxes; advertising; supplier licensing and registration; change of control considerations; and recent trends in the industry.

The reference guide also allows for side-by-side comparisons with other local insights from jurisdictions such as Australia, Brazil, Germany, Hong Kong, Japan, Macau, Nigeria, South Africa and the USA.

We invite you to review the reference guide at your leisure.

28Feb

Chambers Global 2022 – Four Lawyers Ranked

28th February 2022 Ting Fung 212

Harris Hagan continues to have four lawyers individually ranked for Chambers & Partners’ Global Market Leaders Rankings (Gaming & Gambling).

As always, 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.

Julian Harris (Band 1), was recognised as one of the leading gaming specialists in the UK and venerated for his “considerable experience advising on multi-jurisdictional gaming and gambling matters.”

John Hagan (Band 1), was recognised as having “significant expertise” advising “leading gaming and gambling clients on complex regulatory matters”, for which market sources have praised him as being “absolutely excellent”.

Bahar Alaeddini (Band 2) has been exalted for her “considerable strength” advising clients on a broad spectrum of regulatory and licensing complexities.

Last but certainly not least, Hilary Stewart-Jones occupies the esteemed position of Senior Statesperson. Commentary has emphasised her status as being both “well-respected” and “international”, with wide-ranging transactional and regulatory experience.

06Jan

Gambling Commission Compliance and Enforcement Report 2020-2021

6th January 2022 Ting Fung 251

The Gambling Commission’s latest Raising Standards for consumers – Compliance and Enforcement report 2020 to 2021 (the “Report”) was published on 9 December 2021, the first since Neil McArthur’s departure, and details “one of the busiest for Enforcement and Compliance teams…”. Unsurprisingly, the focus of the Report remains on social responsibility and anti-money laundering failings. It also includes designated sections on licensed operators and financial stability, special measures and licence suspensions, personal management licence (“PML”) reviews and illegal gambling. However, surprisingly, and unlike the Raising Standards for consumers – Compliance and Enforcement report 2019 to 2020, affordability is not featured as a key theme despite the continuing and increasing focus by the Gambling Commission across its compliance enforcement work.

Certainly, this is reflected in the Gambling Commission’s summary of its compliance and enforcement work:

15 financial penalty packages or regulatory settlements totalling £32.1 million;
262 security audits;
57 personal licence reviews were finalised; and
82 website reviews conducted; and
30 full assessments of online and non-remote operators.

Alongside an acknowledgment of the challenges of the pandemic upon consumers and businesses, the foreword concludes that:

“Looking back at enforcement in 2020 to 2021 we see the same two weaknesses in almost every case – operators failing to adhere to social responsibility and anti-money laundering rules…The reasons for these failings are almost as concerning as the failings themselves. Our casework reveals that operators are either not making suitable resources available or are simply putting commercial objectives ahead of regulatory ones…As the Great Britain’s regulator for the gambling industry, we still see far too many breaches of regulations where everyone in the industry agrees we should not see them. The industry has the resources, skills and knowledge to change this.”

We strongly encourage applicants and licensees to review, carefully, the Gambling Commission’s identified common poor practices, case studies, notable enforcement cases, guidance and lessons learned and health-check good practices.

Summary of other key areas from the Report:

Anti-money laundering and counter terrorist financing

“The Commission is finding increasing instances of gambling operators failing to consider how problem gambling can be linked to ML and TF despite both the Commission’s Guidance for remote and non-remote casinos: The prevention of money laundering and combating the financing of terrorism and Duties and responsibilities under the Proceeds of Crime Act 2002: Advice to operators (excluding casino operators) stating:
a pattern of increasing spend or spend inconsistent with apparent source of income could be indicative of money laundering, but also equally of problem gambling, or both.”

The common poor practices which led to “avoidable failings” were cited as:

inadequate due diligence measures;
failure to account for the Gambling Commission’s various guidance documents;
failure to consider the full range of circumstances in which enhanced due diligence (“EDD”) is to be applied;
over reliance on third party providers to conduct due diligence (“CDD”) checks;
delayed customer identification checks;
commercial considerations overriding the need to comply with anti-money laundering (“AML”) and counter-terrorist financing (“CTF”) provisions;
operators having no clear methodology in place in their money laundering (“ML”) and terrorist financing (“TF”) risk assessments;
vague references made in ML and TF assessments;
not considering how problem gambling can be linked to ML and TF;
high financial thresholds in place before CDD or EDD measures take place;
high financial thresholds based on losses, deposits, or winnings only; and
the ML/TF risk assessment not being fully used to inform policies, procedures and controls.

