02Jul

Financial Action Task Force: June 2024 update to Grey List jurisdictions

2nd July 2024 Chris Biggs 144

The Financial Action Task Force’s (“FATF”) June Plenary concluded on 28 June 2024, with the announcement of changes to its list of Jurisdictions under Increased Monitoring (“Grey List”).

The changes to the Grey List are as follows:

Jamaica and Turkey are no longer subject to increased monitoring by FATF, due to “significant progress” in addressing the strategic anti-money laundering (“AML”) and counter-terrorism financing (“CTF”) deficiencies previously identified during their mutual evaluations. Even though these countries have been removed from the Grey List, they will continue to work with FATF and their local FATF-style regional bodies to continue improving their AML/CTF regimes.

Conversely, FATF have added Monaco and Venezuela to the Grey List, meaning these jurisdictions have committed to implement an action plan to resolve strategic deficiencies in their regimes to counter money laundering, terrorist financing and proliferation financing within agreed timeframes.

FATF made no changes to its list of High-Risk Jurisdictions subject to a Call for Action (“Black List”), which at the time of writing includes the Democratic People’s Republic of Korea, Iran and Myanmar.

A full list of high-risk third counties on FATF’s Grey and Black Lists can be found on its website.

As discussed in our previous blog, the Gambling Commission recently reminded licensees in its Emerging money laundering and terrorist financing risks from February 2024 to conduct robust customer due diligence checks in relation to any customer relationships associated with the jurisdictions on the Grey List.

Additionally, holders of casino operating licences issued by the Gambling Commission are required by regulation 33(3)(a) of The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 to conduct enhanced customer due diligence and enhanced ongoing monitoring in any business relationship with a person established in a jurisdiction named on the Grey or Black Lists (a ‘high-risk third country’).

Next steps

We recommend that all licensees review their AML/CTF policies, procedures and controls, including business risk assessments, to ensure appropriate measures are applied in relation to high-risk third counties including, from July 2024, Monaco and Venezuela. In addition, licensees should diarise the date of the next FATF Plenary meeting, so they can check if there are further updates. FATF’s next meeting will take place in October 2024.

Please get in contact with us if you require assistance reviewing your AML/CTF policies, procedures or risk assessments or with any other AML/CTF compliance matters.

20Jun

Reminder: Quarterly regulatory returns in force for all licensees from 1 July 2024

20th June 2024 Chris Biggs 135

On 1 July 2024, the Gambling Commission will update licence condition 15.3.1 of the Licence Conditions and Codes of Practice (“LCCP”) to require all licensees to submit their regulatory returns on a quarterly basis, within 28 days of the end of each quarterly period.

The Gambling Commission will also update its regulatory returns guidance from 1 July 2024, to remove guidance that applies to questions that will be removed from regulatory returns and amend the wording of guidance “in some cases” to clarify what data is required, based on feedback from licensees.

As we discussed in our previous blog, Quarterly regulatory returns across the board from July 2024, this change to the LCCP follows the Gambling Commission’s publication of its Frequency of regulatory returns: Consultation Response in March, and will harmonise regulatory return reporting dates across the industry.

The Gambling Commission has published information on its website to explain how it will transition licensees from their current regulatory returns reporting period, in addition to information about the questions it will be removing from regulatory returns from 1 July 2024, split by reference to licence type.

The first set of regulatory returns that will relate to the quarterly return period 1 July 2024 to 30 September 2024 must be submitted by 28 October 2024.

Importantly, licensees with current regulatory return periods containing 30 June 2024 will have their reporting period end date changed to 30 June 2024. In such cases, licensees may have shortened reporting periods and due dates. The Commission has published worked examples on its website, to illustrate how the reporting periods for different licence types will align.

The guidance also contains a reminder that once these changes have taken effect, licensees’ reporting periods will not, in most cases, reflect the regulatory year applicable to their licences, which will continue to be used to calculate the correct fee category, and thus annual fee, for operating licences.

If a licensee believes that they will exceed their fee category limit at any time after they have paid their annual fee, they must submit an application to vary their fee category to the Gambling Commission. Details of how to submit applications to vary licence fee categories can be found in the Gambling Commission’s guidance on how to make changes to your operating licence.

Please get in touch with us if you have any questions about regulatory returns and your obligations, licence fee categories, or if you would like assistance with any compliance or enforcement matters.

13Jun

Gambling Commission AML updates: Changes to legislation

13th June 2024 Chris Biggs 138

On 24 May 2024, the Gambling Commission published four notices on its AML Hub, relating to recent changes to legislation and the Licence Conditions and Codes of Practice (“LCCP”) impacting the anti-money laundering (“AML”) and counter-terrorist financing (“CTF”) obligations of licensees.

These notices cover: (1) Scheduled LCCP update: new PML requirements; (2) High-risk third countries; (3) DAML exemption provisions for the regulated sector; and (4) Politically exposed persons.

We summarise each of the notices below.

Scheduled LCCP update: new PML requirements

On 1 May 2024, the Gambling Commission published its Summer 2023 consultation response, announcing it will introduce the changes to personal management licence (“PML”) requirements in the LCCP as proposed in the Summer 2023 consultation. For detailed analysis and insight into this announcement, as well as guides and tools for PMLs, please see our recent article White Paper Series: Changes to Personal Management Licences.

Specifically, the Gambling Commission will, from 29 November 2024, require the person responsible for a licensee’s AML and CTF function, as head of that function, to hold a PML. The Gambling Commission points out that this will include:

for holders of casino operating licences issued by the Gambling Commission (“Casino Licensees”):

the person responsible for compliance with The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations (“MLRs”) (and appointed in accordance with the MLRs). Where appropriate, with regard to the size and nature of the business, this individual “will be a member of the casino’s board of directors (or equivalent management body if there is no board) or of its senior management…”; and
the person responsible for submission of reports of known or suspected money laundering or terrorist financing activity under the relevant legislation (and appointed in accordance with the MLRs), which will be the Casino Licensee’s nominated officer;

for holders of licences other than casino licences, where an individual has been appointed to submit reports of known or suspected money laundering or terrorist financing activity under the relevant legislation, that individual.

The above requirements apply to all licensees, except ancillary remote licensees. Small scale operators will also remain exempt from these requirements in accordance with licence condition 1.2.1 (6).

Key point

The Gambling Commission is now accepting PML applications for these roles and recommends that applications “should be submitted in good time so that the PMLs are in place on 29 November 2024.” Therefore, licensees must ensure PML applications for these roles (if they are currently occupied by individuals who are not PML holders) have been submitted and granted before the extended requirements come into force on 29 November 2024.

High-risk third countries

Casino Licensees are required by the MLRs to conduct enhanced customer due diligence and enhanced ongoing monitoring in any business relationship with a person established in a high-risk third country or in relation to any relevant transaction where either of the parties to the transaction are established in a high-risk third country.

With effect from 23 January 2024, the MLRs were amended by The Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) Regulations 2024 to update the meaning of a ‘high-risk third country’.

Instead of referring to a separate schedule that contained the list of high-risk third countries, regulation 33(3)(a) of the MLRs now defines a “high-risk third country” as “a country named on either of the following lists published by the Financial Action Task Force as they have effect from time to time—

High-Risk Jurisdictions subject to a Call for Action;
Jurisdictions under Increased Monitoring;”.

The Gambling Commission has confirmed that it will update its The prevention of money laundering and combating the financing of terrorism guidance “in due course” to reference these changes.

Key point

In order to keep abreast of which countries are high-risk countries, Casino Licensees must refer directly to the lists published by the FATF of ‘Jurisdictions under Increased Monitoring’ and ‘High-Risk Jurisdictions subject to a Call for Action’. The Gambling Commission points out that these lists are updated 3 times a year on the final day of each FATF Plenary meeting, which is held every February, June and October. The dates of these meetings – which we recommend licensees diarise – are published several months in advance, in the FATF’s events calendar and the FATF list of countries are updated and published in full on the FATF website.

