Anti-money laundering, responsible gambling and consumer protection have been continuing areas of key focus across UK gambling sectors in recent years, as reflected in high profile enforcement action, and this is not set to change. In June 2019, the British gambling regulator, the Gambling Commission, confirmed that over the past year it had carried out over 160 investigations, with operators paying a total GBP19.6 million in penalty packages for their breaches. This has been coupled with an increased focus on the accountability of personal licence holders (including CEOs), as reflected in various high-profile enforcement cases since late 2018.
In recent years, the Gambling Commission has identified, through its compliance and enforcement work, numerous cases of a similar nature where players have gambled beyond their means through the misappropriation of funds (for example, using stolen monies from their employer) or by taking out unaffordable loans. The Gambling Commission’s view is that common to all these cases has been the ineffective controls framework used by the operators to identify and manage the risk. Its view is that operators should be revising their triggers by using disposable income levels as a starting point to identify, as early as possible, and interact with vulnerable customers. For the first time, affordability was a separate theme in the Gambling Commission’s enforcement report this year and it seems inevitable that mandatory affordability checks will be introduced in the foreseeable future. Given the regulatory burden and cost of affordability checks, their introduction is likely to transform the British market with many leaving these shores (by surrendering their licences or having them revoked by the Gambling Commission) or through M&A activity.
New Licence Conditions
The Gambling Commission issued new licence conditions regarding alternative dispute resolution (ADR) and customer interaction, which came into force on 31 October 2019. The focus of these is on providing consumers with greater reassurance regarding ADR impartiality and consistency, and more effective identification of and interaction with those at risk of gambling related harm.
Additional licence conditions are expected to come into force on 1 January 2020 regarding financial contributions by operators towards problem gambling research, prevention and treatment, which will affect all licence holders.
Fourth National Lottery Licence Competition
The Gambling Commission is set to run the competition for and regulate the next National Lottery licence (the current licence held by Camelot is due to expire in 2023). Gambling Commission CEO, Neil McArthur has stated, “[the National Lottery] is increasingly moving towards tech-based, media-based, personal device-based. We want to find out what’s interesting to finance providers and technology providers to get the broadest possible input”, further adding that the franchise holds “significant untapped potential”.
The gambling industry introduced self-imposed advertising ban which came into effect on 1 August 2019. No gambling advertisements will now be shown during televised live sports before the 9pm watershed, starting and ending five minutes before and after a match. The intention is to curb the potential impact of gambling advertisements on children and others vulnerable to gambling-related harm.
See 1.1 Current Outlook.
The following online sectors are regulated in Great Britain:
Free to play social gaming is not regulated. The Gambling Commission concluded, following a scoping review in 2015, that the sector did not require regulation but would continue to be monitored by the Gambling Commission for any potential risks.
See 2.2 Land-Based for product definitions.
The following land-based sectors are regulated in Great Britain:
Each arcade category can offer a specific subcategory of gaming machine. Those under 18 years of age may not be allowed access to the adult-only section of a licensed family entertainment centre or an adult gaming centre.
The key legislation applicable to the gambling sector is as follows:
The 2005 Act is set out as follows:
The Licence Conditions and Codes of Practice (LCCP) is issued under the 2005 Act, Section 24, and is in the author’s opinion the key reference document with which all licence holders should familiarise themselves. See also 1.1 Current Outlook.
Gambling in the 2005 Act means gaming, betting or participating in a lottery.
Gaming means "playing a game of chance for a prize", including games where the chance element can be eliminated by superlative skill. “Prize” constitutes money or money's worth and “playing” means a chance of winning, irrespective of whether there is a risk any loss.
Betting means the making of or acceptance of bets on:
Sub-categories of betting:
Lottery are classed as “simple” or “complex” and they cannot be run for private or commercial gain. Lotteries are “simple” if:
Complex lotteries differ on the point of prize allocation whereby prizes are allocated by a series of processes, the first of which relies wholly on chance.
Sub-categories of lotteries include:
The 2005 Act also addresses the following cross-category activities in the event that products may satisfy more than one of the above definitions of gambling:
Land-based gambling is not specifically defined under the 2005 Act.