The Gambling Commission highlighted the need for licensees to:

apply a risk-based approach;
conduct robust CDD and EDD checks;
ensure that their ML/TF risk assessment along with their policies, procedures and controls sufficiently mitigate the risk of ML and TF;
ensure that they are compliant with and stay up to date on customer interaction requirements, and that they take account of the current formal guidance for their sector; and
deliver robust and up to date employee training.

Licensed operators and financial stability

“It is not surprising given the significant challenges the pandemic has posed globally, that we have observed a significant increase in gambling operators, particularly land-based operators, experiencing extreme financial difficulty. In such situations it is imperative that operators, and their representatives are mindful of what is required of them in relation to the Licensing Objectives and customer protections. We urge licensees who are encountering financial stability issues to engage with the Commission at an early stage.”

Key takeaways from this section are:

responsibility for regulatory compliance remains – at all times – on the licensee, whether this is the gambling business or an appointed administrator;
in the case of administration, all regulatory responsibilities continue and vest in the administrator; and
operating licensees and PMLs were reminded the Gambling Commission will remain focused on ensuring licensees are treating consumers fairly. Fair treatment includes but is not limited to ensuring that segregated funds with medium and/or high-risk customer protection measures are ring fenced and not used to pay business expenditure.

The unsurprising consequence of either improper closedown or not adhering to continuing regulatory responsibilities are risks to any continuing operating licences PMLs. The Gambling Commission further emphasised that any adverse outcomes “may” affect future applications both in Great Britain and with other regulators abroad.

Special measures

As part of its regulatory toolkit, the Gambling Commission has been piloting the use of special measures, since September 2020, “to bring operators to compliance at pace” following the identification of failings during a compliance assessment.

During the special measures process a licensee makes various commitments to, and is supervised by, the Gambling Commission in “a closely managed and monitored timetable to achieve compliance over a relatively short period of time.” Wide-ranging, significant and immediate improvements are required to the licensee’s policies, procedures and controls, generally, within a challenging timeframe. Once the Gambling Commission is satisfied improvements have been made and there is no risk to the licensing objectives, particularly consumers, the special measures will be lifted.

The Report highlights that the pilot scheme has used in relation to eight licensees. The Gambling Commission has found special measures highly effective in incentivising licensees to make quick and substantial improvements (and divestments!) to avoid a licence review, and that it why they are being formalised (as noted below). The shared objective of the dangled carrot is to avoid a section 116 licence review, and in the case of the licensee, the uncertainty, huge stress and cost that they bring!

The Gambling Commission is currently consulting on special measures, to make them a permanent feature of their regulatory toolkit, as part of its consultation on the Licensing, compliance and enforcement under the Gambling Act 2005: policy statement. Read more about the consultation and special measures process in our blog on 13 December 2021.

PML reviews

“Businesses do not make decisions – people do. This is why the Commission continues to ensure that personal licence holders are held accountable, where appropriate, for the regulatory failings within the operators they manage.”

Key failings identified through casework included:

inadequate source of funding or source of wealth checks;
record keeping – lack of adequate documentation and audit trails to demonstrate properly informed decision making;
reporting criminal offences – delays or failures to report Schedule 7 offences as a key event;
nominated officer/ MLRO poor practice; and
senior management lacking oversight.

The associated casework has resulted in the following outcomes:

10 licence revocations – eight Personal Functional Licenses (“PFL”) and two PMLs;
11 PML warnings issued;
One PML warning with conditions;
21 PML advice as to conducts; and
10 PMLs surrendered.

Illegal gambling

“We are particularly focused on identifying and disrupting websites which are targeted at young or vulnerable people, those who experience significant harms from their gambling and self-excluded gamblers. The most widely reported complaints from members of the public related to the allowance of gambling. This accounted for 62% of all unlicensed remote reporting for the financial year 2020 to 2021 representing a 17% increase compared to the financial year 2019 to 2020.”

