08May

White Paper Series: Changes to Personal Management Licences

8th May 2024 Bahar Alaeddini 151

In our blog last Summer, White Paper Series: Transforming corporate culture by “driving personal accountability and responsibility” for lookers-on seeing most of the game?, we summarised the Gambling Commission’s key proposals relating to personal management licences (“PMLs”).

The Gambling Commission proposed to:

make clear that the person responsible for “overall management and direction of the licensee’s business or affairs” (which triggers a PML requirement) “is likely to be the CEO, MD or equivalent”;
require the person “chairing the Board (where the licensee has such a body)” to hold a PML;
make it clearer that those responsible for AML and CTF, including the Money Laundering Reporting Officer and Nominated Officer, need to hold a PML; and
assess, on a case-by-case basis, whether CEOs and directors of “parent companies or subsidiaries in the group” need to hold PMLs too.

On 1 May 2024, the Gambling Commission published its consultation response and announced it will introduce the changes as originally proposed, with only minor clarifications to make it clear that the requirement for the Chair – executive or non-executive – to hold a PML only applies to those that hold fixed or indeterminate office. Anyone appointed as Chair on a transient and/or short term basis for individual meetings will not be caught by the new requirement, but the licensed gambling business will need to retain evidence to support the fact the Chair’s role is transient and/or short term.

In our view, the Gambling Commission is striking the right balance with these changes, particularly with the requirement that Chairs must hold PMLs. Increasing the number of PMLs, particularly at a senior level, will drive personal accountability and responsibility, and thereby hopefully enhance the corporate culture and improve standards of compliance.

However, the Gambling Commission has not expressly addressed in its consultation response how the new requirements will apply to large gambling businesses (specifically, D. above), for example, group / regional / business division CEOs, MDs or equivalent, who may share the overall management responsibility and direction for the business in Great Britain. Based on the new licence condition wording, it only applies to the licensee, not its parent, related or subsidiary companies. This was a missed opportunity, and – despite the lack of clarity – our view is that the Gambling Commission would expect such individuals to hold a PML and thereby be caught by the new requirements, given that the licence condition is being implemented “as consulted” and the intention of the Gambling Commission in the consultation document was clear, as follows:

The group structures in which licensees operate vary and sometimes it may be appropriate for the CEOs and Directors of parent companies or subsidiaries in the group to hold PMLs too. This will depend on how these companies interact with the licensee and the influence they have over it.

Information on group structure, licensee interaction and influence is assessed during the process for licence application and during change of corporate control licence applications, and can be assessed at any other time.

Based on the information provided at any of these points, we would take a view on a case-by-case basis as to which individuals would need to hold a PML.

We consider that the proposed amendment to Licence Condition 1.2.1…would reinforce our expectations over which roles require a PML, and would make sure there is adequate personal coverage and accountability in each licensee’s business.

There is no one size fits all approach. Each case should be considered on its merits, taking into consideration how decisions are made, whether decisions can be overruled and by whom, and reporting lines.

Timing of new requirements

The extended requirements in relation to PMLs come into force on 29 November 2024.

Critically, PMLs must have been applied for, and been granted, before this date.

When can applications be made?

The Gambling Commission will be accepting PML applications based on the following timings:

MD, CEO or equivalent:	with immediate effect
AML and CTF:	from 1 June 2024
Board Chair:	from 1 August 2024

We regularly work with clients to prepare PML applications for their employees, senior managers and Board members. Please get in touch if you would like our assistance.

What do PMLs need to know?

If you would like tips for PMLs and employers or to understand PML requirements, such as key events, please read our overview guide.

Preparing new PMLs & training

It is imperative that PML applicants understand the personal liability that flows from holding a PML and, equally, the important role they play in ensuring business decisions are underpinned by the licensing objectives, building a strong foundation of compliance and raising standards.

Borne from our strong desire to help clients navigate the complex framework and landscape in Great Britain, we offer Partner-led PML training covering the key legal, regulatory and licensing issues for PMLs, Boards, Compliance Committees, employers and those in supporting roles, as well as scanning the horizon on key changes, including the Gambling Review, and providing practical advice based on our extensive knowledge, experience and expertise. Our training is entirely bespoke and tailored for each audience group.

