Gambling (Licensing and Advertising) Bill



1. The Gibraltar Betting and Gaming Association (the "GBGA") offers this written evidence to the Committee to supplement the oral evidence given by Peter Howitt, Chief Executive, on 12 November 2013. This evidence covers:


a. The consumer protection risk if the Bill is passed in its current form.

b. The difficulties with enforcing licensing in the UK when operators are overseas.

c. The quality of regulatory supervision being offered by local regulators.


d. The GBGA’s proposed solution to provide enhanced protection of consumers via passporting.


2. The GBGA considers that the only way that consumers can be effectively protected in respect of operators based outside of the UK is by working with approved local licensing authorities and regulators. 



3. The GBGA represents nearly all of the remote gambling operators based in Gibraltar. At least 60% of remote gambling by UK consumers is with Gibraltar operators, the overwhelming majority with GBGA members.


4. Gibraltar operators and the Gibraltar regulator have over 15 years of experience at the top of the remote gambling market. The GBGA is actively engaging with the Department for Culture, Media & Sport, Treasury and the UK Government in order to provide its views and proposals based on this experience. It is very much hoped that this engagement will help to avoid a licensing regime which undermines consumer protection.



5. Under the Bill, it would be down to the UK Gambling Commission to licence and regulate all remote gambling services being offered to UK consumers, wherever the operator is in the world. This form of entirely remote licensing and regulatory regime is completely untested. It is a backwards step given the increasing importance of effective regulatory oversight and communication between jurisdictions to deal with cross-border issues such as money laundering, cheating and protection of consumer funds.


6. In particular, there are frameworks in place within the EU to ensure protection of consumers and proper supervision by regulators including in relation to data protection, dispute resolution, anti-money laundering, e-commerce, payments, mutual enforcement and recognition, regulatory co-operation and policing. The absence of a European wide agreement on the proper supervision of online gambling does not justify a regime that takes no account of the relevant European legal frameworks and approach.


7. We see three key risks with the regime:


a. The UK Gambling Commission will not be in a position to ensure that operators that are licensed by them do actually comply with their conditions and codes of practice leading to an influx of poorly regulated operators targeting UK consumers.


b. The additional and unnecessary licensing and compliance costs for many operators currently supplying the UK market (coupled with the new remote taxation regime) will mean that operators with a UK Gambling Commission licence will not be as competitive by comparison to unlicensed and unregulated overseas operators. Unlicensed and unregulated overseas operators, particularly those outside of the EEA, will be encouraged to target the UK market as they have not before.


The problems with enforcement related to both (a) and (b) are dealt with in more detail below.


c. Overseas operators will be able to obtain a licence from the UK Gambling Commission without any European nexus and even if they do not intend to target UK customers. Such a licence will be likely to be taken throughout the world as a badge of quality and reliability, in effect customers and regulators will assume it means that the operator is supervised by the UK. These operators will then be able to hold themselves out globally as UK licensed and regulated businesses even though the UK Gambling Commission would not be regulating or taxing any of their activities directed to those outside the UK (and for the reasons stated above, inadequately regulates the activities directed to those within the UK).


8. We therefore have very serious concerns that the Bill will achieve the opposite of its aim. It will undermine rather than improve consumer protection.



9. The principal reason why the Bill cannot achieve its stated aim of better consumer protection is because the licensing regime it sets out cannot be properly enforced. The UK Gambling Commission will not be able to ensure compliance with the licensing conditions and codes of practice by applicants or regulated operators overseas and it will not be able to prevent unlicensed operators from accessing the UK market.


10. Where an operator applies for a licence or has a licence from the UK Gambling Commission it will be required to provide information to show compliance. The UK Gambling Commission does not have the power to inspect offices and servers in other jurisdictions. The UK Gambling Commission also will not be in a good position to monitor and pick up information concerning operators in distant territories as a local regulator would. In addition, the UK Gambling Commission will be in no position to effectively supervise senior management or any systems of control for UK facing elements (including anti-money laundering) and will not attempt to supervise non-UK elements.


11. There have not been any practical proposals from the UK Gambling Commission as to how it will review, supervise and monitor overseas companies. Operators will therefore be licensed but largely left to their own devices in many respects including with regard to reporting suspicious betting activity and assisting problem gamblers with self-exclusion.


12. Consumers will be able to find unregulated operators easily online even without print advertising, for example through odds comparison and affiliate gateway websites. Examples of practical restrictions on unlicensed online gambling in Europe and the USA have shown that enforcement measures such as financial transaction blocking and website blocking are ineffective.


13. In Norway, more than half of online players have found ways to circumvent payment blocking measures introduced in June 2010. In Italy, despite website blocking the head of remote gaming at the regulator estimated in 2012 that unregulated operators accounted for up to 50% of the market. A bi-partisan parliamentary report in France has stated that ISP blocking has been ineffective.


14. It is for these reasons that the GBGA believes that the flaws in the Bill cannot be remedied by adding enforcement measures.



15. We understand that approximately 85% of remote gambling in the UK is with operators that are not regulated by the UK Gambling Commission. However, these operators are regulated by their local regulators.


16. We consider that local licensing is a much safer and more effective way to make sure that operators maintain high standards and remain competitive so that customers are not drawn to the unregulated market.


17. As set out above, 60% of remote gambling in the UK is provided by Gibraltar regulated operators. The Gibraltar system of regulation has been recognised internationally (for example, by the Nevada State Gambling Control Board) and by non-governmental groups (for example, CARE) as first rate.


18. The first important feature is restricting licences to responsible operators. The Gibraltar regulator is rigorous and accordingly has only 29 licence-holders (and many more have been refused or withdrawn).


19. The second important feature is safeguarding consumers with high standards in licensing codes of practice and conditions.


20. The final important feature is making sure that licensed operators comply with the terms of the licence. There is no value to strong codes of practice if they are not effectively managed and monitored and cannot be enforced. Effective enforcement in Gibraltar is guaranteed by a regulator with direct and close supervision of operators in the same territory. The fact that systems of control are in Gibraltar and are managed and monitored on the ground ensures a high degree of regulatory oversight of our members who can expect, for example, regular visits to their offices, face to face meetings and regular correspondence with respect to their global activities.



21. We are engaging actively with the Department for Media, Culture & Sport in order to out forward our concerns about the Bill and to reach a solution which truly supports consumer protection in remote gambling. We consider that this can be achieved only by relying on local regulators that have been approved by the UK Gambling Commission as providing a sufficient level and strictness of effective regulation. This is consistent with EU policy.


22. Overseas operators that are not licensed by an approved local regulator should not be able to offer services to UK consumers. There is no way to ensure that they are complying with adequate standards and enforcing the same.


23. The financial services industry has demonstrated that the GBGA’s proposed form of "passporting" in reliance on both UK and local regulators is both necessary and effective. In addition, such passporting allows for the imposition of any necessary relevant UK regulatory requirements (e.g. reporting of suspicious activities) irrespective of the local licensing jurisdiction for UK facing activities. In financial passporting these are commonly known as Conduct of Business requirements. The GBGA’s proposal includes that the UK Gambling Commission will be able to impose conditions on operators via their approved local regulator.


24. We would be delighted to discuss the detail of this proposal with the UK Government and the Gambling Commission.


November 2013


Prepared 20th November 2013