There were 99 reports of unlicensed remote operators in the financial year 2020 to 2021, some of which accounted for the same illegal website. In addition:

consumers’ inability to withdraw funds remained a prevalent issue;
there was a rise of illegal lotteries on social media;
the Gambling Commission continues to work with social media outlets and other regulators internationally to counteract the risks posed by illegal lotteries;
the Gambling Commission is also assessing its need for further legislative powers to counteract illegal gambling and will report any conclusions to the Department of Culture, Media and Sport as part of the Gambling Review.

What’s next?

The Gambling Commission’s foreword concludes that:

“The reasons for failings are almost as concerning as the failings themselves. Our casework reveals that operators are either not making suitable resources available or are simply putting commercial objectives ahead of regulatory ones.
This is simply unacceptable and will be seen as such by others in the industry who work hard to achieve compliance.
…
Our Enforcement and Compliance work will continue to focus on customer protection, as consumers have every reason to expect. This will vary from paying very close attention to novel products to checking that operators are looking after their customers by meeting the LCCP requirement and taking into account the current Commission guidance on anti-money laundering and customer interaction”.

Compliance and enforcement action will continue unabated.

Updated and consolidated guidance on AML and customer interaction is due to be issued “shortly” following the Gambling Commission’s consultation that ended nearly a year ago on 9 February 2021.

We strongly encourage applicants and licensees to review, carefully, the Report and the Gambling Commission’s identified common poor practices, case studies, notable enforcement cases, guidance and lessons learned and health-check good practices.

24Nov

The Gambling Commission’s First National Strategic Assessment

24th November 2020 Ting Fung 334

On 6 November 2020 the Gambling Commission published its first National Strategic Assessment (“NSA”) alongside its annual, Raising Standards for consumers – Compliance and Enforcement report 2019 to 2020.

What is it?

The NSA is a document comprised of the latest available evidence with the aim of assessing the issues and risks associated with gambling related harm. Gambling Commission Chief Executive, Neil McArthur has stated:

“We will use our National Strategic Assessment as the foundation for prioritising our work over the coming months and years.”

In the accompanying press release, Neil McArthur adds:

“We look forward to working with the government on the forthcoming review of the Gambling Act and alongside that work we will be working hard to address the issues that we have identiﬁed in our Strategic Assessment.
We have demonstrated that we are willing and able to respond quickly to emerging issues and risks and that we will use the full range of our powers to protect consumers. We and have made considerable progress in many areas to make gambling safer – but we want to go further and faster.”

The report outlines the Gambling Commission’s assessment of the key issues faced in making gambling fairer, safer and crime free, and sets out the priority actions and an overview of progress that has been made since 2019.

The Gambling Commission acknowledges that whilst neither gambling participation nor problem gambling rates are increasing, the continually evolving landscape of gambling presents new risks and ongoing challenges. In the Executive Summary the Gambling Commission states:

“We must see the industry doing more to proactively identify and address the risks within their businesses. An approach to raising standards for consumers which is heavily dependent on the Commission using its formal regulatory powers will continue to damage the industry’s reputation, restrict activities and result in escalating penalties.”

The regulator maintains that the best and most sustainable way forward is for operators to allow the distinction between regulatory and commercial considerations to diminish if not disappear altogether.

How will it work?

The Gambling Commission will use “priority actions” to target relevant risks and issues whilst highlighting areas where significant progress has been made. Assessment is built on four “pillars” relating to:

the Person gambling (Chapter 1);
the Place gambling occurs (Chapter 2);
the Products available to customers (Chapter 3); and
the Provider of facilities for gambling (Chapter 4).

The NSA is structured around these pillars, which are coupled with sections on measuring the effectiveness of gambling regulation (Chapter 5), Covid-19 and its impact on gambling consumers (Chapter 6) and the timeline for action (Annex 1).

The NSA is essential reading for any Gambling Commission licensee. Unsurprisingly, the content is closely aligned to the Compliance and Enforcement Report (see our blog on 18 November 2020), published on the same day, and there is a strong emphasis on affordability (Chapter 1, pages 14-18). We strongly encourage B2Cs to review this section carefully, particularly figure 7 and the “clearly unaffordable gambling” case studies.

