29Jan

Unlicensed gambling – Part 3: The warning, the webinar and the method(ology) to the madness

29th January 2025 Gemma Boore 225

In this Part 3 of our recent blogs on unlicensed gambling, we discuss recent statements made by the Gambling Commission regarding the steps that it is taking to identify, quantify and disrupt illegal online gambling in Great Britain (“GB”).

If you would like to read more on this subject please see: Unlicensed gambling – Part 1: Growing threat or exaggerated myth? and Unlicensed gambling – Part 2: Is the Gambling Commission winning the “whack-a-mole” game?

The Warning

On 20 January 2025, the Gambling Commission posted a warning notice to the gambling industry on its website in which it explained it had become aware of casino games supplied by licensed operators appearing on unlicensed websites available to GB consumers illegally, and called on its B2B licensees to help it to tackle the illegal, unlicensed market.

The Gambling Commission noted that in some instances, third party resellers (who are also commonly known in the industry as aggregators) are distributing games supplied by its licensees to the illegal market, often in breach of contractual obligations. In the Gambling Commission’s view, licensees may have been negligent in permitting this and warned that that this practice might place a Gambling Commission issued operating licence at risk.

To mitigate this regulatory risk, the Gambling Commission advised its B2B licensees:

to actively monitor their business relationships to ensure their partners are not participating in offering illegal gambling facilities to the GB market;
to terminate relationships where non-compliance has occurred; and
to actively engage with the Gambling Commission where such activities are identified, setting out the preventative measures adopted to ensure such activity ceases immediately, making clear that:

“Actively notifying the Commission and setting out a clear plan to mitigate the issue at pace is a minimum requirement.” 

The Webinar

The previous week, Harris Hagan’s Managing Partner, John Hagan hosted the International Association of Gaming Advisors (IAGA) Best Practices Webinar on 15 January 2025, titled “Setting the UK Gambling Agenda for 2025: a less political year?”. During the webinar, Andrew Rhodes (Chief Executive of the Gambling Commission) and Grainne Hurst (Chief Executive of the Betting & Gaming Council (“BGC”)) shared their thoughts on various topics, including unlicensed gambling.

Rhodes confirmed that the Gambling Commission has invested in disrupting the illegal, online gambling market during recent years, with some success. However:

“Everyone should accept there has always been an illegal market present and much as different people want to debate the size and value of it, the reality is we need to understand the flow into it and why that happens, as well as preventing its ability to operate at scale.”

Rhodes emphasised that “legitimate” licensees are expected to undertake their own due-diligence on their suppliers and partners to ensure they are not engaged in unlicensed activity facing into GB – expressing concern at why anyone in the licensed industry would want to be in business with a company that is supporting illegal competition.

Rhodes went on to confirm that in 2025, the Gambling Commission will continue to use new capabilities around covert test purchasing and other investigative tools to identify those who are assisting illegal operators, as well as targeting those illegal operators directly – concluding by making clear that where the Gambling Commission feels it is necessary to suspend or revoke the licence of any operator or supplier, they will do.

Meanwhile, Hurst confirmed that disrupting the unlicensed market is a top priority for the BGC, alongside delivering the outstanding elements of the White Paper and making sure that a sensible tax harmonisation is put in place when the new regime is announced later this year. While they are still in the process of formalising next steps, action is being taken following the Gambling Commission’s challenge to the industry last year, and B2B BGC members will soon be required to commit not to provide content to unlicensed operators serving the GB market.

The Method(ology) to the Madness

The recent flurry of warnings by the Gambling Commission regarding unlicensed gambling follow its release last year of a statistics and research paper, Unlicensed gambling – Using data to identify unlicensed operators and estimate the scale of this market – October 2024 (the “Methodology Paper”). The Methodology Paper was a first step for the Gambling Commission in sharing its work in developing its capacity to identify unlicensed operators in GB, in which it explains how it is using an evidence-led approach to disrupt unlicensed gambling.

Focus

Although the Gambling Commission acknowledges in the Methodology Paper that unlicensed gambling can also take place in land-based premises, the paper is focused on the online market ‘where data has the greatest potential to help us make an impact’. The Gambling Commission explains in the Methodology Paper that it has undertaken several stages of work to formulate its approach which include:

Understanding the motivations for consumers to enter the online unlicensed market, and the channels through which they do so

The Gambling Commission is focusing on specific areas of consumer motivation: people who have experienced gambling harms – especially those who are self-excluded; and consumers looking to avoid identity verification.

Identifying unlicensed operators and estimating the scale of usage by GB customers

Web traffic data and gambling behaviour data will be used to estimate the gross gambling yield (“GGY”) of the online unlicensed market, although the Gambling Commission concedes that making an accurate estimate will be challenging, as much activity is deliberately obscured by virtual private networks (“VPNs”).

Methodology

The Gambling Commission will use the following methods to identify and measure the scale of the online unlicensed market:

Google search results to list of search terms

Results to search terms will be monitored on a monthly basis. The search terms will be devised from a combination of industry engagement and consumer research, advice from the Gambling Commission’s intelligence and enforcement teams, and additional desktop research on to identify terms used on affiliate pages such as “not on GAMSTOP” that are used to target particular groups of consumers.

Identify affiliate pages or articles listing unlicensed sites

The Gambling Commission will identify affiliate sites and/or articles that recommend gambling websites targeting specific consumer groups, for instance, “best UK casinos not on GAMSTOP”, by checking for key words on web pages and identifying the presence of outgoing affiliate links.

Extract links to unlicensed gambling sites and obtain web traffic data

Unlicensed sites that are linked from affiliate pages and/or articles will be reviewed to determine whether they are blocked to GB customers. Under the current methodology, the Gambling Commission is able to flag sites that are blocked immediately upon opening but not sites that are blocked upon account registration. Web traffic and average visit duration data is obtained for each of the unlicensed sites using Similarweb, which is a digital intelligence platform that allows access to estimated web traffic data.

Combine web traffic data with research data to estimate spend on the identified sites

To estimate the GGY associated with identified sites, web traffic data will be combined with an estimate of average consumer spending behaviour, the latter of which will be based on data from the Gambling Commission’s Patterns of Play research.

The intended output of the above work will be twofold: (a) a dashboard of unlicensed operators ranked according to current usage by GB consumers, which can be used by enforcement teams to prioritise and target disruption activity; and (b) to allow the Gambling Commission to estimate the likely scale of the unlicensed market for GB consumers.

Limitations

The Gambling Commission acknowledges within the Methodology Paper, that its methodology cannot capture the whole online unlicensed market. For instance, GB traffic from consumers using a VPN.

Other assumptions and limitations include:

The assumption that gambling behaviour on unlicensed sites is the same as on licensed sites;
GGY estimates are based on online slots play only, as it is assumed that a significant proportion of unlicensed gambling activity is slots;
Unlicensed sites are included in the GGY estimate regardless of the average visit duration, including very short average visit durations which could indicate visits where no money is spent or very long durations which could indicate periods of inactivity; and
Not all consumer motivations are currently included in the core search terms.

Next steps

The Gambling Commission has called on the industry to report suspicious activity to the Gambling Commission’s intelligence team at [email protected] or, alternatively, through the following confidential portal: Tell us something in confidence.

Please get in touch with us if you have any questions regarding unlicensed gambling in GB, your due diligence obligations and how to actively monitor your business relationships, or if you would like assistance reporting a suspicion to, or responding to an information request from, the Gambling Commission.

15Jul

Unlicensed gambling – Part 2: Is the Gambling Commission winning the “whack-a-mole” game?

15th July 2024 Gemma Boore 198

As regular readers will recall, in our blog: Unlicensed gambling – Part 1: Growing threat or exaggerated myth? which was published in November 2023, we:

discussed the threat of unlicensed gambling in Great Britain, along with steps the Gambling Commission had – as at that date – been taking to disrupt illegal, unlicensed operators;
advised businesses on the steps to take if they discover their intellectual property is being used on illegal gambling sites; and
provided a helpful checklist of actions for licensees to take, if they receive communications from the Gambling Commission regarding illegal gambling activity.

