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UK LEGAL COMMENT


attempts to identify and interact with customers who are gambling in an unsafe way, it is almost inevitable that some will remain undetected. So, they must expect that if a measure is put in place which will reduce spending by problem gamblers, their revenues will decline. However, it is by no means clear that the credit card ban will prevent play by problem gamblers or reduce their spend – these individuals are very motivated to fi nd other ways to fund their addiction. Unfortunately, it seems very unlikely that the 3-4% of customers who will stop gambling include many of those who are compulsive gamblers.


What is a “money service business” and how can it be determined if payments were made via credit card?


The new licence condition also captures payments made


through “money service businesses” (“MSBs”) which originated from credit cards. This means that whenever a licensee accepts a payments from a MSB, they must have an assurance from the MSB that the payment did not originate from a credit card. In reality, this will mean that the MSB takes on the obligation of preventing credit card payments from reaching gambling operators and operators will want to ensure their agreements with payment processors are amended to refl ect this. MSBs who are not able to prevent payments from credit cards being transmitted to gambling operators should not be used by those operators as payment processors.


It is not made explicit, but it is reasonable to assume that the licence condition means MSBs as defi ned by the Money Laundering Regulations 2017 – this defi nition has been adopted by the Financial Conduct Authority in its Handbook. The defi nition captures companies that: (a) operate a currency exchange offi ce / bureau de change; or (b) transmit money, or any representation of monetary value, by any means; or


(c) cash cheques which are made payable to customers. Part (b) of the defi nition will be of most relevance to online


operators. What falls to be considered as a “representation of monetary value” may become a pertinent issue if customers seek to subvert the credit card ban by making payments in virtual currencies or tokens which they have purchased with a credit card, for example. Pre-paid cards will not be captured by the new licence condition, even if funded by credit cards. The Commission considers that loading funds onto a pre-paid card is suffi cient to create friction in the “gambling transaction journey”. Whether this friction is suffi cient to deter somebody suffering


from a gambling addiction is debatable. However, the Commission has warned that it may consider “further intervention” if it becomes aware of payment solutions which enable relatively easy and frictionless means for customers to gamble on credit.


Can gambling operators offer credit themselves?


The licence condition changes do not prevent online gambling operators from offering credit to customers themselves, however if they choose to do so they should obviously be very mindful of whether they are doing so in a safe and responsible way. There are social responsibility provisions which must be complied with, including credit scoring customers and setting credit limits.


How will operators know if customers are gambling on credit by other means?


The 2CV research indicated that over a third of customers currently gambling using credit cards will continue to gamble using credit, but obtain it elsewhere. This includes using overdrafts, payday loans and money borrowed from friends or family. 5% of current credit card gamblers indicated that they would turn to illegal loan sharks for funds. This is very concerning, as it equates to around 7 in every 1,000 customers. Credit card use, in particular adding multiple credit cards


to an account or frequently changing which card is associated to an account, is currently used as an indicator of problem gambling. In the case of a number of customers it will no longer be so obvious that they may be experiencing fi nancial diffi culties. This is just one of a number of indicators, but operators may need to increase their scrutiny of other factors such as total deposits as compared to likely disposable income.


Melanie is a gambling regulatory lawyer with 13 years’ experience in the sector. Melanie advises on all aspects of gambling law including licence applications, compliance, advertising, licence reviews and changes of control. She has acted for a wide range of gambling operators including major online and land-based bookmakers and casinos, B2B game and software suppliers and start-ups. She also frequently advises operators of raffl es, prize competitions, free draws and social gaming products. Melanie has a particular interest in the use of new technology for gambling products and novel product ideas.


38 FEBRUARY 2020


279photo/Adobe Stock


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