Defence against money laundering (“DAML”) exemption provisions

On 26 October 2023, The Economic Crime and Corporate Transparency Act 2023 (“ECCT”), updated the Proceeds of Crime Act 2002 (“POCA”) and introduced two new exemptions to money laundering offences that apply to casinos (and other businesses in the regulated sectors).

Exemption from authorised disclosure requirement

Section 182 of the ECCT enacted an exemption under sections 327, 328 and 329 of POCA which affects paying away funds under £1,000 when exiting a relationship with a customer, where there is knowledge or suspicion of money laundering or criminal property.

This means that if a Casino Licensee has knowledge or suspicion of criminal property, it can transfer money or other property owing or belonging to a customer for the purposes of exiting that customer relationship, without needing to submit an authorised disclosure to the National Crime Agency (“NCA”), provided the value is less than £1,000 and any customer due diligence measures required under the MLRs have been completed before transferring or handing over the money or other property.

Exemption for mixed property transactions

Section 183 of the ECCT, enacted an exemption under sections 327, 328 and 329 of POCA for mixed property transactions which allows Casino Licensees to “ring-fence funds they believe are criminal property and transact with funds outside of those ring-fenced funds” where they know or suspect that part – but not all – of funds held on behalf of a customer are criminal property.

This exemption will apply provided:

it is not possible, at the time the act (i.e., the Casino Licensee’s transfer of funds) takes place, to identify the part of the funds or property that is the relevant criminal property; and
the value of the funds in the account or accounts, or of the property so held, is not, as a direct or indirect result of the act, less than the value of the relevant criminal property at the time of the act.

Key point

In both of the above circumstances, Casino Licensees will still need to report their suspicions of money laundering to the NCA, but are not required to submit an authorised disclosure and obtain consent from the NCA to avoid committing money laundering offences under sections 327, 328 and 329 of POCA. Importantly, these exemptions do not apply to non-Casino Licensees, so those businesses continue to be subject to authorised disclosure requirements in the above scenarios.

Politically exposed persons

With effect from 10 January 2024, the MLRs were amended by The Money Laundering and Terrorist Financing (Amendment) Regulations 2023 (“2023 Amendments”) to address the treatment of Politically Exposed Persons (“PEPs”) who are entrusted with prominent public functions by the UK, their family members and known close associates (collectively, “Domestic PEPs”).

The 2023 Amendments introduce a proportionate and risk-based scale for regulated firms in their assessment of a Domestic PEP vs non-Domestic PEP. Specifically, this means that Domestic PEPs must still be subject to enhanced customer due diligence measures, but should, as a starting point, be treated as lower relative risk than non-Domestic (or foreign) PEPs.

We have previously discussed the 2023 Amendments in our article Treatment of Domestic Politically Exposed Persons under the Money Laundering Regulations.

Key point

Casino Licensees must bear in mind that it remains critical that the individual risks posed by PEPs are still assessed on a case-by-case basis: any risk factors identified that do not concern the customer’s position as a Domestic PEP, may still give rise to the obligation to conduct enhanced customer due diligence.

Casino Licensees should also note that the Financial Conduct Authority (“FCA”) is due to review and update its own PEP guidance by June 2024. Accordingly, the Gambling Commission’s guidance on the treatment of PEPs may be further updated, if there are amendments to the FCA’s guidance that the Gambling Commission considers should also apply in relation to Casino Licensees.

Next steps and Recommendations

Licensees should consider whether their money laundering and terrorist financing risk assessments, as well as their policies, procedures and controls, should be amended as a result of these changes and if so, ensure such amendments are prioritised.

Please get in touch with us if you would like assistance with PML applications, reviewing AML policies, procedures and risk assessments in the light of these updates, or with any other AML/CTF compliance matters.

10May

Gambling Commission Corporate Strategy for 2024-2027

10th May 2024 Gemma Boore 163

On 8 April 2024, the Gambling Commission released its new Corporate Strategy for 2024 to 2027. The 20-page document, which is entitled ‘Gambling Regulation in the Digital Age’ highlights the most important work the Gambling Commission intends to deliver over the next three years (the “Corporate Strategy”).

Accompanying the release of the Corporate Strategy is a short video, in which the Gambling Commission states:

“We’re making better use of data and analytics to make our gambling regulation more effective, enhancing our core operational functions to provide best practice licensing, compliance and enforcement work, setting clear evidence-based requirements for licensees, being proactive in our approach and address potential problems at the earliest opportunity. And finally regulating a successful National Lottery.”

You can watch the Gambling Commission’s video here:

Introduction

The Corporate Strategy is introduced by a foreword from Marcus Boyle, Chair, and Andrew Rhodes, Chief Executive Officer and Commissioner of the Gambling Commission.

In the foreword, Boyle and Rhodes note that the way people gamble continues to evolve, and that, since the COVID-19 pandemic, studies have shown that fewer people report that they gamble regularly but consumers are collectively spending more money gambling than in 2019. Coupled with the accelerating development of new technologies, increasing globalisation of gambling business models and significant reforms to the regulation of gambling, Boyle and Rhodes declare that this is a “transformative period for the industry”.

The “ambitious” Corporate Strategy is thus underpinned by two main motivations focused on making gambling safer, fairer and free from crime:

Delivering on the decisions taken to bring about significant and lasting change to how gambling is provided, and the National Lottery is operated; and
Investing in key areas to improve how the Gambling Commission delivers its work for consumers, the public and licensees.

The Corporate Strategy sets out how the Gambling Commission commits to achieving these objectives in five areas of strategic focus, which it considers will have the biggest impact in delivering better outcomes for consumers, the public and licensees. Namely:

Using data and analytics to make gambling regulation more effective.
Enhancing core operational functions.
Setting clear evidence-based requirements for licensees.
Being proactive and addressing issues at the earliest opportunity.
Regulating a successful National Lottery.

We summarise the Gambling Commission’s commitments in each of these five areas below.

Using data and analytics to make gambling regulation more effective

Key Commitments

The Gambling Commission commits to:

significantly increasing the depth of its understanding of the gambling market and consumer behaviour;
using data science methods to improve early identification of issues and its understanding of industry compliance;
building a leading understanding of gambling-related harm; and
developing its internal capability to embed the effective use of data across all aspects of its work.

By making progress against its published evidence gaps and priorities, undertaking the Gambling Survey for Great Britain (about which we have written in a previous article) and investing in its own people, the Gambling Commission states that consumers, the wider public and licensees will benefit from better outcomes resulting from the Gambling Commission’s better regulation.

Progress metrics

The Gambling Commission will measure its progress against these commitments by:

assessing itself against the Government Data Maturity Framework;
annually auditing its data science capacity and testing the progress of improvement in its data tools;
publishing regulator updates on changes in the gambling sector and its views for the future;
demonstrating improvement of its understanding of outcomes and approach to evaluation; and
evidencing how its assessment of risk has improved through timely, targeted and effective interventions.

Enhancing the Gambling Commission’s core operational functions

Key Commitments

The Gambling Commission commits to:

evolving its licensing, compliance and enforcement work including improving its core processes, technology and related approaches, which it intends will result in processes, approaches and systems being “digital by default”, and “a more responsive and automated experience for applicants and licensees”;
developing its approach to assurance including increasing transparency of industry compliance levels by theme and licensee – this means that the Gambling Commission will start routinely publishing findings from its work to assess compliance with requirements relating to fairness, protection from harm and crime prevention in 2024 – without identifying specific licensees; and
increasing investment, resources and capacity to tackle illegal gambling.

Progress metrics

The Gambling Commission will measure its progress in this focus area by:

publishing its improved performance against key operational performance indicators;
reporting on levels of industry compliance, building an initial benchmark and then demonstrating positive trends towards greater compliance; and
publishing the metrics on the impact of its disruption activities relating to illegal gambling operators and highlighting case studies.