In this next instalment, we explore recently published research regarding the extent of unlicensed gambling in Great Britain, discuss the different ways in which gambling is illegally being made available to consumers, and comment on some of the newer methods the Gambling Commission is using to tackle unlicensed gambling – pending the introduction of its new powers under the Criminal Justice Bill.

What do we mean by unlicensed gambling?

As noted in our previous blog, it is an offence to provide facilities for gambling to customers in Great Britain from anywhere in the world, without holding an operating licence from the Gambling Commission – unless a relevant exemption applies.

Gambling is defined in the Gambling Act 2005 (the “2005 Act”) as including “gaming”, “betting” and “participating in a lottery”. Accordingly, anyone who provides facilities that allow British consumers to (a) take part in gaming (which typically includes casino products such as slots – but also extends to more novel and even free-to-play products if the player is “playing a game of a chance for a prize”), (b) bet (which includes peer-to-peer and pool betting, as well as fixed odds); or (c) enter a lottery, without holding the appropriate Gambling Commission licence / benefitting from an exemption, will commit an offence under the 2005 Act.

Is it really that bad?

A report published by the International Betting Integrity Association (“IBIA”) in March 2024, which considered the channelisation rate (i.e. the proportion of gambling taking place with licensed vs unlicensed operators) of sports betting, seems, at first blush, to indicate that black market gambling is less of a threat in Great Britain than elsewhere.

The study, which is entitled: The Availability of Sports Betting Products: An Economic and Integrity Analysis analysed channelisation rates in a range of jurisdictions:

Great Britain, which permits a wide range of sports betting products (including in-play bets) had the highest channelisation rate across the surveyed jurisdictions, of 98% in 2022.
Italy, which has minimal restrictions on pre-match and in-play betting, was a close second with a channelisation rate of 93%.
By contrast, in markets such as Australia and Germany, where access to sports betting markets is more tightly controlled, the rates were 78% and 59%, respectively.

The IBIA study hypothesised that these statistics indicate a strong correlation between the wide availability of sports betting products and the proportion of consumers who place bets with onshore regulated sports betting operators. Citing Canada as a case in point; the authors noted that channelisation in Ontario, a province that introduced an online sports betting licensing system in 2022, is expected to reach 92% in 2024. This figure is a stark contrast to the channelisation rate for the rest of Canada combined, which continues to operate a limited monopoly model, and is forecast to have an onshore rate of 11% in 2024 and lose an estimated $2bn in taxable sports betting gross gambling revenue between 2024 and 2028.

So Great Britain must be doing something right when it comes to sports betting… but is this the whole story?

To work out the answer, it is important to remember that sports betting makes up only a fraction of licensed gambling in Great Britain. In fact, according to an interactive dashboard published by the Gambling Commission in February 2024, only 31.5% of GB gross gambling yield (“GGY”) during the 2022/2023 financial year derived from remote and non-remote betting (which also includes non-sports betting, for example, on politics) – with the lion’s share of the remaining proportion being derived from casino, bingo, lottery and licensed amusement arcades.

Putting non-remote gambling to one side, the Gambling Commission’s interactive dashboard reveals that the percentage of industry GGY from remote betting dips to 15.1% (or £2.29bn) – with the largest contribution to remote gambling actually deriving from online casino, which made up an impressive 26.7% (£4.04bn) – or just over one quarter of total industry GGY – during the 2022/2023 financial year.

Surely it follows, therefore, that a significant percentage of money staked by British customers in the unregulated black market, ought to be on online casino?

At the time of writing, we are unaware of any studies that have recently considered the channelisation rate for online casino only, in Great Britain. However, research in other jurisdictions has indicated that casino channelisation tends to be lower than for other verticals. For example: in Sweden, AB Trav och Galopp estimated that the channelisation rate for remote casino in Q3 2023 was 74% vs 82% for remote sports betting.

Applying this rationale in Great Britain suggests that 98% channelisation rates for sports betting are unlikely to also apply in respect of other verticals. Pending regulatory changes in Great Britain impacting the online casino market may also detrimentally impact the licensed sector – with reforms proposed in the Government’s White Paper: High stakes: gambling reform for the digital age (the “White Paper”) including lower stake limits (£5, with a lower £2 limit for young adults aged between 18 and 24), game design changes and financial vulnerability checks, all due to come into force in the near future. For further information please see our blogs: White Paper Series: DCMS announces online slots stake limits and Gambling Commission publishes Summer 2023 Consultation Response and Betting & Gaming Council announces New Industry Voluntary Code.

Trying to fit a square peg in a round hole?

Even when properly measured, traditional methods for calculating channelisation might not reveal the whole story.

A more modern phenomenon that must be considered in the round, is the growing popularity of pay-to-enter competitions that often incorporate a question and free entry route to mitigate the risk that they are an illegal lottery. These arrangements can, if properly structured, lawfully be operated in Great Britain without an operating licence. However, the Gambling Commission actively monitors these competitions – and has recently been increasing its enforcement action in relation to arrangements that cross the line and are, in fact, illegal lotteries.

Similarly, many other new and disruptive product types run the risk of constituting gambling (and may thus be illegal gambling) in Great Britain. These include mystery, or loot boxes, where participants pay for a chance to win a prize that is allocated to them at random; and even traditional prize competitions such as crosswords or sudoku, where the underlying activity is presented as involving an element of chance.

The bottom line is that if a new product falls within the statutory definitions of “gaming”, “betting”, or “participating in a lottery” under the 2005 Act then, unless the person offering it in Great Britain does so in reliance upon an operating licence or exemption under the 2005 Act, they may be conducting illegal gambling in Great Britain and could face enforcement action by the Gambling Commission.

In addition, it is less likely that lost revenue from such products will be considered in the calculation of channelisation rates in Great Britain, which has historically focused on more traditional product verticals.

What is the Government doing to curb unlicensed gambling?

Within the White Paper, the Government acknowledges that estimating the size of black market gambling is difficult. Unlicensed gambling sites can appear, disappear and change without warning and until recently, the Gambling Commission’s resources for responding to unlicensed gambling have been concentrated on acting on complaints and intelligence with a risk-based approach.

Accordingly, one of the solutions presented by the Government in the White Paper was to increase the Gambling Commission’s powers, with the aim of creating a safety net and versatility for the Gambling Commission to “apply to court as a last resort” if required. However, the relevant legislation remains pending: although the Home Office’s Criminal Justice Bill contains provisions to confer new powers on the Gambling Commission to apply to court for an application to suspend an IP address or domain name if it is being used for the purposes of serious crime connected with unlicensed gambling, the Bill is still at the Commons Report stage and certain onlookers have queried whether, as currently drafted, the Bill goes far enough. Particularly given that equivalent powers are not granted to the regulator and competition authority for UK communications industries, Ofcom, which could be well placed to work alongside the Gambling Commission in taking action against unlicensed gambling websites.

We also note that, from a political perspective, Labour’s recent election has cast doubt over the timing of the Bill’s enactment, as newly elected members of Parliament will need time to get up-to-speed on the Bill and settle into their new roles.

What can the Gambling Commission do in the meantime?

At the Westminster Media Forum on the future for the betting and gaming industry in the UK, which took place online on 13 May 2024, Ben Dean, director for Sport and Gambling at the Department for Culture, Media and Sport commented that tackling illegal gambling continues to be an arduous process, akin to a game of “whack-a-mole”. He attributed this in part to the flexible nature of unlicensed organisations in circumventing restrictions, but stressed that:

“Working with internet service providers and payment agencies is key.”

Indeed, Andrew Rhodes, Chief Executive Officer and Commissioner of the Gambling Commission, confirmed at the same event that whilst the Commission awaits its new powers, a significant portion of its work in this sphere has been with third parties such as Google, resulting in the removal of over 7,000 URLs from search results in the last six months.

In addition, Rhodes confirmed that the Gambling Commission has:

in January 2024, issued 98 cease and desist and disruption notices with 39 successful disruption outcomes; and
more than trebled the number of successful positive illegal website disruption outcomes – from 25 in FY21/22, to 79 in FY22/23.

