Standards, priorities, opportunities By David Clifton, Director, Clifton Davies Consultancy Ltd November 8, 2019 at 2:52 am It is no longer the case, but there was a time – more than ten years ago – when a number of fundamental questions were raised in relation to the standards of the gambling licensing and regulatory regime established in Malta in 2001, when the regulator was known as the Lotteries and Gaming Authority. Since that time, three successive CEOs of the regulatory body – rebranded in 2015 as the Malta Gaming Authority (MGA) – have overseen substantial improvements to that regime. Few would doubt that Joseph Cuschieri (appointed in 2013) achieved his ambition to make the regulator “more professional, agile, proactive and strategically driven”. His stewardship witnessed improving standards in consumer protection, greater levels of enforcement action, and a broadening of the scope of remote gambling regulation. His successor, Heathcliff Farrugia, took up his appointment as CEO just a few months before Cuschieri’s legacy – a substantial overhaul of Malta’s gambling regulatory framework – came into force in August 2018. That came from new legislation designed to strengthen the MGA’s oversight of the industry, including, importantly, in relation to consumer protection issues. Since then, important developments include a step-up in terms of enforcement action against licence-holders, resulting so far this year, in cancellation by the MGA of eighteen gambling authorisations and suspension of seven others; establishment of a Commercial Communications Committee to review commercial marketing and advertising communications; and creation of a new Sports Integrity Unit. Speaking about the MGA in an interview conducted in February this year, Farrugia said: “We are strong believers in the benefits that can arise when regulators share best practices among themselves. We always keep an eye open for what other reputable regulators do, and we do meet with them on a regular basis to discuss different ideas”. It is a shame, then, that remarks made by the CEO of the UK Gambling Commission (UKGC), Neil McArthur, in a speech entitled “Raising Standards: Our Priorities, Your Opportunities”, delivered in Malta on 30 October, have been interpreted in some quarters as critical of the MGA’s current regulatory standards. What set that particular hare running is the following passage from McArthur’s speech: “Last year we undertook a massive piece of thematic work, involving 123 online casino operators (out of total 189 (~1,700 urls) who are licensed) to look at compliance standards. Following that compliance work: 45 online casino operators were told to submit an action plan to raise standards and a further 14 online casino operators were the subject of enforcement investigations, following which: 7 operators paid £18million in penalty packages, 5 operators surrendered their licences and 3 PMLs surrendered licence. Other investigations are continuing. It’s disappointing to note that currently, 24 of the 45 operators who had to submit action plans are based here [i.e. in Malta]. The same is true for 5 of the 7 operators who had to pay penalties and 3 of those which surrendered licences”. That information was of course accurate. Indeed it was one of the prime motivations behind a conference entitled “Safeguarding Standards” that my company, Clifton Davies Consultancy Limited, co-hosted with Valletta boutique law firm, City Legal, in Malta on 17 October. We sought to emphasise differing expectations behind the approaches to gambling regulation adopted by regulators in different jurisdictions, with a particular emphasis on Malta, the UK and Sweden. However, we most certainly did not set out to “score” one regulator as against another. That different regulators adopt differing approaches is probably best illustrated by the failure of all EU Member States except one – Denmark – to fully implement a recommendation issued by the European Commission back in 2014 that was designed to ensure a high level of protection for consumers through the adoption of a common set of principles for online gambling services and for responsible advertising and sponsorship. It follows that even the UKGC, whose CEO has previously emphasised that he wants “gambling consumers in Britain to be able to enjoy the fairest and safest gambling in the world” and the UKGC to be “the most respected gambling regulator in the world”, is not – yet at least – necessarily setting the highest standards in every single aspect of gambling regulation across Europe. What McArthur did confirm in his speech last week was that he had met the previous day with the MGA and that the MGA shares the UKGC’s concerns about “the need to raise standards”. That this will have been at the top of the meeting agenda is not at all surprising, given that Malta-based operators “now account for over 30% of online GGY” or “about one-eighth of the whole GB regulated market”, according to McArthur. However, that does not mean that the UKGC considers the Maltese regulator’s own regulatory standards are lacking or in some way sub-standard, as some commentators seem to have suggested. The press release published by the MGA in the face of such suggestions made its position clear, particularly in relation to compliance with EU-wide AML requirements. The full text of its press release is as follows: “The concentration of gambling businesses based in Malta and operating in other jurisdictions invariably leads to a high proportion of Maltese companies that attract the attention of the foreign regulators with whom they are licensed and duly regulated. The past few years have seen a significant increase in stringent regulations, and compliance expectations from regulators are very high. Whilst a number of operators have been able to raise the bar, others are struggling to meet expectations, and this is a concern shared by the Gambling Commission as well as the MGA and the FIAU. Regulator outreach is important to set out expectations to the industry, which is why the MGA also participated in the same conference [i.e. as that at which McArthur spoke], delivering a message around the MGA’s expectations on the collection of source of funds and source of wealth information and documentation”. In light of the ongoing collaboration between gambling regulators on best practice issues, acknowledged by both McArthur and Farrugia in their comments I have quoted above, it will be interesting to see whether regulators in Malta and other jurisdictions will pick up on any of the three “opportunities to collaborate” identified to operators by McArthur in last week’s speech, namely: Production of an effective Industry Code for Game Design that will set out: the techniques that the industry plans to use when designing apps and online games, the risks associated with each product and how they can be mitigated and a clear explanation of what is not acceptable Development of a code of conduct in relation to operators’ treatment of VIPs and associated inducements to gamble (following an earlier warning from McArthur that “if the industry cannot or will not drive improvements in this area,we will need to explore the use of all our tools to encourage or mandate changes in the interests of consumer protection”) Formulation of a plan setting out new standards for how industry will: better use technology to minimise the risk of exposure of gambling advertising content to children, young people and vulnerable adults, and embrace ad-tech for social responsibility purposes – actively targeting away from vulnerable audiences. My hope is that each of these will be initiatives seized on by the Betting and Gaming Council when it launches imminently in the UK. I believe that only that way will there be a realistic possibility of the industry retaining a measure of self-regulation in every single one of those respects. Time will tell. Time will also tell whether those will be the only new major gambling-related initiatives that emanate from the UKGC within the near future. That may be largely dependent on which political party comes to power following the UK General Election on 12 December, when issues of gambling policy will rank higher on some parties’ agendas than they ever did before. One has only to read the quite alarming list of recommendations, contained within an Interim Report published on 4 November by the Gambling Related Harm All-Party Parliamentary Group in relation to its ongoing “Online Gambling Harm Inquiry,” to realise how even more fluid the requirements of gambling regulation in the UK could well become in the near future. However, that’s a different story for a different day.