The Gambling Commission will also explore the availability of reliable proxies to help estimate the scale and risk posed by the illegal market in Great Britain.

Setting clear, evidence-based requirements for licensees

Key Commitments

The Gambling Commission commits to:

delivering the measures it is responsible for in the White Paper, including improving player protections and product safety;
increasing its capacity to evaluate new requirements and policies; and
reviewing how it communicates its requirements and related guidance to licensees and the public.

Progress metrics

To measure its progress in this focus area, the Gambling Commission will continue to report on the progress of its White Paper commitments, publish the results of its evaluation and research outputs, and support the Government and others in their evaluation of the impact of the White paper reforms.

Being proactive and addressing issues at the earliest opportunity

Key Commitments

The Gambling Commission commits to:

investing in a programme of activities exploring how licensees can be supported to meet their responsibilities to consumers and the wider public; and
increasing the resource available to improve its understanding of issues which pose a risk to the fair and open licensing objective.

Progress metrics

The Gambling Commission states that the number of licensees demonstrating an understanding of standards and increased compliance rates will serve to measure its progress in this focus area, as will identifying key metrics such as consumer sentiment on whether gambling is fair and can be trusted. Notably, the Gambling Commission intends to reduce its reliance on formal enforcement tools to secure compliance and focus its efforts more on those who fail to comply.

Regulating a successful National Lottery

Key Commitments

The Gambling Commission commits to:

completing its oversight and assurance of the transition to, and implementation of, the Fourth National Lottery licence;
embedding its regulatory approach to the Fourth National Lottery licence; and
assessing how well the benefits from the new licence arrangements are realised.

So long as player protection is maintained and improved, the Gambling Commission will permit the new National Lottery licensee, Allwyn, to use more freedom and commercial judgement to innovate for the benefit of consumers and the wider public.

Progress metrics

The Gambling Commission will use a combination of qualitative and quantitative methods to assess both its progress in this focus area, and Allwyn’s performance against each of its duties, to ensure that performance does not diminish under the operation of the new licensee.

Next steps

The Gambling Commission’s progress in each of the five focus areas will be reported within its annual reports.

Insight

The objectives in the Corporate Strategy are clear. The Gambling Commission is committing to improving the way that it regulates, and it is doing this by: (1) making better use of data; (2) enhancing its own operational functions; (3) setting clear (and importantly, evidence-based) requirements; (4) being proactive; and finally (5) ensuring that the first transition to a new National Lottery licensee in the last three decades, goes smoothly.

All laudable aims, but from our perspective we will be particularly keen to see the Gambling Commission deliver on its commitment to create more efficiencies in its licensing, compliance, and enforcement work. By its own admission, the Gambling Commission’s “core technology and systems are reaching the limits of their capabilities”. Investing in new technologies (provided they are effective, economic, and properly utilised) can only be a positive step for a public body. After all, the gambling industry is often noted for being at the cutting-edge of technology – so it is only appropriate that its regulator should be, too.

We also welcome the announcement that the Gambling Commission will begin publishing the findings of its compliance work this year, without identifying individual licensees. While this is of course important in the context of sanctions and regulatory settlements; this sporadic means of communication can make it difficult for the wider industry to learn from others’ failings. By consolidating anonymised compliance findings relating to fairness, protection from harm and crime prevention into one report, say quarterly, the Gambling Commission is giving all of those that are licensed by it a fairer chance to (i) understand and (ii) comply with its requirements in the future.

The pressure is now on the Gambling Commission to deliver on extensive commitments, not just in the Corporate Strategy but also those imposed on it by the Government in the White Paper. Challenging times lie ahead, and it is in stakeholders’ interests that the Gambling Commission delivers (and is held to account) on its promises. Positive signs are plentiful under Andrew Rhodes’ now established leadership, not least with important new internal appointments in key positions, a genuinely consultative response to its critical summer 2023 consultation on proposed changes to the LCCP and RTS, trial and pragmatism in relation to financial risk checks and meaningful engagement with industry and other key shareholders. Stakeholders may therefore have reason to be optimistic that the Gambling Commission can deliver upon its ambitious corporate strategy, and we are sure its progress will be monitored closely!

With sincere thanks to Chris Biggs for for his invaluable co-authorship.

Please get in touch with us if you would like assistance with any compliance or regulatory matters.

08May

White Paper Series: the White Paper, one year on

8th May 2024 Jessica Wilson 177

It has been one year since the long-awaited White Paper was published on 27 April 2023 – dubbed by Andrew Rhodes, Chief Executive of the Gambling Commission, as a “key moment” for the industry. The White Paper set out 62 specific policy proposals for the Government, the Gambling Commission, and the gambling industry to take forward in order to implement the reform of gambling regulation.

A lot has changed in the last 12 months, with the opening and closing of several consultations, and Government will begin to implement the main proposals from August 2024.

We recap the journey of the White Paper and consider what will happen next.

The journey so far…

The White Paper was divided into 6 chapters, each setting out a number of proposals. We summarise below the headline proposals within each chapter and the progress made to date.

Chapter 1: Online protections – players and products

Headline proposals included:

New default stake limits for online slot games that will be between £2 and £15 per spin, with greater protections for those aged 18 to 24.

DCMS published its response to its consultation on default stake limits on 23 February 2024, which confirmed the following stake limits would be introduced from September 2024 following secondary legislation:

£5 maximum stake limit per spin for adults aged 25 and above; and
£2 maximum stake limit per spin for young adults aged 18-24.

There will be a minimum six-week transition period for operators to introduce a £5 stake limit for all customers; followed by a further six weeks for the development of any necessary technical solutions before the lower stake limit of £2 for young adults aged 18 to 24 is introduced. Please see our previous blog for further information.

Introduction of “frictionless” financial vulnerability checks and financial risk assessments at set thresholds to understand if a customer’s gambling is likely to be harmful in the context of their financial circumstances.

This is without doubt the most controversial White Paper proposal. The Gambling Commission opened its consultation on 26 July 2023, proposing (1) light-touch financial vulnerability checks using publicly available data at £125 net loss within a rolling 30-day period or £500 net loss within a rolling 365-day period; and (2) enhanced financial risk assessments at £1,000 net loss within a rolling 24 hours or £2,000 net loss within a rolling 90-day period. The proposals sparked great debate within the industry, resulting in significant pressure on Government and the Gambling Commission, particularly from the horseracing industry.

On 22 February 2024, the Gambling Commission published a blog updating the industry on implementation plans for the proposed financial risk checks. The plans included its intention to implement the proposals via a pilot scheme for enhanced risk checks to enable the Gambling Commission to test the details of data-sharing in practice. In addition, the Gambling Commission confirmed they will initially come into force at a higher threshold, before moving to a lower threshold later in the year. The blog came four days before UK Parliament debated the petition Stop the implementation of betting affordability/financial risk checks, reflecting the mounting pressure Government and the regulator were facing.

On 1 May 2024, the Gambling Commission published its consultation response, confirming the introduction of light-touch financial vulnerability checks, alongside a pilot of enhanced frictionless financial risk assessments, with the latter only being rolled out if the pilot proves the checks can be frictionless.

In summary, the following will be implemented:

Light-touch financial vulnerability checks for customers with a net deposit of more than £150 a month. The checks will involve the assessment of publicly available data. Initially, the checks will come into force at £500 a month from 30 August 2024, to ease introduction, before reducing to £150 a month from 28 February 2025. The proposed £500 annual threshold for these checks will not be implemented, following analysis that 99% of individuals that exceeded that threshold, also exceeded the £150 a month threshold.
A pilot of enhanced financial risk assessments for operators in the three highest bands of fee categories and volunteers in lower fee categories, for a minimum of six months. The pilot will test how frictionless assessments can work in practice and will involve working with credit reference agencies and gambling businesses to assess consumer impact. Data collection will assist in setting financial thresholds at which financial risk assessments should be conducted. It is expected that the pilot will take place between 30 August 2024 and 31 March 2025, with the Gambling Commission having the ability to extend to the end of April 2025 if necessary.

