David Clifton: What does the future hold with a new UKGC CEO?

Licensing expert David Clifton, Director at ‎Clifton Davies Consultancy, tries to read the runes (or the many strategy documents) to discern what the new Gambling Commission (UKGC) CEO has to deal with during his 18 month tenure.

The last month has seen the arrival of a new, albeit ‘interim’, Chief Executive at the Gambling Commission. With an employment background of senior positions in higher education, the Department for Work & Pensions, the Food Standards Agency and the DVLA, Andrew Rhodes will clearly have been regarded as a ‘safe pair of hands’ to lead the Commission through what will be an extremely challenging 18 months period.

The advertised job description for this post left no doubt as to expectations, explaining as it did to potential candidates that “you will join us at an important time as we seek to transform our own organisation, whilst continuing to pursue widespread improvements in protection for consumers”. The interesting word there is “transform”, the dictionary definition of which is “to change completely the appearance or character of something or someone”.

That expectation was underlined by the job description’s requirement that the successful candidate would “have the capability, conviction and credibility to review and reset every aspect of our operation if necessary”. An obvious conclusion is that one of the new CEO’s first tasks is to address some damning criticisms of the Gambling Commission’s performance received last year from each of the National Audit Office, the House of Commons Public Accounts Committee, the Gambling Related Harm All Party Parliamentary Group and the House of Lords Select Committee on the Social and Economic Impact of the Gambling Industry.

One can now add to that list subsequent criticism of the Commission from all sides that has led to last month’s announcement of an independent review into the regulation of Football Index. That review, conducted by the Government’s appointee Malcolm Sheehan QC, is focusing on the role of the Commission and other relevant regulatory bodies, including the Financial Conduct Authority. Its aim is to provide “an objective account of their actions, identify any lessons, and inform the government’s Review of the Gambling Act 2005. The intended outcome is that Mr Sheehan’s report will “provide recommendations, if required, as to changes to regulatory practice or to gambling legislation so as to provide necessary and proportionate protection for the public in relation to complex betting products”.

Notwithstanding all of those challenges ahead of him, Andrew Rhodes laudably greeted his appointment with the words: “this is a great time to have the opportunity to work in gambling regulation”. I wish him well.

Just in case any UK licence-holders are hoping for the new CEO to introduce a dramatic relaxation in the Commission’s approach to gambling regulation, I should emphasise that other comments attributed to him provide no indication whatsoever that any material change in that respect is on the cards. His declaration that “protecting the public and players from gambling harm will continue to be central to our work” came as no surprise, particularly given the Commission’s intention to “build on the work it is already doing”, as was clearly stated within its three-year Corporate Strategy and annual Business Plan published in April.

Without any previous professional knowledge or experience of the gambling industry, Andrew Rhodes is inevitably facing a very steep learning curve. As a result, I imagine that his reading list will already include the regulator’s ‘Statement of Principles for Licensing and Regulation’. In the interests of achieving the crucial balance required for the purposes of proportionate gambling regulation, I will not be alone in hoping that he takes due note within that document of the Commission’s longstanding and clearly stated principles (a) to “use the least intrusive regulatory tool to achieve compliance”, (b) to “have regard to the desirability of promoting economic growth”, (c) not to “impose unnecessary regulatory burdens in upholding the licencing objectives and (d) to “provide a fair regulatory framework within which existing operators and new entrants can compete and grow with as limited a regulatory burden as is compatible with the protection of consumers, the protection of the wider public, and the upholding of the licensing objectives.”

He will be assisted in confronting the challenges ahead by last month’s Government announcement that the fees payable by UK licence-holders to the Gambling Commission will be increased in line with the regulator’s own proposals in order to “deliver additional resource for the Gambling Commission to address industry concerns”. The key changes are set out below:

  • a 55% increase in annual fees for remote operating licences on 1 October 2021;
  • a 60% increase in all application fees by 60% from 1 October 2021;
  • other changes made to simplify the fees system, including removing annual fee discounts for combined and multiple licences, on 1 October 2021; 
  • a 15% increase in annual fees for non-remote operating licences, implementation of which will be delayed until 1 April 2022.

