Category: Gambling

The Gambling Act requires the Gambling Commission (“GC”) to provide advice to the Government on all matters gambling, including its effects on the public. On Monday, it provided its “formal advice” to the Department for Digital, Culture, Media and Sport on the review of gaming machines and social responsibility – which, as we all know, has focussed primarily on B2 machines, or Fixed Odds Betting Terminals (“FOBTs”).

The advice was not circulated by the GC as an update or in a newsletter, which I find surprising- I heard about it on the news on Radio 4 (some of you will know that this is my station of choice) – although it is available on the GC website, here: http://www.gamblingcommission.gov.uk/PDF/Review-of-gaming-machines-and-social-responsibility-measures-–-formal-advice.pdf

It’s fair to say that the GC’s advice has caused some consternation among those campaigning for a reduction in the maximum stake for FOBTs to £2. This is because the GC has opted for a stake limit “at or below £30”.

Some might think that this represents the GC sitting on the fence – after all, “at or below £30” could mean anything between £0 and £30 – but the GC is at pains to point out that the final decision is one for Ministers to make.

The GC’s advice centres around the need to reduce the risk of harm to consumers – who are the focus of its present strategy – particularly the vulnerable. It believes that action needs to be taken, not just by government, but also by operators and the GC itself. The conclusion in the formal advice is that “the case has been made for action to be taken on B2 machines to reduce the risk of harm, and that this should include a stake cut.”

So, why has the GC not fallen in with the £2 maximum stake being campaigned for so strenuously by campaigners? The answer it gives is that it has identified four criteria to take into account in setting any maximum gaming machine stake. These are:

• Impacts on gambling harm – the GC is concerned that merely reducing the stake might encourage players to adopt riskier strategies, play for longer or switch to other gambling products, particularly online;
• Categorisation of gambling premises and a concern that any proposed change might mean that a “harder” form of gambling product is available in arcades, bingo halls and pubs, which are less tightly regulated than the betting and casino premises in which FOBTs are currently allowed;
• The need to preserve consumer choice and to avoid eliminating the very popular game of roulette from betting shops; and
• The need to take everyone’s views into account, being those of stakeholders such as Parliamentarians, Local Authorities, operators, faith groups and local residents.

It is between these competing considerations that the GC says it is for Ministers to decide. However, its advice does seek to draw a distinction between B2 slot-type machines (for which it believes that there is a case for limiting stakes to £2) and those that offer roulette, for example – the most popular game played on B2 machines – (for which its view is that the maximum stake should be £30 or less).

The GC also believes that limiting stakes is not enough to deal with gambling-related harm, and its prevention: it favours a comprehensive approach, and believes that there is a “strong case” for making tracked play mandatory across all B1, B2 and B3 machines, giving consumers access to information that will help them keep track of their play and make informed decisions about whether to continue gaming.

We’ll be monitoring this proposal carefully, as it will affect a large number of operators. The GC’s formal advice presents various matrices relating to the costs and benefits of introducing tracked play on this scale, but admits that, so far, the GC has “only limited information on the costs”, so we will have to wait to see if and how this proposal develops.

The GC’s advice has been met with a great deal of disquiet from campaigners pushing for the maximum stake on FOBTs to be reduced to £2. Tom Watson, Labour’s Deputy Leader, called the advice “deeply disappointing”, and accused the GC of having “caved in to industry pressure”. Carolyn Harris, the Labour MP who chairs the all-party Parliamentary group investigating FOBTs, said that she was confident that “Government will see past this and do the right thing, as the moral argument has been made so overwhelmingly for £2 [stake]”. John White, Chief Executive of the anti-FOBT amusement machine industry trade organisation BACTA, also weighed in, saying that “whilst a stake reduction is a step in the right direction, merely reducing this to £30 is still dangerously high…With a 20 second play duration on FOBTs, the proposed £30 stake will generate a loss of £90 within one minute. Within 10 minutes it is £900… [this] does not do enough to protect the consumers who are vulnerable.”