On the same day, the Betting and Gaming Council (“BGC”) published a new Industry Voluntary Code on Customer Checks and Documentation Requests Based on Spend (“Industry Voluntary SR Code”), which will operate as a voluntary interim code to provide consistency across the regulated sector to social responsibility compliance until the financial vulnerability checks and risk assessments are brought into force. The Industry Voluntary SR Code sets out what actions a BGC member must take when customers wish to make net deposits of:

More than £5,000 in a rolling month (£2,500 for 18-24 year olds) – in which case the operator must undertake a financial risk assessment using open source information, information obtained from the customer previously, and financial insights from third parties, escalating to “enhanced consideration” if high-risk activity is identified.
£25,000 in a rolling 12-month period – in which case the operator must undertake “a process of enhanced consideration”.

It is intended that a supplementary BGC code on anti-money laundering checks will also be published to provide similar consistency in respect of anti-money laundering measures. Please see our previous blog for further information.

Amendments to game design rules to bring other game types in line with slots.

The Gambling Commission’s consultation closed on 18 October 2023 and the response was published on 1 May 2024. The changes extend requirements that already apply to slots to other online products. In particular, they ban speed features such as “turbos” or “slam stops”, game cycles of less than 5 seconds on casino products (N.B. the requirement for slots is 2.5 seconds), autoplay functions, celebrations of returns less than or equal to the stake, and the facilitation of playing multiple simultaneous products. The new remote games design rules come into force on 17 January 2025. Please see our previous blog for further information.

Amendments to the Remote Technical Standards to ensure customers can seamlessly use pre-commitment tools e.g. deposit limits.

The aim of the proposals is to ensure customers maintain awareness and control over their gambling. The Gambling Commission’s consultation closed on 21 February 2024 and sought views on minimising friction in the customer journey when choosing customer-led tools, and on a cross-operator deposit limit. At the time of writing, a response is awaited. Please see our previous blog for further information.

Chapter 2: Marketing and advertising

Headline proposals included:

Improving consumer choice on direct marketing by giving them more control over the gambling marketing they wish to receive.

The Gambling Commission’s consultation closed on 18 October 2023 and the response was published on 1 May 2024. Online gambling business will need to provide customers with options to opt-in to the product type (casino, betting and bingo) they are interested in, and the channels through which they wish to receive marketing. Following the consultation, the Commission removed lottery as a product type (and the land-based sector has now been excluded from the requirement) and removed post as a channel for marketing. The new rules come into force on 17 January 2025. However, in order to make customers aware of the preference choices, and so they are not hidden in an email, customers will only be required to re-confirm their marketing preferences the first time they log in after the implementation date. Until then, marketing can continue based on the customer’s prior marketing preferences. Please see our previous blog for further information.

Incentives such as free bets to be constructed in a socially responsible manner.

Proposals include banning or limiting the use of wagering requirements in promotional offers, and banning the mixing of product types. The Gambling Commission’s consultation closed on 21 February 2024. At the time of writing, a response is awaited.

Cross-sport gambling sponsorship code of conduct to be developed, which will guarantee a robust minimum standard, ensuring that gambling sponsorship across all sports is done in a socially responsible manner.

On 13 March 2024, Stuart Andrews MP announced that the code of conduct has been finalised and binds domestic sports governing bodies to four core principles: (1) reinvestment into sport, (2) maintaining sport integrity, (3) protecting children and other vulnerable people, and (4) ensuring socially responsible promotion. Bespoke, sport-specific codes are also being designed by individual governing bodies, and will be published and implemented “in due course”.

Government to work with the Department of Health and Social Care (“DHSC”) and the Gambling Commission to develop systematic safer gambling messaging, independent from industry, to maximise the information available to consumers and enable them to make informed decisions, with a better understanding of the risks.

The DHSC has initialised a review of the evidence around effective public health-led messaging. At the time of writing, a response is awaited.

Chapter 3: The Gambling Commission’s powers and resources

Introduction of a statutory gambling levy.

The statutory levy will fund research, education and treatment of gambling harms and is one of the pillar reforms within the White Paper, replacing the current voluntary system. The statutory levy will provide a sustainable and consistent income stream to support the treatment of gambling-related harms, and create a more equitable approach. DCMS’ consultation closed on 14 December 2023. At the time of writing, a response is awaited. Please see our previous blog for further information. Government confirmed in its response to DCMS’s Second Report (published 19 April 2024) that it will be publishing a response “in the coming weeks”.

Additional Gambling Commission powers, including to tackle the black market.

The Government will introduce new powers for the Gambling Commission so it can more effectively take action against the illegal online gambling market through provisions set out in the Home Office’s Criminal Justice Bill. The Bill was introduced in the House of Commons on 14 November 2023 and is currently at Commons Report stage. In the meantime, a key commitment in the Gambling Commission’s three year corporate strategy, published on 8 April 2024, is to increase investment, resource and capacity to tackle illegal gambling.

Increased Gambling Commission fees.

DCMS’ consultation is awaited. It is expected that the revised funding system will enable the Gambling Commission to adjust its fees on an annual basis where necessary, increasing or reducing fees as appropriate.

Chapter 4: Dispute resolution and customer redress

Headline proposal:

Appointment of a Gambling Ombudsman.

The White Paper proposed the formation of an independent non-statutory ombudsman to improve consumer protection and ensure fairness for consumers relating to social responsibility complaints. The Gambling Commission expected the Gambling Ombudsman to be accepting complaints within a year of publication of the White Paper, however appointment of a Gambling Ombudsman is yet to take place and seems unlikely to happen any time soon. Please see our blog for further information.

Chapter 5: Children and young adults

The headline proposals relating to children and young adults tie into the proposals in Chapter 1, with separate thresholds (for example) being applied to children and young adults.

Chapter 6: Land-based gambling

Headline proposals included:

Strengthening age verification in land-based premises.

The Gambling Commission’s consultation closed on 18 October 2023 and the response was published on 1 May 2024. New rules will come into force on 30 August 2024 requiring smaller land-based gambling licensees to carry out age verification test purchasing, extending the existing requirements in place for larger land-based gambling licensees. The LCCP will also be updated to confirm that “Think 25” is best practice for land-based premises, replacing “Think 21”. Please see our previous blog for further information.

Introduction of cashless payments on gaming machines.

The DCMS consultation regarding the proposals closed on 4 October 2023. The proposal to remove the current prohibition of cashless payments on gaming machines aims to bring the land-based sector into the digital age. At the time of writing, a consultation response is awaited. Please see our previous blog for further information.

Increasing gaming machine entitlements and relaxing rules relating to table/machine ratios.

The DCMS consultation regarding the proposals closed on 4 October 2023. The proposals aim to address inconsistencies and level the playing field between land-based and online operators, and to allow operators greater commercial flexibility. At the time of writing, a response to the consultation is awaited. Government confirmed in its response to DCMS’s Second Report (published 19 April 2024) that it will be publishing a response “in the coming weeks”.

Consultation progress

The table below provides an overview of consultations launched relevant to the White Paper and their current status.

