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Responsible Gambling

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26Sep

The Gambling Commission’s Checklist for Licensees on Good Practice Complaints Handling

26th September 2022 Adam Russell Harris Hagan, Responsible Gambling, Uncategorised 18

Following a review of licensee complaints policies which contained “a number of areas for improvement”, the Gambling Commission published advice and good practice tips for operators on 21 July 2022. This blog serves to summarily remind licensees of existing rules and guidance enclosed in the Gambling Commission’s update.

Player complaints: relevant themes

Research from the Gambling Commission found that 8% of players have made a complaint in the past, with an additional 4% reporting their wish to complain but failure to do so. These statistics are supplemented by qualitative data which suggests that some players refrain from pursuing complaints procedures because it is often considered a “tedious process”, with some licensees appearing “purposefully difficult to reach”.

However, it is important that players can locate policies and “raise their complaints without any barriers” to “improve outcomes” for both them and operators.

Although mentioned in the detailed leaks in July 2022, it remains to be seen whether a gambling ombudsman scheme will be introduced, as part of the Gambling Act Review, to adjudicate gambling complaints.

Checklist for good practice complaints handling

In light of this, the Gambling Commission issued the following checklist for good practice complaints handling:

  • ensure your complaints process is clear and short;
  • include clickable and appropriately functioning links, including a link to the complaints procedure on your homepage;
  • avoid jargon/legalese and use plain English instead;
  • inform players what information is required to investigate their complaint;
  • include details of the 8-week time limit for either resolving the complaint or issuing a final response;
  • clearly indicate whether a final decision or ‘deadlock’ has been reached;
  • utilise technology (such as webforms and decision trees) to help guide consumers through the complaints process, but always provide alternative contact methods;
  • ensure that your complaints procedure is accessible for all, including vulnerable people, with adjustments readily made where required;
  • maintain a virtual paper trail;
  • utilise consumer support tools, such as Resolver; and
  • provide clear signposting to ADR providers.

The overarching theme is that licensees should design their complaints procedures in a transparent, clear and accessible manner.

Next steps

We strongly encourage licensees to review their complaints procedures against the Gambling Commission’s checklist on good practice for complaints handling, making them as simple as possible, and ensuring policies are implemented.

Please get in touch with us if you require assistance in developing appropriate internal policies and/or updating your complaints procedure in line with the Gambling Commission’s checklist.

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21Sep

New remote customer interaction requirements take effect…in part

21st September 2022 David Whyte Anti-Money Laundering, Marketing, Responsible Gambling 20

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.

  1. 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).
  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’). 
  3. 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.
  4. 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. 
  5. 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.
  6. 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.
  7. 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. 
  8. Licensees must take appropriate action in a timely manner when they have identified the risk of harm. 
  9. 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. 
  10. 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.
  11. 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.
  12. 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.  
  13. 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.
  14. 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.
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18Jul

Customer interaction guidance for remote gambling licensees (formal guidance under SR Code 3.4.3)

18th July 2022 David Whyte Harris Hagan, Responsible Gambling 26

Following its announcement, in April 2022, of the introduction of a new Social Responsibility Code Provision (“SRCP”) 3.4.3 that comes into effect on 12 September 2022, the Gambling Commission (the “Commission”) published its customer interaction guidance – for remote gambling businesses (formal guidance under SR Code 3.4.3) (the “2022 Guidance”) on 20 June 2022, which comes into effect at the same time as SRCP 3.4.3. To date the Commission has made no reference to the revision of its guidance for premises-based businesses and therefore those licensees remain in the dark about any changes that may be introduced in the future.

However, the Commission’s reference to “ew consumer protection guidance” in the press release for the 2022 Guidance demonstrates further its self-driven evolution into a consumer protection body and, given that the requirements set out in SRCP 3.4.3 require action across licensees’ entire customer base, the Commission’s reference to “new rules on action for at risk customers” in the release for the new SRCP is a further indication that the Commission considers all gamblers to be “at risk”. It is therefore likely that revisions to the requirements for premises-based licensees will follow. As we know from the affordability issue, whether formal inclusion of these licensees occurs or not, the Commission is not averse to applying guidance to the entire industry. As we have explained before, the Commission’s approach is difficult to reconcile with the licensing objectives set out in section 1 of the Gambling Act 2005 (the “2005 Act”) and in the Commission’s statutory obligations under section 22 of the Act:

“(a) to pursue, and wherever appropriate to have regard to, the licensing objectives, and

(b) to permit gambling, in so far as thinks it reasonably consistent with pursuit of the licensing objectives”

The Commission is not charged with protecting all consumers, however admirable that may be; it could be the purpose of an ombudsman if appointed as part of the changes to gambling legislation. It was certainly not the intention of Parliament when passing the 2005 Act that the third licensing objective – “protecting children and other vulnerable persons from being harmed or exploited by gambling” apply to all customers who, at some point in time, may be “at risk”.

The 2022 Guidance, which we recommend licensees review in detail, reveals an apparent ignorance on the Commission’s part of various concerns that have been raised in the past about its approach, thereby exposing it to the risk of challenge. This article does not attempt a detailed critique of the entire 2022 Guidance; rather we have sought to identify the most salient points which we believe may have the greatest impact on licensees, or where we believe the Commission’s approach is misconceived.

Section A – General requirements

Paragraphs 1 and 2 – Formal guidance?

The Commission maintains its previous approach in paragraphs 1 and 2 of SRCP 3.4.3, requiring licensees to “embed the three elements of customer interaction – identify, act and evaluate”. Its replacement of the previous requirement to “interact” with a requirement to “act to minimise harm” illustrates its expectation that licensees do more than simply engage with customers and that tailored, proactive steps are taken to minimise the risk of harm.

The 2022 Guidance is more prescriptive than the existing guidance documents that the Commission has issued in relation to customer interaction, and it is certainly less outcome focussed. It requires licensees to undertake specific measures, for example that “licenses must understand that there are many reasons a person may be in a vulnerable situation” or that “licensees must identify customers that may be at risk of harm using all of the information available about the customer.” The use of words such as “must” and “required” have no place in guidance: they are the language of statute, conditions and codes of practice. We will leave for now the bigger issue that this prescription undermines the entire premise of the 2005 Act, which introduced a principles and risk-based system, as opposed to the prescriptive regime of the Gaming Act 1968 which it replaced.

It is of note that paragraph 2 requires that licensees “take into account the Commission’s guidance on customer interaction … as published and revised from time to time…” and that the Commission makes similar reference in the 2022 Guidance, stating that “for the purposes of raising standards, protecting customer interests, and preventing harm to customers, will update and re-issue guidance.” It is intriguing how the Commission considers that future updates to guidance “intended to support compliance with LCCP SR code 3.4.3” can raise standards or prevent harm. Unless, that is, the Commission intends to use the “formal” 2022 Guidance to implement “formal” requirements.

For a number of reasons, the Commission’s attempt to make a silk purse out of a sow’s ear is evident from the questionable foundations upon which the evolved 2022 Guidance is based. Firstly, and somewhat unsurprisingly, the Commission continues to ignore previous concerns raised, not least by us, about its use of guidance: guidance that enables the Commission to outline its expectations to licensees to assist their understanding of licence conditions or codes of practice is sensible. However, the Commission continues to introduce formal requirements through its use of guidance and without consultation, which is wrong. The Commission’s powers are controlled by statute and are therefore the preserve of Parliament. The 2005 Act requires that the Commission must consult before specifying a licence condition (section 76) and before issuing or revising a code of practice (section 24). Guidance must therefore be easily distinguished from a licence condition or code of practice (including those that carry the weight of a licence conditions such as SRCP 3.4.3) and should not prescribe additional requirements.