Rhodes explained that the Gambling Commission is focussing on identifying and undertaking high impact interventions with a view to “making it difficult to provide illegal gambling at scale”. Notably, and in addition to the measures outlined in our November 2023 blog (e.g. the Gambling Commission’s work with web hosting companies, registrars, internet search providers, social media firms and payment providers – as well as international regulators and its own licensees), recent efforts have included:

using intelligence and software programmes to identify those websites with the largest British footprint or profile and focus on those which pose the highest risk, especially websites and affiliates which target vulnerable consumers such as GAMSTOP self-excluded players;
engaging with banks to raise awareness and identify consumer protection protocols to identify and stop payments to illegal websites;
agreeing protocols with search engines to remove illegal websites from search results; and
actively identifying UK-facing online advertorial articles and engaging strongly with publishers (for example, by threatening public prosecution) to get these articles, and the marketing affiliates that are posting them, removed.

Rhodes also confirmed that the Gambling Commission has been working in conjunction with other bodies and regulators, such as the National Crime Agency, Police Intellectual Property Crime Unit and His Majesty’s Revenue and Customs (“HMRC”):

“For example, our work with HMRC where we have been tackling illegal Facebook lotteries has not only seen those lotteries shut down by the Gambling Commission, but the organisers have found themselves paying £600,000 in penalties to HMRC as well.”

Conclusion

Dean and Rhodes’ comments highlight the importance of and continued need for cooperation and unity in efforts to tackle illegal gambling, to maximise their effectiveness. Pending the introduction of the Gambling Commission’s new powers under the Criminal Justice Bill, there is still much that can be done to deter unlicensed operators from targeting customers in Great Britain – and ultimately protect the businesses (and revenue) of those that have invested the time, money and resources in obtaining, and complying with, operating licences issued by the Gambling Commission.

Please get in touch with us if you have any questions about the lawfulness of new gambling products in Great Britain, the process for obtaining a gambling operating licence from the Gambling Commission and/or if you require assistance with licensing and compliance matters generally.

With sincere thanks to Yue-Ting Fung for her invaluable co-authorship.

21Dec

Treatment of Domestic Politically Exposed Persons under the Money Laundering Regulations

21st December 2023 Chris Biggs 260

On 14 December 2023, the UK Government laid The Money Laundering and Terrorist Financing (Amendment) Regulations 2023 (SI 2023/1371) (“Amendment Regulations”) before Parliament. The Amendment Regulations will amend The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (“MLRs”), to address the treatment of Politically Exposed Persons (“PEPs”) who are entrusted with prominent public functions by the UK (“Domestic PEPs”).

Amendments to the MLRs

The Amendment Regulations will introduce a requirement in the new paragraph 3A of Regulation 35 of the MLRs, stating:

“For the purpose of the relevant person’s assessment under paragraph (3), where a customer or potential customer is a domestic PEP, or a family member or a known close associate of a domestic PEP—

a) the starting point for the assessment is that the customer or potential customer presents a lower level of risk than a non-domestic PEP, and

b) if no enhanced risk factors are present, the extent of enhanced customer due diligence measures to be applied in relation to that customer or potential customer is less than the extent to be applied in the case of a non-domestic PEP.”

Regulation 35 will also be amended to include definitions for ‘domestic PEP’, ‘non-domestic PEP’ and ‘enhanced risk factors’, the latter of which means “risk factors other than the customer’s or potential customer’s position as a domestic PEP or as a family member or a known close associate of that domestic PEP.”

In a statement to the House of Lords, Baroness Vere of Norbiton, the Treasury Lords Minister, reiterated that domestic PEPs, or a family member or known close associate of a domestic PEP, must be treated as “inherently lower risk” than non-domestic PEPs by banks and other regulated firms. Baroness Vere further specified that the Government is making this change “to ensure that banks and other regulated firms take a proportionate and risk-based approach to the treatment of domestic PEPs”, which aligns with the Government’s approach to combating money laundering (“ML”) and terrorist financing (“TF”).

The Amendment Regulations will come into force on 10 January 2024.

Takeaway points for Casino Licensees

As a class of ‘relevant person’ listed under the MLRs, holders of a casino operating licence issued by the Gambling Commission (“Casino Licensees”) must comply with the MLRs.

Casino Licensees must therefore review and update their policies, procedures and ML/TF risk assessments to ensure they take into account the Amendment Regulations.

Please get in contact with us if you require assistance with reviewing your ML/TF risk assessment and/or your AML policies, procedures and controls.

12Dec

Gambling Commission releases its updated risk assessment of money laundering and terrorist financing in the British gambling market

12th December 2023 Chris Biggs 272

On 30 November 2023, the Gambling Commission published its updated money laundering and terrorist financing risk assessment for the British gambling industry in 2023 (the “ML/TF Risk Assessment”). The release of the updated ML/TF Risk Assessment has been a long time coming: the Gambling Commission had not updated its ML/TF Risk Assessment since December 2020.

The Gambling Commission sets out that the purpose of the ML/TF Risk Assessment:

“…is to:

provide a resource for the industry in informing their own ML and TF risk assessments
provide the Commission’s support to HM Treasury’s National Risk Assessment
inform and prioritise licensing, compliance, and enforcement activity to raise standards in the industry and meet duties under …”

Key points of note are:

The Gambling Commission reminds casino licensees to consider their obligations in the light of the update to the Regulations in September 2022 which requires those businesses to identify, assess, understand and mitigate the risk of proliferation financing.

The overall risk rating for each gambling sector has not changed since the Gambling Commission’s previous risk assessment from 2020 (the “2020 ML/TF Risk Assessment”).

The methodology applied by the Gambling Commission to assess the risks in the British gambling industry has been developed from its 2020 ML/TF Risk Assessment and it therefore recommends that the ML/TF Risk Assessment is read in conjunction with the 2020 ML/TF Risk Assessment.

Licensee requirements

Licence Condition (“LC”) 12.1.1 of the Licence Conditions and Codes of Practice requires that all operating licence holders (with the exception of gaming machine technical and gambling software licences):

conduct a risk assessment addressing “the risks of their business being used for money laundering and terrorist financing”;

following the completion of that risk assessment, ensure they have “appropriate policies, procedures and controls to prevent money laundering and terrorist financing”; and

ensure that their policies, procedures and controls for the prevention of money laundering and terrorist financing are “implemented effectively, kept under review, revised appropriately to ensure that they remain effective, and take into account any applicable learning or guidelines published by the Gambling Commission from time to time”.

Licensees must therefore ensure that they review the ML/TF Risk Assessment in detail, with a view to:

reviewing and refining (as applicable) their own money laundering and terrorist financing risk assessment in the light of the ML/TF Risk Assessment; and

updating their policies, procedures and controls to take into account any changes made to their risk assessment.

Please get in contact with us if you require assistance with reviewing your money laundering and terrorist financing risk assessment and/or your AML policies, procedures and controls.

24Nov

Gambling Survey of Great Britain: Gambling Commission’s new approach to collecting gambling participation and prevalence data

24th November 2023 Chris Biggs 239

In December 2020, the Gambling Commission launched a consultation on proposals to change the way it collects data about adult gambling participation and problem gambling prevalence. Since then, the Gambling Commission has been developing a “single, gold standard population survey for the whole of Great Britain”, in an effort to improve the quality, robustness and timeliness of its official statistics.

Following two years of pilot surveys, stakeholder engagement, interim findings reports and fieldwork conducted by the National Centre for Social Research (“NatCen”), an independent not-for-profit organisation and registered charity, and the University of Glasgow, on 23 November 2023, the Gambling Commission published the first “experimental” statistics of the Gambling Survey of Great Britain (“GSGB”). Thus begins the roll-out of, as the Gambling Commission’s CEO Andrew Rhodes recently described it in a two-part podcast discussion with The Gambling Files, the “largest survey in the world of its kind, on gambling behaviours, attitudes, participation”.