Consultation	Headline proposals	Status
DCMS Consultation: Stake Limits Opened 26 July 2023	New default stake limits for online slot games.	Closed 4 October 2023 (extended from 20 September 2023) Response published on 23 February 2024. Changes come into force in September 2024.
DCMS Consultation: Land-based measures Opened 26 July 2023	– Changing gaming machine ratios in arcades and bingo halls. – Introduction of cashless payments on gaming machines.	Closed 4 October 2023 Awaiting response
Gambling Commission Summer Consultation Opened 26 July 2023	– Proposed changes to the Remote Technical Standards to bring other game types in line with slots. – Financial vulnerability checks and financial risk assessments. – Extending the roles required to hold a Personal Management Licence. – Regulatory panel changes (NB. not a proposal in the White Paper. Please see our blog for further information). – Improvements to consumer choice on marketing. – Tightening of age-verification in premises	Closed 18 October 2023 Response published on 1 May 2024. Changes will be implemented for all proposals (except regulatory panels) and will come into force across multiple dates between 30 August 2024 and 28 February 2025.
DCMS Consultation: Statutory Levy Opened 17 October 2023	Proposals for the structure, distribution and governance of the statutory levy.	Closed 14 December 2023 Awaiting response
Gambling Commission Autumn Consultation Opened 29 November 2023	– Amendments to customer-led tools e.g. deposit limits. – Rules around free bets and bonuses. – Changes to regulatory returns reporting. (NB. not a proposal in the White Paper. Please see our blog for further information).	Closed 21 February 2024 On 27 March 2024 the Gambling Commission confirmed it will be introducing a requirement for the submission of quarterly regulatory returns for all licence types, effective from 1 July 2024. Responses are awaited for the other proposals.
Gambling Commission December Consultation Opened 15 December 2023 NB. not related to the White Paper , but includes important proposals alongside other consultations	– Changes to criteria for imposing a financial penalty and penalty calculation methodology. – Changes to financial key event reporting	Closed 15 March 2024 Awaiting response

Other updates

Other updates from the last 12 months include:

23 May 2023 – The Gambling Commission published Evidence Gaps & Priorities, a document outlining current evidence gaps and the Gambling Commission’s approach to address these over the next three years.

19 June 2023 – Gambling Commission published a new hub for operators engaging with third parties.

25 July 2023 – As part of wider work by Government on online advertising and consumer protection, DCMS published its consultation response to the Online Advertising Programme.

14 September 2023 – Gambling Commission Industry Forum established.

23 October 2023 – The Gambling Commission called upon licensees to participate in a user research programme aimed at sharpening the dataset received through regulatory returns.

31 October 2023 – The Gambling Commission’s updated customer interaction guidance came into effect.

14 November 2023 – Criminal Justice Bill (which contains new powers for the Gambling Commission to tackle illegal online gambling) introduced in the House of Commons.

22 November 2023 – The Government published the Autumn Statement 2023, which included proposals to change the structure of remote gambling taxation.

1 December 2023 – The Betting & Gaming Council’s seventh edition of the Industry Group for Responsible Gambling Code for Socially Responsible Advertising came into force.

29 February 2024 – Publication of the first wave of the Gambling Commission’s Gambling Survey for Great Britain.

11 March 2024 – Gambling Commission Industry Forum members appointed.

27 March 2024 – Quarterly regulatory returns required for all licence types announced, effective 1 July 2024.

1 April 2024 – LCCP GAMSTOP and suicide reporting requirements came into force.

8 April 2024 – Gambling Commission launched its Corporate Strategy for 2024 – 2027.

25 April 2024 – House of Lords debate on the impact of gambling advertising, predicting enhanced pressure for greater change to advertising following the results of the Gambling Survey for Great Britain due to be published in July.

Where are we now?

The White Paper generated a substantial amount of work for all stakeholders, including the Government, the Gambling Commission and the industry. The intention was for the main measures in the White Paper to be in force by Summer 2024 and Government and the Gambling Commission were committed to and focused on implementing the proposals as quickly as possible.

It is clear a lot of work has been done by all parties to advance the White Paper proposals. Days after the one-year anniversary of the White Paper we saw publication of the Gambling Commission’s response to its Summer Consultation, which included next steps on some of the most critical aspects, such as financial vulnerability checks and enhanced risk assessments. The publication of the Industry Voluntary SR Code demonstrates the collaboration between the Gambling Commission and industry and the concerted efforts being made to ease transition during this period of change. However, some targets have been missed, for example the 1-year deadline for appointing the Gambling Ombudsman has now passed.

Whilst many of the critical proposals in the White Paper can be progressed through LCCP changes and voluntary measures, the goal of Summer 2024 now presents a tight timetable in respect of those proposals that require secondary legislation. Regardless, Government still appears to be intent on reaching that goal as it confirmed in its response to DCMS’s Second Report (published 19 April 2024) that it will be publishing responses to DCMS’s consultations on the statutory levy and land-based measures “in the coming weeks”. It also noted that it “remains on track to introduce the statutory levy via secondary legislation this Summer, with levy funding flowing to organisations as soon as possible thereafter”.

Whilst the 2024 General Election appears unlikely to affect the final outcome of the White Paper proposals, particularly as our understanding is that Labour is supportive of the balance of proposals therein, it may delay matters, as gambling is unlikely to be a high priority for any new government.

What can we expect next?

Responses to the following consultations:

DCMS Consultation: Land-based measures (expected in the “coming weeks”).
DCMS Consultation: Statutory Levy (expected in the “coming weeks”)
Remainder of Gambling Commission Autumn Consultation.
Gambling Commission December Consultation.

DCMS consultation on Gambling Commission fees.
Introduction of the statutory levy (expected this Summer).
Government consultation on bringing remote gambling into a single tax structure.
Establishment of Gambling Ombudsman (now behind schedule).
Extension of Gambling Commission powers to tackle illegal gambling.
Government review of the horserace betting levy.
Publication of the second wave and annual report of the Gambling Survey for Great Britain.

Please sign up to our blog to receive insight and commentary on the continued journey of the White Paper.

01May

HM Treasury consultation: Improving the effectiveness of the Money Laundering Regulations

1st May 2024 Chris Biggs 161

On 11 March 2024, HM Treasury launched a consultation on Improving the effectiveness of the Money Laundering Regulations (the “MLRs Consultation”).

Background

The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the “MLRs”) place requirements on a range of businesses in the regulated sector (which includes casinos) to identify and prevent money laundering and terrorist financing.

In the MLRs Consultation, HM Treasury seeks views on proposed changes to improve the effectiveness of the MLRs as part of the Government’s wider programme of work set out in its Economic Crime Plan 2023-2026.

In the foreword to the MLRs Consultation, Baroness Vere, the Treasury Lords Minister, makes clear that “a key principle in the MLRs is proportionality” and that the Government is seeking to address areas of the MLRs where there is room to find a better balance between what is required of regulated firms (i.e. relevant persons within scope the MLRs, including casinos) and customers, and the risk of money laundering and terrorist financing.

Consultation Themes

The MLRs Consultation focuses on four core themes which we summarise below.

Making customer due diligence more proportionate and effective

Chapter 1 considers customer due diligence requirements, including enhanced and simplified checks, and explores key stakeholder concerns about the proportionality of the due diligence requirements. It further considers the various options to use the MLRs to achieve a “better balance” and support efforts to prioritise resource where it will have the greatest impact. The topics covered include:

whether the triggers for due diligence are sufficiently appropriate and clear, particularly for regulated firms that are not in the financial sector, such as casinos;
whether clarity can be provided to regulated firms on when to carry out ‘source of funds’ checks;
how best to support the use of digital identity when verifying customer identity;
when enhanced due diligence checks (“EDD”) should be required; and
if changes could be made to improve the proportionality and effectiveness of EDD in relation to High Risk Third Countries.

Strengthening system coordination

Chapter 2 considers a number of issues intended to strengthen the system coordination across the UK’s anti-money laundering and counter-terrorism funding (“AML/CTF”) regime. The changes proposed reflect in part the need to update the MLRs, to ensure effective cooperation as the system evolves to take account of new and emerging threats, technological change and changes to the legislative landscape. The topics covered are:

ways to ensure that key information sharing and collaboration gateways are open and useful;
whether Companies House should be added to the list of bodies with whom AML supervisors must cooperate; and
how regulated firms should use the National Risk Assessment of Money Laundering and Terrorist Financing to help target their compliance work.

