David Clifton: Licensing Expert – Who are you & how old are you?

David Clifton

We all knew it was coming. Back in March, the Gambling Commission published its Review of Online Gambling, expressing the clear opinion that “progress by the online industry to minimise harm has been significantly slower than we expected and required”. I wrote about it in my No surprises from UKGC’s review of online gambling article for SBC  that month.

So it should equally have come as no surprise that, in the Commission’s recently announced consultation, it explains its intention to strengthen existing LCCP age and identity verification requirements.

It proposes to do so by requiring remote betting and gaming (and some lottery) operating licence-holders to:

  1. verify the age of all customers, not only before they can deposit money or gamble, but also before they can access play-for-free versions of gambling games,
  2. verify the identity of (and obtain more information about) their customers at an earlier stage in the business relationship, and
  3. ensure that the name associated with any payment method used by a customer matches the verified identity of that same customer.

It is proposed that these new requirements will take effect from April 2019. However, we can expect earlier next year a yet further consultation by the Commission, this time on strengthening requirements for customer interaction, that will include its proposal that remote licence holders must set limits on their customers’ gambling activity that can only be changed once further information about the customer has been verified to establish whether signs of problem gambling exist. I am going to comment below on each of these developments.

Age verification

The new age verification requirement would abolish both (a) the current 72-hour rule for completion of such checks (which the Commission believes provides an opportunity for children and young people to deposit money and gamble undetected for up to three days) and (b) the current exception to that rule that presently allows random age verification testing only amongst credit card users.

The requirement to verify age before a customer can access play-for-free versions of gambling games arises from the Commission’s concern that play-for-free games may encourage children to attempt to gamble, coupled with its belief that there is “no legitimate reason” why such games should be available to children at all.

One of the motivations behind the proposed changes to age verification requirements is the very considerable improvement in technology that has taken place since the LCCP first came into force in 2007 and now enables age verification to be completed within a matter of minutes or seconds. However, such technology does not come cheap and, even though the Commission has no intention to prescribe how operators should go about completing age verification, smaller operators, in particular, may find the added expense prohibitive.

On that score, the Commission is inviting licence-holders to provide estimates of (a) the time that would be needed to implement any required technological developments and (b) the one-off, annual and ongoing costs that might be incurred by operators in implementing the proposed age verification changes. These costs could include, for example, software development and associated staff time, familiarisation costs in terms of staff training and other business impact expenditure.

From a practical perspective, affected operators should take note that age verification would not necessarily need to be completed at the point a new customer account is opened and registered. However, verification would need to be completed before that customer is able to deposit or gamble online, and before they could access any free-to-play versions of games made available. In this respect, the Commission states that its proposals would mean that:

  • “if a customer can access free-to-play games before depositing any of their own money into their account, then the licensee must complete age verification pre-deposit and before the customer can access free play games” and
  • “if a customer can register and gamble for a prize using free bonus funds provided by the licensee without having to first deposit cash funds,then the licensee will need to complete verification earlier than the point of deposit (ie at the point of account registration or the point where the free bonus can be used by the customer)”.

Identity verification

The Commission also identified concern in its “Review of Online Gambling” that licence-holders do not know enough about their customers at a sufficiently early stage of the business relationship.

As is apparent from the Commission’s recently published Enforcement Report 2017/18 (about which I wrote in July in my Pointing to the next stage in gambling-related harm article), inadequate identification and insufficient knowledge of customers from the start of a relationship can lead to all sorts of regulatory problems from both an anti-money laundering and social responsibility perspective.

It has also led to suggestions that operators are treating customers unfairly by requesting additional identity information only at the point where, after the customer has potentially spent significant amounts of money gambling, he or she requests to withdraw funds from their account. This ties in with last month’s Competition and Markets Authority (“CMA”) announcement that remote operators must make it easier and fairer for customers to withdraw money from their online gambling accounts by, amongst other things, no longer confiscating their money if they do not meet their identity check rules within a specific timeframe.

The proposed new licence condition would require remote operating licence holders to obtain details (and verify the identity) of customers before they are allowed to gamble. Those “basic identifiers” should at least include the customer’s name, address, date of birth and email address.

However, the requirement would go further than this in circumstances where, for example, further information is needed by an operator to (a) allow a customer to promptly withdraw funds from their account, or (b) apply gambling management tools or self-exclusion consistently across multiple accounts held by a customer with it (or with other licence-holders in the same group structure). In such circumstances, the new licence condition would require the operator to obtain and verify, where practicable, further information (in addition to the above-mentioned “basic identifiers”) before the customer is permitted to gamble.