Next steps

We strongly encourage gambling businesses to:

Identify the appropriate individuals who must apply for a PML now and not wait until the Autumn when the Gambling Commission is very likely to be deluged with PML applications and experiencing processing delays;
Prepare and submit PML applications early, ensuring they are complete upon submission (to minimise the risk of rejection); and
Provide adequate training to the PML applicants in advance of, or very soon after, 29 November 2024.

Please get in touch if you would like to discuss your PML requirements, PML applications or receive a deck about our PML training services, including client testimonials.

31May

White Paper Series: “Hurry up and wait”

31st May 2023 John Hagan 244

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

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

1. Spirit and intention of the White Paper

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

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

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

2. All things to all people

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

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

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

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

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

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

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

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

3. The upcoming consultations

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

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

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

10Nov

The Legal 500 Country Comparative Guide 2022 – Gambling Law

10th November 2022 Adam Russell 196

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

UK Chapter Download

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

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

01Dec

Chambers Gaming Law 2021 Global Practice Guide

1st December 2021 Ting Fung 260

Partners, Julian Harris and Bahar Alaeddini, return to their roles as Contributing Editors to the Chambers Global Practice Guide and co-authors of the UK chapter, with the latest edition of the Gaming Law 2021 eGuide now online.

The esteemed publication spans over 30 jurisdictions and provides the latest regulatory information including the availability and duration of licences; B2C and B2B licences; application requirements; affiliates; white labels; responsible gambling; AML legislation; restrictions on advertising; acquisitions and changes of corporate control; trends in social gaming, esports, fantasy sports and blockchain; and tax.

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

In addition, to their role as Contributing Editors, Julian has published the Introduction to provide commentary on the latest developments regarding the gambling industry whilst Bahar provides the latest gambling regulatory position in Alderney.

Please use the above links to review their contributions and the rest of the eGuide at your leisure.

09Mar

Changes of Corporate Control: The Basics

9th March 2021 Bahar Alaeddini 298

In our experience, there is often confusion regarding change of corporate control (“CoCC”) requirements and, in particular, what events trigger a CoCC. CoCCs are easy to miss in complex corporate structures. Further, often “the left hand does not talk to the right hand” and the relevant individuals within the business, such as the PMLs or Compliance Department, who are fully aware of the licensing implications, are not notified of an event that triggers a CoCC until after the event or, worse, after the deadline has passed.

In this blog we summarise the basics of CoCCs. This will be supplemented by further blogs on the Gambling Commission’s areas of focus and common pitfalls we have identified in our work on numerous CoCC applications.

We strongly recommend you always seek legal advice, if in any doubt, given the risk to your licence(s), as highlighted below.

What is a CoCC?

Under section 102 of the Gambling Act 2005, a CoCC takes place when a new person or other legal entity becomes a new “controller” of the licensee. The definition of a controller stems from section 422 of the Financial Services and Markets Act 2000 (“FSMA”), which is financial services legislation. This is a complex provision, which even the Gambling Commission summarises incorrectly on its website and in its application forms.

Broadly speaking, section 422 of FSMA covers a person or entity that holds:

10% of more of the shares in the licensee or in a parent company of the licensee (i.e. directly or indirectly);
10% of more of the voting power in the licensee or in a parent company of the licensee; or
less than 10%, but able to exercise significant influence over the management of the licensee.

When considering whether a person or entity holds 10%, it is critical to consider:

whether the threshold has been reached as filtered by the corporate layers (i.e. directly or indirectly in the licensee);
cumulative interests; and
equity interests and voting rights separately if they are not aligned at any point in the corporate structure.

5-week deadline

Section 102(5) of the Gambling Act 2005 requires a licensee to submit a CoCC application to the Gambling Commission when there is a new controller within 5 weeks of the change occurring, for the licence(s) to continue to have effect. This is a statutory deadline.

Why is it important?

