The gambling White Paper was released on 27 April, laying out the UK Government’s plan for the reform of gambling regulation following the review of the Gambling Act 2005. The White Paper presented several new recommendations to help tackle problem gambling, as well as making sure operators are abiding by regulations and constructing necessary checks of its players. A stake limit may also be introduced for online slot games, with the proposed amount being between £2 ($2.49) and £15. As per the White Paper, further limitations will also be introduced to the 18-24-year-old age bracket, with £2 per stake again a possibility.
However, there will also be a change to how many slot machines land-based casinos can offer, with the upper limit being raised to 80 from the previous 20. Sports betting may also be legalised in all casinos as part of the paper’s recommendations, as opposed to the select casinos that were licensed under the 2005 act.
Operators will also be expected to share data on high-risk customers with one another, to prevent problem gambling and money laundering, as well as make changes to how they market bonuses and free bets to reduce social harm. Despite many operators already partaking in voluntary levies, the White Paper proposes a compulsory statutory levy to be paid directly to the Gambling Commission. This levy will help to support treatment, education and research into gambling harm. So, naturally, there is plenty there for the gambling industry to decipher. But what about the payments angle?
Affordability checks: How will they be used?
In abidance with the White Paper’s recommendations, operators will be expected to enforce stricter financial checks on individual customers. The first of these checks will be triggered by a bettor having a £125 net loss within a month or £500 net loss within a year, with the strictest checks kicking in at a £1,000 net loss within 24 hours, or a £2,000 net loss within 90 days.
Open-source indicators of financial vulnerability, such as county court judgements and bankruptcies, will be examined at this point. Credit reference agencies will be involved in most checks and, if insufficient information is obtained, direct customer data collection may be required. We discuss this topic with Lloyd Firth, Counsel at Wilmerhale’s UK White Collar Defence and Investigations Practice, and Martin Cheek, Managing Director at SmartSearch and qualified solicitor.
Cheek tells Gambling Insider: “The checks are designed to prevent individuals from gambling beyond their means and protect vulnerable individuals. Although the White Paper doesn’t provide specific details on the thoroughness of these checks, it emphasises the need to implement effective measures for responsible gambling and protecting individuals from excessive financial losses.”
When it comes to financial checks taking place, they aren’t that complicated or intrusive on a smaller scale; it is a basic vulnerability check that takes seconds. However, once the bettor begins losing larger amounts in smaller time frames, the checks become more thorough.
Firth states: “At a moderate loss threshold (£125 net loss within a rolling month or £500 net loss within a rolling year), operators should conduct a financial vulnerability check, considering the types of open-source indicators that many already routinely assess; such as county court judgments, average postcode affluence and declared bankruptcies. These checks should take seconds to process and would be frictionless for the consumer. “If a check raises concerns and no robust evidence to the contrary can be provided, operators will need to respond accordingly. Any account with net losses exceeding £1,000 in a rolling 24-hour period should be subject to an enhanced spending check: this provides much greater insight into a customer’s financial situation by accessing more personalised data to consider factors like discretionary income.
“Checks would involve credit agencies providing estimates of overall disposable income and not interrupt the customer journey unless the check raises concerns. Where this is not possible, information may need to be collected directly from the customer, including potentially via open banking. Any account with a £2,000 net loss within a rolling 90-day period would also trigger these enhanced checks. It is proposed that the investigation thresholds be halved (to £500 net loss in 24 hours and £1,000 in 90 days for enhanced checks) for those aged 18-24.”
“It is expected that around 20% of accounts will be subject to a financial vulnerability assessment and around 3% of all accounts to an enhanced check in the first year the new measures are in place” - Lloyd Firth
Could these new checks deter casual gamblers?
Having their financial background assessed could be a put-off for some customers, especially new bettors as they don’t want to grant access to that data. Cheek says: “While the primary aim of these checks is to prevent individuals from gambling beyond their means, there is a possibility that casual gamblers may find the process invasive. It will depend on how the checks are implemented and whether they strike the right balance.