The NSA’s scope of evidence aims to be wide ranging, drawing on:

the Gambling Commission’s own compliance and enforcement work;
its advisory bodies, the Advisory Board for Safer Gambling as well as the Digital Advisory Panel;
the Interim Experts by Experience Group (involving those with direct experience of gambling related harm);
industry colleagues and representatives; and
the findings of recent Parliamentary reports (see here).

Why now?

Such a document is no doubt in line with the Gambling Commission’s licensing objectives and follows on from regulatory action and research that the Gambling Commission has already performed (see Annex 1 of the NSA for a timeline of action). However, it is also arguable that the speed and depth of their action is partially motivated by the House of Commons’ Public Accounts Committee assessment in June this year that more and faster action was needed by the Gambling Commission to protect vulnerable customers and consumers’ rights to redress. Neil McArthur seems to echo this in his above statement that “ to go further and faster” with its progress.

What to expect next?

The NSA includes numerous “GC actions” throughout. We have summarised these, by chapter, as follows:

Chapter 1: the Person gambling

In response to the key issues and risks regarding:

ineffective KYC approaches including affordability checks;
delayed and ineffective responses to at-risk behaviours;
inadequate controls for more engaged gamblers;
underage gambling; and
gaps in evidence and understanding of gambling-related harms.

The Gambling Commission proposes to act on the following:

Consultations regarding more effective KYC and early identification and effective responses to at-risk behaviour, to include: responding to and implementing the Gambling Commission’s customer interaction consultation on themes of affordability, vulnerability and identifying and acting on harm indicators, including the management of high value customers. In addition, the Gambling Commission will issue a consultation on streamlining the approach to tracking of gambling participation and prevalence of at-risk and problem gambling, with the aim of implementing consultation outcomes in 2021. The Gambling Commission also intends to publish a statement setting out the principles and key areas of work in its approach to vulnerability.
Developing first-rate evidence to inform regulation and legislation, including but not limited to: added questions to the Gambling Commission’s quarterly online omnibus survey to understand the public’s experience of gambling-related harms; longitudinal study of gambling behaviours and problem gambling to inform future improvements to gambling research; a permanent advisory body (Experts by Experience) to build on the Gambling Commission’s interim arrangements.
Developing risk-based approach to harm minimisation in response to more engaged gamblers, such as, developing solutions to provide a ‘single customer view’, and including an updated approach to and use of technology.
Regulatory powers: continued regular investigation of operators’ adherence to social responsibility code provisions and review of its commitment to Annual Assurance Statements; ensuring compliance with strengthened age verification controls and supporting industry bodies generally in their legal and regulatory oversight.

Chapter 2: the Place gambling occurs

In response to the key issues and risks regarding:

the accessibility of online gambling;
the anonymity associated with premised-based gambling; and
socially responsible advertising.

The Gambling Commission will take action in the following ways:

Partnership and industry engagement, to include: partnership with key regulators to ensure gambling is fair, safe and crime free; working with product design groups to challenge the industry to implement better consumer protections; engaging the non-remote sector and promoting initiatives that reflect the Gambling Commission’s compliance and enforcement activity elsewhere.
Research and knowledge, to include: increasing knowledge on digital industries and emerging technologies to ensure regulation remains fit for purpose and responsive to emerging risks; gathering evidence on the most effective ways to prevent bonuses being offered to consumers displaying indicators of harm; building on its interim guidance issued during the first Covid-19 lockdown; monitoring progress on the use of ad-tech to proactively target online marketing for gambling away from children, young people and those who are vulnerable to harms.
Regulatory powers: targeted actions using the Gambling Commission’s regulatory powers to continue to raise standards; monitoring the effectiveness of the Gambling Industry Code for Socially Responsible Advertising which came into effect on 1 October 2020.

Chapter 3: the Products available to customers

In response to the key issues and risks regarding:

potential harms associated with online game and platform design
regulatory risks presented by gaming machine product characteristics and environments
matching controls to the risks presented by product characteristics such as speed of play, accessibility and return to player; and
making consumer and regulatory outcomes equivalent to commercial outcomes.