The GC says that it has drawn on a “a broad evidence base”, including on data from the Responsible Gambling Strategy Board and 20 billion plays on B2 machines. BACTA have rejected this as being “drawn from a narrow interpretation of a limited range of evidence and [focussed] on the theoretical rather than the reality.”

Matt Hancock, the Culture Secretary, is rumoured still to favour limiting the maximum FOBT stake to £2, but he is apparently under pressure from the Treasury, who get £700m in machine gaming duty every year, a large proportion of which is represented by revenue from FOBTs.

A decision by Government is expected in the next couple of weeks and we will, of course, update you in future editions of our Newsletter.

The advertising regulator in Great Britain has announced new standards for gambling advertisements after a broad government consultation on the health risks associated with the gambling industry. The new standards will restrict adverts that create what the Committees of Advertising Practice (CAP) consider to convey an “inappropriate sense of urgency” – such as those that include phrases like Bet Now! to push offers during live events and betting in play.

They will also endeavour to curb what they have called the “trivialisation of gambling”, for example by encouraging repetitive play. One of the other areas to come under the microscope is advertising which gives what the regulator deems to be an irresponsible perception of the risks involved in gambling.

In this week’s announcement, the CAP said the new measures will aim to provide greater detail on problem gambling behaviours that should not be portrayed – even indirectly – in advertising, and will strive to prevent “undue emphasis on money motives for gambling”.

These changes will come into effect on 2 April and will be taken into account when the Advertising Standards Authority (“ASA”) – the regulator that enforces the code – makes decisions on what adverts are and are not appropriate to broadcast and display.

The CAP said on Wednesday that, whilst problem gambling rates have generally remained relatively stable since the Gambling Act of 2005 came into force, there is evidence that suggests that certain claims, imagery or approaches portrayed in advertising might unduly influence people to gamble irresponsibly.

“We won’t tolerate gambling ads that exploit people’s vulnerabilities or play fast and loose with eye-catching free bet and bonus offers,” said Shahriar Coupal, the CAP director.

“Our new guidance takes account of the best available evidence to strengthen the protections already in place, ensuring that gambling is presented responsibly, minimising the potential for harm,” he added.

The advertising industry has welcomed the news. “The new guidelines on responsibility and problem gambling are an essential and welcome addition to the UK advertising codes for gambling,” said Stephen Woodford, chief executive of the Advertising Association.

“Our industry recognises the gambling sector is one which requires close, consistent and effective monitoring by our own regulatory bodies, as well as concerted effort through public education campaigns that use the ability of advertising to affect positive social change.”

The majority of complaints that the ASA receives about gambling advertisements are about the requirement for consumers to make a deposit to access their “free bets/bonus”, or the number of times they must then wager their “free bet” and deposit money before they are allowed to withdraw any winnings.

The new guidelines will also make it clear that “money back” offers must be in cash and not bonuses, that “risk free” offers must incur no loss to the consumer and that, when it comes to “matched bets”, any stake limitation should be treated as a significant condition and stated upfront.

Responding to this CAP announcement on tougher standards for gambling advertising, Cllr Simon Blackburn, Chair of the Local Government Association’s Safer and Stronger Communities Board, said:

“Councils have previously called for greater restrictions on gambling advertising and we are pleased to see the steps taken by the Committees of Advertising Practice to address this. Urgent or time limited offers encouraging people to bet immediately, and misleading descriptions such as ‘risk free’, can be particularly harmful for problem gamblers, so it’s right that they should be stopped. However, there must still be consideration of whether more curbs are needed alongside this.

“The LGA has been working closely with its members to help strengthen local gambling regulation, and it’s vital that this isn’t undermined by misleading or excessive levels of gambling advertising.

“We need to ensure that people, and particularly our children and young people, are kept safe and protected from the problems gambling can cause. Problem gambling is a major concern for councils which can cause greater personal harm. It can lead to spiralling debt, deteriorating mental health and wellbeing, and a toll on society – and taxpayers – through crime and disorder, family breakdown and homelessness.”

The rules are the first of a number of activities planned for 2018 in an effort to raise public awareness of the risks associated with gambling. The CAP said that later in the year it would publish further guidance specifically focusing on the protection of children and young people.