Online gambling is referred to as “remote gambling” and means “gambling in which persons participate by the use of remote communication”. Remote communication includes: the internet, telephone, television, radio or any other kind of electronic or other technology for facilitating communication.
Part 3 of the 2005 Act covers all offences, however, a key offence is:
“Providing facilities for gambling'' occurs where a person satisfies at least one of the following:
Other key offences of note include:
A person commits an offence if in the course of a business they manufacture, supply, install or adapt gambling software, unless they act in accordance with an operating licence.
See 9.5 Sanctions/Penalties for advertising sanctions and penalties.
The penalties for the key offences listed in 3.5 Key Offences and 9.5 Sanctions/Penalties are a maximum of 51 weeks imprisonment and/or an unlimited fine.
There is no pending legislation, however, an updated LCCP, as issued under the 2005 Act, is expected to come into force on 1 January 2020 with new licence conditions regarding at-risk gambling research, prevention and treatment.
The Gambling Commission and various Licensing Authorities enforce the 2005 Act. Under the 2005 Act, Part 2, the Gambling Commission’s primary functions include:
The Advertising Standards Authority regulates gambling advertising in the UK. See 11 Enforcement.
The Gambling Commission’s approach to regulation is risk-based with the aim of continuing to raise standards. The Gambling Commission indicated in its Business plan, 2019-20, that its five strategic priorities continue to be:
The types of licences are:
Generally, the operating licences types are:
The 2005 Act enables the Gambling Commission to authorise all regulated land-based and online activities outlined at 2.1 Online and 2.2 Land-Based above, including gambling software. Licences authorising multiple licensable activities (for instance, bingo and casino) are classed as a “combined operating licence”. Subject to exceptions, licences are also amenable to “umbrella” arrangements for those acting in the course of another’s business. “Umbrella” arrangements are approved at the Gambling Commission’s discretion following review of factors including but not limited to:
See also section 6 Online Gambling.
Premises licences, issued by the relevant Licensing Authority (not the Gambling Commission), are available which authorise the following activities:
See 5.1 Premises Licensing for requirements.
Personal licences are governed by the LCCP and issued by the Gambling Commission. They allow the Gambling Commission to regulate individuals and hold key decision makers accountable for any inadvertent or deliberate breaches of the LCCP. General conditions for licences, as stipulated by the 2005 Act, Section 75, are listed under Part 3 of the LCCP.
The two types of personal licences are:
The LCCP requires persons with responsibility for any of the below key positions to hold a PML:
Individuals working in a casino who are involved in gaming or handling cash (for example, croupiers, dealers and cashiers) must hold a PFL. Under the 2005 Act, Section 133, personal licences may not be issued to individuals who already hold one but may authorise the performance of more than once function.
Operating licences and personal licences are readily available subject to the fulfilment of application criteria and payment of the application fee.
Land-based casinos premises licences are sub-categorised into “small”, “large” and “converted”. ‘Converted’ casino premises licences were awarded under the repealed Gaming Act 1968. They may be moved to alternative premises within the same Licensing Authority area but there are no new licences available. Sixteen “small” and “large” casino premises licences were issued under the 2005 Act and awarded by the relevant licensing authority area following a public competition. The majority of these licences have now been awarded, meaning that no other casino premises licences are available (see Premises licence in 4.3 Types of Licences).
Pursuant to the 2005 Act, Section 110, operating licences are indefinite in duration, subject to payment of annual fees and compliance with licence terms and conditions.
Key Application Requirements for Operators
Operating licence applications must be submitted to the Gambling Commission, who will conduct an extensive investigation (having regard to the licensing objectives) in order to determine whether the applicant’s suitability to carry on the licensed activities. The Gambling Commission broadly uses the following principles to assess any application:
The 2005 Act, Section 69(2) requires that operating licence applications:
Currently, there are no server location or data storage obligations.
