Memorandum from the Jockey Club (DGB 50)
1. The Jockey Club is the Regulatory Authority
for horseracing in Great Britain.
2. In our submission to the Gambling Review
Body we called for greater regulation of betting and changes to
the criminal law. Our key recommendation was that a single Regulatory
body be appointed to regulate all gambling. We, therefore, warmly
welcome the draft gambling bill which will put into effect the
sort of regulatory framework for betting for which we have been
calling since 1999.
3. Horseracing is vulnerable to criminal
behaviour and cheating as a consequence of the betting with which
it is inextricably linked. Both activities require firm regulation.
Those vulnerabilities have been exacerbated by the emergence of
betting exchanges, which enable any person to lay a horse to lose
and are thus potentially attractive to those with inside information
detrimental to horses' chances or who wish to corrupt an event.
4. In its policy document the Government
states that "it is only right that sports regulators take
the leading role in controlling the betting behaviour of participants
in their sport. The Gambling Bill cannot relieve regulators of
their prime responsibility, but it might usefully complement these
measures and strengthen the deterrents to malpractice."
5. Lord McIntosh speaking shortly after
the publication of the draft bill went further. He said "The
Government wants racing to show itself beyond reproach . . . So
it is for racing and the betting industry to work together to
rid themselves of these allegations. The Government will give
racing every support in this work."
6. While we accept prime responsibility
for the regulation of racing, including the actions in certain
circumstances of direct participants in relation to betting, the
Jockey Club does not regulate betting; that is a matter
for the Gambling Commission. Furthermore, the Jockey Club has
limited powers of investigation, for example we have no powers
of search or seizure of documents and our authority beyond those
whom we licence or register is limited to excluding persons from
racecourses or trainers' premises. As we see it criminal behaviour
linked to racing is a matter for the Police and for the Gambling
Commission when it is linked to betting malpractice.
7. We have nevertheless recently taken a
number of further actions as deterrents to malpractice.
— We have extended the ban on jockeys
betting to include a ban on trainers, stable staff and owners
laying horses under their control or ownership.
— We are significantly expanding our
Security Department, following an independent review, to increase
our ability to monitor and investigate unusual betting movements
that may be indicative of an attempt to corrupt an event.
— We have negotiated voluntary agreements
with a number of betting organisations for the provision by them
of detailed betting data (an audit trail) on races which are a
cause for concern.
8. However, while we have to rely on voluntary
agreements with the betting industry and continue to be constrained
by limited investigatory powers, racing will remain more vulnerable
than is inevitable in any case to corruption through betting.
The recent measures taken by us represent an interim expedient
to cover the period before the Gambling Commission is in a position
to lay down appropriate rules for the conduct of betting.
LICENSING
9. In this regard we recommend that conditions
of operating licences for betting organisations include:
— Strict client verification rules
to ensure that betting organisations know precisely with whom
they are dealing. Compliance with money laundering standards would
be a deterrent to cheating.
— A duty for betting organisations
to report to the Gambling Commission any activity which it suspects
on reasonable grounds to be potentially criminal or corrupt.
— A duty for betting organisations
to honour the rules of a sport on betting by reporting to the
Gambling Commission where they believe the Rules of sporting bodies
may have been breached by individuals betting or laying in prohibited
circumstances.
— A duty for the provision of comprehensive
audit trails of betting including the provision of information
to the Regulator on request from the Gambling Commission where,
for example, there has been concern that an event may have been
corrupted.
— A duty for betting organisations
to advise their clients about insider trading, the new criminal
offence of cheating and of the consequences of committing an offence.
— A requirement that betting organisations
do not provide any preferential terms, payments or other advantages
to participants in sport (who may have inside information or be
able to influence the outcome of an event).