Providing clarity on scope of the MLRs

Chapter 3 considers issues at the boundary of the AML/CTF regulation regime, and recognises that the regime, and the guidance that supports firms and supervisors to comply with it, needs to be kept updated to keep pace with wider regulatory and market changes following the UK’s exit from the EU. The topics covered are:

how the thresholds in the MLRs which are currently in Euros could be changed to Pound Sterling;
potential gaps in the regulation of trust company and service providers; and
how best to align registration and change in control measures for custodial wallet providers and cryptoasset exchange providers between the Financial Services and Markets Act 2000 and the MLRs.

Reforming registration requirements for the Trust Registration Service

Finally, Chapter 4 proposes a number of changes to the registration requirements for the Trust Registration Service, which are intended to increase transparency in relation to certain higher risk trusts, whilst reducing the administrative burdens on low-risk trusts.

Relevance to other open consultations

A. Reforms to the AML/CTF supervisory regime

The MLRs Consultation has been launched whilst the Government considers the responses to its June 2023 consultation on reforms to the AML/CTF supervision regime that was launched last year (see our previous article) (the “Supervisory Consultation”).

At the time of writing, no response to the Supervisory Consultation has been published. However, Baroness Vere confirms in the MLRs Consultation that the Government expects to determine the new model for the UK’s AML/CTF supervisory regime “in the coming months”. It is Baroness Vere’s intention that any amendments to the provisions in the MLRs pursuant to the MLRs Consultation will be supported by an improved supervision regime “further strengthening the UK’s overall regime for reducing economic crime”.

B. Cost of compliance survey

In parallel with the MLRs Consultation, HM Treasury is running a survey (the “Cost of Compliance Survey”) on the cost of compliance with the MLRs, in order:

to better understand how regulated businesses comply with the MLRs; and
to assess the impact of future changes to the MLRs.

You can view and respond to the Cost of Compliance Survey here.

Next steps

On 12 April 2024, HM Treasury announced it would be hosting a series of virtual, open roundtables to discuss the MLRs Consultation with interested stakeholders, including regulated businesses and their customers, supervisory bodies, law enforcement agencies, civil society organisations and members of the public. The first session for relevant persons regulated by HMRC and the Gambling Commission (i.e. casino licensees) was held on 18 April 2024. However, an additional session for all sectors and stakeholders will be held at 11am on Tuesday 7 May. Details for this session, including how to register, can be found here, and we encourage all casino operating licence holders (and other interested parties, including stakeholders) to participate in these roundtables.

We also recommend that casino operating licence holders (and other interested parties, including stakeholders) review and respond to the MLRs Consultation and the Cost of Compliance Survey.

Both the MLRs Consultation and the Cost of Compliance Survey are open until 11:59pm on 9 June 2024.

Please get in touch with us if you would like assistance preparing a response to the MLRs Consultation, or legal advice on any AML/CTF compliance matters relevant to gambling licensees in Great Britain.

03Apr

Reminder: Changes to LCCP now in force

3rd April 2024 Chris Biggs 189

In accordance with the Gambling Commission’s Changes to multi-operator self-exclusion, notification of deaths by suicide and payment services: Consultation Response (“Consultation Response”) published on 17 October 2023, two changes to the Licence Conditions and Codes of Practice (“LCCP”) came into force on 1 April 2024:

A. Social responsibility code provision 3.5.5 – Remote multi operator self-exclusion

The Gambling Commission has extended the requirement to participate in the GAMSTOP multi-operator scheme to include all gambling licensees that make and accept bets by telephone and emails, which includes betting services conducted via SMS text and instant messaging services such as WhatsApp, Telegram, Facebook Messenger and Instagram Direct. The amended wording to social responsibility code provision 3.5.5 now reads as follows:

“Applies to: All remote licences except: any remote lottery licence the holder of which does not provide facilities for participation in instant win lotteries, ancillary remote betting when relied upon to provide facilities for betting via a machine (commonly known as self-service betting terminals) on premises where a betting or track premises licence has effect, remote general betting (remote platform), remote betting intermediary (trading room only), gaming machine technical, gambling software, host, ancillary remote bingo, and ancillary remote casino licences.

1. Licensees must participate in the national multi-operator self-exclusion scheme.”

B. Licence condition 15.2.2 – Other reportable events

The Gambling Commission has added a requirement to this licence condition that requires all gambling licensees to inform the Gambling Commission when they become aware, or have reasonable cause to suspect, that a person who has gambled with them has died by suicide. This additional requirement at licence condition 15.2.2 reads as follows:

“Applies to: All operating licences.

2. The licensee must notify the Commission, as soon as reasonably practicable, if it knows or has reasonable cause to suspect that a person who has gambled with it has died by suicide, whether or not such suicide is known or suspected to be associated with gambling. Such notification must include the person’s name and date of birth, and a summary of their gambling activity, if that information is available to the licensee.”

In its Consultation Response, the Gambling Commission provides some guidance on its expectations of a licensee’s ‘reasonable cause to suspect’, indicating that the word ‘reasonable’ was an “important qualification” and further stating:

“We do not expect gambling businesses to actively investigate various sources of information but to be cognisant of developments it might become aware of and respond accordingly.”

Whilst it remains somewhat ambiguous as to what may be considered ‘reasonable’ in these circumstances, the Gambling Commission explains that it introduced this wording to ensure licensees do not fail to report complex cases where they do not have ‘actual knowledge’ of a death by suicide. All licensees must therefore now ensure they notify the Gambling Commission as soon as reasonably practicable upon becoming aware, or having reasonable cause to suspect, that a customer has died by suicide and (where applicable) ensure they participate in GAMSTOP.

Many licensees will have already implemented these requirements into their policies, procedures and systems. However, for those that have yet to do so, you may find the following helpful:

GAMSTOP

The Gambling Commission published a blog on 18 December 2023, which provides information on how to integrate with the GAMSTOP application programming interface.

Helpfully, the blog links to a webinar delivered by the Gambling Commission and GAMSTOP, which provides:

a summary of GAMSTOP’s work completed to date – starts at 1 minute 40 seconds;
an overview of the GAMSTOP scheme – starts at 6 minutes 17 seconds;
guidance about the integration process – starts at 17 minutes 29 seconds; and
a question and answer session – starts at 32 minutes 06 seconds.

Reporting suicides

If licensees become aware, or have reasonable cause to suspect, that a customer has died by suicide, they should provide the following information to the Gambling Commission:

the date the licensee became aware of the death;
the person’s name;
date of birth; and
a summary of their gambling activity, if this information is available.

This information should be submitted to the Gambling Commission via eServices as soon as reasonably practicable. It is critical to remember that the Gambling Commission requires any deaths by suicide to be reported – it does not matter whether the suicide is known or suspected to be associated with gambling. As noted by the Gambling Commission in its Consultation Response:

“…we are not expecting gambling businesses to determine whether the person’s death was caused by or connected to their gambling activity. Responsibility for establishing whether a death is by suicide is a matter for a coroner or the police to determine.”

Additional details about information the Gambling Commission expects licensees to include in these notifications can be found in the Gambling Commission’s LCCP Information requirements guidance.

In terms of the timing of the notification, the Gambling Commission does not provide guidance on what is meant by “as soon as reasonably practicable”. However, licensees should note the relative urgency and would be well-advised to put in place robust systems and processes to ensure that any relevant facts/matters are reported to appropriate personnel within the business as soon as possible – ideally to those in the compliance department, including the personal management licence (“PML”) holder responsible for the licensee’s regulatory compliance function.

In addition, all employees (and particularly those that are customer-facing and/or who supervise this cohort) should be trained on the new reporting obligation as soon as possible, to mitigate the risk that relevant facts or matters are known within the wider business but not reported “up” through the appropriate channels.

We also recommend that licensees review their terms and conditions and privacy policies to make it clear that they are required to disclose information to the Gambling Commission in these circumstances.

Please get in touch with us if you: (i) would like us to review your policies and procedures to ensure they comply with the Gambling Commission’s requirements; (ii) require training for the PML holders in your business; and/or (iii) would like any other assistance in relation to licensing and compliance matters.