Key Differences, if any, Between Application Requirements for Land-Based and Online Operators
Land-based casinos are generally considered to be a high impact activity in terms of the Gambling Commission's work, which means that applications may attract a high level of scrutiny and interest. In addition, non-remote casino operating licence applications must be accompanied by a casino premises licence application, which must be submitted to the licensing authority of the area in which the premises is situated.
Key Application Requirements for Directors, Owners or Senior Management
Individuals holding 10% or more equity and/or voting rights in an existing or proposed licensee must apply for an Annex A authorisation from the Gambling Commission.
Individuals occupying a management holding a key position or being are able to exercise significant influence over the operator must hold a PML.
Key individuals for small-scale operators may be exempt from this requirement to hold a PML and may apply instead to hold an Annex A authorisation. See 4.3 Types of Licences for further information on personal licences.
The Gambling Commission assesses personal licences according to the same suitability criteria listed above for operating licences. Furthermore, the Gambling Commission introduced a new policy, from April 2018, to reject incomplete applications.
Subject to full information being provided, Gambling Commission guidance indicates that operating licence applications take approximately 16 weeks to process. However, in the author’s experience this can take longer depending on several factors, including but not limited to product complexity, ownership structure and source of funding and the Gambling Commission’s workload.
Application fees for operating licences are determined by the types of activities and financial projections for the first year. These can be calculated using the Gambling Commission’s online fees calculator. Discounts are provided for multiple licensable activities.
At the time of writing, application fees for personal licences are GBP370. There is no application cost for Annex A applications.
Annual fees are determined in the same way as application fees, outlined in 4.8 Application Fees. Annual fees may be found on the Gambling Commission’s website or may be calculated using the online fees calculator.
The requirements for a premises licence are:
Fixed-odd betting terminals (FOBTs), defined as Category B2 gaming machines under the 2005 Act, have been subject to recent intense public and political scrutiny regarding the maximum stake permissible. Subsequently, the permitted maximum stake was reduced from GBP100 to GBP2.
Most recently, in response to a review which showed that 84% of public houses (“pubs”) in England and Wales are failing to prevent under 18s from playing fruit machines, defined as Category C gaming machines under the 2005 Act, the Gambling Commission issued a call in October 2019 for the pub sector to take faster action to prevent under 18s from accessing gaming machines in pubs.
Historically, remote operating licences did not reflect the distinction between B2B and B2C business models. B2B operators hosting games through B2C websites required a licence authorising remote casino, bingo, betting (virtual events) or betting (real events), in addition to gambling software, as hosting games constitutes providing facilities for gambling. However, new legislation introduced in April 2017, the Gambling (Operating Licence and Single-Machine Permit Fees) Regulations 2017 (SI No 303, 2017), created B2B-specific “host” sub-categories:
However, these licences are subject to various requirements, including:
See 6.1 B2C Licences.
Affiliates are not regulated by the Gambling Commission, as companies only providing advertising services or branding to a gambling operator do not require an operating licence. Social responsibility code provision 1.1.2 provides that responsibility for third-party compliance lies squarely with the licence holder who must ensure that third parties “conduct themselves in so far as they carry out activities on behalf of the licensee as if they were bound by the same licence conditions and subject to the same codes of practice as the licensee”.
The Gambling Commission’s July 2019 article “Free-to-play games being available through gambling affiliates” provides some additional guidance on how licensees should approach affiliate marketing, especially in view of the May 2019 LCCP updates on age verification.
See 6.3 Affiliates.
See 1.1 Current Outlook.
There are no technical measures in place regarding consumer protection and the Gambling Commission does not have direct powers to enforce either payment or website blocking. However, it seeks to protect consumers rights, through its powers under the 2005 Act, to seek enforcement action.
Responsible gambling – now coined “safer gambling” by the Gambling Commission – is one of the Gambling Commission’s biggest areas of focus, across licensing, compliance and enforcement. Its oversight and requirements are broad, meaning they cannot be summarised in this publication. The focus, which stems from the third licensing objective (protecting children and other vulnerable persons from being harmed or exploited by gambling) is proper identification and engagement with those who may be at risk of or experiencing harm, ensuring terms and conditions are clear, fair and straightforward for consumers and do not target vulnerable or self-excluded customers.