The timing of the announcement came as GVC, the online gambling firm behind Foxy Bingo, was fined £350,000 for “repeatedly misleading consumers” with offers of free bonuses, on the same day that regulators announced a crackdown on gambling adverts.

In October last year, regulators including the Gambling Commission, the ASA, the CAP and the Remote Gambling Association wrote to 450 operators of gambling sites urging them to remove what they called “unacceptable” adverts likely to appeal to children.

It will be interesting to see how these new powers are used and what impact they will have on the gambling sector. It will also be informative to see if there will be a direct result in the reduction of problem gambling. There will surely be an impact on “bet in play” adverts. This could be the end of Ray Winstone’s floating head telling us to bet NOW!

As Oscar Wilde said: “All women become like their mothers. That is their tragedy. No man does, and that is his.” I suppose that, to the extent that I tend to have Radio 4 on in the background at all times when I am at home, this saying is true of me. It does have its upsides, though: something made me sit up – and turn the volume up – on Sunday night. The opening of The Westminster Hour (Sundays, 10pm) announced that the presenter, Carolyn Quinn, and her panel would be discussing the proposed crackdown on Category B2 machines, which we all know as FOBTs.

Should you wish to listen, the programme is available here for the next month or so: http://www.bbc.co.uk/programmes/b09lw2yc#play (at 48 – 56 minutes) and it presents an extremely negative portrait of these machines, with any arguments advanced on behalf of the industry being roundly shot down in flames at every turn.

This feature was looking ahead to the close of the Government’s Consultation on the subject, initially launched on 31 October for 12 weeks, but which has been extended, so the closing date is now next Tuesday, 23 January. Quinn’s panel was   composed of Tory MP and rebel Nicky Morgan (the same Nicky Morgan who voted against same-sex marriage and subsequently stated publicly that she regretted her decision), the broadcaster, journalist, blogger and former Tory politician Iain Dale and the Labour Leader of the House of Lords, Angela Smith.

The proposal to reduce staking on FOBTs from £100 to £2, which is the focus of the Consultation, is primarily being driven by Tory MP Tracey Crouch, Parliamentary Under Secretary for Sport and Civil Society, whose remit includes gambling. As Iain Dale remarked, to even get the plan to consultation stage in the face of Treasury resistance is a remarkable achievement for a relatively junior Minister. Tracey won her Chatham and Aylesford seat from Labour in 2010 and was only appointed as a Minister (initially as Parliamentary Under Secretary for Sport, Tourism and Heritage) on 12 May 2015.

The programme centered heavily on an interview with Matt Zarb-Cousin, who describes himself as a former gambling addict who is an activist and has been an aide to Jeremy Corbyn. He is currently a spokesperson for the Campaign for Fairer Gambling. The interview described how he became rapidly addicted to FOBTs at the age of 16 and how he lost in the region of £20,000 in the space of 4 years, becoming suicidal as a result, before being bailed out by his parents.

He described FOBTs as “the most addictive form of gambling”, and the liberalisation of the gambling industry brought about by the Gambling Act 2005 as “one of the Labour Party’s biggest mistakes” which, in his opinion, has failed to produce the hoped-for regeneration of deprived cities and areas via what he called “super-casinos”.

He also criticised self-exclusion procedures, saying that they do not work as they depend on staff recognising individuals and preventing them from entering betting premises. He pointed out that self-exclusion procedures only deal with those “who are already very addicted, who have already lost way more than they can afford”. Instead, he said, the industry should focus on preventing harm and people becoming addicted in the first place – but he gave no specifics as to how he thought this might be achieved, other than looking to eliminate the most addictive products, namely FOBTs.

Zarb-Cousin dismissed the argument that bookmakers support the UK horseracing industry via the levy out of hand, saying that FOBTs actually undermine that industry by creating “a new generation” of gamblers who have no interest in form or odds or in betting on horseracing or other sports. This explains, he contended, the contribution to bookmakers’ profits from FOBTs being over 50%. He pointed to the distinction between the features of sports betting, involving “informed decisions” and intervals between events, and those of FOBTs, where gamblers can risk up to £100 every 20 seconds.