27Mar

Quarterly regulatory returns across the board from July 2024

27th March 2024 Francesca Burnett-Hall 196

The Gambling Commission has confirmed today that it will be introducing a requirement for the submission of quarterly regulatory returns for all licence types, effective from 1 July 2024.

In our previous blog, we outlined the proposals set out in the Gambling Commission’s Autumn consultation, which also included harmonising regulatory return reporting dates, so that all operators will report at the same time.

The Gambling Commission is going ahead with its plans, which it believes will:

have a material impact on its ability to budget, through an improved ability to understand income levels on a more regular basis and forecast accurately;
provide a timelier, deeper and more accurate picture of the gambling sector, in line with the Gambling Commission’s aspirations and the intentions of the government’s White Paper;
facilitate simpler systems development for the Gambling Commission; and
simplify internal processes and improve the quality of industry statistics, as reporting periods will align.

The Gambling Commission sets out that these advantages will also directly improve its ability to use data to: (a) ensure licensees are within the correct fee category; (b) provide vital information to ensure it regulates effectively, and enable comparisons between sectors; and (c) publish industry statistics on the size and shape of the gambling market in Great Britain. It believes that:

“quarterly returns will support our aim to be a risk-based, evidence-led, and outcomes-focused regulator.”

The Gambling Commission does acknowledge that moving to quarterly regulatory returns will introduce a greater regulatory burden on those licensees that are currently only required to submit annual returns, but it hopes that this will be balanced by other changes it is making to regulatory returns, such as improving supporting guidance and streamlining the number of questions that need to be completed each quarter by removing around 600 fields across all licence types,; these changes were proposed in a previous consultation which was the subject of our blog published in 7 April 2020. For those licensees that hold multiple licences, the Gambling Commission considers that “these changes should simplify the administration required for submitting regulatory returns as they can all be done at the same time across the same time periods.”

Updated licence condition 15.3.1 will come into effect on 1 July 2024, and the first set of regulatory returns, which will relate to the quarterly return period 1 July 2024 to 30 September 2024) must be submitted by all licensees by 28 October 2024.

The Gambling Commission will set out further details of the changes, including information about the data required, in communications to licensees in the period leading up to the implementation date of 1 July 2024.

The full consultation response can be seen here.

Please get in touch if you have any questions about regulatory returns, or if you would like assistance with any compliance or enforcement matters.

11Mar

The Gambling Commission’s emerging money laundering and terrorist financing risks: February 2024 update

11th March 2024 Chris Biggs 191

The Gambling Commission released its most recent update on emerging money laundering and terrorist financing risks on 9 February 2024. This update covers five emerging risks that we set out in detail below.

Multiple cards and innovative payment methods

The Gambling Commission indicates that there are an increasing number of instances of “multiple stolen debit cards” being used to fund online gambling activities. Alongside virtual debit card products that allow multiple virtual debit cards to be linked to one bank account, these instances pose a significant money laundering and terrorist financing (“ML/TF”) risk.

The Gambling Commission points out the following (non-exhaustive) red flag indicators of which licensees should be mindful:

- the operator is unable to match the customer’s personal details with the card details;
- the operator does not have the ability to verify the card holder’s identity information; and
- there are multiple bank accounts being used to fund a customer’s gambling activity.

The Gambling Commission reminds licensees that they are required to have “robust customer due diligence and onboarding checks” in place. It points out that in accordance with Licence Condition (“LC”) 12 of the Licence Conditions and Codes of Practice (“LCCP”), licensees must review their ML/TF risk assessments as necessary in the light of “any changes of circumstances, including the introduction of new products or technology or new methods of payment by customers.” It also reminds licensees that they must consider whether checks on customer ID documents are sufficient to identify false, stolen or “mule” (third party) ID documents, in accordance with the identification and verification requirements set out in LC 17.1.1(1) and (4).

Risks associated with access to third party funds

The Gambling Commission states that customers who are in functions, roles or responsibilities that give them access to third party funds should be considered to present a higher inherent ML/TF risk. Such roles may include access to:

- the funds of vulnerable people;
- customer funds, in the case of banking, accounting or finance (for example);
- company funds; and
- charitable funds.

It points out that licensees should consider these risks at the start of the customer relationship and before any deposits are made, noting that in order to sufficiently identify these risks customer monitoring should be an ongoing process.

Updated FATF ‘grey list’

In stating that the Democratic Republic of the Congo, Mozambique and Tanzania have been added to the list of jurisdictions that are under an increased level of monitoring by the Financial Action Task Force (“FATF”), the Gambling Commission points out that these jurisdictions are placed on the FATF’s ‘grey list’ due to “strategic deficiencies in their regimes to counter money laundering, terrorist financing and proliferation financing.”

It reminds licensees to conduct robust customer due diligence checks in relation to any customer relationships associated with the jurisdictions on the FATF’s grey list in order to mitigate the risk of ML/TF, including proliferation financing.

The above-listed countries were added to the FATF’s grey list on 27 October 2023. However, it is important licensees note that following the Gambling Commission’s February 2024 update, the FATF announced on 23 February 2024 that Barbados and Gibraltar have been removed from the grey list. The FATF’s recent announcement and full grey list can be found here.

Funds originating from crypto-assets

The Gambling Commission states that it is aware of cases of licensees “not sufficiently” considering the risks associated with customer funds where the funds have originated from crypto-assets. It reminds licensees that it considers crypto-assets to be high risk and it expects licensees to “appropriately scrutinise transactions throughout the course of customer and business relationships.”

Common operator failings

The Gambling Commission states that there continues to be numerous instances of customers being able to deposit large amounts of money before the first anti-money laundering (“AML”) review can be undertaken by the licensee against a customer, due to insufficient and/or ineffective source of funds (“SOF”) checks and enhanced customer due diligence or KYC triggers.

It states that licensees have been identified as “failing to critically review SOF documentation” instead relying on electronic checks, which includes relying solely on open-source information, such as Companies House records, to verify SOF information. Other issues include licensees failing to provide sufficient guidance to staff on how to review and verify SOF information and to determine what supporting documents should be requested.

To mitigate these risks, the Gambling Commission recommends:

- setting realistic and effective monetary and non-monetary thresholds/triggers for determining when customer interactions should take place;
- carrying out such interactions earlier on in the customer relationship;
- ongoing customer monitoring (including monitoring all transactions or activity). The monitoring of customer activity should be carried out using a risk-based approach. Higher risk customers should be subjected to a frequency and depth of scrutiny greater than may be appropriate for lower risk customers; and
- considering geographical, customer, transactional and product risk in all customer relationships.

Next steps

As a reminder to licensees, LC 12.1.1(3) of the LCCP requires that all operating licence holders (with the exception of gaming machine technical and gambling software licences) 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”.

We recommend that all licensees review their ML/TF risk assessments as soon as possible in the light of the Gambling Commission’s update. In addition to any necessary updates to their risk assessments, licensees must update their policies, procedures and controls to take into account any changes made.

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

28Feb

White Paper Series: Parliamentary debate on affordability and financial risk checks

28th February 2024 Chris Biggs 193

On Monday 26 February 2024, the UK Parliament debated the petition Stop the implementation of betting affordability/financial risk checks (the “Petition”), formally addressing one of the Government’s (and the Gambling Commission’s) more controversial commitments from the White Paper.

Background

Launched on 1 November 2023 by The Jockey Club Chief Executive Officer, Nevin Truesdale, the Petition reached more than 100,000 online signatures within 27 days, prompting Parliament’s Petitions Committee to schedule yesterday’s debate by Members of Parliament (“MPs”) including the Gambling Minister, Stuart Andrew (the “Debate”).

The Petition states:

“We want the Government to abandon the planned implementation of affordability checks for some people who want to place a bet. We believe such checks – which could include assessing whether people are ‘at risk of harm’ based on their postcode or job title – are inappropriate and discriminatory.”