Pursuant to section 102(5), the Gambling Commission has the power to revoke the licence(s) – without a licence review – if a CoCC application, along with the application fee, has not been submitted within 5 weeks.

In our experience, the Gambling Commission has become increasingly stricter with CoCC application deadlines and we would strongly recommend you comply with the statutory deadline. The Gambling Commission is no longer generous in giving extensions, sometimes with extension requests being refused, so their goodwill cannot be relied upon. Further, in our recent experience, the Gambling Commission no longer overlooks failures to apply in time, often issuing “advice as to conduct” for the failure to comply with section 102.

Given the potential ramifications, it is essential that someone, with detailed knowledge of the Gambling Commission’s licensing requirements, is monitoring changes in corporate structure promptly and liaising with your stakeholders, as required. You need to develop effective internal procedures, relative to the size and complexity of your business, to ensure that equity and voting interests are regularly monitored.

Please get in touch with us if you believe you have failed to comply with the statutory deadline or require assistance preparing a CoCC application.

18Nov

Gambling Commission Compliance and Enforcement Report 2019-2020

18th November 2020 Bahar Alaeddini 351

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

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

Chief Executive’s message

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

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

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

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

Neil McArthur also emphasised:

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

Summary of other key points from the Enforcement Report:

Triggers and customer affordability

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

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

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

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

Further, the Gambling Commission is concerned that:

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

Most notably, the Gambling Commission adds that:

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

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

Customer interaction and social responsibility failings

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

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

The responsible teams for social responsibility should be adequately resourced.

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

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

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

Anti-money laundering and counter terrorist financing

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

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

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

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

PML Reviews

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

Common failings have emerged from:

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

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

Illegal gambling

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

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

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

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

White label partnerships

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

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

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

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

Operators are encouraged to:

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

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

Betting exchanges

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

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

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

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

16Apr

Vlog on Gambling Commission Licences

16th April 2020 Bahar Alaeddini 344

I am pleased to share our new training vlog on the basics of licences issued by the Gambling Commission. Happy watching!

The contents of this video are for general information purposes. Nothing in this video constitutes legal advice and legal advice should always be taken on appropriate gambling legal, regulatory and licensing requirements.

Harris Hagan is committed to creating and sharing content you will be interested about and will find useful. Please email us with any (reasonable!) suggestions for future training vlogs.
If you have enjoyed watching our vlog, please like, comment or share.

08Apr

Welcome To Harris Hagan’s Vlog

8th April 2020 Bahar Alaeddini 377

In a blog post last week I mentioned the launch of our video blog with weekly vlogs or blog tutorials providing training on key topics in the gambling industry. These will be published on our website and available completely free of charge.

I am pleased to share our very first vlog in which I discuss our desire to bring a new perspective to what we do and how we interact with you.

Harris Hagan is committed to creating and sharing content you will be interested about and will find useful. Please email us with any (reasonable!) suggestions for future training vlogs.
If you have enjoyed watching our vlog, please like, comment or share.

02Apr

“Tell me and I forget, teach me and I may remember, involve me and I learn.”

2nd April 2020 Bahar Alaeddini 373

Training means “the action of teaching a person or animal a particular skill or type of behaviour”. It has specific goals of improving a person’s competence, capacity, productivity and performance. As the title suggests (the words of Benjamin Franklin), any training programme must be coupled with learning and development initiatives.

On the one hand, employees need to replenish their knowledge and improve their skillset to do their jobs better. They need to feel confident about improving efficiency and productivity, and raising standards, as well as finding new ways towards their personal development and success. On the other hand, and most crucially, employers need to:

1. Develop and maintain an effective training and development programme. We recommend this include:

the assessment of training needs across the business;
the review of all communication channels with employees to ensure consistency of messaging;
reviewing existing internal training materials;
reviewing the competency of internal trainers;
the assessment of internal and external training;
considering ways to embed training and development across the business to create/strengthen a culture of compliance and learning; and
an evaluation methodology to measure success or failure.

2. Provide robust, comprehensive, relevant and up-to-date training.

Why is this important?