The distinction is not more apparent than real. Aside from the fact that it exceeds the Commission’s powers to introduce a licence condition or code of practice without consultation, by using guidance which should only be explanatory rather than mandatory, the distinction has very different consequences. Breach of a licence condition or code of practice carrying the weight of a licence condition is a criminal offence and allows the Commission to prosecute or resort to its full armoury of penalties through licence review. By contrast, licensees must “take into account” guidance and therefore not following it should not be an automatic breach. It is therefore wrong, and confusing, for the Commission to include specific requirements in the 2022 Guidance, particularly when it has very recently consulted on the introduction of SRCP 3.4.3 and has thus had the opportunity formally to introduce whatever further formal requirements it wished at that time. Reference to “formal” guidance in the title of the 2022 Guidance is indicative that it knew what it was doing.

Secondly, if the Commission is willing and able to circumvent statutory controls now, and not for the first time (it introduced its Covid-19 guidance very quickly and not alongside a change to the SRCP or consultation), it is likely to do so again. This leaves licensees and other stakeholders exposed to the risk of further change without fair notice or the ability to challenge.

Thirdly, whilst it may seem somewhat hypocritical to challenge now this prescription when licensees have been desperate for clarity for many years, a more thorough analysis of the 2022 Guidance reveals that, despite it being more prescriptive, it is unlikely to provide licensees with the clarity that they desire and will certainly lead to a continuance of the ‘flexible interpretation’ experienced by licensees during compliance assessments and subsequent regulatory investigations. One might argue that, like licensees, the Commission has also struggled to identify what specific controls and thresholds will adequately identify who might be at risk of harm and balance those controls against the freedom of choice.  

It seems that in recent times, guidance, formal guidance and licence conditions have become one and the same thing in the belief of the Commission, the only difference being that the former two contain requirements that the Commission have found inconvenient.

Section B: Identify

Paragraph 3 – Transforming vulnerability

Paragraph 3 requires that “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.” Prior to the publication of the 2022 Guidance, the wording of paragraph 3 indicated that the Commission may have taken a step back from its intention, set out in its consultation, to require that licensees “take account of its definition of vulnerability”. However, it is clear in the 2022 Guidance that this is not the case: the requirement remains but it is drafted more subtly. The Commission sets out in “Aim 3” (which reads as more of an obligation than an aim – a theme that runs throughout the 2022 Guidance) that “ require operators to take action when they are aware that a customer is in a vulnerable situation”, and sets out its own definition of a vulnerable person as

“somebody who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care”.

The Commission requires (amongst other things) that “licensees must understand that there are many reasons a person may be in a vulnerable situation…” explaining that a vulnerable situation “can be permanent, temporary or intermittent, and may be related to health, capability, resilience, or the impact of a life event such as a bereavement or loss of income”.

In recent years the transformation of what the Commission considers to be “vulnerability” is bewildering. Parliament clearly considered the interpretation of vulnerability a straightforward matter: it did not find it necessary to include a statutory definition in the 2005 Act. This is understandable: as we have discussed previously, the reference in the third licensing objective firstly to children, and then to other vulnerable persons, adequately set out Parliament’s intention that the licensing objective apply to those people who are not able to make properly informed or ‘adult’ decisions.

Most worrying, however, is that vulnerability as now defined, is to be determined by whether a “firm”, which we understand to mean a licensed operator, is “acting with appropriate levels of care”. Given that the decision about whether a licensee has acted with “appropriate levels of care” rests with the Commission, it seems that vulnerability will be determined subjectively by the Commission, in hindsight, most likely during compliance assessments, and based primarily on a licensee’s actions and controls in relation to each individual customer. In referring to those “appropriate levels of care” the Commission also suggests incorrectly that licensees have a duty of care at law to prevent customers from gambling if they are or might be vulnerable and risks improperly seeking to introduce such a duty in law, or at least exposing licensees to such a challenge based on its definition.

Matters are likely to become further complicated when the Commission launches its further consultation on the ways to tackle what it considers to be three key financial risks for consumers: binge gambling, significant unaffordable losses over time, and risks for those who are financially vulnerable (the “Financial Risks Consultation”). Licensees who are hoping that this consultation will provide clarity about affordability expectations may be disappointed and faced with a further definition to consider, this time of “financial vulnerability”. Based on its current approach, the Commission is likely to permit itself a similar level of hindsight, the focus of its decisions being on action taken and controls implemented.  

The Commission apparently considers itself lawmaker on a par with Parliament: it will determine who is and who is not vulnerable, and will further amend its definition without consultation, whenever it sees fit.

Paragraphs 4 and 5 – Affordability?

Paragraphs 4 and 5 require licensees to “have in place effective systems and processes for monitoring customer activity” and set out a range of indicators which must be operated by licensees. The 2022 Guidance expands on these requirements, making it clear that the Commission expects a mix of automated and manual processes and that systems should “draw on all available sources of data”.

The 2022 Guidance does nothing to clarify the uncertainty about affordability, with the Commission’s position largely replicating the previous guidance. In setting out examples of indicators which should be used by licensees (some of which have now been made requirements) the Commission refers to “mounts spent compared with other customers, taking account of financial vulnerability”. It is of note that in its reference to the Financial Risks Consultation, the Commission indicates that further “guidance” will follow. Again, given that the Commission has considered it necessary to define “vulnerability”, this is an indication that a further definition for “financial vulnerability” seems likely.

Section C – Act

Paragraphs 8, 9, and 11 – An absence of prescription or guidance?

These paragraphs require that licensees take “appropriate action in a timely manner when they have identified a risk of harm” and that this action is tailored “based on the number and level of indicators of harm exhibited.” The 2022 Guidance obliges licensees to have a suite of actions in place ranging from “early generic action” to “very strong” action (this essentially amounting to ending the business relationship). The Commission does not, however, specify which indicators of harm it considers lower level and which it considers strong. Rather, strong indicators must be “defined within the licensees’ processes”. Prescription, when most likely to be helpful, is absent. The resulting inevitability of inconsistent standards and expectations being applied during compliance assessments will further frustrate licensees.

The requirement not only to “implement automated processes”, but also when those automated processes are applied to “manually review their operation in each individual customer’s case” is burdensome, impracticable, counterproductive and undermines the benefits of automation. The limited guidance – in its true sense – in relation to this requirement and the lack of clarity about when any manual review must take place, is indicative that the Commission has not considered fully how it is “consistent with data protection requirements”.

Section D – Evaluate

Paragraphs 12, 13 and 14 – Impact?

