SBC News David Clifton: Licensing Expert – Questions on Consultations view of risk & vulnerability

David Clifton: Licensing Expert – Questions on Consultations view of risk & vulnerability

SBC News David Clifton: Licensing Expert – Questions on Consultations view of risk & vulnerability
David Clifton

Post White Paper, UK gambling enters its ‘consultation phase’, as the government seeks relevant feedback on key policy proposals to govern the sector. Licensing Expert David Clifton details how consultation questions asked by the Gambling Commission reveal a new approach to the risk assessment & financial vulnerability of customers.


On 26 July, the UKGC launched its first set of consultations pursuant to the UK Government’s Gambling Act Review White Paper. One of the most long-awaited consultations – that applies solely to remote gambling operators licensed by the UKGC – focuses solely on financial vulnerability checks and financial risk assessments of customers. 

These topics are by no means new, stemming as they do from a debate that has caused very considerable controversy for at least the last four years, namely the subject of “affordability”. My recent articles for SBC News entitled “William Hill tells a Story of a Predictable Outcome (published in April) and “Probing the White Paper’s Great Unknowns (published in June) explain the background circumstances that have led up to the current consultation. 

My immediate impression on first reading this particular consultation was that it is not easy to see the wood for the clumps of trees scattered throughout it… So, in this article, I will summarise exactly what is being proposed on the above-mentioned topics and why it is extremely important that all with an interest in the subject-matter ensure that they submit their responses to the UKGC by no later than 18 October 2023 when the consultation closes.

Thirty questions on the above-mentioned topics are posed in the UKGC’s online survey (accessible here) but I hope the answers to my 10 questions below might help those of you intending to participate in the consultation.

Q1: What is the key proposal in this consultation, and what has prompted it?

The UKGC proposes to impose LCCP obligations on UK-licensed remote gambling operators to conduct two new checks intended to enable them to understand if a customer’s gambling is likely to be harmful in the context of their financial circumstances. 

This has been prompted by a long series of findings in the regulator’s casework that have served to identify three key risks of gambling harm, namely (a) binge gambling, (b) significant unaffordable losses over time and (c) financially vulnerable customers. 

Examples of such casework findings over the last six months alone – resulting in fines and financial penalties totalling nearly £32.8 million – can be found in the following postings on the UKGC’s website:

Q2: What are the two new checks on customers that are being proposed?

The first is a ‘financial vulnerability’ check using publicly available data at ‘moderate rates of spend’, that is intended to be ‘unintrusive’ and ‘light touch’ in nature. Its purpose is to identify customers who may be “particularly financially vulnerable”. The second is an enhanced financial risk assessment (informed primarily by credit reference data) that is intended to be implemented “at unusually high loss levels where the risks are greater”.

According to the UKGC states, these policy proposals are ”designed to set consistent standards where there are unusual patterns of spend compared to the vast majority of customers”.

Q3: What will trigger and what will constitute a financial vulnerability check?

The UKGC proposes that a financial vulnerability check will be triggered when a customer sustains either (a) a £125 net loss within a rolling 30 day period or (b) a £500 net loss within a rolling 365 day period. 

For the purpose of this check, the phrase ‘net loss’ would mean “the loss of deposited money with a particular operator”, not including “the loss of restaked winnings or the loss of accrued bonus funds”. 

A financial vulnerability check would need to include, at a minimum, a customer-specific public record information check for significant indicators of potential financial vulnerability, including whether the customer is the subject of a bankruptcy order (or equivalent), an Individual Voluntary Arrangement, a County Court or High Court judgment, an Administration Order or Decree, or equivalent. 

It would also need to combine information already provided by the customer with public and geodemographic data which may flag a potential financial risk, including (a) information about the customer’s postcode area (such as deprivation index) and (b) information about the average salary for the customer’s stated employment status and job title.

There would be no requirement to conduct such a financial vulnerability check at the point when a customer reaches one of the above financial thresholds if the operator has conducted within the previous 12 months (a) such a check or (b) a financial risk assessment of the type described in the answer to Question 4 below. 

Q4: What would (a) trigger and (b) constitute a financial risk assessment?

The UKGC proposes that a financial risk assessment will be triggered when a customer has lost an unusually high amount (a) over a short period of time (i.e. during a so-called “binge gambling” episode) or (b) over a sustained period. 

In the case of (a) above, an assessment will be required where net losses of £1,000 or more have been incurred by a customer within a rolling 24 hour period. In the case of (b), such an assessment will be required where net losses of £2,000 or more have been incurred within a rolling 90 day period. 

The regulator also proposes that, in the case of customers aged 18 to 24, the triggers for this type of assessment will be half of the above-mentioned figures (i.e. where net losses of £500 or more have been incurred within a rolling 24 hour period or net losses of £1,000 or more have been incurred within a rolling 90 day period).

For the purpose of a financial risk assessment, the phrase ‘net loss’ would mean loss of deposited monies with an operator, not counting (a) accrued bonus funds or (b) the loss of restaked winnings during the relevant time period. That said, a net loss may take into account the net position of a customer who was in an overall net positive position in the immediately preceding 7 days (in the case of binge gambling) or the immediately 90 days (in the case of significant losses over time). 

When conducting such an assessment, at a minimum the operator would have to obtain data from a provider (or obtain a risk assessment from a provider) that includes (a) credit performance data and (b) income and expenditure data, including current account turnover data. Failing that, the operator “must obtain information about income and expenditure of the customer to help support its understanding of financial risk, for example, through open banking or the direct provision of information from the customer”. I can’t help but wonder whether this sits well with the original idea that these will supposedly be ‘frictionless’ checks.