There is an abundance of reasons. Here are our top 10 reasons:

improved employee motivation and morale;
the workplace is likely to be a happier place;
internal mobility can be an important means of attracting and retaining employees;
maintained and improved employee performance;
identifying and addressing weaknesses;
consistency across the workforce;
increased productivity and internal collaboration;
improved compliance;
increased innovation; and
enhanced reputation and profile.

Training plays an instrumental role in maintaining and raising standards of compliance in respect of a gambling business’ legal, regulatory and licensing requirements, including promotion of the licensing objectives. Creating and cultivating a culture of compliance and learning are vital ingredients for a sustainable gambling business. Before COVID-19, we were facing the most challenging regulatory climate in a generation.

Now is a useful time to take stock and consider what long term sustainability and success looks like for your business, and establish the role that training plays.

Non-compliance is expensive, meaning that prevention is certainly better than a cure. To minimise this risk, we go above and beyond pure legal advice by providing supplementary services to our clients to assist them with staying abreast of legal and regulatory developments and priorities. The aim is to ensure that personal management licence (“PML”) holders, other key staff (for example, compliance, IT developers, those managing PMLs, commercial or other support staff) or a gambling business’ Board or Compliance Committee, understand the obligations and responsibilities that come with being licensed by the Commission.

It is, of course, individuals who make the decisions concerning the gambling business, and, therefore, these individuals who will determine whether the licence holding entity is compliant. Increasingly, the Commission is focused on holding leaders in gambling businesses to account, with the aim to improve Board focus on, and accountability for, the licensing objectives, and encouraging them to set the tone from the top and lead a culture of compliance. This is not a new area of focus. The Commission’s casework continues to show licensees (operating and personal) are not doing enough to learn and, as a direct result, it is taking a stricter approach to enforcement against businesses, imposing bigger financial penalties and tougher sanctions.

Since April 2018, there have been more than £50 million in penalty packages, including more than £30 million in 2020. Since 2018, and during the course of investigations into nine of the most serious operating licensees, the Commission examined the actions of 22 PMLs. Of these, nine surrendered their PML, six received a formal warning, one received an advice to conduct, seven are still ongoing and no further action was taken against two.

Licences (operating and personal) are a privilege, not a right. Training employees is an investment in them and the business, and help protect any gambling operator or supplier’s most valuable asset – its licence(s).

How can we help?

Ensuring compliance with an increasingly complex, pervasive and ever-changing regulatory environment requires expert advice and support. We help gambling businesses before, during and after compliance and enforcement intervention by the Commission. We have significant experience training senior management teams from leading online and land-based operators and suppliers. As external training providers, we bring a new perspective to operators and suppliers used to looking at training and compliance through their own prism.

Our training is very much tailored to our clients’ needs and, in most cases, based on our extensive knowledge working closely with them. We work closely with clients to ensure training is pitched at the right level, informative and interactive, with wide use of case studies.

Our unrivalled training services include:

reviewing internal training materials;
designing new, robust and effective training materials;
developing training and development programmes;
developing employee handbooks and manuals;
delivering training in person (post-COVID-19);
delivering training via videoconference;
delivering training via audioconference; and
training internal trainers.

We regularly train the following stakeholders:

start-ups;
PMLs;
senior management;
compliance departments;
Boards; and
Compliance Committees.

For more details of our training services, please visit our designated Training page on our website, email or call us.
From next week, we will be posting a weekly video blog (we believe the youngsters call this a vlog) or blog tutorial providing training on key topics in the gambling industry. We are committed to creating content you will be interested about and find useful. Please email us with any (reasonable!) suggestions

31Mar

Productivity in This Time of Crisis

31st March 2020 David Whyte 362

The widespread closure of land-based gambling businesses, coupled with the impact of a hiatus in sport may, however undesirably, present some operators and suppliers with the opportunity to take advantage of additional spare time and ease regulatory and commercial burdens prior to the much-coveted return to normality.

Annual fees

In its recent update, the Gambling Commission (the “Commission”) has confirmed that due to the structure of its fee system, which is based on secondary legislation, it is unable to offer a reduction in annual fees or accept payment by instalments.