Evaluating the impact of each customer interaction is no easy task. As licensees have already experienced, it doubles the operational impact, with additional and equivalent resource required to follow up on the original interaction. The Commission fairly points out in the 2022 Guidance that “not every customer who receives an interaction will require a follow up” however it overlooks the fact that not every interaction will require evaluation. The Commission states that “by impact we mean a change in the customer’s gambling activity which could be attributed to the interaction”. The implication here is that if the customer’s gambling activity does not change for the better (i.e stop or reduce), they are suffering, or continue to be at risk of suffering harm. This cannot be correct. Some customers will, for various reasons, simply continue to gamble at previous levels, or may even increase their spend, particularly if they are winning (as is commonplace when most people gamble). This is certainly not always an indicator of harm. This lack of clarity will mean that licensees will continue to feel obligated to ensure that on every occasion they interact with a customer they see a change in behaviour, and where this is not the case will feel bound to take further action whether or not any such action is wanted by a customer or thought necessary to prevent harm.

The requirement that licensees evaluate the effectiveness of their overall approach maintains the current requirements, however the Commission sets out in more detail its expectations. The new obligation to “take account of problem gambling rates for the relevant activity published by the Commission in order to check whether the number of customer interactions is, at a minimum, in line with this level” is something of a step away from the tailored approach of other requirements in SRCP 3.4.3 and the 2022 Guidance. To avoid criticism, licensees will need to be acutely aware of any updated publication of problem gambling rates by the Commission, however questionable that data may be, and ensure that this is reflected in their approach.

Conclusion

Whatever the Commission’s intention, and however strongly it feels that licensees are not going far enough to protect consumers, it is vitally important that it acts within its statutory remit. Not for the first time, the 2022 Guidance reveals a willingness on the Commission’s part to act beyond its powers, this time under the guise of the new SRCP and its intention to introduce “stronger and more prescriptive” rules. The Commission’s willingness to continually use guidance as a means of introducing formal requirements through the back door is concerning and it may only be a matter of time before it faces challenge. In the meantime, licensees should ensure that they take steps to ensure that they are able to adhere to both the SRCP and the 2022 Guidance to mitigate the risk of regulatory action.

With thanks to Julian Harris for his invaluable co-authorship.

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07Jul

The Affordability Debate (4): The Commission Unmasked

7th July 2022 Julian Harris Harris Hagan, Responsible Gambling 39

Readers may recall the three articles we have previously written analysing the Gambling Commission’s (the “Commission”) covert operation to introduce a requirement on operators to conduct evidenced affordability checks. Whilst we cannot claim that it is as a result of those publications, it is encouraging that the Commission has finally and “officially” been taken to task on this controversial issue by no less a body than the Digital, Culture, Media and Sport (the “DCMS”) Committee of the House of Commons (the “Committee”). On the penultimate day of the Committee’s Inquiry on What next for the National Lottery? (30 June 2022), the Committee heard evidence from Commission CEO, Andrew Rhodes and its Executive Director, John Tanner. Whilst much of the questioning by the Committee related to the subject matter suggested by the title of the Inquiry, the Committee then turned to the subject of affordability checks and then customer interaction.

We can all sympathise with being taken off guard by unanticipated questioning, but less so with Mr Rhodes’ apparent denial of responsibility for, or even knowledge of, matters that occurred before his appointment, especially in relation to such a critical issue for consumers and the industry.

Even less worthy of sympathy was his apparent inability to explain the relationship between the newly published Customer interaction guidance – for remote gambling licensees, the November 2020 Consultation and call for evidence – Remote customer interaction  (the “Consultation”) on which the Committee interrogated Mr Rhodes, and the issue of affordability which was the basis for the questioning. This is particularly the case given that the core and most contentious of the Commission’s ever evolving proposals in relation to affordability, the introduction of mandatory financial thresholds for affordability checks, was introduced in the Consultation.

Secrecy v transparency

To quote Jeremy Bentham, “secrecy, being an instrument of conspiracy, ought never to be the system of a regular government.” summarises neatly the Committee’s displeasure – to put it mildly – at the Commission’s failure to publish the results of its Consultation. As the Chair, Julian Knight MP, put it:

“This is important work. Affordability and affordability checks are of great public interest. It seems to be very strange that this has not been made publicly available. I do not know what is so secret about it that it needs to be handed over covertly to DCMS and then inform the White Paper. We have a right to see it as well and so does the general public, because we pay for you.”

Mr Rhodes denied knowledge of the reasons, on the basis that it pre-dated his appointment. Now that he has been the CEO for a year, one would expect that he knew, or ought to have known, about the Commission’s handling of an important document relating to a key Commission policy that has been disclosed to DCMS, which has been the subject of numerous licence reviews conducted by the Commission, is of critical importance to those whom the Commission regulates and to consumers, and which has been the subject of very substantial commentary. As the Chair commented:

“It does seem to be very strange that you should announce a consultation in November 2020 on such an important area, which frankly does need scrutiny more widely than just DCMS and the Department, and that was not released publicly. I thought that would be of interest to parliamentarians, rather than for it just to be handed covertly to officials at DCMS. That seems a very strange approach and lacking in transparency, frankly.”

Strange indeed. A lack of transparency on the part of the Commission has unfortunately permeated this issue; coupled with the Commission’s sleight of hand in introducing affordability requirements outside due process, this has left operators confused by the relationship between their regulatory obligations in law and the Commission’s expectations, as explained in more depth in our second article (The Affordability Debate (2): Ambiguous Regulatory requirements). Mr Rhodes again pleaded ignorance:

“I was not at the Commission at the time, so I am very happy to look at what the reasoning was for it not being published. My understanding since I have joined the Commission is that we have fed into the White Paper that affordability checks will be considered as part of the White Paper’s recommendations, rather than have essentially two bites at that.”

More disappointing is that he did not explain what the Commission is doing now in relation to affordability. Given that the Committee referred to this as being “such an important issue”, we consider this to be somewhat disingenuous: it does not reflect the degree of transparency which the Committee felt entitled to expect, nor to the level which the Commission expects of its licensees.

Realpolitik

As operators are painfully aware, the Commission has for some three years done rather more than, in the word of Mr Rhodes, “…fed into the White Paper…”.  The Consultation was followed just three days later by the Compliance and Enforcement Report 2019 to 2020 (6 November 2020) (the “2020 Enforcement Report”).  In fact, even earlier – in its Compliance and Enforcement Report 2018 to 2019 (27 June 2019) (the “2019 Enforcement Report”) – the Commission outlined various open-source data that may help licensees to “assess affordability for its GB customer base and improve its risk assessment and customer interventions.”  In referring to the recommendations it made in the 2019 Enforcement Report, and considering customers who have “demonstrated gambling related harm indicators and been able to continue to gamble without effective engagement”, the Commission opined that: “Furthermore, these individuals have funded their gambling without satisfactory affordability checks and appropriate evidence being obtained.” . The 2020 Enforcement Report proceeded to outline various open-source data that can help licensees to “assess affordability for GB customers and improve risk assessment and customer inventions”. Similar to the 2019 Enforcement Report, this data primarily focuses on average annual salary as outlined in the ONS survey of Hours and Earnings.

The core, critical “requirement” is that:

“Operators must interact with customers early on to set adequate, informed affordability triggers to protect customers from gambling related harm. Failure to do so could render the operator non-compliant.”

“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.”