This will need very careful consideration by operators because the proposed new licence condition will require them to make clear to their prospective customers before they deposit funds into a new account, the forms of identity documentation that the operator might require them to provide, and when. Operators will also need to (a) consider what steps they can take to reassure their customers as to the security of the identity-related data and (b) place appropriate limitations on its use and retention.

They will also need to take account of the Gambling Commission’s expectation that, in addition to verifying the identity of new customers, they will verify the identities of their existing customers to the standards required by the proposed new licence condition. As the Commission points out, this will be necessary for any event to delivery effective multi-operator self-exclusion under the GamStop scheme.

Payment methods

The proposed new payment methods licence condition arises from concern on the part of the Gambling Commission that:

  • some operators might not routinely ensure that the name associated with any payment method used by a customer to fund their account matches the verified identity of that same customer and
  • this could have the possible consequence that a customer will use their partner’s debit or credit card (or perhaps a stolen card) to deposit funds into their own gambling account.

This said operators who experienced the rising role of the consumer to the centre of Gambling Commission policy during Sarah Harrison’s time as CEO will not be surprised to learn that the Commission is also keen to ensure that consumers are not adversely affected by this specific proposal

Mandatory account limits on customers’ gambling activity

The Gambling Commission also flagged up earlier this year in its “Review of Online Gambling its intention to consult on requirements for licence-holders to set limits on customers’ gambling activity which could only be changed once the licence-holder has further verified information about the customer.

However, the Commission is not consulting at this stage on introducing a specific licence condition or code about account limits. Instead, in what it describes as “an opportunity for respondents to influence any future specific proposals”, it is asking for “any information or evidence of good practice that helps licensees and customers to ensure gambling remains fair and safe …. both in terms of existing practice and what is possible, and which could later inform specific proposals on mandatory account limits to strengthen provisions for preventing gambling-related harm”. 

It suggests that such further information might include:

  • financial indicators to assess whether a customer can afford their current levels of gambling (that could be with reference to customer-specific data such as their credit profile information, or socio-demographic indicators that are not specific to the customer, such as postcode deprivation indices),
  • behavioural indicators or markers of harm (such as time spent or intensity of gambling, which a licence-holder can monitor from the start of the customer relationship) which might inform the basis of account limits to prevent harm, providing as possible further examples: failed deposit at first attempt since registration, use of high interest credit cards, choice and number of payment methods at account opening, bonus requests, void requests, patterns of deposit or loss in the first few weeks of relationship and deposit and loss levels in the first few days after registration, and
  • problem gambling self-assessment screens completed by customers.

The Commission has long denied that the current Annual Assurance Statement (“AAS”) requirement for larger gambling operators (under which they conduct a self-assessment of the risks to the licensing objectives posed by their business, how well they are managing those risks, where they need to improve and how they intend to do so) is necessarily to be extended to smaller operators. However, it seems that at least that element of the AAS that relates to the manner in which operators support at-risk and problem gamblers will come even more under the regulatory microscope once the LCCP requirements on customer interaction are beefed up next year. All operators – regardless of their size – would be well-advised not to disregard the 15 questions that are posed on mandatory account limits, merely because they refer to the subject-matter of a future consultation.

Questions

The age and identity verification consultation runs until 27 November 2018. It takes the form of an online survey and poses a total of 38 questions which the Commission describes as a “non-exhaustive” list, adding that respondents should provide any other information that they think may be relevant.

In my view, the survey is far from easy to navigate, particularly if you want to read through it all before starting to answer every one of the 38 questions that are posed within it. In the hope that it will assist, I have set out on the Clifton Davies website every single question that is posed in the online survey so that you can read through those now to get a better advance understanding of what the Commission wants to know. However, it is crucial that all operators wishing to respond to the questions do very carefully read through the entire consultation proposals before doing so.

Postscript

Unsurprisingly, a question not posed in the Gambling Commission’s current consultation is: Are regulators the biggest threat to the industry?”. I suspect that either way, some readers of this article will have their own strong view. If so, I encourage them to attend the Betting on Sports panel session on this very same topic, that will be moderated by my business partner Suzanne Davies and will be taking place at the Olympia Conference Centre in London at 4 pm on Thursday 20th September. See you there!

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David Clifton – Director – ‎Clifton Davies Consultancy Limited

The Betting industry’s regulatory agenda and current context will be discussed at the upcoming ‘Betting on Sports Conference’ (#boscon2018 – Olympia London-18-20 September 2018). Click on the below banner for more information…