On 16 November 2023, the Government responded to the Petition, stating it is “committed to a proportionate, frictionless system of financial risk checks, to protect those at risk of harm without over regulating”, also indicating that the Gambling Commission would set out its plans “in due course”.

Last week (and in advance of the Debate), the Gambling Commission’s Executive Director of Research and Policy, Tim Miller, published a blog entitled “Financial risk next steps – February 2024”, which provided an update on the Gambling Commission’s intended implementation of financial risk checks. We discussed these proposals in our recent blog: White Paper Series: Gambling Commission update on its implementation of financial risk checks.

The Debate

The Debate was attended by a large number of MPs, 27 of whom shared views in favour of both sides of the argument. In opening the Debate, MP for Neath, Hon. Christina Rees, stated “affordability checks are not about attacking consumer rights or curbing individual liberties, but about upholding consumer protections and curbing operator excess.” Whilst Rees acknowledged the concerns of industry bodies, operators and the horseracing community, she argued that the idea of introducing financial risk checks is not new, and that industry and consumers alike support the need for regulation against harmful betting. In Rees’ view, the issue rather seemed to be that:

“such checks need to be frictionless, without negative impact on punters or operator revenue, and without pushing vulnerable gamblers into the black market.”

Similar concerns about the proposed financial risk checks were raised by other MPs. Broadly, the major concerns from the industry (particularly horseracing) and consumers, as put forward by various MPs, were:

it is unclear if the financial risk checks would truly be frictionless;
it is inappropriate for the Government and/or the Gambling Commission to determine what is affordable for an individual;
financial risk checks would push more consumers to the black market; and
horseracing should be distinguished from other forms of gambling, such games of chance, in the implementation of financial risk checks.

Several MPs called for the Government to reconsider the proposals and start again, arguing that a one-size-fits-all approach would not work, and that a wider group of industry stakeholders and experts must be consulted in order to find the appropriate balance.

MP for Shipley, Hon. Philip Davies, on the other hand, took a slightly more nuanced approach, stating that “however much I would like the Government and the Gambling Commission to abandon the affordability check policy, I have not been here so long without accepting that some battles are impossible to win”. Davies suggested that, if they are to be introduced, the proposed “enhanced” financial risk checks should be based on data from the Steering Committee on Reciprocity (“SCOR”), instead of current account turnover data. Davies argued that the use of SCOR data would, crucially, ensure that the checks are “entirely frictionless and do not discriminate against any group, such as the self-employed”.

Amongst the arguments in support of the introduction of financial risk checks, several MPs emphasised that the lower, “light-touch”, financial vulnerability checks will be frictionless and that the enhanced financial risk checks would only require 0.3% of online gambling account holders to provide gambling businesses with additional financial information – the 0.3% being a reference to Andrew Rhodes’ (Chief Executive Officer for the Gambling Commission) blog entitled “Your questions answered on the financial risk checks consultation”, which was published on the Gambling Commission’s website on 7 September 2023. In his blog, Rhodes argued that, on the basis that nearly all gambling customers have a credit reference file which can be checked frictionlessly, only a small percentage (estimated at 0.3% by the Gambling Commission – although it is unclear on the basis of what data/research) would be asked to directly provide additional financial information to an operator in connection with a financial risk assessment.

MP for Sheffield Central, Hon. Paul Blomfield, stated that gambling addiction is a health issue which needs to have a prevention strategy. Noting gambling-related harm can occur at relatively low levels of spend, Mr Blomfield also considered that the 0.3% of customers likely to be affected by the enhanced checks is a “tiny number” in relation to the benefit that could be achieved through introducing the checks. Blomfield went on to downplay the argument that financial risk checks would cause customers to move to the black market. Blomfield cited similar concerns that were raised by the tobacco and payday lending industries, which he noted did not come to fruition after these industries were more stringently regulated.

MP for Swansea East and Chair of the All-Party Parliamentary Group on gambling related harm, Hon. Carolyn Harris, suggested that the logical way forward in protecting those gripped by gambling addiction is to introduce the financial risk checks on anyone gambling larger sums:

“Those would not stop anyone who can afford it betting as much as they choose, but it would stop those who cannot.”

Harris cited research by Dr Philip Newall from the University of Bristol and Dr David Zendle from the University of York using open banking data, which found that “unharmed” gamblers have an average monthly spend of £16.41, compared with £208.91 for the highest risk group. Harris went on to conclude that this research suggested that “risk-free” gamblers would very rarely trigger any affordability checks at the thresholds proposed by the Gambling Commission, being £125 net loss within a month for the light-touch financial vulnerability checks.

Gambling Minister, Hon. Stuart Andrew was last to respond in the Debate and did not provide any significant new information or details about the financial risk checks. Andrew appeared to attribute responsibility to the industry for its “onerous, ad hoc and inconsistent“application of financial checks under the current regime and to cite this as a basis for the Gambling Commission introducing consistent and less intrusive checks. An alternative argument might be that it is the Gambling Commission’s overreaching in its compliance and enforcement activity, particularly in relation to its application of its guidance, that provides the foundation for the proposed financial risk checks.

Andrew briefly addressed the issues raised regarding the black market and the horseracing industry, but largely focused on reiterating the Government’s position that it is not its “job to tell people how to spend their money”. Rather, and as outlined in the White Paper, the Government wants to balance individual freedom with the “necessary action to tackle the devastating consequences that harmful gambling can have on individuals and communities”. Andrew also stated:

“I believe that the proposals for financial risk checks will represent a significant improvement for both businesses and customers, compared with the current situation.”

In addressing the implementation of the financial risk checks, Andrew largely restated the Gambling Commission’s position from its blog of 22 February 2024 (referred to above). However, he emphasised that the Gambling Commission is “carefully listening” to concerns, demonstrated by its confirmation that gambling businesses will not be required to consider an individual’s personal details, such as their postcode or job title, as part of the financial risk checks. We question whether it is the Gambling Commission “carefully listening”, or the public and political traction created by the Petition that led to the Gambling Commission issuing a premature update on its intentions immediately before the Debate, and in doing so backtracking on its original proposal to obtain personal information, such as occupation, from customers. Had the Gambling Commission not so issued its update, Andrew would have had little new information to put forward.

Andrew also emphasised that the Government is supportive of the Gambling Commission’s intention to pilot the implementation of the financial risk checks, and that he hopes it is clear that:

“both the Government and the Commission want this to be a genuine pilot of how data sharing would work”.

Summary

In summary, the Debate uncovered many more questions than answers, and it is still unclear how the Government and Gambling Commission intend to ensure that the financial vulnerability and financial risk checks will truly be frictionless. What is clear, however, is that the Government and the Gambling Commission are working closely together to roll out these checks.

In terms of next steps, Andrew confirmed that the Gambling Commission will publish its full consultation response “very soon”, which reflects the Gambling Commission’s promise in its February 2024 blog that the consultation response would be published in March 2024. We, along with many other industry stakeholders, will eagerly be awaiting the publication of this response, in the hope that it will: (1) clearly set out full details of its proposals with regard to financial vulnerability and financial risk checks (including in relation to the proposed pilot phase); and (2) propose novel and well considered solutions to address some of the (we consider, genuine) concerns raised by MPs in the Debate, and by the wider industry.

Frustratingly, and despite the high number of signatories to the Petition, it is unlikely that the Government and the Gambling Commission will depart from their path as articulated in the White Paper. The Gambling Commission, it seems, is determined to establish the requirement for financial risk checks, ensure that technological developments are implemented, and only then consider and determine what the “vast majority” of customers having a “frictionless” experience actually means. To continue the theme of horse-based analogies enjoyed by several MPs during the Debate, by then, the horse will have bolted.

Watch the full Debate in Parliament here:

Please get in touch with us if you have any questions about financial risk checks or if you would like assistance with any compliance or enforcement matters.

With thanks to David Whyte and Gemma Boore for their co-authorship.