31Mar

Productivity in This Time of Crisis

31st March 2020 David Whyte 492

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.

31Mar

PMLs: Maintenance or Renewal?

31st March 2020 Julian Harris 482

We have encountered some misunderstanding, not least on the part of the Gambling Commission (the “Commission”), as to the nature and status of personal management licences (“PMLs”). These licences are required for individuals performing certain defined functions in the gambling industry. Holders of PMLs can be held personally liable for failures on the part of entities holding an operating licence.

The Gambling Act 2005 (the “2005 Act”) provides that a PML has effect unless and until it ceases to do so, by reason either of surrender, lapse, forfeiture or revocation. The Explanatory Notes for section 131 of the 2005 Act, which deals with duration of PMLs, specifies that

“Subject to surrender, lapse, forfeiture or revocation, all personal licences will be of unlimited duration. The Commission does not have the power to introduce limited durations for personal licences.”

However, regulations do provide that a PML holder pay fees every five years of the tenure of the licence. The Explanatory Notes to the 2005 Act explain that these fees are to be paid by the PML holder to the Commission to maintain the licence, and which are used by the Commission to cover the costs of regulation.

On its website the Commission sets out the maintenance process, which involves completing an application including provision of various documents (ID documents, a DBS application (UK and Channel Islands), police report (if overseas) and credit report (if overseas)) and paying the £370 fee. PMLs will no longer receive a maintenance pack in the post. Instead, the Commission will send an email, to their registered email address, informing them that they can sign in to the Personal eServices to start the maintenance process. We understand that this email will be sent on or shortly before the PML anniversary date. If the application is not made within 30 days of the anniversary date (five years from issue and every 5 years thereafter), then the licence will be revoked. Subject to that, and provided of course that the application is properly completed, the process is automatic; it is not a renewal application, and therefore cannot involve any reappraisal as to the PML holder’s qualification, fitness or suitability to hold such a licence. Any such question must form the subject of a licence review under separate provisions.

Until recently there was a reference on the “Personal licence maintenance” page of the Commission’s website to “renewal” of PMLs. This has now been corrected as a result of submissions made by Harris Hagan, that this was wrong in law, as there was no such provision or power. Nevertheless, there is a leftover of this on the webpage, in the inappropriate use of the word “application” to describe the process; this assumes that there is something the Commission is being asked to grant, and therefore something which can be refused, which it cannot. This is an automatic process, the purpose of which is solely the provision of updated information about the PML holder, such as for example, current address and position, and payment of the fee. It is for the Commission simply to check and record the information.

Whilst this may seem pedantic and of little importance, it is vital that the Commission does not assume powers which it does not have, and that PML holders are not confused about their position, or stressed by a pending “application”, which they may believe could be refused. This concern has been thrown into sharp focus in circumstances where PML maintenance has been delayed, or put on hold, by the Commission on the misconceived ground that enforcement action was current in relation to the PML holders’ employer, which potentially could, at some future date, result in a licence review of PMLs. Once your PML maintenance is submitted and the fee paid, and providing this is within time, your obligations are fulfilled. The Commission may ask for further information if necessary. Otherwise the PML continues, and there is no question either of grant or refusal. Job done!