Alasdair Lamb

Alasdair Lamb

Associate

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17 February 2017

Gambling Commission recaps 2016 and lays out plans for year ahead

 

At the 2017 ICE Totally Gaming conference earlier in February, Sarah Harrison, Chief Executive of the Gambling Commission, provided an update on recent developments in the industry, the work the regulator has undertaken over the last 12 months, and its strategy for the year ahead.

 

Consumer Terms and Affiliate Marketing

As with her speech at ICE in 2016, Harrison put consumers at the heart of her address. On the Commission's actions during the preceding year, she highlighted their co-operation with other British regulators in particular. She referenced the Commission's joint investigation with the Competition and Markets Authority (CMA) into the terms and conditions of online gambling operators, and her concerns that still remain in this respect:

"Despite our clear warnings to industry operators, I continue to have grave concerns about terms which appear to bamboozle rather than help customers make informed choices. We look to this joint work to set a new benchmark for fairness and transparency. This is vital at a time when competition in the industry, manifesting itself in intense marketing, excessive and complex bonussing and free bets, risks creating further incentives to cut corners".

Similarly, Harrison also referenced the Commission's work with the Advertising Standards Authority (ASA) and the Information Commissioner's Office (ICO), and the latter's launch of an investigation into more than 400 affiliates associated with the gambling industry in recent months. She acknowledged the widespread use of spam throughout the gambling industry and the fact that affiliates are often the source of this, warning affiliates to "get their house in order". Operators did not go unscathed, with Harrison stating "my message to operators is there is no ‘fudge’ around this, no equivocation - the affiliates who promote your brand and who drive business to your websites are your responsibility, and it is you who are accountable".

 

Social responsibility

Harrison also focused heavily on social responsibility, beginning her speech with various striking statistics (for example the estimate that problem gambling costs the UK government between £260m - £1.6bn per annum (€302m – €1.8bn)). In her recap of the Commission's 2016 activities, she touched on the fact that by-and-large the new requirements for Annual Assurance Statements (AASs) had been accepted by operators, whilst stressing the mutual benefit that these can provide for regulator and operator alike to ensure compliance.

Despite this, she described the first year's pilot of the AASs as poor, citing the most contentious aspect as the expectation that operators would identify the scale of problem gambling in their business. She did, however, acknowledge that following Commission-led workshops over the summer there had been signs of improvement.

Harrison also cited examples of operators increasing their use of data and predictive analytics to identify "at risk" patterns of play risk, reengineering their compliance functions and cultures to centralise social responsibility and AML, and providing products which limit the consumer's spend and loss. Of these she stated: "these are examples of operators ‘designing in’ practices which can help minimise gambling-related harm and the risks of crime – these are examples of leadership".

 

Anti-Money Laundering and Crime Prevention

Whilst touching on certain positive examples, Harrison raised concerns that some operators are still taking a "wait and see" approach in respect of AML, where they wait until the source of funds is proven to be illegal before acting: "this is clearly unacceptable and industry must do better. It is these practices which put at risk the ‘social contract’ which permits gambling in Britain as a mainstream leisure activity".

She also referenced the implementation by the Commission of new rules to tackle crime – which saw the introduction of a risk assessment of money laundering, as well as additional reporting requirements - stating that these, in combination with cases of enforcement, led to improvements amongst operators. Looking to the year ahead, she commented on the impeding implementation of the 4th Anti-Money Laundering Directive stating that "whether gambling is exempt or not, in whole or in part, operators’ focus on Know Your Customer…to keep crime out of gambling, and to mitigate gambling-related harm, will need to be intensified".

 

Enforcement and Emerging Products

Touching on the Commission's recent consultation on its enforcement strategy, Harrison remarked that their new approach – which will see a movement away from voluntary settlements and an increase in fines for non-compliance – "represents the strongest message from the Commission of our determination to use all our powers, as Parliament intended, to protect consumers and safeguard the integrity of the market".

She also commented on the Commission's recent focus on new and emerging gambling products, as illustrated by the Commission's discussion paper on eSports, virtual currencies and social gaming from August 2016. She announced that, due to the Commission's continued concerns regarding these areas, a further position paper would be published in the coming months. Accompanying these "soft powers" Harrison reflected on the landmark case of the criminal proceedings brought against futgalaxy.com, whereby two individuals were prosecuted for running an unlicensed website which allowed users to gamble in-game items for the FIFA video game. Regarding this case, she warned: "the messages here couldn't be clearer: the Commission will tackle unlicensed gambling wherever it occurs; we will above all act to protect children; we will use all the powers available to punish and deter; we will work collaboratively where we can with fellow regulators to disrupt unlicensed gambling".

 

Looking to the Future

Turning to the year ahead, Harrison stressed the need for trust in the industry to ensure its viability, stating that "as with any business sector, the gambling industry’s longer-term sustainability is hugely reliant on trust - a recognition that customers using products and services are valued, respected and treated fairly". To this end, she stressed that the Commission would focus on improving understanding of consumer behaviour during 2017, particularly through the use of consumer data.  

In a departure from the rest of her speech - which gave little focus to lotteries - Harrison stated that another priority for the Gambling Commission this year would be the National Lottery and the lottery market. She explained the delicate balancing act of applying the regulatory framework in a manner that maintains the integrity of the National Lottery and protects consumers, whilst also incentivising Camelot to grow sales and thus increase contributions to good causes.

Harrison also touched on the Commission's role in advising the Government in relation to the Department for Culture Media & Sport's on-going gambling review, and that the Commission would soon publish some of its findings regarding gaming machine data. She also explained that the Commission would focus on reviewing the online market, examining data, market trends, consumer participation and action by operators on social responsibility and crime, to assess whether recommendations for future action should also be made to the Government in this respect.

Harrison concluded her speech by stressing the importance of consumer focus once more, the leading theme of her address: "we will work, as the GB regulator, and including with our European and international regulator partners, to do all we can within our powers to put consumer interest first; to create regulation which can give confidence; and in turn support healthy gambling markets".

 

A transcript of Sarah Harrison's speech can be accessed here.