The Commission takes the view that its Enforcement Reports serve as indicators to licensees of its expectations, for which licensees can be held to account; these reports therefore arguably contain policy positions that, if enforced, are more akin to licence conditions or code provisions. We have discussed previously our concerns that the Commission may be making indirect changes to licence conditions and/or code provisions through its introduction of requirements to adhere to guidance and this is perhaps another, somewhat broader, example of that. Aside from the fact that the Commission is not adopting a risk based and proportionate approach, the evidential basis for the Consultation included research in which customers admit to having sometimes lost more than they can afford, rather than their gambling being unaffordable. The Commission cite the Enforcement Reports as evidence in support of their proposed measures, when in fact the Enforcement Reports deal with “clearly unaffordable” gambling, whilst the proposed affordability constraints go far beyond customers losing tens of thousands, extending to affordability checks after lifetime losses of as little as hundreds of pounds; a point not missed by the Committee, when the Chair referred to “consumers potentially having to submit bank statements or tax returns to bet as little as £100 a month.”

We do not agree that the Enforcement Reports carry the weight of formal guidance. It is clear from the content of the Licence Conditions and Codes of Practice (the “LCCP”) that in cases where the Commission expects licensees to adhere to formal guidance, it says so. Social Responsibility Code Provisions 2.1 (anti-money laundering – casino) and 3.4 (customer interaction) are examples of the Commission explicitly requiring licensees to adhere to, or take account of, specific formal guidance. Nowhere in the LCCP is there any reference to the Enforcement Reports carrying such weight, as we have previously explained (The Affordability Debate (2): Ambiguous Regulatory requirements).  

So, in the case of affordability, the Commission expects licensees to abide by a series of “requirements” none of which are clearly set out in licence conditions, codes of practice, or formal guidance issued by the Commission under its statutory remit, but in their Enforcement Reports and the existing Customer Interaction Guidance and more broadly the Consultation. Breach of a Code under section 24 of the Gambling Act, 2005 may properly be taken into account by the Commission in the exercise of its statutory function but acting contrary to whatever opinions it expresses in its Enforcement Reports, or in speeches, may not. There can therefore be no basis for the Commission, when raising safer gambling concerns, to refer to those Enforcement Reports in its compliance assessment findings, licence review threats or regulatory actions, as it is increasingly doing.

A Bridge Too Far

As licensees know from sometimes bitter experience, and as we explained in our second article on this subject, whilst the Commission has not formally imposed the proposals in the Consultation, it has sought to require operators to abide by them, or variants of them, referred to in its Enforcement Reports, by exerting pressure and threatening regulatory action for failing to implement affordability checks. This is clearly inconsistent, unfair and possibly exceeds its powers. Operators subjected to regulatory action have been pressured by the Commission to adopt affordability checks as if they were a legal requirement. The consequence, aside from placing them at a disadvantage to competitors, has been to create a climate of fear.

This has been exacerbated by confusion as to what the Commission actually requires. Moreover, despite the fact that the Consultation contains proposals for such checks to be applied solely to the online industry, the Commission is requiring such checks also from the land-based industry. The Commission has not merely pre-empted the Government’s decision, it has taken upon itself the role of Government and Parliament, i.e. that of lawmaker.

The whole truth

Mr Rhodes was unambiguous in saying that the issues relating to affordability checks “are something for the White Paper.”

Against the background explained above, it is reasonable to ask how he found himself able to make this statement. He was certainly correct in his pithy summary of how the Commission should have addressed affordability. However, he failed to explain that the Commission has been acting on many of the proposals on which it purported to consult for some three years, without reference to any higher authority. We find this strange indeed, not least given the Committee’s obvious interest and concern about the subject and the Chair’s statement that “affordability and affordability checks are of great public interest.”  Given this “public interest” in the issue and the Committee’s concern as to lack of transparency on the part of the Commission, the Committee should have been informed of the Commission’s existing enforcement on the whole industry of affordability checks.

There is little point in speculating as to the reason for this absence, but it is reasonable to question whether (1) Mr Rhodes did not consider it relevant; (2) he was unaware of it and of the numerous licence reviews in which affordability has been an important feature; or (3) he chose not to mention it. If (1) obviously his view was misconceived; if (2) this would be a cause to question his grasp of the Commission’s work; and if (3) one wonders why not.

In the first article on affordability (The Affordability Debate: Protection, Responsibility and the Right to Choose), we commented that in disregarding the Consultation and pre-empting the results, the Commission had become the emperor that had no clothes. He has now been defrocked.

A question of trust

In conclusion, the Committee Chair asked Mr Rhodes if the Commission “have any measures or metrics in place to decide exactly how you are trusted by your licensees, for instance? Is there an overarching survey of that?” His answer was: “Not presently, no. There isn’t.”  The answer from Mr Rhodes was correct: an answer that the Committee probably found disappointing.The fact of the question being asked hints at the possibility that the Committee considered there could be a negative response to such a survey.

There are stronger remarks that leave little doubt as to the Committee’s opinion; in questioning on metrics to determine whether the National Strategy to Reduce Gambling harms works, the Chair described the approach set out by Mr Rhodes as “very slipshod”. Having then heard Mr Rhodes admit there were no metrics to determine whether the £40 million spent does any good, the Chair concluded the hearing by saying:

“What do you do? There seems to be money going out the door and no accountability for that money, apart from when you make the award. This money just splashes out there and you have no idea in terms of what this impacts with the licensees. I am struggling to think precisely as an organisation how you are doing your job, because these seem to be key measures and indicators of whether you are successful.”

It is not for us to speculate on the views of licensees, who are quite able to make their views known themselves, but this withering criticism from the Committee reflects what was said by the All-Party Parliamentary Group on Betting and Gaming: there is reason to suppose it may well be shared by others.

As we know from experience, the degree of engagement between the Commission, those whom it regulates and even independent advisers, is negligible. The Commission seems interested in canvassing the views of those whom it knows to be anti-gambling or have reason to dislike the industry. This has been demonstrated by its formation of a group of people with “lived experience”, which meant only those who had suffered a problem with gambling. The Commission has never, to the best of our knowledge sought views from the vast majority who enjoy gambling as an adult leisure activity. For most licensees, the only real engagement with the regulator is through regulatory reviews or other confrontational issues.

In short, this issue demonstrates the need for the Commission to go on an “improvement journey”, be put into “special measures”, or even the equivalent of a “licence review” to establish whether it is fit, able and prepared to carry out the function with which it is charged under the Gambling Act, 2005 and not to make law according to its own whims.

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05Jul

Lexology – Getting the Deal Through, Gaming 2022

5th July 2022 Harris Hagan Anti-Money Laundering, Harris Hagan, Marketing, Responsible Gambling 25

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.      

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06Jan

Gambling Commission Compliance and Enforcement Report 2020-2021

6th January 2022 Ting Fung Anti-Money Laundering, Marketing, Responsible Gambling 43

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.

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22Jun

Consultation response: Gambling Commission fees to increase from 1 October 2021

22nd June 2021 Jemma Newton Anti-Money Laundering, Harris Hagan, Responsible Gambling, Uncategorised 81

On 14 June 2021 the UK Government issued its response to a consultation by the Department for Digital, Culture, Media and Sport (“DCMS”) in relation to proposals to increase the fees which are payable by gambling operators in Great Britain to the Gambling Commission (the “Commission”).

The Government’s response set out that the consultation had proposed an increase in fees in order to enable the Commission to continue to “recover its costs and address regulatory challenges”.