The Gambling Commission will work on the following:

Consultations and responses, to include: publishing a response to the Gambling Commission’s consultation on safer game design; publishing a response to its proposal to ban reverse withdrawals.
Research and knowledge, to include: publishing the findings of the randomised controlled trials with three large operators into anchoring and commitment devices; active engagement in research programmes including the GambleAware-funded project on online patterns of play, led by NatCen.
Testing: implementing the enhanced test house framework and ensuring that the United Kingdom Accreditation Service assessments of test houses are robust and effective.

Chapter 4: the Provider of facilities for gambling

In response to the key issues and risks regarding:

transparent cooperation regarding ownership and governance;
the evolving risks presented by illegal gambling; and
upholding the licensing objective of keeping crime out of gambling.

The Gambling Commission will take the following action:

Consultations and responses, to include: publishing the response to the consultation on the Gambling Commission’s corporate governance including its approach to regulatory panels.
Research and knowledge, to include: publishing clear metrics to measure the effectiveness of regulatory interventions; increasing understanding of the scale of illegal gambling and exploring disruption techniques.
Daily operations, to include: improving data systems and capacity to ensure quicker identification of and response to consumer issues; expanding capacity and availability of accredited online investigators and necessary software tools respectively, in order to tackle illegal gambling.
Regulatory powers, to include: upholding stringent processes to assess the suitability of prospective licensees and taking swift enforcement action against non-compliant licensees; updating the Gambling Commission’s money laundering risk assessment; and continuing to support the sport and sports betting integrity action plan.

With regards to the impact of Covid-19 on gambling consumers (Chapter 6), the Gambling Commission has stated that it will continue to collect and publish data to inform on the ongoing impact and associated risks.

As stated in relation to the providers of facilities for gambling (Chapter 4), the Gambling Commission is preparing key metrics on the impact of its regulation and where it is making progress in changing the behaviours of operators. It will use these metrics along with the four pillars of assessment to help prioritise its responses to harm minimisation in the short and long term. With its evidentiary emphasis, the NSA is a foundational document for the Gambling Commission to continue to develop its regulatory approach and impact and help inform stakeholders. The Gambling Commission itself states:

“Good regulation is informed by good evidence. We continually seek to improve the evidence base; to have access to better data, to move away from just counting problem gamblers to understand more about specific gambling-related harms.”

18Nov

Gambling Commission Compliance and Enforcement Report 2019-2020

18th November 2020 Bahar Alaeddini 350

On 6 November 2020 the Gambling Commission published its annual Raising Standards for consumers – Compliance and Enforcement report 2019 to 2020 (the “Enforcement Report”). The Enforcement Report has been expanded this year and is laid out in the following eight sections:

Chief Executive’s message;
Triggers and customer affordability;
Customer interaction and social responsibility failings;
Anti-money laundering and counter terrorist financing;
Personal management licence (“PML”) reviews;
Illegal gambling;
White label partnerships; and
Betting exchanges.

Chief Executive’s message

In the very first sentence of his message, Gambling Commission Chief Executive, Neil McArthur, reminded readers that:

“Holding an operating licence or a personal licence is a privilege, not a right, and we expect our licensees to protect consumers from harm and treat them fairly.”

He goes on to summarise the Gambling Commission’s compliance and enforcement work in the last financial year (April 2019 to March 2020), in which:

49 section 116 licence reviews were commenced against PML holders;
5 operating licences were suspended;
11 operating licences were revoked;
12 financial penalty packages or regulatory settlements, totalling over £30 million, were imposed; and
350 compliance assessments (land-based and online) were conducted.

Neil McArthur also emphasised:

“Those in boardrooms and senior positions need to live up to their responsibilities and we will continue to hold people to account for failings they knew, or ought to have known, about…Regulatory settlements are a way of resolving enforcement cases which we have used to good effect. Frankly, however, there are too many occasions where settlement proposals are made at a late stage of our investigation process or approached as if a licence review is a commercial dispute to be negotiated. That is not acceptable…Settlements are only suitable where a licensee is open and transparent, makes timely disclosures of the material facts, demonstrates insight into apparent failings and is able to suggest actions that would prevent the need for formal action by the Commission. Only licensees who meet those criteria need make settlement offers; licensees who choose to contest the facts before conceding at a later stage need not make offers of settlement…Everyone has a part to play to make gambling safer and learning the lessons from the failings identified in this report is one way of doing that.”