It may be some time yet before we hear Andrew Rhodes’ maiden speech as CEO of the Commission. Ahead of that, there were some encouraging words on reduced levels of problem gambling within the ‘Reducing Risks, Tackling Harms’ speech given on 20 May by Sarah Gardner (then the regulator’s Acting Joint Chief Executive) and I hope to hear more in a similar vein at the forthcoming 4th Annual KnowNow Conference on 7 and 8 September, which I will have the pleasure of chairing and at which the Commission’s Executive Director, Tim Miller, will be delivering a keynote speech.

In the meantime, on the subject of encouraging news, tucked away in the Commission’s recent posting entitled “Understanding how consumers engaged with gambling advertising in 2020” is the following statement: “We should be clear – our official statistics on gambling participation don’t indicate an increase in gambling through the pandemic period, in fact the opposite. Similarly, we aren’t seeing an increase in problem gambling rates at a population level”. 

That posting continues with the words: “nonetheless, all who are interested in gambling related trends should be alert to the potential risks of ad exposure to different population groups”. That is sensible advice even though the DCMS Minister with responsibility for lotteries and gambling (John Whittingdale MP) answered recent parliamentary questions on the same subject by maintaining the Government’s previously stated line that “the existing evidence base does not demonstrate a causal link between exposure to gambling advertising that complies with the current rules and problem gambling”.

However, as is always the case, complacency on the part of the industry should be avoided. This was borne out by last month’s press release entitled “Impact of Covid-19 on gambling behaviour – operator data from April 21”, in which the Gambling Commission warned that “extra operator vigilance continues to be needed”. Amongst other reasons, it based this warning on the fact that, although the easing of lockdown restrictions is taking place, people are still spending more time at home and, as recent research conducted for the Commission has shown, most online gambling in Great Britain takes place via mobile phones at home. In addition, the Commission points out that many people are likely to be feeling more isolated and vulnerable as a result of the length of the pandemic period, the restrictions that are still in place and further uncertainty about their personal or financial circumstances. I strongly recommend that all UK licensed online operators should read the above press release to ensure they are fully aware of the Commission’s continued expectations.

Complacency should similarly be avoided on the AML front. Recent weeks have seen identification by the Gambling Commission of emerging money laundering risks in the areas of innovations in crypto-assets, the quality of SAR submissions, insufficient due diligence checks and the threat of organised crime. Arising from this, operators should have reviewed their ML risk assessments and AML policies, procedures and controls accordingly. 

In addition: 

  • updated guidance relating to the Proceeds of Crime Act 2002 from the Crown Prosecution Service has raised the spectre of future section 330 POCA ‘failure to disclose’ prosecutions and given rise to publication of a SAR reminder by the Gambling Commission to UK licensed operators and
  • within the last month, the Commission has also drawn attention to (a) the NCA’s National Strategic Assessment of Serious and Organised Crime and (b) other relevant AML developments, including new UKFIU podcasts and advice what gambling operators should do if they find dye-stained bank notes on their premises.

I have been searching for a positive note with which to conclude this month’s article. I am delighted to say that it has been provided by the International Betting Integrity Association and H2 Gambling Capital, whose collaboration has served to produce a very interesting report entitled “An Optimum Betting Market: A Regulatory, Fiscal & Integrity Assessment”. As they have explained, “the purpose of the collaboration was to examine a range of different regulatory models for betting globally and to evaluate the relative strengths and weakness of those markets”. 

In this immediate time of national pride/disappointment in UK home nations’ prowess against international competitors, it is good to see Great Britain coming first in something! With a top mark of 93 points, it is applauded by the authors of the report for its “robust regulation, moderate operator costs and taxation” that “represents one of the earliest pieces of online gambling legislation and remains one of the best examples of regulation globally”. I hope Andrew Rhodes will be reassured to read that! Despite all of the challenges to regulator and regulated alike (to which I have referred above), it is gratifying to read that the report concludes that GB is “forecast to retain high operator numbers and channelling rate”.

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