In this blog, we discuss the background to the GSGB, its current status in light of the recent announcement, and why the GSGB is such an important project for the gambling industry in Great Britain.

What is the GSGB?

Background

Prior to the Gambling Commission’s December 2020 consultation, the GSGB was foreshadowed in the Gambling Commission’s Business plan 2020-2021, where the Gambling Commission stated, in connection with its key strategic priority to prevent gambling harm to consumers and the public, it would “review approach to measuring participation and prevalence and publish conclusions”.

As noted above, the December 2020 consultation on gambling participation and problem gambling prevalence research was subsequently launched, which included proposals to change the Gambling Commission’s research methodology to, amongst other things, consolidate the different surveys the Gambling Commission previously relied upon to understand adult gambling participation and prevalence into one population survey, and improve the frequency and turnaround time of the survey data. The response to the consultation, when it was published, confirmed that respondents largely supported these proposals, with an average of two-thirds of respondents agreeing with the proposals to change the research methodology and only one-fifth of respondents disagreeing.

In the meantime, the Gambling Commission had been conducting quarterly telephone surveys on participation and prevalence of problem gambling (the most recent results of which were published on 11 May 2023). However, it was noted by the Government in the White Paper that the telephone survey was “less robust” than the national health surveys of Great Britain in its tracking of gambling trends, and that there are gaps in the evidence and the Government’s understanding of gambling participation and prevalence of harm. This criticism reflected conclusions we had also reached in our joint blog with Regulus Partners on the topic of in-play betting.

It was thus clear, from an industry, regulatory and Governmental perspective, that there was a need for the Gambling Commission to revamp its methodology for the collection of gambling data. In light of the release of the experimental figures, the Gambling Commission’s continued roll-out of the GSGB will be closely followed by the industry.

How is the GSGB carried out?

NatCen describes the GSGB as a survey that asks individuals for their “views on and experiences of playing different games, lotteries and betting, and the effects that these activities may or may not have on people’s lives.” It explains that the GSGB will provide the Gambling Commission with high-quality information about the gaming, betting and playing habits, attitudes and harms experienced across the adult population in Great Britain.

In terms of the specific methodology, the GSGB will be an annual “push to web” survey of up to two adults per household in Great Britain. The Gambling Commission hopes that the GSGB will collect responses from 20,000 individuals each year.

Procedure

NatCen explains that survey invitation letters have been sent to addresses selected at random from the Postcode Address File. In these invitations, NatCen asks that up to two adults in each household take part in the survey online by either:

scanning one of the QR codes provided in the survey invitation letter; or
visiting the webpage (survey.natcen.ac.uk/GSGB2) and entering one of the unique access codes provided in the survey invitation letter.

Participants will be asked a series of questions that should take approximately 20 minutes to complete. As a reward for taking part, those who complete the GSGB will receive a £10 shopping e-voucher.

Further information about the GSGB and the procedure can be found on NatCen’s website.

Timeline

The Gambling Commission has published a timeline tracking the progress of the GSGB since its December 2020 consultation. This displays the various stages of the Gambling Commission and NatCen’s progress, such as the consultation, stakeholder engagement, pilot testing and interim reporting on the GSGB project.

Release of experimental statistics

What are the findings?

The findings are (in the Gambling Commission’s words) “not yet fully developed and are still under evaluation”. In the Gambling Commission’s blog announcing the update, Helen Bryce, Head of Statistics at the Gambling Commission, explained that the findings are from the “final step in the experimental stage of the project”, and have been published so users (i.e. industry stakeholders) can familiarise themselves with the GSGB’s methods and findings before they become the Gambling Commission’s official statistics.

On our initial review, we note the experimental data was based on a sample group of approximately 4,000 (up to 3,774) respondents and presents some interesting key findings:

50% of respondents (of which 53% were male and 47% female) had gambled in the past 4 weeks, whereas 61% of respondents had gambled in the last 12 months.
The three most popular gambling activities in the past 4 weeks were the National Lottery (32%), charity lotteries (15%) and National lottery scratchcards (13%).
Most gambling respondents indicated they had gambled for the chance of winning big money (84%) and because it is fun (72%).
2.5% of respondents were considered to be problem gamblers, having scored 8 or higher on the Problem Gambling Severity Index (“PGSI”) screen, and a further 3.5% of respondents were considered moderate-risk gamblers (scoring between 3-7 on the PGSI screen).

Ms Bryce explained in the Gambling Commission’s blog, due to the significant changes in its methodology for collecting this data, these results should not be compared to previous figures sourced from its quarterly telephone surveys or NHS health surveys. Generally speaking this is a reasonable point of clarification to make, but it is made in a clear effort to dampen industry outcry to the alarming increase in the problem gambling rates: as at March 2023, the overall headline problem gambling rate (measured by the PGSI screen) was “statistically stable” at 0.3%.

The Gambling Commission has also set out its views on the strengths and limitations of the GSGB methodology. Notably, it has reiterated that although the experimental sample size was approximately 4,000 respondents, the Gambling Commission still expects to gather data from 20,000 respondents annually when it moves to the official statistics phase.

The findings, which are set out in an easily navigated spreadsheet, can be downloaded here. The Gambling Commission is also seeking industry feedback on the GSGB, which can be submitted through its online form.

Current status of the GSGB

The Gambling Commission has recruited Professor Patrick Sturgis, Professor of Quantitative Social Science at the London School of Economics, to undertake an independent review of the GSGB methodology. Professor Sturgis’ findings and recommendations will be published by the Gambling Commission “early next year”, with a view to the GSGB methodology becoming the Gambling Commission’s official statistics “later in 2024”.

The Gambling Commission’s previous update on the GSGB came in a blog from July this year. Having hosted panel workshops with three stakeholder engagement groups (academics, representatives from the gambling industry and individuals with lived experience), the Gambling Commission stated that it intended to publish the first set of quarterly official statistics in Spring 2024, alongside a timeline for future quarterly release dates. With the Gambling Commission seeking an independent review of the GSGB’s methodology, it now appears that the Gambling Commission will not adopt the results of the GSGB as its official statistics until later next year.

Why is the GSGB important?

The Gambling Commission has a duty to advise the Secretary of State on: (a) the incidence of gambling; (b) the manner in which gambling is carried on; (c) the effects of gambling; and (d) the regulation of gambling (see section 26(1) of the Gambling Act 2005).

NatCen explains that the information collected by the GSGB will help the Gambling Commission to fulfil this duty by being “written up in reports for policy makers to use in their decision-making process” so it may be used to “inform policy changes in the gaming, betting and playing industry”.

Furthermore, in its Evidence gaps and priorities 2023 to 2026, published on 23 May 2023, the Gambling Commission confirmed it would be using the GSGB to:

improve its understanding of gambling participation at a national level and in sub-groups of interest;
produce robust statistics on who is experiencing gambling-relating harms, and how; and
develop its understanding of how people commit crime or are a victim of crime as a dimension of gambling-related harm.

The quarterly statistics from the GSGB will thus underpin the Gambling Commission’s future decisions about how it can better protect consumers and carry out its regulatory duties.

Of note for online B2Cs, problem gambling prevalence statistics are also referenced in the Gambling Commission’s new remote customer interaction guidance (about which we have written previously). This guidance addresses, among other things, how remote licensees can comply with the requirement under social responsibility code provision 3.4.3(14) of the Licence Conditions and Codes of Practice to “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”, which came into effect from 12 September 2022.

Licensees should familiarise themselves with the experimental findings, as the Gambling Commission intends. It is, in effect, a warning: Licensees should understand how to interpret the findings of the GSGB and carefully consider these results for when they become the Gambling Commission’s official statistics. Licensees should use this data to inform the minimum levels of customer interactions they are making with customers – or risk enforcement action by the Gambling Commission for not complying with a condition of their operating licence.

