“Keeping crime out of gambling”: How much do you know about foreign jurisdictions?

“Keeping crime out of gambling”: How much do you know about foreign jurisdictions?

european continent marked with flags

by Bahar Alaeddini, Partner

by Bahar Alaeddini, Partner

All Gambling Commission (“Commission”) licensees will unanimously agree that the requirements of being licensed in Great Britain have dramatically increased in recent years. One of the latest changes came on 18 May 2017 with the publication of the second part of the Commission’s Regulatory data collection consultation response document (the “Response”). The Response sets out the Commission’s proposals to change some parts of the regulatory data that licensees are required to provide to the Commission.

One of the biggest changes in the Response is the Commission’s plan to:

• remove the foreign jurisdiction section of the regulatory returns form from April 2018; and
• add a new LCCP key event requiring licensees to report group jurisdictional revenue (date to be confirmed).

The Commission’s view remains that:

• “due care” is taken and operators have “a reasonably coherent rationale” for what they are doing;
• where there are no “justifiable arguments” to continue to advertise and/or supply, “reasonable attempts” must be taken to stop access;
• it is not acceptable “to hide behind willful ignorance or implausible assumptions”;
• should an operator not take reasonable steps to stop access being gained it may reflect on their integrity and suitability; and
• responsible operators are expected to take reasonable steps to discourage players deliberately flouting domestic legislation.

As part of the original Regulatory data collection consultation document (dated 16 November 2016) the Commission proposed making a “slight change” to the LCCP notification to indicate either when the group begins advertising to a new jurisdiction, or the 3% / 10% jurisdiction threshold being passed for the group. The Commission goes on to say:

“The requirement is to notify the Commission at such time as the group becomes aware of the change and focuses on upon a significant or sustained change in the group’s revenue profile by jurisdiction.”

The crucial words are “significant or sustained change”, which were added by the Commission to avoid operators having to inform a relatively small-scale or short-term change in revenue, but where operators do not expect such revenue change to apply in the future on a sustained basis. The Commission plans to consult with operators before the new requirement comes into force in April 2018, to work on definitions of data points.

The words “at such time as the group becomes aware of the change” do not dictate timing. The Response states that the reporting period would be against the licensee’s usual reporting period and would relate to a quarter or year, dependent on various factors, including the size or organisational structure of the group. We believe that it could be acceptable to review the position every six months or every year depending on group reporting. The licensee would therefore notify the Commission if its internal report revealed that it had gone over 3% / 10% (as appropriate) on a sustained basis. This reinforces the need for licensees to develop accurate and timely systems to monitor revenues for each jurisdiction.

The driving concern behind these changes remains suitability to hold a licence. As the Commission notes, groups of companies often share funding arrangements, expertise and gaming liquidity. Commission licensees often do not directly trade in other markets, but may benefit from related companies doing so. This therefore raises questions of financial risk and the legality of funding to Commission licensees from other group companies trading in other jurisdictions.

There is no doubt that the changes will create more work for licensees and it would be sensible for operators to ensure their internal systems are prepared.

Please let us know if you would like us to review the jurisdictions in which you operate.