David Clifton: Licensing Expert – Regulatory scrutiny sees White Labels lose their shine

David Clifton

The Gambling Commission has recently announced that it is reviewing the operating licences of (a) FSB Technology (UK) Limited (who voluntarily suspended activities on their Blackbet white label website) and (b) EveryMatrix Software Limited (in relation to which the Commission also suspended their ability to offer B2C remote betting and casino gaming, including pursuant to white label arrangements).

Following on, as they do, the £1.2 million financial penalty imposed on Gamesys (Gibraltar) Limited in June this year for AML and customer interaction failings, both announcements underline the extent to which white label agreements have now come very firmly under the UK gambling regulator’s microscope.

Labour Party Deputy Leader, Tom Watson, clearly has other more Brexit-related priorities at the moment, because he has been notable by his silence following the Commission’s above announcements. Either that or he realises that the likes of me will save him the trouble by inevitably pointing out that, back in June, in an article for Parliament’s magazine The House (entitled Tom Watson: Gambling companies should have to reapply for their licences and undergo proper scrutiny), he criticised:

  • white label arrangements as “a cluster of partnership brands which are able to market in the UK despite not having their own individual UK licences” and
  • some of the marketing partners under white-label agreements for donating as little as £50 last year to GambleAware.

He added that he believes “a UK gambling licence should be a hallmark of credibility and trust. It should not be seen as a platform for overseas operators to use the reputation of British sport as a marketing tool for their own domestic audience, whereby the benefits of the UK market are enjoyed, but nothing is given back to address the harm that is caused”.

Watson went on to call for a full review of all remote gambling licences that have been issued by the Commission since 2014. Although unlikely that such a draconian step will ever be implemented, it did serve to focus attention on relationships between overseas gambling operators and British football teams, an area where the wider UK media has sought to leave no stone unturned in recent weeks.

It has also served to reignite the question – last seriously explored at Betting on Football four years ago whether gambling operators unlicensed by the Gambling Commission can nevertheless sponsor UK sports teams if they make it clear both in their advertisements and in reality that their gambling facilities are not available to those in Great Britain, enabling them to argue both (a) that they didn’t know and (b) it couldn’t be said that they should have known that their gambling facilities were likely to be used in Britain.

I don’t believe for one moment that Tom Watson can claim credit for instigating the Gambling Commission’s focus on white label providers. Instead, the issues that have given rise to the regulator’s concerns are in the same old areas with which we are all now very familiar, not least (a) the adequacy or otherwise of customer interactions (in relation to which see my last “Licensing Expert” article for SBC News) and (b) the extent to which the holder of  UK operating licence is responsible for the actions of any third parties with which it contracts. It was precisely this latter aspect that led Sky Betting & Gaming and others to close or considerably tighten up their affiliate marketing programmes two years ago.

It is clear that, in the case of EveryMatrix, the Commission’s concerns are with its B2C operations, rather than with its B2B activities of manufacturing, supplying, installing and adapting gambling software, which EveryMatrix is able to continue providing.

For its part, EveryMatrix has responded to its licence review as constructively as one would expect a company of its reputation to do. This has included a tie-up with beBettor, a Mark Blandford backed company that offers an innovative affordability solution to help operators understand how much their customers can sustainably afford to gamble.

Coincidentally, Mark Blandford is also Chairman of FSB Technology. As such, he will not be alone in acknowledging the Gambling Commission’s clearly expressed expectation, publicised following commencement of both the above-mentioned licence reviews, that white label providers licensed by it must conduct adequate due diligence on third parties with which they contract (including pursuant to white label and similar agreements) to ensure that, amongst other things, those third parties are “competent and reliable”.

The Commission has added that “any licensee that relies on a third party to conduct any aspect of the licensee’s business related to the licensed activities must ensure it has sufficient oversight and controls in place to ensure that all activities are carried out in accordance with the LCCP, notably, but not exclusively, social responsibility and anti-money laundering requirements. Failure to maintain adequate control of third parties can result in regulatory action including suspension or the loss of the operating licence”.

Contrary to views expressed by some, I don’t believe that the Commission will look in future to license marketing partners under white-label arrangements (as long as those partners do nothing more than offer marketing via their branded website) any more than it would contemplate licensing marketing affiliates of licensed B2C operators.

Why would it, when the white label gambling provider is responsible for not only, amongst other things, (a) registering the customers and conducting age verification and KYC checks, (b) providing the product for customers to gamble on, (c) managing customer funds, (d) the security of confidential customer details, (e) providing customer support for the gambling product and (f) conducting any required customer interactions, but also for any misdemeanours committed by the white label marketing partner?

All of the above issues and more will feature in the following Betting on Sports and CasinoBeats Summit panel sessions at Olympia, London that I am either moderating or speaking at on Thursday of this week, 19 September:

  • 11:20: Regulatory Creep – The Long Arm of the Law
  • 12:05: Understanding Player Finances
  • 14: 45: The Future of Advertising

I hope to see you there!

____________________________

David Clifton – Director – ‎Clifton Davies Consultancy Limited

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