BETTING EXCHANGES
10. The problems associated with the misuse
of inside information and the potential corruption of sports events
are exacerbated by the emergence of betting exchanges (Betting
Intermediaries) which have expanded the ability to lay a horse
to lose. Whilst strict adherence to the licence conditions proposed
above should act as a useful deterrent, it is for consideration
whether further licence conditions should be applied in respect
to layers on betting exchanges to reduce the vulnerability of
the public to being on the wrong side of insider trading or of
cheating. It is suggested in the policy document that Licence
conditions for betting intermediaries might include "the
flagging of certain categories of customers." It is for consideration
whether, in addition to licensed betting operators, it would be
practicable (and indeed helpful to the public) to flag on the
exchanges any person directly involved in the sport on which bets
are laid or offered. As far as racing is concerned, and subject
to any data protection restrictions, the Jockey Club would be
prepared to make available to the Gambling Commission, for integrity
purposes only, the identification details of those persons licensed
or registered under the Rules of Racing. However if too large
a proportion of accounts are flagged, frequently with no connection
to the relevant horse, the purpose of the exercise will be vitiated.
11. There is obviously great difficulty
in identifying in advance the potential betting cheat or insider
trader. One suggestion that has been made to limit exposure to
cheating is by differentiating between "recreational"
and "non-recreational" layers, restricting the former
to low levels of activity by transaction or value. Betting Intermediaries
could be required to monitor the activities of "non-recreational"
layers and to make reports to the Gambling Commission or the "non-recreational"
layers could themselves be subject to a "fit and proper"
licensing regime.
12. The Jockey Club would welcome any steps
taken within the bill or in licence conditions which genuinely
do reduce the damage that cheating at betting will usually represent
to the integrity of racing itself.
ENFORCEMENT
13. If we are to achieve effective regulation
of horseracing and the betting thereon, a partnership approach
will be required between the Jockey Club and the Gambling Commission.
The most effective deterrent to malpractice will be successful
prosecution of offences, either by the Gambling Commission in
the case of criminal offences or by the Jockey Club in cases of
breaches of the Rules of Racing.
14. To date the success rate in prosecuting
alleged conspiracy cases has been low. The reasons have been often
stated—the Jockey Club's lack of powers of investigation,
the lack of access to an audit trail of betting, the lack of a
focused police unit containing expertise in betting investigations.
As regards the latter, it seems unrealistic to assume that crimes
in betting and racing (unless connected to serious crime) will
ever be of a high priority to the police, given their limited
resources and their own priorities in the fight against crime.
We therefore strongly welcome the fact that
the Gambling Commission is to have statutory powers of search
and seizure and the ability to initiate prosecutions including
under the new offence of cheating. We urge the Joint Committee
to ensure that the Commission is sufficiently empowered, resourced
and financed to "police" racing criminality connected
with betting either through traditional betting organisations
or through betting exchanges.
15. An essential element in the success
of a partnership approach will be the promised "gateway"
for information flow between the Gambling Commission and the Jockey
Club and other regulators. We have not seen the relevant clauses
as yet and may wish to comment further in due course. Likewise
we have not seen the detail of the proposed criminal offence of
cheating nor have we been able to assess the practicality of the
proposed powers to freeze or void bets but any practicable addition
to the armoury of powers to minimise the challenges to the integrity
of racing and betting are to be welcomed in principle.
16. We remain concerned at any delay in
the introduction of the Gambling Commission because at present
racing's integrity remains vulnerable while the statutory regulation
of betting continues to be inadequate.
17. In these circumstances, the Jockey Club
welcomes the proposal to designate the current Gambling Board
as the Shadow Commission and we urge the Government to move ahead
as swiftly as possible with the introduction of the legislation.
However, when it is up and running, the Gambling Commission using
comprehensive licensing conditions, its statutory power of investigation
and prosecution, the new criminal offence of cheating and its
power to void or freeze bets, working with the Jockey Club with
its established Rules, security resources and racing expertise,
can hopefully get to the bottom of allegations of conspiracy or
the misuse of inside information. We have long said that the greatest
improvement to the confidence of the punter will come with firm
regulation of betting and we look forward to playing our part
in complementing the measures proposed in the Gambling Bill to
strengthen the deterrents to malpractice.
December 2003
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