2 April, 2024

Investigating the history of gaming in Curaçao

Mario Fiorini, Founder and Director of IGA Group, walks us though the history of one of gaming's most important hubs. One, though, whose "fundamentally flawed" framework brought with it a chequered past.

The Government of Curaçao is currently undergoing a significant transformation, with the complete reformation and modernisation of its gambling legislation. This comprehensive legislative overhaul seeks to address the weaknesses and inefficiencies that have tarnished the jurisdiction’s reputation, and bring the sector in line with international standards. In light of this, a bird’s-eye view of Curaçao’s past and present is a good approach to properly understand why the existing framework is fundamentally flawed, what is being done to remedy the situation and what we can expect from the jurisdiction in the future.

A chequered past

When online gaming was formally legalised in 1993, Curaçao enacted extremely liberal gambling laws. When one considers the host of other benefits the jurisdiction offered, such as its OCT (Overseas Countries and Territories) status, 0% taxation on foreign-sourced income, 0% VAT, no sales tax or import duties and no restrictions on the withdrawals of dividends, it quickly becomes clear why Curaçao became the go-to solution for gambling start-ups seeking to access the global iGaming market. Despite attracting thousands of operators, a lack of regulations and monitoring compared to other jurisdictions, weaknesses inherent to the Master-Licence system and cultural idiosyncrasies proper to Curaçaoans would ultimately result in a broken system; allegedly responsible for up to 40% of global unregulated gambling.

There is little doubt that Curaçao’s judicial reform is an extremely positive development with clear advantages for players, operators and the jurisdiction itself

Systemic flaws and a laissez faire attitude

Under Curaçao’s outgoing system, licensing is handled by four private businesses, which each hold “Master Licences” granted by the Government. B2C operators would then apply for a sub-license under one of the Master Licences. This created a number of restrictions for operators, such as payment providers (PSPs) not recognising the sub-licence, meaning operators had to add a subsidiary to their structure, in an EU country such as Cyprus, to process payments.

Without the necessary supporting framework, the Gaming Control Board (GCB) devolved most responsibilities to the Master-Licence holders and then struggled to adequately monitor them. Master-Licence holders also failed to hold their sub-licensees accountable, chiefly because it was economically convenient for them not to do so. Anti-money laundering measures already existed, but without enforcement measures were largely ineffective. Over the years, this lack of intervention and enforcement gradually tainted the jurisdiction’s reputation. Loss of reputation aside, international pressure and demands for Curaçao to overhaul their regulatory framework were steadily increasing.

The tipping point

With the benefit of hindsight, perhaps a catalyst was needed. That came with the curtailing of international travel during the Covid-19 pandemic, dealing a major blow to Curaçao’s struggling economy and prompting it to seek assistance from the Netherlands. While financial assistance was granted, pressure to implement reforms was also brought to bear.

Following discussions between the Dutch Government and its counterparts in Curaçao, it was agreed that the island would create an independent gaming regulator with the power to grant and revoke gaming licences, collect taxes and licence fees, and ensure operators act in accordance with the laws and regulations of targeted countries. After engaging in consultations with industry stakeholders, as well as analysing and modelling best practices in other well-regulated jurisdictions like the Netherlands and Malta, Curaçao began drafting a new legal framework, the National Ordinance on Games of Chance, Landsverordening op de kansspelen (LOK). Having formalised a timeline towards reform, Curaçao committed wholeheartedly to the process.

The present transitional period

In line with the Government’s desire to preserve existing businesses, the current draft of the LOK provides a transitional framework for operators working under an existing Curaçao licence.

A new licensing and supervisory authority

Based on the new legislation, the GCB will be converted into the Curaçao Gaming Authority (CGA), a new independent licensing and supervisory authority for all games of chance. The CGA will grant licences to both B2C operators and B2B suppliers that provide critical services or goods related to games of chance, such as games, platform and payment services providers.

The GCB’s online registration/application portal

Master-Licensors are required to register existing sub-licensees and their associated domains through the GCB portal by 31 March 2024 as part of a census of the current gaming landscape. They may continue to operate – and permit their sublicensees to do so – until current renewals expire or until the National Ordinance on the Games of Chance (LOK) comes into force, whichever happens first. They will then automatically be ‘grandfathered in’ to the new regulatory regime.

Concurrently, since November, the GCB has been accepting new registrations via the same portal and successful applicants are currently being issued with a provisional licence based on the current law (NOOGH). They are then given a further six months to submit audited policies and procedures aligned with international standards.

Key requirements

Online gaming and supplier licences will only be granted to persons that are legally established and providing their services in Curaçao through an actual local presence. There will be a requirement that the operator or supplier provide permanent and full-time work to at least one local key person, and there will be fit-and-proper tests for applicants, beneficial owners, stakeholders, directors, managing directors and compliance officers. The financial integrity of the organisation and source of funds will also be audited. Despite suggestions to the contrary, there is currently no requirement for licence holders to acquire or lease property in Curaçao for the purpose of carrying out business activities.

Player protection, dynamic AML/CFT procedures, responsible gaming, KYC and robust technical and information security setups are required as standard under the new framework and compliance will be subject to regular audits. All licences granted by the CGA will be non-transferable. While this does not imply the prohibition of white labelling, it does mean licence holders will be personally responsible for the execution of their licence and its associated obligations.

Licensing fees

Licence fees for operators and suppliers have already been finalised and communicated. They are affordable and competitive, and largely similar for B2C and B2B operators.

The legislative process

The LOK is expected mid-2024. Once introduced, a bill must go through a number of stages before it can become law, where the bill's provisions are debated in detail and amendments can be introduced, debated and agreed to. The LOK has already been submitted to Parliament’s Council of Advice, which has put forth a number of objections to the draft in its current form.

The Government will address when the Central Committee next reconvenes. Once the draft and any eventual amendments have been debated and finalised, the bill will proceed to Parliamentary vote and be promulgated into law.

With the impending finalisation of the legislative process, Curaçao is now well on its way to re-establishing itself as a well-regulated and reputable jurisdiction

A promising future

Having demonstrated a clear political will in implementing the reforms, Curaçao has been able to rely on political backing internationally – as well as industry support. There is little doubt that Curaçao’s judicial reform is an extremely positive development with clear advantages for players, operators and the jurisdiction itself. Players stand to benefit from the stricter oversight and compliance requirements that will result in greater transparency and fairness. With operators held to higher standards, players can expect higher-quality gaming services and updated responsible gaming practices.

Operators also stand to greatly benefit from the regulatory changes. On the one hand, clearer guidelines and standards lead to more responsible and sustainable business practices. On the other hand – and this is key – the Authority being directly responsible for the licensing process unlocks opportunities with regards to payment processing and the provision of critical supply that were previously unavailable. For example, consider the wording of Malta’s most recent binding instrument, which came into force on 1 January:

“The Licensee may offer the critical gaming supply to persons or entities that are licensed by the Authority, or to persons or entities licensed by a governmental body or regulatory authority in another jurisdiction (...)”

Aside from the obvious advantages, such as enhancing the jurisdiction's credibility and reputation, leading to increased investor confidence, Curaçao will benefit tremendously from strengthened economic contributions such as increased revenue and job creation.

Is Curaçao your best bet?

With the impending finalisation of the legislative process, Curaçao is now well on its way to re-establishing itself as a well-regulated and reputable jurisdiction. At IGA Group, we are firm believers in the potential of the newly evolved jurisdiction, which is why last year we completed our expansion into Curaçao by merging with a local trust company in order to extend our portfolio of services. Having already delivered multiple provisional licences, we look forward to continuing serving clients who wish to operate in compliance with industry standards.