The Government confirmed it intends to proceed with implementing the proposals outlined in the consultation, which were to:

  • increase annual fees for remote operating licences by 55% from 1 October 2021;
  • increase all application fees by 60% from 1 October 2021;
  • make other changes to simplify the fees system, including removing annual fee discounts for combined and multiple licences, from 1 October 2021; and
  • increase annual fees for non-remote operating licences by 15%, with implementation of these increases delayed until 1 April 2022.

The Government also confirmed that two minor amendments will be made to fees regulations:

  • to “ensure fees regulations are consistent with the provisions of UK GDPR and the Information Commissioner’s Office’s guidance”, no variation fee will be charged where individuals exercise their right to have inaccurate personal data rectified; and
  • the fee for an application for a Single Machine Permit will be increased, from £25 to £40, “to ensure that the Commission recovers its costs in processing these applications”.

The Government’s full response can be viewed here.

The Commission released a response to the Government’s confirmation of an increase in fees, stating that it “welcomes publication of consultation response on the funding of gambling regulation”, and clarifying that the much needed changes to its fees income “will enable to continue to regulate effectively”. The Commission’s response can be viewed here.

What does this mean for licensees?

As set out above, in addition to a significant increase to licence application fees, remote licensees will be required to pay considerably higher annual fees to the Commission from 1 October 2021. Notably, the increase in annual fees for non-remote licensees will be delayed until 1 April 2022, to account for the Government’s recognition of the impact COVID-19 restrictions have had on the non-remote sector. The Government’s response sets out that:

The majority of non-remote operators are required to pay their annual fees in August or September each year, meaning that the new annual fee levels for much of the non-remote industry will not be due until August 2022.

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16Jun

Update on the Remote Customer Interaction Consultation

16th June 2021 Jemma Newton Anti-Money Laundering, Harris Hagan, Responsible Gambling 85

Background

On 25 May 2021, the Gambling Commission of Great Britain (“the Commission”) provided an update regarding its Remote Customer Interaction Consultation.

The update referenced the Commission’s consultation, which took place earlier this year, which is concerned with identifying and protecting customers at risk of harm. The update also referred to the Commission’s current requirements, which place a duty on remote operators to monitor gambling, and to take action where there is a risk of harm, and the Commission’s finding that operators were not always acting swiftly enough. The Commission confirmed that it has been analysing the approximately 13,000 responses it received.

Confirming that it had considered what the respondents said, the Commission states that:

Many people think there should be protections in place for the most vulnerable and that appropriate checks should be in place to identify and prevent cases of clearly unaffordable gambling. Many respondents emphasised that measures should be proportionate and targeted at those at risk of harm. At the same time, customers were also concerned about privacy and freedom of choice. We take that seriously.

What are the Commission’s priorities and intentions?

The Commission confirms that it is aiming to achieve the correct balance, and that it has listened to concerns about what could be seen as an unnecessary assessment of time and money spent gambling.  However, it goes on to state that it has seen serious failings by operators towards customers, and (somewhat surprisingly given the extensive responses it has to review) it has concluded that it needs to take action now to address the most significant risks, including excessive spending in short periods of time and harm to vulnerable customers.

The Commission states that it has concluded that stronger requirements are needed for operators to identify a range of indicators of harm, and to take action earlier and more often.

The Commission states that it has identified three key risks that it is prioritising for action:

Significant losses in a very short time

Cases where customers have been able to spend many thousands of pounds in short periods, including minutes, without any checks. These cases are relatively rare but have very significant impacts on the consumers affected. For example, in a recent case a customer lost four thousand pounds in six minutes following sign-up.

Significant losses over time

Where customers have significant losses over a period of time without sufficient assessment of whether they are being harmed. Significant losses over time are experienced by a relatively small proportion of customers and it is appropriate to require checks for these customers. An example of this in our casework was where a customer lost thirty-five thousand pounds over two months, without sufficient checks being carried out.

Financial vulnerability

Where information is available that shows when customers are particularly financially vulnerable and likely to be harmed by their level of gambling.

The Commission then sets out its next steps, which will be to:

    • Publish its full response this summer, which will set out the detailed actions on the areas on which it has previously put forward proposals for consultation. Such areas include the requirement to take action where customers are known to be in a vulnerable situation, to take action in a timely manner, and, where appropriate, for that action to be automated. The Commission clarified that it will also proceed as planned with a consultation on thresholds for operators to take action and guidance as to what those actions should be.
    • Continue to work closely with the Department for Digital, Culture, Media and Sport (“DCMS”) by providing advice and evidence for the Government’s Gambling Act Review (the “Review”) and recognising broader public policy questions about how to protect people from harm which will be considered as part of the Review.
    • Continue to engage with consumers, the financial sector and the gambling industry about information on customers that should be available to gambling businesses.
    • Continue its work to support the prevention of harm, including working to ensure that existing tools for setting deposit limits are used more widely and effectively.

Points of note for licensees and what should they do in the meantime?

    1. The Commission’s update clarified that remote licensees should continue to meet the Commission’s current customer interaction requirements. The Commission’s requirements and current expectations are set out in the Licence Conditions and Codes of Practice, customer interaction guidance issued under SR Code 3.4.1 and in the Commission’s Compliance and Enforcement Report 2019-20. We discuss these requirements further in our blog.
    1. Operators should note the three ‘key risks’ flagged by the Commission that are being prioritised for action. Monitoring “significant losses in a very short time” and “significant losses over time” should not be an overly burdensome task for licensees and they should consider taking steps now to introduce monitoring of these risks if they do not already do so. The third key risk, “financial vulnerability” is somewhat more nuanced; until such time as the Commission makes its position clear, licensees should note the increasing focus by the Commission on the risks presented by customers who are financially vulnerable.
    1. Despite the apparent step backwards, which the Commission’s update indicates it has taken in relation to its future plans for affordability, licensees should note that in practice, the Commission continues to expect them to consider affordability in both their approach to safer gambling and in their approach to anti-money laundering and combating the financing of terrorism.  
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13May

The Personal Management Licence regime: An impossible tightrope?

13th May 2021 David Whyte Anti-Money Laundering, Harris Hagan, Responsible Gambling 89

This article was co-authored by Tom Orpin-Massey from QEB Hollis Whiteman Chambers.

Introduction

Personal management licences (“PMLs”) issued by the Gambling Commission of Great Britain (“GBGC”) are held by those occupying specified management roles at licensed gambling operators. They are the key individuals at operators responsible for overall strategy, finance, marketing, information technology, oversight of day-to-day management of certain premises, regulatory compliance, and anti-money laundering.

The PML licensing regime for these senior managers creates a personal responsibility for regulatory compliance, both in the way that they conduct themselves in their role, and the way in which they have management responsibility for the behaviour of the operator for whom they work.

Their jobs are rarely easy. On top of the stresses and pressures of working for licensed gambling operators in a fiendishly competitive market, they must also navigate an ever-evolving regulatory landscape. In addition, the GBGC has been signalling for the past few years that it will increasingly focus on the role played by PML holders when undertaking compliance and enforcement investigations into operators.

The statistics reflect this; in the period April 2019 – March 2020, 49 separate licence reviews were undertaken into PMLs, primarily due to safer gambling or anti-money laundering (“AML”) failures identified at the operator at which they were employed. We expect that figure to increase by the time of the publication of the GBGC’s next annual Enforcement Report for 2020-21 later this year. Recently published GBGC action taken includes:

  • The CEO of an operator receiving a warning and an additional licence condition due to safer gambling and AML failures identified at the operator.
  • 12 PML holders at an operator receiving warnings, advice to conduct letters, or surrendering their licence following notification that their licence was under review, due to safer gambling and AML failures identified at the operator.
  • A further 19 PML holders at that same operator surrendering their licence or receiving advice to conduct letters outside of the licence review process due to safer gambling and AML failures identified at the operator.