Summary

Following criticism of its prior methods for collecting industry statistics, the Gambling Commission appears to be building a robust research methodology to ensure the GSGB will produce its gold standard population survey for the whole of Great Britain. The latest problem gambling rates collected by the GSGB (albeit ‘experimental’) have indeed attracted further scrutiny from the industry – some may argue that the Gambling Commission anticipated such scrutiny and pre-emptively commissioned Professor Sturgis’ independent review of the GSGB. Either way, we fully expect the Gambling Commission, in its future regulatory decisions, to place significant weight on the evidence drawn from the GSGB when it becomes the Gambling Commission’s official statistics.

With new customer interaction requirements for remote operators in Great Britain in effect, we recommend all licensees (and especially online B2Cs) review the experimental findings, stay apprised of the GSGB’s further progress and closely analyse the problem gambling data that is released in light of the number of interactions they are carrying out with customers, in preparation for the GSGB becoming the Gambling Commission’s official statistics next year. After all, we know the Gambling Commission will be doing the same in future compliance assessments.

Please get in touch with us if you have any questions about the GSGB and how its results should be used to inform your remote customer interaction policies and procedures.

In “push to web” surveys, respondents are recruited offline (such as via another survey, or through the post), and then encouraged to go online and complete a web questionnaire.

09Nov

Unlicensed gambling – Part 1: Growing threat or exaggerated myth?

9th November 2023 Gemma Boore 268

Earlier this month, Andrew Rhodes, the Chief Executive Officer and Commissioner of the Gambling Commission, took part in a two-part podcast discussion with The Gambling Files to reflect on and discuss topical issues affecting the gambling industry. Amongst the subject matter covered, Rhodes touched in Part 2: HE REVEALS MORE! on black market activity and the steps the Gambling Commission is taking to disrupt illegal gambling in Great Britain – which Rhodes claims to have resulted in significant drops in traffic to illegal operators.

This reflected themes in Rhodes’ keynote speech at the International Association of Gambling Regulators (“IAGR”) conference in Botswana on 16 October 2023, in which he noted whilst illegal online gambling market exists in Great Britain, as it does elsewhere:

“it is not a significant concern and this position hasn’t fundamentally changed. However, that does not mean there is no illegal market or no risk”.

In other news, Lucy Frazer, the Secretary of State for Culture, Media and Sport recently digested the contents of a letter from eight UK horseracing industry leaders. In the letter, the signatories reportedly warned that affordability checks, which the Government recommended be introduced in the Gambling White Paper, will cost racing £250 million in funding over the next five years and that this would be a disaster for British horseracing as punters either walk away from the sport or turn to the black market to gamble.

Potentially to back up this claim, the Racing Post then published the results of its “The Right to Bet” survey, which found that (1) one in four of the respondents would be prepared to switch to the black market if faced with stringent affordability checks; and (2) nearly one in ten have already used black market betting sites.

A petition was then posted on the UK Government and Parliament website, calling for the Government to abandon the planned implementation of affordability checks because “more intrusive checks triggered at a higher threshold risks bettors moving to the black market where there are no consumer protection or safer gambling tools”. This petition has – as at the time of writing – accumulated 76,204 signatures, three quarters of the number needed to trigger a debate in Parliament.

So, is the black market really a growing threat, or an exaggerated distraction? What are the Gambling Commission and the Government doing to curb illegal gambling? And what can businesses do if their proprietary content (intellectual property (“IP”)) turns up on unlicensed sites?

Read on for our discussion along with a helpful checklist for licensees that receive communications from the Gambling Commission regarding black market activity.

What is black market gambling?

The term ‘black market’ gained popularity during World War II (when common household products were rationed to avoid hoarding) and generally refers to an illegitimate market in which commodities are being traded, exchanged or performed in an illegal manner.

With regard to modern gambling in Britain, section 33 of the Gambling Act 2005 (as amended) (the “2005 Act”) makes it clear that it is an offence to provide facilities for gambling to customers in Great Britain from anywhere in the world, without holding a licence from the Gambling Commission unless a relevant exemption applies. Accordingly, it is common within the industry to refer to unlicensed online operators that illegally provide facilities for gambling to customers in Great Britain, without the appropriate licence or falling under a relevant exemption, as the “black market”.

Why is unlicensed gambling bad?

As Rhodes notes in his keynote speech at the IAGR conference, every gambling jurisdiction in the world has illegal online gambling:

“Whether online gambling is prohibited or not, if you can access the internet, then you will be able to find a way to gamble. We all know this. It’s also worth pointing out at this point that what is an illegal, unlicenced operator for me in Great Britain may be a legitimate, licensed business for you and vice versa.”

From a consumer perspective, one of the fundamental problems is that black market websites are not always distinguishable from those that are locally licensed – at least to the untrained eye. This means a consumer may be gambling on an illegal gambling site without even knowing it and, in this “Wild West” of the remote sector, unlicensed operators are not constrained by regulation. It is common to see consumer reports of problems, such as the inability to withdraw funds and difficulties contacting support in the event of a complaint. Indeed, Rhodes acknowledged in The Gambling Files podcast, that recent research has shown that illegal websites actively seek to advertise to people that have self-excluded from gambling on GAMSTOP and others allow unlawful activity in itself by, for example, allowing children to gamble.

So, what is the Gambling Commission doing?

One of the Gambling Commission’s key functions is to investigate and prosecute illegal gambling and other offences committed under the 2005 Act. As Rhodes noted in his IAGR keynote speech, the Gambling Commission typically deploys an “intelligence-led approach” to combat black market operators.

This means that ordinarily, they will initially issue a cease-and-desist letter to require the unlicensed operator to suspend their operations. Failing this, the Gambling Commission will implement “disruption techniques, using its partnerships or relationships with other companies”, which can include:

asking web hosting companies to suspend or ‘block’ British consumers from accessing the websites;
contacting payment providers to remove payment services;
liaising with internet search and service providers to prevent websites appearing on search engines;
working with social media firms to take down posts which promote illegal gambling; and
engaging with international regulators, including by sharing information and raising the prominence of the issue – and Rhodes used the keynote as an opportunity to call for collaboration in this regard.

In addition, Rhodes described in his speech more novel steps that the Gambling Commission is taking to disrupt unlicensed, illegal online operators through collaboration with others:

“…this means we’ve been going further upstream, further away from where our formal powers begin and have been looking to work with others to get between those illegal operators and British consumers and generally frustrate their business and force them out of our market.”

And this has included:

working with software licensees to prevent access to popular products when their games appear to be available on illegal sites; and

engaging with licensees if we discover their affiliates have placed adverts on illegal sites – ensuring licensees remove advertising and encouraging an assessment of business relationships with these affiliates.

By taking these steps, Rhodes claimed that the Gambling Commission has “increased… enforcement actions by over 500 percent between 2021-22 and 2022-23” and “more than doubled the number of successful positive disruption outcomes” leading to a “a 46 percent reduction in traffic to the largest illegal sites coming into market”.

Notwithstanding the bountiful fruit of its recent efforts, the Gambling Commission has always acknowledged that stronger measures are required. In its Advice to Government relating to its review of the 2005 Act, the Gambling Commission explains that:

“Under our current framework, we cannot compel third party providers to take action such as to block British access to the website, remove payment services or prevent websites from appearing in search engines. Moving to criminal prosecution has had limited effect, largely because websites can immediately disappear and reappear with a different identity (a phenomenon known as ‘phoenixing’), and their ultimate owners and lines of responsibility are very difficult to fully trace. This also makes it very difficult to accurately scope the size of the black market”.

How does this play into the White Paper?

Before it was even published, the black market was the backbone of many highly politicised debates concerning the White Paper and the proposals to be made therein. Affordability (and more specifically, mandatory deposit and/or loss limits) in particular, led to outcry from the sector and various interested parties commissioned research to try to truly gauge the extent of illegal, unlicensed gambling in Great Britain.

In particular, a 2021 PwC report entitled “Review of unlicensed online gambling in the UK” commissioned by the Betting and Gaming Council, claimed that the proportion of UK online gamblers using unlicensed operators in November 2020 had increased to 4.5 per cent – or around 460,000 people – from 2.2 per cent over the previous one to two years. In addition, the study found that stakes with unlicensed operators had doubled to £2.8 billion.

