Posted by Woods Whur | Gambling, Licensing Law

The Gambling Commission held its first Raising Standards Conference at its offices in Birmingham this week and its Chief Executive, Sarah Harrison, took the opportunity to address operators on the Commission’s vision for making the industry “the most trusted gambling operators in the world”, a vision that might lead it to impose tougher penalties for non-compliance in the future.

Although the Commission concedes that some progress has been made with the development of harm reduction strategies at operator level, and acknowledges the hard work done by the Association of British Bookmakers and the Remote Gambling Association on in-play messages and play limits, Ms Harrison made its view plain: more needs to be done.

She said:

…you need to raise your ambitions and your sights higher. You need to step up the pace of change – in how you handle customer complaints, ensure advertising is clear, simplify terms and conditions, develop your risk management strategies on money laundering, evaluate the impact of social responsibility initiatives – and, working across all these areas, in how you do more to share best practice.

The Commission’s vision for raising standards rests on its aim to ensure that operators place consumers at the heart of what they do, so that consumers have trust of, and confidence in, the industry. This is consistent with the document it published last month, “A two-way conversation: our plan for communicating with consumers”, with the work it is undertaking jointly with the Competition and Markets Authority on the fairness of operators’ terms, conditions and practices, and with the current Government’s focus on consumer welfare. Ms Harrison cited the examples of the banking and automotive sectors, saying:

The message from those examples is clear – don’t wait for a crisis to happen that shakes the very foundation of customers’ trust in your industry. Act now and demonstrate to consumers that your interest in their needs is genuine.

The Commission is urging operators to see best service standards as part and parcel of their competitive edge, to be driven in the way in which they deal with customer complaints by the value of customer feedback rather than merely paying lip-service to an obligation, and to treat licence and code obligations as a minimum obligation rather than an artificial cap. Ms Harrison quipped that she would like to see an industry “maybe even where the likes of John Lewis looks to one of you to learn how to improve their customer offer!

Ms Harrison reiterated her view that effective consumer protection means focussing more on what customers need and less on what the regulator expects. She singled out a number of specific areas where work is required in order to raise standards: social responsibility, treating consumers fairly and money laundering.

On the first area, the Chief Executive set out the five aspects that the Commission will look for when assessing whether a social responsibility initiative is successful, as follows:

  • Clarity of purpose – is the initiative aimed at preventing harm or simply dealing with harm already occurring?;
  • Evaluation – how are operators assessing the impact of the initiative and sharing findings?;
  • Added value – are operators doing the bare minimum or taking their responsibilities further?;
  • Customer focus – are operators considering every aspect of the customer journey?; and
  • Transparency – are operators open about the inputs that have informed their initiatives?

On fairness to customers, Ms Harrison highlighted the huge increase in the last 12 months in the number of complaints or expressions of concern it has received from consumers – at approximately 80,000, this number represents over 300 per cent on the last two years. The main focus for customer concern surrounded self-exclusion, withdrawal of customer funds, terms and conditions and marketing and advertising. Ms Harrison announced that, in addition to the work it is currently undertaking with the CMA, the Commission will be conducting a review of ADR provision in the gambling sector towards the end of this financial year, and this will include examining the current practices and requirements in place for handling customer complaints. I would imagine that this will entail a consultation process, but operators are being urged to steal a march and start driving up standards in complaints handling and redress now.

Turning to the issue of money laundering, the speech obviously referred to the recent high profile settlements reached with certain operators, and announced the Commission’s intention to submit its advice “soon” as part of the consultation process on the Fourth Anti Money-Laundering Directive. Ms Harrison urged operators “specifically to raise [their] game and be far more curious about the source of customer funds”. She criticised a leadership culture which places commercial gain over compliance and which adopts a “wait and see” approach, in other words waiting until the source of funds is proven to be illegal before acting. This, she said, is “far from a risk-based strategy and is simply not credible.

Perhaps one of the biggest take-aways from the address surrounds the Commission’s planned changes to the use of its enforcement powers. It plans to make public in more detail the outcome of regulatory decisions, not just early settlements. It will remove the bias that currently exists in its Statement for Licensing and Regulation in favour of a regulatory settlement over a licence review, and will instead place all of its enforcement tools on an equal footing and “use the right tool for the job”.

The changes will mean a likelihood of higher penalties going forward. Financial penalties currently reflect the need to remove profits from non-compliance, take account of costs and consumer harm, and deter poor compliance, but Ms Harrison indicated that to these considerations, in future a punitive element will be added, in cases of systemic and repeated failings where the Commission can detect no improvement in behaviour. This, together with the threat of more licence reviews, should be treated as a clear warning to operators, particularly given that financial penalties imposed in recent times have, even as matters stand, been hefty.

The Commission says that it is committed to using its enforcement tools proportionately, but now takes the view that settlement will not necessarily be the best way of achieving that proportionality. Settlement will nonetheless remain a key mechanism in driving compliance where the facts are agreed, and particularly in cases where the operator comes forward and declares an incidence of non-compliance, takes measures to implement a quick and effective improvement plan designed at preventing reoccurrence and gives the customer redress. Operators will receive credit for this and in such cases the Commission will “certainly consider resolution through settlement rather than licence review”. This underlines the importance of operators’ co-operating fully with the Commission in an open and transparent way, something which is required by the Licence Conditions and Codes of Practice in any event.

Ms Harrison announced that the Commission will consult on changes to its enforcement policy before Christmas. We will update you once the paper is published, and on the other developments announced in the Chief Executive’s speech, in future editions of this newsletter. In the meantime, should you have any queries or concerns, please contact one of the team.