Prefacing the GBGC’s last Enforcement Report, then CEO Neil McArthur wrote that “holding an operating or a personal licence is a privilege, not a right”. He went on to say that the GBGC had indicated in the summer of 2017 that its focus was shifting towards PML holders and that “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”.

Is personal regulatory liability within a management framework straightforward?

The GBGC’s position seems, on the face of it, a reasonable one. Who else, other than their senior management and PML holders, are responsible for the behaviour of operators? It therefore follows that where PML holders have failed to meet the GBGC’s standards and/or to adhere to their responsibilities, they should be held to account.

However, as is frequently the case when seeking to apportion blame for a mistake, matters are often more complicated than they may seem. Factors of note include:

  • The GBGC’s regulatory framework evolves constantly.
  • The GBGC’s regulatory framework and guidance is often said to be difficult to follow and poorly communicated.
  • Employees who are not PMLs may be responsible for mistakes and oversights. Whilst these mistakes may expose the operator and its PMLs to criticism, it does not always follow that they are due to a PML’s ignorance or incompetence, and thus holding them responsible for shortcomings on a strict liability basis may not be fair or reasonable.
  • PML holders are subject to a licence condition that they take “all reasonable steps to ensure the way in which they carry out their responsibilities in relation to licensed activities does not place the holder of the operating licence … in breach of their licence conditions.” It does not always follow that, because an operator is in breach of licence conditions, a PML holder will also be in breach personally. In many cases, a PML holder may have taken “all reasonable steps”.
  • Inevitably, operators and PML holders’ views will not always be aligned. PML holders, who in our experience are generally trying to do the right thing, often find themselves facing complex challenges and caught between the GBGC’s requirements and the operator’s commercial interests, with their personal livelihood and reputation at risk. This should be borne in mind by the GBGC, particularly in the current economic climate.
  • PML licence reviews are not always carried out by the GBGC in a consistent manner. In some cases they are commenced at the same time as, or during, an operating licence review, but more often than not they are commenced once an operating licence review has concluded. Licence reviews can take years rather than months to reach a conclusion. PML holders are therefore left in the unenviable position of having to recall events that have taken place years ago when trying to defend themselves. This is if they are lucky enough to have access to the information required in order to aid their recall. If, for any reason, they have left the business, this may not be possible.
  • The GBGC does not set out clearly its approach to PML reviews when they are linked to operating licence reviews. PML holders are often expected by the GBGC to disclose information or answer questions about matters relating to an operating licence review that may have an impact on their PML, without having been clearly informed of the risks or consequences of doing so. The fact that in some cases a PML holder may be accused of breaching a licence condition, which is a criminal offence under the Gambling Act 2005, increases further the exposure to personal risk. This is despite the GBGC’s policy position that, as a general rule, it will not pursue a criminal investigation into a licensee, as in most cases the matter is likely to be capable of being dealt with by exercise of its regulatory powers.

In an age where mental health is at the forefront, all would benefit from giving thought to the impact regulatory action may have on the mental health of PMLs, the vast majority of whom are well-intentioned and want to do right by both their operator and their regulator. Competing interests, reputational harm, the unintentional consequences of their actions and future employability are all factors that will weigh heavily on the shoulders of a PML holder subjected to regulatory action. Expedited investigations should be prioritised, processes and procedures clearly outlined, and legal rights clearly communicated.

PML reviews that take years to resolve, often following prolonged operating licence reviews, are of no benefit to the GBGC, nor to the individual concerned. Swift reviews and clear processes will not only serve to limit the impact on the individual concerned but may also improve the efficacy of regulation.

A PML under review: some things to think about

GBGC investigations and licence reviews of operators often expose PML holders to the risk of similar action in a personal capacity. This puts PML holders in the invidious position of not only responding for and on behalf of the operator, but also having to consider their own professional interests and reputation.

We suggest five things a PML should consider in this situation.

First and foremost, when a PML holder learns that the GBGC is investigating a matter relating to either their own or their operator’s licence, they should seek appropriate legal advice and support immediately.

Before commencing a licence review the GBGC is obliged to put an operator or PML on notice, but a PML may become aware of GBGC interest from an early stage, for example through enforcement enquiries. If so, advice should be obtained at this point. This is important because often the interests of the PML do not necessarily align with those of the operator, even if they act very much as part of the “controlling mind” of the operator, and interests seem at the time to be indivisible.

Secondly, PML holders should be mindful of their own position when saying anything on the record to the GBGC. This is not to say that they should be anything other than honest, open and transparent: it is merely about ensuring that the process is fair to them too.

A typical step in the review of an operator’s licence will be a preliminary meeting with senior management. In some cases, this may be followed or replaced by a regulatory interview (sometimes under caution). These meetings and interviews are usually recorded and transcribed by the GBGC. Anything that is said in them may be used in both the investigation into the operator, and also in any subsequent review of the PML holder.

In practice, PMLs themselves should be warned, or in some cases cautioned, in an individual capacity if they themselves might be investigated. Appropriate advice can help PMLs navigate the difficult situation in which they have to respond on the record on behalf of an operator, whilst ensuring their own position is also protected.

Thirdly, if unsure of timescales and/or the review process, PMLs should ask the GBGC to clarify its position. Whilst the GBGC may not always be able to provide a definitive answer, the fact that the request has been made is an important point of record.

Fourthly, if, after an operating licence review has concluded, perhaps with a number of failings identified and regulatory action taken, the PML is unfortunate enough to be notified that their PML is being reviewed as a consequence of their role in the identified concerns, it is vitally important that they are given fair and proper disclosure. Without it they will find it very difficult to understand the case against them, and properly defend themselves. This can become more complicated if the PML no longer works at the operator concerned.

We recommend that the PML do all they can to seek disclosure from the GBGC and the operator in relation to the matter concerned. What material is the GBGC relying upon? What representations did the operator make? Should the GBGC or the operator be reluctant to hand over material relevant to them, there are options open to them to challenge this.  

And finally, a PML should always be open and honest with the GBGC, and remember that they also have a personal duty to uphold the licensing objectives and act with integrity in the review process. Any obfuscation will do them no favours in the long term.

Conclusion

PML holders who make genuine mistakes when trying to do the right thing, particularly those in compliance roles, should in appropriate cases be supported by the GBGC and viewed as people who can assist in raising standards. Prioritising support and guidance over targeted regulatory action when such mistakes occur may be more productive and is less likely to deter highly competent individuals from holding PMLs because of the risks associated with doing so.

Whilst competing commercial and regulatory interests mean that being a PML is becoming tougher, there are things that PML holders can do to help themselves, and to protect their interests when the GBGC become involved. Legal advice should be sought at an early stage.

Tom Orpin-Massey is a barrister at QEB Hollis Whiteman specialising in crime and regulatory law. He was seconded to the GBGC in 2016 for seven months and continues to be instructed in a broad range of gambling work, both for the Commission and for operators and PMLs.

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11May

The Affordability Debate (3): Regulating beyond its means?