Neil McArthur, the then Chief Executive of the Gambling Commission, poured cold water on the PwC report in a letter to cross-party MPs investigating the harmful effects of gambling, reportedly stating it was “not consistent with the intelligence picture” and that the impact of the black market “may be being exaggerated“.

When the White Paper was finally published in April 2023 – some 30 months after the call for evidence – it was broadly accepted to be balanced and evidence-led. Chapter 3, which considered the potential for reform in the Gambling Commission’s powers and resources, outlined the Government’s views on black market gambling and whether it presented a tangible risk. Specifically, the Government acknowledged that although estimating the size of the black market is difficult, it was clear that “excessive commercial caution risks driving customers to the black market where they can be exposed to a variety of risks”. The Government further noted that there has been a rise of illegal operators in other jurisdictions with:

“either extremely permissive regulatory regimes or no regulatory oversight, and/or are being run by individuals with suspected links to serious and organised crime.”

It then went on to acknowledge the Gambling Commission’s disruptive approach was working well to an extent (a statement with which we agree), but recommended that the Gambling Commission’s powers to action be strengthened to create a safety net, giving the Gambling Commission the versatility to “apply to court as a last resort” if required:

“When Parliamentary time allows, we will introduce legislation that will give the Gambling Commission the power to apply to the court for an order that requires ISPs , payment providers and other providers of “ancillary services” to implement measures aimed at disrupting the business of an illegal gambling operator”.

While a laudable aim, changes to legislation take time and given other legislative pressures and the impending General Election, it is not clear when these changes will take effect – there certainly was no mention of such a bill in The King’s Speech on 7 November 2023. This contrasts with affordability checks (which the White Paper recommends become mandatory for operators to carry out when consumers reach specific loss thresholds), which have already been subject to a public consultation by the Gambling Commission and may take effect much sooner.

Lessons for licensed operators

For the meantime, Rhodes emphasised in his keynote that the Gambling Commission will continue to use its existing powers (and authority) to tackle illegally, unlicensed gambling. As noted earlier, this may include the Gambling Commission contacting its own licensees to try to persuade them to take steps to disrupt illegal gambling.

If you hold a British licence and are contacted by the Gambling Commission about a black market website, we recommend that you take professional advice. You may also want to consider taking one or more of the following steps:

verify that your content is being used / your adverts are being placed on an illegal website. Involve your tech teams as they should be able to confirm whether the content is legitimate or an infringing copy of your IP;

check that games / links are accessible in Great Britain and if they are, whether you receive any British traffic from the site in question;

identify the operator of the website and/or the affiliate that is placing advertisements on the illegal site;

consider whether you have a contractual relationship with the operator / affiliate or any member of its group. If you do not have a direct contract with the operator/ affiliate or one of its group companies, consider whether there may be an indirect relationship (for example, via a content distributor or affiliate program);

if a contractual relationship exists, investigate how this arose and review all due diligence you conducted on the third party/ies during the contractual relationship;

send a cease-and-desist letter (takedown notice) to all entities that you can identify as being involved; cite restrictions in your contract (if relevant);

if the third party does not cease the activity or justify their actions:

terminate any contracts with them promptly. Note that inclusion of such a termination right is a requirement under Social Responsibility Code Provision 1.1.2 of the Licence Conditions and Codes of Practice;

consider contacting third parties such as hosting providers, domain registrars and third-party search engine such as Google who may otherwise be able to stop the website being accessible by customers in Great Britain;

engage professionals to review:

your systems and processes for identifying use of your content / placement of your ads on illegal websites; and

your standard contracts,

to mitigate the risk that your IP rights are exploited illegally in the future; and

update the Gambling Commission within the deadline they have set on the outcome of your investigation and the steps you have taken to:

address the present infringement of your IP rights; and

mitigate the risk of a similar situation occurring again.

Please get in touch with us if you would like assistance responding to a Gambling Commission request, or if would like to discuss the themes in this blog more generally.

07Nov

Personal management licensee: What do you need to know?

7th November 2023 Chris Biggs 260

Individuals who hold a personal management licence (“PML”) issued by the Gambling Commission undoubtedly play the most important role in ensuring business decisions are underpinned by the licensing objectives, building a strong foundation of compliance and raising standards. Ultimately, they are personally accountable and responsible for compliance failings. As personal licensees, PMLs can face enforcement action by the Gambling Commission. We expect to see more enforcement action taken against PMLs on the basis that people make decisions, not businesses.

The White Paper included a proposal to extend the requirement to hold a PML, set out in licence condition 1.2.1 of the Licence conditions and codes of practice (“LCCP”), with the goal to drive “personal accountability and responsibility”, allowing the Gambling Commission to “take necessary action against individual (personal) licensees when failures are found”. In our previous blog, we discussed who (currently) needs to hold a PML, how PMLs drive corporate culture, the Gambling Commission’s proposed changes to PML requirements following the White Paper and the reasons for those potential changes.

With the spotlight on PMLs, in this blog we provide an overview of PML requirements and our top pointers for staying compliant.

PML requirements

One of the key challenges for PMLs is that, unlike many other regulated professions, there are no standards of: (a) conduct, performance and ethics; or (b) competence, which set out the minimum requirements. Instead, the PML regime is based on broad principles as detailed below. It is worth noting that if the Gambling Commission commences a licence review against a PML, it will be based on the PML’s failure to comply with the following licence conditions and/or expectations:

Licence conditions

There are three licence conditions attached to PMLs, set out in Part 3 of the LCCP, summarised as follows:

Licence condition 1: PMLs “must take all reasonable steps” when carrying out their responsibilities in relation to licensed activities to ensure they do not place their employer’s operating or premises licence in breach of their licence conditions. This is evidently broadly drafted and widely interpreted by the Gambling Commission.
Licence condition 2: PMLs must keep themselves informed of “developments in gambling legislation, codes of practice and any Commission guidance … relevant to their role”.
Licence condition 3: PMLs must report key events (see below) within 10 working days of becoming aware of the event’s occurrence.

“Expectations”

Additionally, section 4.3 of the Gambling Commission’s Statement of principles for licensing and regulation sets out the expectations of individuals occupying senior positions, whether or not they hold PMLs, to (amongst other things):

uphold the licensing objectives and ensure compliance of operations with the LCCP;
organise and control their affairs responsibly and effectively;
have adequate systems and controls to keep gambling fair and safe;
conduct their business with integrity;
act with due care, skill and diligence;
manage conflicts of interest fairly;
work with the Gambling Commission in an open and cooperative way;
disclose to the Gambling Commission anything which it would reasonably expect to know; and
comply with both the letter and spirit of their licence, the licence of their operator and associated Gambling Commission regulations.

PML key events

As set out in licence condition 3, PMLs are required to notify the Gambling Commission of the occurrence of certain key events, “within 10 working days after the licensee becomes aware of the event’s occurrence”. These are:

a change in name (for example, following marriage);
a change in address;
any current or pending investigation by a professional, statutory, regulatory or government body in Great Britain or abroad, and the imposition of any sanction or penalty against them following such an investigation (this would include another gambling regulator);
being subject to (a) any criminal investigation, or (b) conviction of any offence, listed under Schedule 7 – Relevant Offences of the Gambling Act 2005;
the imposition of a disciplinary sanction against them, including dismissal, for gross misconduct;
resignation from a position for which a PML is required following commencement of disciplinary proceedings in respect of gross misconduct;
disqualification from acting as a company director; and
the presentation of a petition for their bankruptcy or sequestration or their entering into an individual voluntary agreement.

Further guidance to PMLs about personal key events can be found here.

Online service and contact details

PMLs must ensure their registered contact details are accurate. In addition to this being a licence condition, it will ensure critical correspondence is not missed, including relating to any revocation (generally, for failure to undergo PML maintenance) or licence review.

When granted, we strongly encourage PMLs to register for the Gambling Commission’s Manage your personal licence online service for PMLs. This service allows PMLs to update contact details, submit key events and submit maintenance checks (see below).