There have been repeated examples of customers being allowed to gamble significant sums of money in short time frames, significantly beyond their personal affordability, and without any intervention from the operator. Whilst there are signs of meaningful progress, the industry as a whole has been slow to collaborate, evaluate and raise standards, and has, to this point, merely been reactive.
Key RG requirements include:
Gambling management tools include:
The Multi-Operator Self-Exclusion Scheme (MOSES) assists land-based operators with identifying at-risk gamblers. GAMSTOP is the intended online equivalent, initiated by the Gambling Commission and led by the Remote Gambling Association. The soft launch in April 2018 provided the option for early registration, however, all online gambling operators will be required, under the LCCP, to join the scheme in due course, with the provision coming into force one month after notification by the Gambling Commission.
The current primary legislation is the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (implementing the 4th Anti-Money Laundering Directive (Fourth AMLD). The Fifth Anti-Money Laundering Directive will be transposed to national law no later than 20 January 2020 and provide additional regulation on matters including, but not limited to, increased levels of scrutiny required for transactions from high-risk countries and virtual currencies.
Money laundering offences are outlined in The Proceeds of Crime Act 2002 (POCA) and the Terrorism Act 2000 (TACT).
The Gambling Commission has also issued guidance for casinos, and separately for non-casinos, regarding their duties and responsibilities under the POCA 2002. The most recent edition was published January 2019.
See 8.1 AML Legislation. The AML requirements are complex and cannot be adequately summarised here, particularly given the Gambling Commission’s ongoing focus and extensive casework in this area. Generally, the Gambling Commission expects licensees to comply fully with the terms of their licence, as relevant to AML and CTF, and pay close regard to the various guidance documents it issues.
Compliance and enforcement activity continue to reveal that operators’ AML policies, procedures and controls are not fit for purpose and, in many cases, customers are allowed to gambling using the proceeds of criminal activity. The Gambling Commission has warned the industry that “a failure to digest [its] guidance and implement the legislative requirements applicable to Great Britain…must change, for these are not just regulatory matters but breaches of UK law. Those failing to learn these lessons will face further draconian action”.
The Advertising Standards Authority regulates UK advertising and, therefore, gambling advertising. However, it does not carry any enforcement powers. Instead, and as the LCCP has specific rules on advertising, any gambling advertising breaches by a licence holder may lead to enforcement action by the Gambling Commission. This includes seeking criminal prosecution, as breach of a licence condition is a criminal offence under the 2005 Act, Section 35.
“Advertising” is widely defined under the 2005 Act, Section 327, and generally encompasses any action which encourages one or more persons, either directly or through an agent, to engage in facilities for gambling. This covers most forms of advertising, including online content and emails to consumers.
See 9.2 Definition of Advertising. Advertising must be socially responsible and comply with the LCCP, in particular Ordinary Code Provision 5.1.6. The key LCCP advertising provisions are:
The below codes are also applicable as follows:
The ASA also provides the below additional guidance:
The Gambling Commission’s webpage “Advertising/marketing rules and regulations” provides an overview covering the various LCCP and industry regulations.
See 9.3 Key Legal, Regulatory and Licensing Provisions. In addition, since 1 November 2014, gambling operators wishing to advertise in the UK must hold a Gambling Commission operating licence pertaining to the type of activity advertised. Separately, the Gambling Commission confirmed that advertising-only licences will not be granted.
As of 1 August 2019, a voluntary "whistle to whistle" sports betting advertising ban initiated by the UK betting sector (including but not limited to a ban on all TV betting adverts during pre-watershed live sport) came into force.
The following constitute criminal offences and attract up to 51 weeks imprisonment and/or an unlimited fine:
The Gambling Commission also has the power to take regulatory enforcement action for breaches, including seeking to prosecute offenders. In a May 2018 public statement, it was announced that online gambling operator, LeoVegas, was penalised by the Gambling Commission for advertising and marketing failings. The regulatory settlement included a GBP600,000 penalty, divestment of any funds received as a result of the failings and payment of the Gambling Commission’s investigatory costs.