Summary of other key points from the Enforcement Report:

Triggers and customer affordability

“Customer protection has continued to be a priority for the Commission and consideration of affordability should be a significant driving factor in customer risk assessments.”

Affordability is a top priority and the Gambling Commission remains dissatisfied by industry progress. Open source information remains an important element of an affordability framework, because “it is a parameter to consider when setting benchmark triggers that will drive early engagement with customers”. Open source information shows:

median gross weekly earnings* for full-time employees in the UK of £585;
50% of full-time employees in the UK receive less than £30,500 gross earnings* per year;
50% of full-time managers, directors and senior officials (the highest weekly earners) in the UK receive less than £45,000 gross earnings* per year.

*These are gross earnings before expenses such as income tax, national insurance, mortgage/rent payments, travel, food etc. are deducted. The Gambling Commission expects expenses to be considered “so the starting point adequately reflects the true level of available disposable income for that individual.”

Further, the Gambling Commission is concerned that:

affordability frameworks “are not being implemented at pace despite guidance and advice”;
“complex and convoluted matrices and mappings” are being developed based on gross earnings before disposable income is factored in;
“trigger groups are set without any sort of customer interaction to influence their true affordability determination”; and
operators are not interacting early on to set “adequate, informed affordability triggers to protect customers from gambling related harm”, which it goes on to say “could render the operator non-compliant”.

Most notably, the Gambling Commission adds that:

“Customers wishing to spend more than the national average should be asked to provide information to support a higher affordability trigger such as three months’ payslips, P60s, tax returns or bank statements which will both inform the affordability level the customer may believe appropriate with objective evidence whilst enabling the licensee to have better insight into the source of *those funds and whether they are legitimate or not.”

Operators should review lessons in the Enforcement Report and re-assess affordability triggers whilst preparing for any new requirements that may emerge from the Gambling Commission’s consultation on remote customer interaction. We will publish a blog on this consultation next week.

Customer interaction and social responsibility failings

“We have set out clear expectations for operators in relation to safer gambling. We expect operators to actively work and accelerate cooperation with each other to prevent, mitigate and minimise harm, collaborating to accelerate progress and evidence impact. We want a focus on ‘what works’ and we expect operators to empower and protect consumers.”

The scope of social responsibility is broad and includes identification and engagement with those who may be at risk of or experiencing harms.

The responsible teams for social responsibility should be adequately resourced.

Operators are encouraged to consider whether they can evidence the following:

effective safer gambling policies and procedures in place which are tested and periodically reviewed and updated to reflect impact assessments and new research;
policies and procedures that are truly implemented in the business and are being acted upon;
appropriate safer gambling triggers in place that lead to meaningful customer interactions, which are regularly reviewed by management to critically assess their impact on customers and overall effectiveness;
effective challenge and oversight by senior management with clear accountability throughout the organisation; and
teams responsible for conducting social responsibly interactions are adequately resourced so that at-risk customers are not missed or identified too late.

Licensees are strongly encouraged to review the Gambling Commission’s notable enforcement cases, helpful case studies and good practice guidelines.

Anti-money laundering and counter terrorist financing

“Work to ensure gambling stays free from crime and the proceeds of criminal finance continues to be a major area of concern for the Commission. Significant and substantial assessment continued for both land-based and online gambling businesses, including money service businesses activities offered by the casino sector.”

The Gambling Commission continues to see operators falling down on the following:

insufficient depth of knowledge demonstrated by PML holders, leading to competency and integrity concerns;
deficient Risk Assessments leading to ineffective policies, procedures and controls;
operators and PML holders failing to learn lessons from the Gambling Commission’s compliance and enforcement activity; and
failure to provide regular, quality training to staff.

Licensees are strongly encouraged to review the Gambling Commission’s notable enforcement cases, helpful case studies and good practice guidelines.

PML Reviews

“The Commission has been signalling for the past few years that we will increasingly focus on the role played by Personal Management Licence holders (PML) when undertaking Compliance and Enforcement investigations.”

Common failings have emerged from:

Failures to assess if decisions being made at Executive level are being implemented within businesses.
Overly complicated lines of decision making and accountability.
Lack of technical knowledge and oversight of areas that PML holders have specific responsibility for, especially in respect of AML.
Prioritising commercial outcomes over regulatory responsibility.