PMLs:

must – personally – keep their registered email address up to date; and
should ensure the Gambling Commission’s email domain is trusted, to avoid emails going to junk or spam folders.

PML maintenance

PMLs are indefinite in duration, meaning that the licence does not renew or lapse.

PMLs are subject to a mandatory maintenance check every five years. This is an automatic process (not an application, as the Gambling Commission incorrectly describes it), the purpose of which is solely the provision of updated information about the PML, such as current address and position, and payment of the fee. It is for the Gambling Commission simply to check and record the information. As we have written previously, the Gambling Commission is not legally empowered to delay or put on hold PML maintenance on the misconceived ground that enforcement action is ongoing or imminent.

The Gambling Commission will contact PMLs by email to advise of the upcoming PML maintenance. We recommend that PMLs and any supporting compliance/licensing teams separately diarise the five-year anniversary. A failure to submit the PML maintenance check will result in the PML being revoked.

To complete the check, PMLs need to sign into the online service. PMLs cannot submit the maintenance check before the PML anniversary date, and have only 30 days from the anniversary date to submit the check. Upon submission, a fee of £370 needs to be paid.

At the time of writing, if a check is not submitted within 30 days, the Gambling Commission will send a notice of revocation by email, providing a further 28 days from this notice to complete the maintenance check, otherwise the PML will be revoked.

Tips for PMLs

Keep contact details up to date;
Ensure the “gamblingcommission.gov.uk” email domain is whitelisted;
Register for the online service;
Understand the meaning of a key event, including changes of name or address and criminal investigations (without charges);
Understand the PML licence conditions and expectations;
Document structured and unstructured training; and
Diarise the five-year maintenance check.

Tips for employers

Remind PMLs to provide personal contact details (i.e. not a work email address) to the Gambling Commission upon or shortly before departure from the business;
Provide or arrange for annual refresher training to be provided for PMLs on PML licence conditions and expectations (we can help with this!);
Keep a record of internal and external training provided to PMLs;
Diarise each PML’s five-year maintenance check for both the business and the PML;
If a PML leaves or changes roles within the business and they held a specified management office, the business needs to notify the Gambling Commission as soon as reasonably practicable, and in any event within five working days of the PML’s departure under the operating licence condition 15.2.1(4); and
Remind the PML to notify the Gambling Commission of their departure if they leave the business and update their contact details, if required.

Please get in touch if you have any questions or would like to discuss your training needs.

31Oct

Revised remote customer interaction guidance comes into effect

31st October 2023 David Whyte 277

The Gambling Commission’s revised remote customer interaction guidance (“CI Guidance”) has today (31 October 2023) come into effect, along with the requirement set out in Social Responsibility Code Provision (“SRCP”) 3.4.3 that remote licensees must take the CI Guidance into account.

As readers of our blog will no doubt be aware, we have provided several updates (for example, in December 2022 and January 2023) on, and been critical of, the evolution of the CI Guidance, since the first announcement by the Gambling Commission on 14 April 2022 of the new SRCP 3.4.3 and the associated CI Guidance.

The Gambling Commission has now set out its requirements. Irrespective of their views about the CI Guidance, it is vitally important that those remote licensees to which the CI Guidance applies are compliant with SRCP 3.4.3 and can demonstrate that they have taken the CI Guidance into account. We do not propose to further analyse the CI Guidance in detail in this blog. Rather, we set out below some key considerations for those licensees who must comply with these requirements.

Key considerations

Consideration 1: Be wary of the language used in the CI Guidance

We have previously raised concerns about the Gambling Commission introducing formal requirements through guidance, and about the risk that the language used in the CI Guidance might: (a) inaccurately reflect the requirements set out in SRCP 3.4.3; (b) cause confusion; and/or (c) expose licensees to the risk of broad interpretation by the Gambling Commission.

We note that the Gambling Commission has retained its use of “must” and “should” in the CI Guidance, having confirmed in its response to its consultation on the CI Guidance, published on 24 August 2023 (the “CI Consultation Response”) that it has “ensured that consistently appl ‘must’ language when quoting or referring to the requirements, and use ‘should’ language when referring to guidance which must be taken into account”. Licensees should take note of this distinction, but at the same time be aware that the requirement imposed by SRCP 3.4.3 to “take into account” the CI Guidance might effectively make such distinction irrelevant.

Consideration 2: Document your decision-making processes

As the Gambling Commission explains in the CI Guidance, SRCP 3.4.3 “sets out the requirements relevant licensees must comply with in relation to remote customer interaction. For compliance and enforcement purposes, will expect licensees to demonstrate how their policies, procedures and practices meet the required outcomes. This can be through implementing relevant parts of the guidance or demonstrating how and why implementing alternative solutions equally meet the outcomes”.

Licensees will likely be aware that the Gambling Commission has taken a very literal approach to the interpretation of its guidance in the past (e.g. its guidance for remote and non-remote casinos on the prevention of money laundering and combating the financing of terrorism). It is therefore likely that the Gambling Commission will take the same literal approach in relation to the CI Guidance. Licensees should ensure that they carefully document their decision-making process in relation to the CI Guidance, in particular in cases where their approach is inconsistent with, or diverges from, the CI Guidance. This documented decision-making process will enable licensees to demonstrate to the Gambling Commission that they have met their regulatory obligations in the event of future oversights and/or regulatory scrutiny.

Consideration 3: Licensees are not expected to screen all customers for every indicator of vulnerability

The Gambling Commission makes it clear in the CI Guidance that its “aim” for SRCP 3.4.3(3), which requires licensees to “consider the factors that might make a customer more vulnerable to experiencing gambling harms”, is to ensure that “where licensees know that customers are in a vulnerable situation, these customers are supported”. Licensees should note that the Gambling Commission also confirms that it does not expect licensees to screen all customers for each of the factors of vulnerability set out in the CI Guidance.. Rather, it expects that licensees “consider and act on information that they have available to them” (our emphasis added).

Consideration 4: Not all information included in the CI Guidance is required to be taken into account

The Gambling Commission clarified in the CI Consultation Response that certain information included in the CI Guidance is not required to be taken into account by licensees. Rather, that information has helpfully been included in an attempt to provide licensees with clarification or additional explanation to assist their understanding. Licensees should ensure that they are aware of this distinction, particularly when they are revising their policies and procedures and/or documenting their decision-making process.

A helpful example of this is the additional information – which is not required to be taken into account – set out below paragraph 5.3 of the CI Guidance. This lists further sub-categories of potential indicators of harm which, whilst not required indicators, may be of particular use to licensees when considering the formal indicators that they are required to incorporate into their approach to customer interaction by SRCP 3.4.3(5).

Consideration 5: No change to affordability requirements (yet!)

At present, the Gambling Commission’s position on customer affordability has not changed. Whilst the Government set out its proposed financial risk check model in the White Paper, upon which the Gambling Commission is consulting, the CI Guidance does not address those issues. Rather, it restates the current position at paragraph 4.6, reminding licensees that: (a) open source data that can assist them in assessing affordability exists; (b) thresholds should be realistic and based on average available income; and (c) they should be aware of the distinction between ‘disposable income’ and ‘discretionary income’.

Consideration 6: Manual reviews of automated decisions are only required if customers contest that decision

SRCP 3.4.3(11) requires that “icensees 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”. It also requires that, where such automated processes are applied, “the licensee must manually review their operation in each individual customer’s case and allow the customer the opportunity to contest any automated decision which affects them”.

The Gambling Commission clarified its position in relation to this manual review in the CI Consultation Response and does so again in the CI Guidance, stating that its expectation is that “where a decision is made solely by automated means and which has legal effects or similarly significantly affects a customer the licensee contacts the relevant customer to inform them of the decision and their right to contest it”. It is only where the customer exercises their right to contest the decision that a substantive manual review must be undertaken.

Licensees should take steps to review their data protection processes and procedures to ensure that they are consistent with both data protection legislation and the Gambling Commission’s expectations as set out in the CI Guidance.