11th May 2021 Julian Harris Anti-Money Laundering, Harris Hagan, Responsible Gambling 100

This is the third in a series of articles considering different aspects of the affordability debate. We have already considered the right to protection, personal responsibility and freedom of choice (in article 1), and recently (in article 2), what the Gambling Commission (“the Commission”) has sought to require of operators at present, with an analysis of the manner in which it has done so. In this article, we turn to the wider powers of the Commission and consider whether they have been exceeded, or at least stretched, in relation to its approach to affordability.

The Customer Interaction Consultation

The Commission launched its ‘Remote customer interaction – Consultation and Call for Evidence’ (the “Consultation”) on 3 November 2020 and the Consultation closed on 9 February 2021. Further to our criticism in our 18 May 2020 article (‘New Gambling Commission Guidance for Online Operators: Changing the Basis of Regulation?’) of the Commission’s introduction of its ‘Customer interaction – Additional formal guidance for remote operators during COVID-19 outbreak’ (the “Covid-19 Guidance”) without consultation, and more generally its use of formal guidance as a means of expanding its Licence Conditions and Codes of Practice (“LCCP”), it was encouraging that on this occasion, the Commission did consult.

Whilst there is no impropriety in the Commission having a review on customer interaction, to include the consideration and gathering of evidence in relation to affordability, we remain concerned about the Commission’s increased use of guidance as a means of adding layers to existing formal requirements, and also about the nature and content of the Consultation. Firstly, whilst there may be cogent arguments in favour of guidance being used to explain and set out reasonable and proportionate expectations of requirements contained in the LCCP, it should not exceed this purpose to the extent that it is difficult to distinguish between requirements outlined in the LCCP and those contained within purported guidance. Secondly, when consulting, it is important that the Commission analyses all information available to it, rather than seemingly interpreting the information in its possession as a means to its ends.

The core proposal in the Consultation in relation to affordability is for the introduction of mandatory financial thresholds for affordability assessments. The evidence on which the need for such assessments is based is flimsy and unconvincing when properly analysed, which the Consultation does not attempt. In addition, the Commission relies on the 2018 Health Survey for England. This the Commission prays in aid of the proposition that “there is evidence to indicate that there is a large-scale issue with remote gamblers betting more than they can afford to lose and experiencing issues with their gambling”. The basis for this sweeping statement is a finding that 21% of respondents stated that they had bet more than they could afford “sometimes” when asked to choose between four options, the other three of which were “never”, “most of the time” and “almost always”. Without further questioning and analysis, this is hardly a basis for swingeing new regulations restricting the liberty of adults to make their own choices without having to prove their financial wellbeing; indeed, it could be that many of those who ticked that box occasionally bet more than they felt was wise, a position that most people would experience with many different kinds of spending: it is certainly not a guaranteed indicator of vulnerability or harm.

Of even greater concern is the scant regard which the Commission appears to have had for the 2018 Consultation Principles. These require, inter alia, that consultations by government authorities:-

    1. Include “validated impact assessments of the costs and benefits of the options being considered….where proposals have an impact on business…”;
    2. Consider whether “informal iterative consultation is appropriate using….open, collaborative approaches”;
    3. “Publish responses with 12 weeks of the consultation or provide an explanation why this is not possible.”

It is disappointing that the Commission has in recent times shied away from informal engagement with the industry on matters of interest and importance to it and to its licensees.  Whilst there has been some collaboration with the Betting and Gaming Council, this has on occasion been preceded by the threat of action and then followed by negative comments by the Commission. Moreover, collaboration  underpinned by threat is not informal engagement. This, and the Commission’s apparent failure to consider the impact of its proposals on the industry and other stakeholders, such as the sports organisations, could once again lead an observer to question its motives, and ask if the consultation is really intended to open a debate and answer certain questions about safer gambling, social responsibility and affordability, or whether the Commission is simply going through the motions to tick the consultation box, with the intention, whatever the evidence produced, of imposing its own agenda. Perhaps it is for this reason that the Commission relies on questionable evidence from the 2018 Health Survey without mentioning that it also found that the incidence of problem gambling had fallen from 0.7% in the 2016 Survey to 0.5%.

As licensees are only too aware, and as we set out in our previous article on this subject, whilst the Commission has not formally imposed the proposals in the Consultation, it has sought to require operators to abide by them, or variants of them, outlined in its Enforcement Reports, by exerting pressure, threatening regulatory action and generally creating a climate of fear. That fear has been exacerbated by the uncertainty as to what the Commission actually requires.

This is the unfortunate consequence when a regulatory authority fails to have proper or sufficient regard for the statutory framework within which it is required to operate. We have already analysed the difficulties faced by the industry in trying to ascertain what is actually and properly required of it by law and regulation. The Commission has the power, and indeed the duty, to prepare codes of practice and impose appropriate licence conditions to regulate the way in which licensees operate. It is required to undertake consultation on such codes of practice. But in the case of affordability, the Commission expects licensees to abide by a series of “requirements” described, not in the LCCP, but in their Enforcement Reports and their existing Customer Interaction Guidance. Breach of a Code under section 24 of the Gambling Act, 2005 may properly be taken into account by the Commission in the exercise of its statutory function, but acting contrary to whatever opinions it expresses in its Enforcement Reports, or in speeches, may not. There can therefore be no basis for the Commission, when raising safer gambling concerns, to refer to those Enforcement Reports in its compliance assessment findings, licence review threats or regulatory actions, as it is increasingly doing.

It follows that similarly there can be no basis for the Commission to claim that affordability assessments are somehow already a requirement of the LCCP. Were that to be true, there would have been no need to write in different terms in the 2020 Enforcement Report from what was said in the 2019 Report, or in its current Customer Interaction Guidance (see article 2 for details), or indeed for the Consultation itself. Yet in reality, at present this is the only way the Commission could argue it properly makes these requirements of licensees.

Statement of Principles

The Commission publishes a ‘Statement of Principles for licensing and regulation’ (the “Statement of Principles”), as is required by section 23 of the Gambling Act 2005 (the “2005 Act”). This is expressed to have had regard to various documents, including the ‘Regulators’ Code (July, 2013: in force from 2014)’ (the “2013 Code”). Whilst the Commission makes reference to the principles included in the 2013 Code in the Statement of Principles, these are more clearly expressed in the 2013 Code, which requires, inter alia, that:-

“1.1 Regulators should avoid imposing unnecessary regulatory burdens through their regulatory activities and should assess whether similar social, environmental and economic outcomes could be achieved by less burdensome means. Regulators should choose proportionate approaches to those they regulate, based on relevant factors including, for example, business size and capacity.

1.2 When designing and reviewing policies, operational procedures and practices, regulators should consider how they might support or enable economic growth for compliant businesses and other regulated entities, for example, by considering how they can best:

    • understand and minimise negative economic impacts of their regulatory activities;
    • minimising the costs of compliance for those they regulate;
    • improve confidence in compliance for those they regulate, by providing greater certainty; and
    • encourage and promote compliance.

5.1 Regulators should provide advice and guidance that is focused on assisting those they regulate to understand and meet their responsibilities. When providing advice and guidance, legal requirements should be distinguished from suggested good practice and the impact of the advice or guidance should be considered so that it does not impose unnecessary burdens in itself”.