This section ends with a stark reminder, which we always provide to our clients and training subjects, “businesses do not make decisions – people do.” The Gambling Commission adds that “icensees can expect us to continue to take action against accountable individuals to ensure standards are raised to the levels required, whether in relation to the business or individual capability.”

Illegal gambling

“Part of our statutory remit and a key licensing objective is to keep crime out of gambling. We are particularly focused on identifying and disrupting those illegal websites which are targeted at the young and vulnerable gamblers and which often provide little, or no, customer protection. When consumers access illegal gambling sites, they expose themselves to many risks and are not afforded the protections in place in the regulated sector.”

The Gambling Commission’s focus has been on investigating unlicensed gambling facilities and unlicensed advertising, with 59 instances of remote unlicensed operators and 245 illegal lotteries referred by Facebook for closure. Its investigations have shown:

consumers identified as users of the websites have in the main been vulnerable with some having previously self-excluded via GamStop;
consumers often contact the Gambling Commission because they have been unable to withdraw funds;
when consumers have complaints with unlicensed operators these are often not dealt with, and consumers have no right to appeal;
the protection of consumers’ personal information cannot be relied upon; and
such websites may be linked to organised crime.

The Gambling Commission urges licensees to remain vigilant as to the risk of illegal sites using their software without authorisation and to report any such instances immediately

White label partnerships

“The white label operating model continues to be popular within the GB market with there being over 700 white label partners within the industry at present. One of the reasons this model is becoming increasingly popular is that this type of arrangement can bring global exposure to an operator’s products, via the arrangements their white label partners have in place with sports teams for example. However, there is a concern that unlicensed operators who would potentially not pass the Commissions’ initial licensing suitability checks, are looking to use the white label model to provide gambling services in Great Britain.”

White labels have been a key area of focus for the Gambling Commission in the last year. It showed that licensees were failing to appropriately mitigate the risks to the licensing objectives, including:

a failure to properly scrutinise the ownership of white label partners;
ineffective AML controls with individual white label partners or across the customers’ activity; and
poor oversight of activities performed by white label partners, particularly in relation to customer interactions.

Responsibility for compliance always sits with the licensee. In accordance with social responsibility code provision 1.1.20 (responsibilities for third parties) safeguards should always be implemented before committing to contractual obligations to ensure compliance with the LCCP. Failure to do so is likely to bring into question the suitability of the licensee.

Operators are encouraged to:

Conduct risk-based due diligence with a view to mitigating risk to the licensing objectives before entering a relationship with a white label partner;
continually manage and evaluate its white label partner relationships;
ensure service agreements between the licensee and white label partner explicitly articulate where overall responsibly for regulatory functions lie;
ensure white label partnership contracts contain a clause permitting the licensed operator to terminate the business relationship promptly where the partner is suspected of placing the licensing objectives at risk or fails to comply with the requirements contained in the LCCP;
provide training to their partners and conduct ongoing oversight of the activities which should be clearly documented and retained for the life of the business relationship;
ensure that any system the licence holder has in place to manage or detect multiple accounts for individual customers, works across all white label partners so they will have a holistic view of customer activity; and
ensure that source of funds, affordability or markers of harm triggers are based upon this holistic view and not solely on an individual domain basis.

Licensees are strongly encouraged to review the Gambling Commission’s notable enforcement cases, helpful case studies and guidance on white labels.

Betting exchanges

“This year has seen increased regulatory activity related to betting exchanges; an area of growing complexity as operators expand the breadth of markets available and the jurisdictions from which they draw their customers.”

The Gambling Commission reminds betting exchanges that they must apply “critical risk-based thinking” and must not assume that something good enough for one regulator will be acceptable to another. Due diligence should be undertaken for each individual customer. In particular, source of funds and source of wealth must be monitored by adequate checks and controls, particularly where these may be obscure, unconventional and/or especially large – for instance, in relation to account to account transfers or syndicates.

Licensees are strongly encouraged to review the Gambling Commission’s notable enforcement cases.

We strongly encourage all Gambling Commission licensees and applicants to read the Enforcement Report carefully.