Consideration 7: Do not overlook evaluation

Licensees are likely to have gone to significant lengths to ensure their adherence to the burdensome requirements set out in the CI Guidance, with particular focus on indicators of vulnerability and harm. In doing so, there is a risk that they may have overlooked the importance of evaluation as required by SRCP 3.4.3 (12)-(14). Licensees should therefore ensure that their approach to customer interaction incorporates the mandatory evaluation processes both at the individual customer level and of the whole system, and that those evaluation processes are documented and audited.

Next steps

Please get in touch with us if you would like to discuss the CI Guidance, or if you would like assistance with drafting and/or updating your policies and procedures in light of the CI Guidance.

27Oct

Regulatory returns update: Gambling Commission conducting user research sessions

27th October 2023 Chris Biggs 239

In its fortnightly E-bulletin released earlier this week, the Gambling Commission called for licensees to sign up to its User research programme for the purpose of participating in upcoming regulatory returns user research sessions.

As we previously discussed, the Gambling Commission has recently signalled its intention to “sharpen” the dataset currently received from licensees in regulatory returns, increase the frequency of the reporting requirements and aligning licensees’ reporting dates (see its Making better use of operator data blog), which are proposals we very much welcome. The Gambling Commission also indicated that there would be a consultation on the frequency of regulatory returns in November.

User research programme

The user research programme, which is an initiative we welcome, has been introduced to help the Gambling Commission “test new services, websites and features with people who use them” and sessions can take place face-to-face, over the phone or remotely.

Getting involved may include:

responding to questionnaires: 5-10 minutes;
telephone or video call session: 60 minutes;
face-to-face session: 60 minutes; or
workshop: half a day.

You can register as a participant of the Gambling Commission’s user research programme here.

Registration takes approximately two minutes, whereby you will be required to provide your full name and answer general questions pertaining to your involvement in the gambling industry and use of the Gambling Commission’s services. This information will be used to select suitable participants for the regulatory returns sessions, as well as other research sessions.

Regulatory returns user research sessions

The regulatory returns user research sessions will, as the Gambling Commission states, help it “improve the data, while reducing the burden for operators”. The Gambling Commission has asked that a diverse range of licensees from all sectors sign up to the programme, as it will be hosting a series of workshops on the topic with the aim of producing “a more focused dataset”.

The Gambling Commission has not given further details about the regulatory returns user research sessions, nor an indication of when these sessions will be held. We expect that these sessions will take place very soon to inform the Gambling Commission’s consultation on regulatory returns, which we expect in November 2023.

Why participate?

As we discussed previously, in looking to update the regulatory returns system, the Gambling Commission has the opportunity to refocus its dataset and provide clarity and further guidance on the system. Doing so will ensure the evidence it collects from licensees is accurate and therefore useful. It is equally important to ensure the system is fit for purpose and there is consistency in the responses provided.

We encourage licensees and other relevant industry stakeholders to sign up and participate in the regulatory returns user research sessions, and to provide feedback to the Gambling Commission.

Please get in contact with us if you have any questions about the regulatory returns process.

01Sep

Gambling Commission sets its sights on late regulatory returns and incorrect fee categories

1st September 2023 Gemma Boore 249

In its latest E-Bulletin, the Gambling Commission has reminded operators that it is a licence condition (15.3.1 of the Licence Conditions and Codes of Practice) to submit regulatory returns on time.

The update goes on to note that the Gambling Commission is aware that some regulatory returns have been overdue since 1 April 2023, and advises operators to bring these up to date “immediately”.

“Operators who fail to submit returns on time will be escalated to our Enforcement team to consider regulatory action and may result in a financial penalty under section 121 of the Gambling Act 2005.”

This is an important reminder from the Gambling Commission, which should not be taken lightly, and it is clear a tougher approach is now being taken.

Background

Gambling licence holders in Great Britain are required to submit a regulatory return for each type of activity for which they hold a licence.

Depending on licence type, regulatory returns must be submitted on a quarterly or annual basis. Quarterly returns must be submitted within 28 days of the end of each quarterly reporting period. Annual returns must be submitted within 42 days of the end of each annual reporting period.

All returns must be submitted via the online regulatory returns system within the Gambling Commission’s eServices Hub.

The Gambling Commission uses the information to publish bi-annual industry statistics and to inform its understanding of its licensees and the wider gambling industry. The information also helps the Gambling Commission ensure licensees are within the correct fee category for their licensed activities.

An imperfect system

The Gambling Commission publishes information on when and how to submit regulatory returns in its Regulatory Returns Guidance, which is split by licence type.

However, the guidance is simple, and a repetition of what is asked within the regulatory return forms. There is no additional detail as to the type of information that should be captured in the form, and where. The lack of clarity, in our experience, has sometimes resulted in incorrect data being provided with the regulatory returns, or being provided under the wrong licensable activity.

In our experience, licensees often require assistance with the following:

Non-GB revenues – they should only be reported if taking place in reliance on the Gambling Commission operating licence;

B2B online casino revenues that are not revenue shares – the form only allows for GGY (revenue share) to be reported, and not fixed fee revenues, although the Gambling Commission is now aware of this issue from us.

It is important that information provided in regulatory returns is accurate. If a licensee misrepresents or fails to reveal information that it is asked to provide, unless it has a reasonable excuse it will commit an offence under section 342 of the Gambling Act 2005.

Beware exceeding your fee category

Regulatory returns go hand in hand with ensuring a licensee is in the correct fee category and, recently, we have noticed an increase in the Gambling Commission using regulatory returns to identify and contact licensees that it believes have exceeded the upper threshold of their fee categories.

Fee categories are a licence condition, included on the face of an operating licence. Therefore, an application to vary the fee category must be submitted before the upper threshold has been exceeded and it is a licensee’s responsibility to proactively monitor its fee category to ensure the upper threshold is not exceeded.

We urge licensees to routinely consider whether they are approaching the maximum limit of their fee category and whether a change of fee category is warranted. Licensees should be aware that the fee category licence condition follows the licence year, and will not necessarily align with the regulatory returns reporting period.

The process for submitting an application to vary is relatively simple. The applications can be completed through the eServices portal and carry a fee of £40. It is important to note that:

fee category increases by one level do not require any supporting documentation;
fee category increases by two levels or more must be supported by:
- new or updated financial projections;
- new or updated business plan;
- evidence of how the expansion of the business is funded;
decreases in fee categories must be supported by a full explanation.

Gambling Commission working group

In order to address some of the issues with the regulatory returns system, the Gambling Commission has established a working group and is seeking feedback from licensees on the questions currently posed in regulatory returns.

The last time the regulatory returns process was reviewed was in 2020 when, following a Consultation on changes to information requirements in the LCCP, regulatory returns, official statistics, and related matters, the Gambling Commission simplified the regulatory returns processes. In its consultation response, the Gambling Commission also committed: (1) to publish guidance for regulatory returns (which went live on 4 May 2021); and (2) to improve the usability, accessibility and availability of the regulatory returns system.

Three years on, the system is under review again – but it appears there will be no consultation and, consequently, fewer licensees will be aware there is an opportunity to help shape forthcoming improvements.

Next steps

We strongly recommend licensees use the online contact form to tell the Gambling Commission about their concerns with the regulatory returns process, forms and guidance as soon as possible, so they can be improved.

We hope that the working group will use this, as well as our recent feedback on the Gambling Commission’s guidance, to improve the current system.

In the meantime, licensees should also:

submit any outstanding regulatory returns as soon as possible;

endeavour to submit complete and accurate regulatory returns within the timeframes set by the Gambling Commission. The Gambling Commission is taking a much tougher approach and late and/or inaccurate regulatory returns will be referred to the Enforcement Team; and

routinely review whether they are in the correct fee category and, if necessary, submit an application to vary before exceeding the upper threshold of a fee category.

Please get in touch if you have any questions regarding the regulatory returns process and/or if you would like our assistance preparing a regulatory return or changing your fee category.

With credit and sincere thanks to Jessica Wilson for her invaluable co-authorship.

Compliance