We do not know and cannot speculate as to whether the Commission has given careful thought to these obligations when preparing the Consultation. However, we cannot be satisfied that the level of burdensome proposals included in the Consultation and their probable economic impact, are demonstrably considered in the Consultation and this calls into question whether the Commission has had adequate regard to the requirements of the 2013 Code.

The vulnerable

When considering the Commission’s powers, the starting point is the licensing objectives, set out in section 1 of the Gambling Act, 2005 (“the 2005 Act”). These are:

“(a) preventing gambling from being a source of crime or disorder, being associated with crime or disorder, or being used to support crime;

 (b) ensuring that gambling is conducted in a fair and open way; and

 (c) protecting children and other vulnerable persons from being harmed or exploited by gambling.”

The Commission is required, by virtue of section 22 of the Act:

“(a) to pursue, and wherever appropriate to have regard to, the licensing objectives, and

 (b) to permit gambling, in so far as thinks it reasonably consistent with pursuit of the licensing objectives.”

The licensing objectives were not entirely new inclusions in the 2005 Act, having been carried forward from the Gaming Act, 1968, albeit somewhat reworded. The third licensing objective – “protecting children and other vulnerable persons from being harmed or exploited by gambling” is relevant, as the basis for affordability checks. In the Statement of Principles, the Commission at 5.26 states that:

“With regard to ‘vulnerable persons’, whilst the following list is not exhaustive, the Commission considers that this group will include:

    • people who spend more money and/or time gambling than they want to;
    • people who gamble beyond their means;
    • people who may not be able to make informed or balanced decisions about gambling, for example because of health problems, learning disability, or substance misuse relating to alcohol or drugs.”

The wording of the third licensing objective refers firstly to children, and then to other vulnerable persons. The use of that word “other”, and the position in which it appears in the wording of this licensing objective is significant: it is there for a reason. Children are, by law, incapable of making adult informed decisions. Gambling is an adult activity, again by law, as is the consumption of alcohol or the use of tobacco products. In our view the use of other is to indicate that this is the standard by which vulnerability is to be judged; i.e, that it means people who are unable to make a properly informed, or ‘adult’, decision. Plainly, that would include those referred to in the Commission’s third bullet point above. It might include some in the second, though this is too widely expressed. The same point applies to the first. But both of these would depend upon fact and degree: who amongst us has not at some time spent more than we set out to do, carried away by the moment, in a pub, restaurant, or shop? It does not necessarily follow that we are vulnerable people.

In recent years the Commission has interpreted “vulnerable persons” increasingly broadly in its publications and speeches, to include not just those who demonstrate a problem with gambling, or even those who are at risk of being problem gamblers, but to include those “who may be at risk of harms associated with gambling”. In reality, this could include everyone who indulges in gambling at any level. Despite the fall in the percentage of problem gamblers in recent years, or perhaps because of it, the Commission has expanded the class of people whom it considers to be vulnerable. This is not what the legislation intended. Moreover, it is the exercise of arbitrary power with no Parliamentary oversight. The absence of this oversight is all the more concerning when the progress of the 2005 Act through Parliament is considered.

Volume I of the Joint Committee Report on the Draft Gambling Bill (Session 2003-04) was produced by the Joint Committee on the Draft Gambling Bill, appointed by the House of Commons and the House of Lords to consider and report on any clauses of the draft Gambling Bill.  It includes, at Annex 1, a schedule of detailed comments on the draft Bill. It is of note that, in response to a comment made by the Gordon House Association, that “the concept of protecting children and the vulnerable must be extended to include those whose lives are detrimentally affected by problem gambling”, the Department of Culture, Media and Sport (“DCMS”), indicated that it did not expect “vulnerable persons” to be interpreted so broadly when it stated:

“DCMS does not consider that the protection afforded by the Bill needs to extend to this wider group or persons who may be affected by the gambling of others.”

As a result of this ambiguity, the proposal in the Consultation on affordability to amend the Social Responsibility Code to require that licensees “must take account of the Commission’s definition of vulnerability”, amounts to an inappropriate suggestion that the Commission should make legislation, thereby assuming for itself that which is the prerogative of Parliament. The duty of the Commission is to uphold the licensing objectives, not to rewrite them, particularly when this rewriting appears to extend the ambit further than Parliament intended.

It follows that those who are not in fact vulnerable should be free to enjoy their gambling without interference, intrusive interrogation, or, worse still, demands for the provision of highly sensitive private financial information. For the Commission to seek to introduce measures to require such an invasion into the rights of individuals appears to be contrary to their duty to permit gambling where it is consistent with the licensing objectives.

The Gambling Review

Early in December the Government announced the Gambling Review. At the same time, DCMS published its Response to the House of Lords Committee recommendations (the “Response”). In relation to affordability, DCMS commented:

“However, we are not waiting for the Gambling Act Review to take action in this area. The Gambling Commission is, as recommended by the Committee, already consulting and calling for evidence on proposals to strengthen requirements on licensees to identify and interact with customers who may be at risk of harm. Alongside clear expectations on affordability checks, this consultation includes questions for discussion around markers of harm, how to identify and respond to vulnerability and how best to respond to risks for customers in particular situations.”

As we and other commentators, notably Regulus Partners have said, affordability affects every aspect of gambling structure and licensing objectives and potentially profoundly impacts them. In addition, it has massive implications for the cost of compliance and the economic health of the industry, as well as worrying implication for the liberty of consumers. There is therefore a very strong case for the type of affordability measures being proposed by the Commission to be considered as part of the Gambling Review. That affordability requirements were being introduced before the conclusion of the Consultation and before the Gambling Review, potentially renders much of the discussion and evidence irrelevant. By the time that Government and Parliament come to consider new legislation, the Commission will have pre-empted the process, with the consequence that the industry may already have been transformed beyond recognition, and not for the better.

In the Response, the Government – rightly in our view – said that addressing the risk of gamblers spending more than they can afford would involve a number of considerations, “including the need to strike an appropriate balance between player protection and the freedom of individuals to choose how they spend their money”.  These are matters which embrace constitutional and human rights questions, which fall outside the statutory remit of the Commission. It is for the Review, and subsequently Parliament, to determine the future course of gambling legislation and regulation, not the Commission. Whilst the duty of the Commission is to regulate, it cannot be within its power to determine the level of regulation.

It seems to us that the Commission, by its commendable but unrealistic desire to abolish all gambling related harm, is at the root of the problem; it has lost sight of what the then Government recognised in developing the Bill which became the 2005 Act, when it stated in paragraph 7.3 of “A Safe Bet for Success”: “It is impossible to do away with problem gambling; and excessive controls could make matters worse by encouraging the growth of illegal gambling.”  The Commission is dubious about the second part of that statement, but it certainly needs to accept the first part.

In the light of recent rumours, it is to be hoped that the process will now be halted, pending the Gambling Review. The issues raised are, in our opinion, too fundamental to fall within the purview or power of the Commission. This is not to say that the exercise was wasted; the evidence gathered can form part of the material for consideration as part of the Review.

The first stage on the road to recovery from any addiction, be it gambling, alcohol or drugs, is recognising and admitting the problem. This is a lesson which the Commission, which might be said to be at risk of developing a problem with regulation, would be wise to learn, or it may have to be taught by others: Government, Parliament or the courts.

With thanks to David Whyte for his invaluable co-authorship.

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