UK LEGAL COMMENT
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customer interaction provisions and guidance coming into force on 12 September 2022, the clear message for other licensees is that the necessary policy and procedure changes must be implemented (and implemented effectively) on that date, not at some point in the following weeks or months.
2. Regularly review whether policies and procedures are being followed and are effective
Smarkets was criticised by the Commission for failing to “effectively implement its policies and controls”. Remedial action agreed by Entain included undertaking an audit of policies and procedures within 12 months to ensure whether they are being effectively implemented. Rather than waiting to volunteer such a review as part of a regulatory settlement, operators could reduce the likelihood and/or severity of action by carrying out an annual assessment, either internally or with external advisors (such as your friendly columnist). If past issues are already identified and remedied before the Commission carries out a compliance assessment, the Commission is less likely to see a need for urgent action and any penalty later applied is very probably going to be reduced.
3. Be ready to explain why policies and procedures are what they are
A key point arising from the action against Leo Vegas is that the operator was criticised for being unable to explain why triggers it had set were appropriate. This included a spend trigger for review by the Safer Gambling Team (which was higher than the average customer’s spend) and a six hour point at which customers were required to take a 45 minute cooling off period. The Commission’s statement does not state that these triggers were necessarily wrong and it appears that, had the operator been able to provide a reasonable explanation as to why they were chosen, they might have been acceptable. Various sources might be used by operators to assist in determining where to set triggers and later to justify their choices, including data from public sources (such as income data for a relevant population), data from their own customers and conclusions from research papers.
What’s next?
Further regulatory penalties can certainly be expected and any operator that has not recently undergone a compliance assessment should ensure they are ready for one. Looking at the pattern of increasing penalties, however, it is becoming clear that the Commission needs to make some changes to the way it regulates. Reactively imposing large penalties on licensees is not ensuring that (what the Commission deems to be) acceptable policies and procedures are in place and are being followed. Isolated incidents of non-compliance are to be expected, but regular and widespread non-compliance, leading to what the Commission calls a “string of enforcement cases”, suggests a failure in regulation. Either the regulator has failed to make it clear to licensees what requirements they must follow, or it has failed to have sufficient oversight of their compliance with those requirements. As part of the long-awaited Gambling Act review, the
Government is expected to recommend increased oversight of licensees by the Commission. In particular, Chris Philip MP (then Minister for Tech and the Digital Economy) stated in December
2021 that the Commission “need[s] powers to regulate the enormous and innovative gambling industry, including the ability to requisition and analyse bulk account-level data from operators to identify whether they’re doing what they’re supposed to under their licence conditions.” How this is implemented by the review remains to be seen, as do the details, including how when such data might be requested and used. Returning to the regulatory settlement between Entain and the Commission, it appears that protracted discussions may have taken place between the parties as to whether compliance failings in fact occurred. In a statement on its corporate site, Entain noted that the Commission found “no evidence whatsoever of criminal spend” and that the settlement was agreed to “avoid further costly and protracted legal proceedings”. The implication is that Entain may have been willing to defend the policies and procedures it had in place, had the cost of doing so (likely involving appealing a fine imposed by the Commission) not been disproportionate to cost of settling. As financial penalties increase in comparison to the severity of the issues uncovered, at some point we may see an operator willing and able to challenge the Commission’s findings.
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 raffles, 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.
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