The only two options presented by the Commission are:

licence surrender; and
reducing the annual fee payable by applying to vary an operating licence to decrease the fee category where there is a reduction in gross gambling yield (“GGY”).

While option 2 may sound attractive, only some licensees will benefit. We recommend considering the following points when making a variation application to decrease a fee category:

it is the cheapest type of application and only costs £25.00;
it can be submitted quickly and easily though the Commission’s eServices portal;
apply as early as possible – the guideline processing time (up to eight weeks) is likely to be lengthened as the Commission experiences increased levels of absence;
the annual fee reduction will not take effect until the next annual fee is due; and
licensees who have recently paid their annual fee will not benefit from any such variation this year because the Commission does not issue refunds, as it has no statutory mechanism to do so.

Licensees whose annual fees are due in the coming weeks/months and expect to see a significant reduction in GGY should move quickly and submit variation applications as soon as possible.

Please remember that, in accordance with section 100 of the Gambling Act 2005, annual fees are payable before the licence anniversary and the Commission has the power to revoke an operating licence for non-payment.

Compliance

Neil McArthur, CEO of the Commission, has reminded licensees, particularly online operators, of the safer gambling and AML risks presented by COVID-19 and that consumer protection is paramount. In a message to online operators, on 26 March 2020, he said:

“…whilst I recognise the enormous challenges businesses are facing, I want to make the Commission’s expectations absolutely clear… If we see irresponsible behaviour we will step in immediately. So, whilst I know that the current climate is unprecedented, gambling operators must play their part in making sure that people are kept safe…”

As a follow-up to his blog on 25 March 2020, The Gambling Commission’s Response to the Coronavirus Crisis, Julian Harris will be posting his views on Neil McArthur’s latest message shortly. In the meantime, we strongly encourage licensees to view the Commission’s warning as an opportunity to take stock and respond positively and proactively as this is likely to result in improved business practices. Inevitably, this will reduce workloads when gambling businesses are finally able to operate as normal:

We recommend licensees consider the following:

AML business risk assessment

In accordance with licence condition 12.1.1 of the LCCP, all licensees (other than gaming machine technical and gambling software licences) are required to conduct an assessment of the risks of their business being used for money laundering and terrorist financing. This risk assessment must be reviewed at least annually and amongst other things in the light of any changes in circumstances or other material changes.

Licensees may wish to begin their review of this AML risk assessment now, considering internal business changes and the risks presented by COVID-19 (almost certainly a change in circumstances or other material change). Risk assessments that are part completed in draft now will require less time when premises reopen or sport recommences, meaning key employees can focus on other matters.

AML and safer gambling policies

Licensees should review their AML and safer gambling (“SG”) policies. This review should not just consider the adequacy of the policies now, but also the risks presented by COVID-19. Particular attention should be paid to the levels which trigger AML and SG customer interactions, and the approach taken to consider the customer’s affordability given the likelihood of disrupted income. Consideration should also be given as to how audits are completed, and whether any changes are required. Again, the completion of amendments in draft now will mean less effort and time is spent on this review when normality returns.

Marketing

Operators should review their marketing policies, ensuring new customers are on-boarded in a socially responsible way, cleanse customer marketing databases and review relationships with affiliates. They may wish to audit their affiliates and renegotiate terms to strengthen control and their position to deal with non-compliant affiliates.

Training

Employees who have been furloughed and/or who have not been operating in their primary role for prolonged periods of time, may need refresher training on key areas on their return to work. Licensees should take steps now to ensure that they have plans in place for this, to ensure that the high standards being adhered to prior to COVID-19 are maintained. We will discuss training in a separate blog post shortly.

The strong messages from the Commission to the remote industry during the COVID-19 crisis maintain a pre-existing tone that is likely to continue. Land-based and sports betting operators and suppliers should use this opportunity to their advantage so that they have a renewed sense of focus when the time eventually comes to return to normality.

If you would like to discuss any of these issues, please do get in touch with us.