It is regrettable that the programme did not include any direct contribution from the industry – I do not know whether anyone from the sectors was invited to participate or not, but the result is that all the arguments against FOBTs went unchecked and this painted a very negative picture. Following Zarb Cousin’s interview, the discussion went back to the studio panel, who were in unanimous agreement that stakes should be reduced as proposed, as, in the view of participants, FOBTs “undoubtedly do damage to people’s lives”. The suggestion that there should be any consideration of personal liberty was dismissed by Iain Dale and, whilst Angela Smith conceded that there is clearly a problem with people gambling similar amounts online, it was abundantly clear that the knives are well and truly out for FOBTs across Parliament and among commentators.

Once the Consultation closes, the matter will go to the new culture Secretary, Matt Hancock, for a decision. Newmarket is in his constituency and he is known to be a race-goer, so it remains to be seen whether he is swayed by the argument that bookmakers support horseracing, or whether he shares Zarb Cousin’s view that FOBTs are undermining the sport. Either way, pundits are suggesting that this may well be his first significant announcement since he took up his new post.

The outcome of the Consultation is expected towards the end of March and we will, of course, report further then. In the meantime, I’m going back to my radio.

Anna Mathias

The Gambling Commission (“GC”) has written to online casino operators warning them that they risk losing their operating licences following a recent compliance assessment exercise. 5 operators could lose their businesses. The actions that the GC expects operators to take to rectify the failings it has discovered must be implemented immediately, it says, issuing a stark warning about the consequences if they fail to do so.

The assessment has flagged up what the GC calls “significant concerns” about the remote casino sector’s management and mitigation of risks to the licensing objectives, and has resulted in investigations into 17 operators, with the GC currently considering whether to review the licences of 5 of them.

The compliance assessment appears initially to have been aimed at analysing compliance with the requirements to have measures in place to prevent money laundering and terrorist financing, but has uncovered concerns surrounding social responsibility, specifically, customer interaction, along the way.

The assessment looked at compliance with Licence Condition 12.1 of the GC’s Licence Conditions and Codes of Practice (prevention of money laundering and terrorist financing), the Proceeds of Crime Act 2002 and the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (“the 2017 Regulations”).

The GC found that operators are not carrying out regular risk assessments examining the likelihood of their business being used for money laundering and terrorist financing, or updating and refining these as necessary to take into account the introduction of new products and technology, new payment methods, changes in customer demographic and any other material changes. As a result, they are failing to drive any, or any adequate, improvements in financial crime risk management, to determine the general and specific money laundering risks they are facing, and to evaluate how effective their anti-money laundering measures are.

The GC’s concern is that these failings put the licensing objective of keeping crime out of gambling at risk. Some companies, it says, are hiring money laundering reporting officers (“MLROs”) without any formal qualifications and who are unable to provide any suitable explanation as to what constitutes money laundering, which is quite shocking. It also found a general lack of understanding of how criminal spend could affect online casino operators’ businesses, which is quite alarming. Operators, it said, are not providing enough information about suspicious transactions to law enforcement agencies such as the National Crime Agency and the Financial Intelligence Unit. The GC said: “MLROs had neither made nor kept any note of specific cases of referrals and there were no documented risk assessments. There was also lack of understanding as to what would constitute ‘tipping off’”.

The GC also found failings relating to customer due diligence (“CDD”) and enhanced due diligence (“EDD”), which the 2017 Regulations require operators to conduct whenever establishing a business relationship and in any case where money laundering is suspected or E2000 or more is being transacted, EDD being required in higher risk cases. The GC’s initial investigations found a lack of evidence of ongoing monitoring of customer accounts. This lack of proactivity could lead to money laundering and socially irresponsible gambling incidents going unreported, it says.

The GC also pulls online casino operators up on training for staff, saying that they are falling short on providing adequate training, particularly on money laundering, record keeping and reporting suspicious transactions. Equally, there was a failure to record training given – something that should not present a problem, surely?