Disclosure to the Gambling Commission is required within five working days (or as soon as possible) via a key event notification using the Gambling Commission’s eServices, an online self-serve portal.
Separately, a change of control application providing detailed information and the appropriate fee must be submitted to the Gambling Commission for assessment of the new controller(s)’s suitability to uphold the licensing objectives regarding the existing licence. The application or notification of licence surrender must be provided within five weeks of the change occurring otherwise the licence will be revoked.
Under the 2005 Act, Section 103, advance applications for persons or entities expected to become a controller can also be made prior to the change occurring. Subject to the Gambling Commission's assessment of all necessary information, which they indicate typically takes around 12 weeks, the existing licence will either be granted continuance under the new controller(s) or it will be revoked.
A change of corporate control is defined in Section 102 of the 2005 Act and occurs when a person or legal entity becomes a new “controller” (as derived from the Financial Services and Markets Act 2000, Section 422). This is a complex definition, and needs to be considered in detail, but is generally broken down as:
Where there is a non-alignment, a cumulative assessment must be made.
The same requirements apply as there are no exemptions for passive investors.
Under the 2005 Act, Part 2, the Gambling Commission has the power to investigate and prosecute offences directly. Its regulatory powers also include calling licences for review and initiating investigations in the following circumstances:
The Commissions sanctions are:
The Gambling Commission also has the power to commence a criminal prosecution.
The Gambling Commission’s approach to enforcement is currently set out in three key documents. They are:
Contravention of the 2005 Act, including the LCCP (issued under the 2005 Act) results in criminal liability. In August 2017, the Gambling Commission set out its “new vision” for its enforcement, emphasising its focus on putting consumers first. The key changes we proposed included:
In recent years, the Gambling Commission has garnered a reputation for taking enforcement against its licensees. In certain cases, a “regulatory settlement” is reached meaning that it is not a sanction and stops short of a formal licence review. This is subject to the Gambling Commission’s discretion and will only be considered if various factors are met, including:
The regulatory settlements and licence reviews are detailed in numerous public decisions or public statements issued on the Gambling Commission’s website and usually include a financial penalty (a record penalty package of over GBP7.8 million was issued to 888 UK Limited in August 2017).
The Gambling Commission is responsible for issuing and enforcing financial penalties regarding any LCCP breaches. Any contravention of the 2005 Act itself is a criminal offence and will trigger a potentially unlimited fine, enforced by the courts, and imprisonment up to 51 weeks (see 3.6 Penalties for Unlawful Gambling and 9.5 Sanctions/Penalties).
It is worth noting that any payment made as part of a regulatory settlement is not a financial penalty (as it is not a sanction) and is a payment made in lieu of a financial penalty. These are treated differently by the Gambling Commission and could, theoretically, be enforced by recommencing the licence review.
There have been no additional significant updates in this sector since the Gambling Commission’s consideration in 2016. See the Gambling Commission’s webpage on “Social gaming” and their March 2017 position paper “Virtual currencies, eSports and social gaming” for further information.
See 12.1 Social Gaming.
There has been an increase in bookmakers offering fantasy sports in the UK. The Gambling Commission’s position remains that any fantasy leagues run in the course of business may require a licence (pool betting) where prize values are determined by the number of paying entrants. See the Gambling Commission’s webpage “Fantasy football and gambling” for additional guidance.
This is not applicable in our jurisdiction.
Although blockchain-related gambling is not currently regulated, the Gambling Commission has responded to stakeholder interest with guidance on its website regarding “Blockchain technology and crypto-assets”. The guidance focuses, in particular, on the importance of source of funding, third-party social responsibility and, for existing licensees', general notification requirements regarding funding and payment.
See 1.1 Current Outlook.
The following rates apply for the tax year 2018-2019:
Casino ("gaming duty" on or after 1 April 2015):
Remote Gaming Duty (as of 1 April 2019):
Please note, the majority of gambling activities are exempt from VAT.