“The Government will need to carefully consider the potential effects on different segments of the gambling population, to ensure the new checks do not discourage casual gamblers unnecessarily. Operators will also need to make sure checks are completed as efficiently as possible to minimise any potential dropout. Increasing the adoption of technology and digital compliance platforms seems like the most logical move to streamline this process for customers and ensure businesses can access all the necessary information regulators demand.”
On this topic, Firth tells Gambling Insider: “It is expected that around 20% of accounts will be subject to a financial vulnerability assessment and around 3% of all accounts to an enhanced check in the first year the new measures are in place. Most customers do not lose enough to trigger the investigation thresholds. The checks are aimed primarily at detecting and preventing problem online gamblers rather than money laundering, but both share similar red flags. There should be a very limited impact on the average gambler who is not engaged in harmful gambling or money laundering.”
To make the affordability checks as frictionless as possible, Firth suggests cutting-edge technology and data, from credit agencies and banks, could be the answer. He tells Gambling Insider: “To implement the checks while maintaining a smooth and frictionless process, there are a few areas that gambling companies could explore. Cutting-edge technology could help automate the process with the support of aggregated data from credit agencies and banks, to gain a comprehensive view of a gambler’s financial situation in real-time.
“Operators should already be well versed in utilising technology to mitigate the increasing compliance burden. Ditching manual checks for electronic verification and digital onboarding is essential to not only meet the demands of regulators but to provide customers with a frictionless experience. A by-product of these checks will be greater oversight of potentially fraudulent behaviour. With anti-money laundering failures, a key contributor to the multi-million-pound fines dished out by regulators, a digital compliance strategy will enable operators to safeguard clients and their business as a whole.”
Are affordability checks necessary?
Some could argue that, as an adult, you are responsible for your own actions. Therefore, if you are spending more than you can afford, it is up to you to put a stop to it. Likewise, casual bettors might not want to grant that data to operators just to place small, infrequent bets. However, addictions are undeniably a factor when it comes to gambling, so affordability checks can be a good way to control problem gambling. Are affordability checks thereby truly necessary?
Cheek sees both sides: “It is a matter of balancing responsible gambling measures with individual freedom and choice. While the specific threshold is subjective and open to debate, affordability checks can be beneficial in identifying potential gambling-related harm, especially for individuals spending significant amounts. These checks help ensure that individuals are not gambling beyond their financial means and protect them from potential financial difficulties. However, it is important to consider the feasibility and practicality of implementing such checks and strike a balance between consumer protection and personal freedom in the context of gambling regulations.“
“The new requirements – not only the proposed checks but also the increased powers to disrupt illegal gambling and the shift to a big-data approach to operator compliance – should help combat the risk of money laundering in the sector" – Loyd Firth
Detecting money laundering
Gambling has been known as a common way for criminals to launder money, so, with that in mind, how can the changes in the White Paper prevent money laundering? Firth comments: “Alongside assessing the risk of harm, the new checks will allow operators to fulfil their wider ‘know your customer obligations; for instance, by considering customers’ source of wealth and whether that presents any additional risks, such as possible links to money laundering or other crime.
“The checks will provide operators with additional customer data points that should allow them to identify red flags associated with money laundering breaches, including high spending relative to income and sustained heavy losses, which can be markers of gambling using the proceeds of crime (involving stolen credit cards and false or stolen identification, for example) and attempts to disguise the true source of funds (mule accounts).
Firth continues: “The new requirements – not only the proposed checks but also the increased powers to disrupt illegal gambling and the shift to a big-data approach to operator compliance – should help combat the risk of money laundering in the sector. However, there are extensive AML obligations already in place for operators to abide by, which, as is clear from the Gambling Commission’s long list of recent enforcement actions, continue to be routinely breached. Although gambling is unlikely to be the most efficient way of laundering significant amounts of cash, criminals will inevitably continue to find a way to allow the proceeds of crime to flow through the sector.”
All in all, in regards to the White Paper affecting payments, it seems as though operators will have to move from manual checks to electronic verification to provide a smoother experience for customers. From what both Cheek and Firth have told us, increasing the adoption of technologies would be the main way to ensure payments are frictionless and that money laundering isn’t overlooked. Even though the release of the White Paper came out at the pace of a snail, payments for UK operators shouldn’t be affected on a huge scale.