On social responsibility, the GC found a lack of effective and documented customer interaction in cases where the player’s behaviour might exhibit signs of problem gambling, by reference to indicators such as time or money spent. Over “a large number of customer accounts”, the GC identified potential signs of problem gambling, based on consumers’ behaviour and spend, where this had not triggered an interaction, where interactions had not been recorded, or where the operator had concluded (incorrectly, in the GC’s view) that there was no cause for concern.

As a result of all of its findings, the GC has put online casino operators on notice regarding the measures it expects them to take – immediately – to put things right. Generally, these involve a comprehensive review of their anti-money laundering and counter-terrorism financing and social responsibility policies, but with the spotlight on the following aspects:

• Risk-assessing the business for anti-money laundering and counter-terrorism funding vulnerabilities and putting policies and procedures in place to manage these effectively;
• Introducing CDD and EDD procedures that are sufficiently risk-focused and effective, including better risk-profiling of customers;
• Ensuring adequate recording/evidencing of customer interactions;
• Providing appropriate staff training, particularly in relation to anti-money laundering, counter-terrorism financing and declaring suspicious transactions; and
• Making use of all relevant sources of information in cases where problem gambling might be suspected.

These findings are only the result of the first batch of the GC’s assessments of remote casino operators and it is certain that further investigations and actions will follow. As always, the GC report majors on what it expects and gives no detail on how its expectations may be met. This is understandable, coming from the regulator: it is for online operators and their legal advisers to get their house in order. We should not be surprised by this, or see it as something new – these standards were in place from the off and any non-compliance needs to be addressed if operators are to protect their position.

The Gambling Commission has given clear guidance about local risk assessments. They say “premises licence holders in your area must conduct a local risk assessment for each of their current premises. This is a social responsibility code which helps them demonstrate how they aim to address the local risks to the licensing objectives”.

The Gambling Commission, in advising the Licensing Authority, goes on to stress that this applies to all categories of gambling operations requiring premises licences and highlights that operators are required to conduct and update a risk assessment when applying for a new premises licence, applying for a variation of a premises licence and when there are changes in the local environment or to the premises warranting a fresh risk assessment to be conducted.

It is my view that Licensing Authorities are not taking obligations in this area particularly seriously and that operators’ risk assessments currently tend to be generic rather than specific in their drafting. I am not convinced that Licensing Authorities or operators are giving this the attention to detail the Gambling Commission expects.

The Gambling Commission has stressed that there is power for the Licensing Authority to challenge a risk assessment, if it feels that there is evidence that local risks have not been taken into consideration.

The requirements relating to local risk assessments should be set out in clear detail in a Licensing Authority Statement of Gambling Principles. A good example of this is Liverpool’s Statement, which says:

A.4.1      The City Council is entitled to request such information from operators as it requires to make effective licensing decisions. Whilst the 2005 Act requires that an application must be accompanied by a minimum level of information, the City Council agrees with the Gambling Commission’s view that this does not preclude reasonable requests by licensing authorities for additional information to satisfy themselves that the licensing decision is reasonably consistent with the licensing objectives and the Commission’s code. That information may include, for example, a suitable business plan or the operator’s own assessment of risk to the licensing objectives locally.

A.4.2      The City Council welcomes the implementation from 6 April 2016 of the Social Responsibility Code provision 10.1.1 (which must be followed and has the force of a licence condition) which will require licensees to assess the local risks to the licensing objectives posed by the provision of gambling facilities at each of their premises, and have policies, procedures and control measures to mitigate those risks. In undertaking their risk assessments, they must take into account relevant matters identified in the licensing authority’s policy statement.

A.4.3      Licensees will be required to undertake these local risk assessments when applying for a new Premises Licence.

At paragraph A.4.4 of its Statement, Liverpool go on to quote Ordinary Code Provision 10.1.2., which encourages licensees to share their risk assessments with Licensing Authorities.

We are now seeing that similar policies are being incorporated into more Statements of Gambling Principles, as they are being revisited and revised.

However, we are also finding that a significant number of operators (particularly when operating from multiple sites) are not taking the site-specific basis for these risk assessments seriously enough.