There will be an important restriction imposed on the data obtained when undertaking a financial risk assessment, in that it must only be used by the operator to “consider the risk to the customer and decide what proportionate action to take” and “must not be used for any other purpose”.

Q5: What action would an operator need to take while a financial vulnerability check or financial risk assessment is pending?

 The UKGC proposes that a customer would be able to continue to gamble whilst a financial vulnerability check is taking place. It explains in the consultation document that “while it is important to assess the risk of particularly financially vulnerable customers, the vast majority of customers would not have any risk flags identified as part of the check”, adding that “it would be disproportionate to disrupt the activity of this vast majority while a check is taking place”. 

It also states that it has not proposed a timeframe during which such a check must be conducted but would like to receive views on that point, particularly “whether a long- stop for turnaround of these checks should be put in place in order to guard against complacency in this context and ensure that a check is conducted promptly”.

In relation to financial risk assessments, the UKGC proposes that until the required information has been gathered, risk flags considered and any necessary action taken, operators must limit potential gambling-related harm by preventing further deposits, explaining that this will “enable the customer to continue gambling in line with their previous decisions to deposit funds into their account, and to continue spending winnings that they might have in their account”, adding that this “presents a reasonable balance between preventing the risk of significant harm to consumers and allowing the customer a reasonable customer journey”. 

Q6: What would the operator have to do once it has received the results of (a) a financial vulnerability check and (b) a financial risk assessment?

The consultations includes the wording of (a) a new LCCP Social Responsibility Code provision 3.4.4 applicable to financial vulnerability checks and (b) a new LCCP Social Responsibility Code provision 3.4.5 applicable to financial risk assessments. 

In both cases the operator will be required to consider the financial risk information it obtains, together with all of the other information it knows about the customer and is permitted to use, in order to assess risk and take “proportionate action” if risk is identified. In circumstances where risk is identified, with the consequence that a decision will need to be taken about what action to take, that decision will have to be “made manually” (i.e. by a member of staff) rather than solely by automated means. In addition, the rationale for the decision on proportionate action will have to be recorded. 

It will also be a specific requirement in the case of a financial risk assessment that the operator will have to “consider the results of the financial risk assessment and take any proportionate action necessary before they allow any further deposits”.

Q7: What does “proportionate action” mean?

 In its consultation paper, the UKGC states that it does “not propose to set the detailed decision-matrix that an operator would be required to follow, as this would be very detailed and may be considered to be too prescriptive”. However, it goes on to say: 

“Dependent on what the checks show combined with information already held on the customer, action taken may include: 

  • No further action – in many cases, the financial vulnerability check will show no risk flags. Similarly, following a financial risk assessment the gambling may not represent a risk flag in the context of the individual’s financial situation, especially where there are no other indicators of harm;
  • Enhanced monitoring of account activity for further identification of further risk flags in cases where there is a low level of risk, or in combination with other actions; 
  • Contact with the customer to discuss their gambling or encouraging a customer to set deposit limits; 
  • Signposting to help and support, or encouraging self-exclusion;
  • Setting a deposit or loss limit on behalf of the customer;
  • Cessation of targeted marketing to customers showing strong indicators of harm; 
  • In some cases, stopping gambling temporarily or ceasing the customer relationship”. 

Q8: When will a “suitably effective and secure platform’ be in place to enable all of this?

 When the White Paper was published on 27 April. It was made clear that the UKGC will only consult on making data sharing on high-risk customers mandatory for all remote operators “once a suitably effective and secure platform is in place”.

Matters have moved forward since then with publication on 12 July of a letter from the ICO to UK Finance confirming that (a) data protection law does not stop operators from conducting financial risk checks on customers, and (b) lenders can share people’s personal information as long as this is done transparently and proportionately. 

Q9: Does this consultation address the ‘Single Customer View’ project? 

No it doesn’t but there has been a separate material development there because, on 13 July, in its ‘Regulatory Sandbox Final Report’, the ICO confirmed to the Betting and Gaming Council its support for the ‘Single Customer View’ (now known as ‘GamProtect’) project that will allow the sharing of information about customers identified as high risk who are gambling across multiple sites. 

Q10: Is it now clear what the UKGC means by the phrase ‘financial vulnerability’?

Hopes that a clear definition of “financial vulnerability” might emerge from this consultation have not been fulfilled. Perhaps there is no surprise there because (as mentioned in my June article for SBC News) the UKGC’s CEO, Andrew Rhodes, forecast at May’s CasinoBeats Summit in Malta a “fierce debate about vulnerability”, adding that “to an extent this is in the eye of the beholder. It is quite easy in many ways when you get a case that you look at and everybody goes ‘that’s awful’ – for everybody to see in hindsight that’s awful – it is much harder to define that when individual experiences can differ so greatly and circumstances can differ so greatly.”

It may be that this – together with what constitutes “proportionate action” of the type mentioned in my answer to Question 7 above – will be an area in which the UKGC will have to produce yet further formal Customer Interaction guidance in future to once again minimise the risk of confusion amongst operators regarding the regulator’s expectations. 

By the way, the financial vulnerability checks and financial risk assessments consultation does at least confirm that the long-awaited Customer Interaction Guidance, that had been anticipated to come into force on 12 September 2022 (or, failing that, February this year), should finally emerge from the shadows of UKGC HQ “later this autumn”.


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