14Oct

Gambling Industry Code for Socially Responsible Advertising, Sixth Edition

14th October 2020 Ting Fung 327

“From ancient times in China, Egypt and Rome, it has been present as a pastime, affording enjoyment for many, corrupting some and harming not a few…”

Of gods and mortals

In his introduction in the Chambers and Partners Gaming Law Global Practice Guide, Julian Harris writes of Palamedes, the god to which the Greeks ascribed the invention of dice, as well as weights and measures. With the publication of the sixth edition of the Gambling Industry Code for Socially Responsible Advertising (the “Industry Code”), now under the custody of the Betting and Gaming Council (“BGC”), it is this dichotomy of play and balance that is held in mind.

As technology and its consumption changes and continues to advance, consumers across industries are more exposed to advertising than ever, maximising fun but also magnifying potential harm. With the scope of online advertising presenting the greatest influence, and arguably the most risk, it is unsurprising that one of the key areas of update in the Industry Code relates to social media, in respect of marketing and its use to promote consumer awareness.

What licensees need to know

From 1 October 2020, Gambling Commission-licensed operators are required to enforce the following:

Sponsored/paid-for social media advertisements must be targeted at consumers aged 25+. This requirement relates solely to prospecting campaigns where the targeted audience is not already verified through an operator’s own age verification processes;
Given improvements in identification technology if a social media platform can verifiably prove that its age gating systems can prevent under 18s from accessing the gambling advertising content, a possibility exists that the above age filter may be reduced to 18+;
Organic YouTube content produced by an operator as well an operator’s own YouTube channels must be age-restricted to 18+ to ensure users log in to age-verified accounts in order to view content;
Operators should undertake reasonable endeavours to exclude from their paid-for social media campaigns (a) customers with an active self-exclusion or cool-off period and (b) those assessed by an operator as ‘higher risk’;
Operators must use their own social media pages to post frequent safer gambling related information; and
Operators must provide information (in an easily accessible and sufficiently prominent manner) on how customers can limit their exposure to gambling advertising across social media platforms.

In other areas, further changes to the Industry Code include:

Search activity

Search advertisements must clearly contain 18+ messaging in the advertisement copy, along with safer gambling messaging within the core ad format;
The BGC will collate (and regularly update) a shared blacklist of negative keywords, against which no gambling advertising should be served. This blacklist will include keywords that (a) indicate vulnerability and (b) relate to children. Operators must, “in a timely fashion”, incorporate the keyword blacklist into all relevant campaigns where applicable;
These requirements will also apply to any affiliate marketing carried out on behalf of an operator.

Affiliate compliance

All affiliates must be subject to due diligence and PEPS/sanctions checks. KYC checks should also be conducted, wherever relevant.
Affiliates must comply with all relevant regulatory and legislative requirements including CAP’s guidance on ensuring advertisements are obviously identifiable as such. In order to promote consistency, all relevant affiliate ads should be clearly and prominently marked ‘#ad’;
Relevant affiliates must share safer gambling related content on a regular basis with each individual operator with whom that affiliate has an agreement;
It is expected that (a) compliance with the above requirements will be managed by way of contractual obligations imposed by operators and (b) operators will terminate relationships with affiliates that cannot or do not comply, the Industry Code adding that this will be “preferably on a one strike and you’re out rule” basis.

As many will already be aware, ordinary code provision 5.1.8 of the Licence Conditions and Codes of Practice states: “icensees should follow any relevant industry code on advertising, notably the Gambling Industry Code for Socially Responsible Advertising”.

The Industry Code states that it aims for the above changes to “better protect children and vulnerable consumers online”, with BGC Chief Executive, Michael Dugher, further adding:

“We have made excellent progress in recent times and the Industry Code for Socially Responsible Advertising is updated as technology evolves. The latest edition is further evidence of our determination to continue to ensure that standards are rising and are as high as they can possibly be”.

The measures are certainly timely in light of the Advertising Standards Authority’s findings published in August 2020, which revealed that four operators had breached age-restricted advertising rules.

Whistle-blowing at its finest

By contrast, in other avenues of advertising, the ‘whistle-to-whistle’ ban (introduced under John Hagan’s leadership as former Chair of IGRG) has proven markedly effective, with the BGC noting that betting advertisements seen by children has since fallen by 97% and that the amount of gambling advertisements viewed by children has fallen by 70% over the full duration of live sport programmes.

Marketing