The Gambling Commission Guidance states that these risk assessments should be “structured in a manner that offers sufficient assurance that the premises has suitable controls and procedures in place. These controls should reflect the level of risk within the particular area which will be determined by local circumstances.”

Risk assessments should therefore take into account the risks presented by the local landscape. For example, if premises are a near school, then the operator must explain how it will mitigate the risk of underage gambling.

The Gambling Commission’s advice also states that operators should have available copies of these risk assessments on each individual premises.

I think that we will see this become a key feature in Licensing Authority policies moving forward, and operators will be expected to create bespoke risk assessments for each premises, rather than a generic risk assessment which serves all of their premises, many having different local circumstances. It is clear from the Gambling Commission’s advice that the purpose of these risk assessments is to be particularly local and bespoke, and to deal with any issues arising around the individual locality of the premises, rather than being of a generic nature.

We are more than happy to look at operators’ risk assessments and to see whether, in the circumstances, they are fit for purpose when applying for any new premises licence, applying for a variation to a premises licence, or where there has been, or is proposed, any material change in the local area or in the premises’ operation.

We should all soon know the result of the long-awaited review of FOBTs, which is being carried out by the Government and which is expected to be announced very shortly.

The outcome of the review has already been delayed, allegedly following an argument between the Treasury and the Government Department responsible for the gambling industry over regulation of the machines. The Guardian also reported on 30 June 2017 that MPs in the Democratic Unionist party are in favour of cutting the stake from £100 to as low as £2. In the same article, Tracey Crouch MP, the Conservative Minister responsible for the review, confirmed that gambling advertising would be looked at as well, and that the results of the review would be not “kicked in to the long grass”.

The importance of this review cannot be understated, both for those who are looking for a significant cut to the maximum stake, and for those in the industry who are opposing any draconian measure and who hotly dispute allegations made by the anti-gambling lobby. Even Ian Rankin’s latest Rebus thriller “Rather be the Devil” has scenes in which detectives are looking into betting shops and in particular fixed odds betting terminals. “Plenty of jaunty blips and beeps and colourful lights. Not just high-tech one-armed bandits, but versions of blackjack and roulette too…”; “…a quid gone in 15 seconds”. The Detective Inspector visiting the betting office even enquires with the cashier as to whether or not he can still get a bet on horses in these premises.

The Guardian’s article reports that there are 34,388 FOBT machines in the country, which contribute around £4 million in taxes every year. The Treasury therefore must be concerned at the impact that any review may have on the amount of tax it takes from the gambling industry. Meanwhile, on the other side of the argument, Jim Shannon, MP for Strangford, has made clear his distaste for FOBT machines and accuses bookmakers of seeking to “protect their huge profit made at the expense of the vulnerable”.  

The book-making industry led by the Association of British Bookmakers has constantly urged any review of FOBT machines to base its decision on evidence and fact, instead of on scare-mongering led by the anti-gambling lobby. The Association of British Bookmakers has itself been accused of scare-mongering by arguing that a significant curb to FOBT stakes could lead to a significant number of shops closing, 20,000 jobs being lost, and the Treasury deprived of millions of pounds in taxes. It is easy to find numerous articles written on this subject, although many articles often drift into a wider moral discussion on gambling and, in particular, on online gambling and advertising.

The Campaign for Fairer Gambling has argued against FOBTs for many years and has often referred to these machines as “the crack cocaine of gambling”. Mr Zarb – Cousin of the Campaign has said: “In the early days when I used to do local radio interviews about my addiction, the radio host would say something like, “These are just fruit machines” and I would say “Well actually, no, these have been described as the crack cocaine of gambling””.

Whatever the outcome of the review, this is unlikely to be the end of the story. The bookmaking industry appears to accept that there will be some reduction in stakes, but it is unlikely that the reduction will go as far as the anti-gambling groups wish. So this debate is likely to go on for some time. It is to be hoped that the outcome of the review can be based on evidence submitted to it and not merely on speculation. It is without a doubt one of the most important issues that has surrounded the industry and its customers for many years.