David Clifton: Licensing Expert – Musings on a pending White Paper

David Clifton

As I write this, the global gambling industry community has this week once more descended on London for the return of the ICE 2022 conference. Many of them may have thought that, by now, the potential future UK gambling regulatory landscape would already have been made clear, bearing in mind initial indications that the Government White Paper on the Gambling Act Review was going to be published before the end of 2021. That did not happen, although hopes are now pinned on its publication next month, if not before.

In the meantime, the rhetoric from all sides of the debate has stepped up, sometimes not necessarily adding to the quality of that debate, and we are all left guessing what the government’s proposals for reform will contain. However, in recent weeks a few clues about the content of the White Paper have been revealed in recent comments emanating from both Government ministers and the Gambling Commission.

With that in mind, let me take you through some White Paper related questions with my answers incorporating my thoughts arising from those clues.

Will there be some fundamental changes proposed in the White Paper?

The answer to that appears to be ‘Yes’. Concluding his keynote speech at the Gambling Reform Rally on 8 March, Gambling Minister Chris Philp could not have been clearer when he said: “Change is needed, and change is coming”, reinforcing his earlier comment in that speech that “Reform is undoubtedly long overdue …. as it is now significantly different from the last time our gambling laws were comprehensively reviewed some 17 years ago”.

A similar view has been taken in the Gambling Commission’s Interim Business Plan and Budget 2022-23, published last week, in which the regulator says: “We expect the Gambling Act Review White Paper to introduce several fundamental and far-reaching changes, implementation of which is likely to require significant effort from teams across the Commission”.

Will all of those changes require legislative change?

According to other comments made by the Gambling Commission in its Interim Business Plan, the answer to this question appears to be ‘No’.

It says that White Paper commitments will result in proposals to change both Commission policy and its Licence Conditions and Codes of Practice (‘LCCP’) implying that those commitments can be achieved following consultations on LCCP changes, without the need for any change in legislation. The Commission adds that it will seek to publish a timetable of proposed consultations, make them ‘more thematic in nature’ and “limit the number of individual consultations to avoid overburdening stakeholders and minimise consultation fatigue”.

Can we expect to see a focus on more effective use of data?

Without any doubt at all, the answer is ‘Yes’. Indeed that will form a central plank in the White Paper proposals.

Following up on comments in this respect in his GambleAware conference speech last December, Chis Philp said (in a House of Commons debate on 21 March), that “data should and will enable the Gambling Commission to do a much better job at identifying what the operators are really doing and getting a complete picture of whether they are intervening when people’s gambling patterns of behaviour indicate that there is a problem”.

This followed his 8 March speech when he had made clear what role he wanted the Commission to play in this respect, stating: “the big gambling companies have enormous troves of data which they use very effectively for the purposes of cross-selling, and encouraging people to gamble more. So I think we need to use that data to help protect the public, which means having a regulator that has the powers and capability to get hold of that data and properly analyse it, to understand where bad practices are happening and ensure compliance”.

Quite evidently the Commission is already on board with this proposal, its Interim Business Plan confirming that “data and insight will be a primary focus for the Gambling Commission next year” and that, in its proposed new role, it “will lay the foundations to make significant improvements in how [it] acquires and holds an increased range of data and leverages this to assist with its regulatory operations, as well as providing an open-source repository for stakeholders”.

Some commentators have queried how the Commission will be resourced to carry out such a role. That is a perfectly valid question but, once again, the answer is set out in the Interim Business Plan. The Commission says it will review its internal structures to ensure that it has “appropriate skills and resources available to deliver the new data programme” but, to accelerate its data agenda, “£1.1m of investment funding has been allocated from the recent increase in operators’ fees”.

What about affordability?

The answer is definitely ‘Yes’, we can expect to hear a lot more about affordability (as well as financial vulnerability) in the White Paper. Just as well too, because confusion on this topic presently reigns supreme.

It is clear that the Gambling Commission’s official line on affordability remains that the existing LCCP requirements remain in place requiring UK operating licence holders to take account of the 2019 customer interaction guidance.

Nevertheless, experience has shown that Commission officers conducting compliance assessments regard UK licensed operators as also obliged to take equivalent account of the Commission’s Enforcement Reports, the 2020 version of which stated that “customers wishing to spend more than the national average should be asked to provide information to support a higher affordability trigger such as three months’ payslips, P60s, tax returns or bank statements which will both inform the affordability level the customer may believe appropriate with objective evidence whilst enabling the licensee to have better insight into the source of those funds and whether they are legitimate or not”. In fact, one officer at the Commission’s HQ has gone so far as to say just over a month ago that this is “a current LCCP requirement”.

By way of contrast, in his speech at the GambleAware Conference in December, Chris Philp said (very sensibly in my opinion) that: “because people’s circumstances differ, affordability checks need to be proportionate”, adding that “as the Commission has said, demanding payslips or bank statements from every customer spending £100 or so is likely to be unwelcome, disruptive and disproportionate to the risks”. Although that would be an extremely welcome approach in terms of removing at least some of the present confusion, I have not tracked down any specific statement by the Commission to that effect. However, the Commission’s CEO, Andrew Rhodes, was in the same room when Chris Philp made his comments and, to my knowledge, no attempt has been made by him or anyone else at the Commission to correct the Minister’s assertion that those comments reflect the regulator’s own views on this subject. If that is what the Commission truly believes, I feel sure I am not alone in wishing they would make that clear. 

That is even more important now, given comment by DCMS Minister Nigel Huddleston at a Westminster Hall debate on 29 March to the following effect: “There has been particular discussion in recent weeks …. about the role of so-called affordability checks, where a customer’s financial circumstances are considered as part of assessing whether their gambling is likely to be harming them. Such assessments are undoubtedly a key part of the toolkit for preventing the devastating losses that we have all heard about but, to be workable and prevent harm, checks need to be proportionate and acceptable to customers”.

He added that the Government is closely working with the Gambling Commission on the responsibility and role of the financial services sector in the Gambling Act Review and will continue to do so ‘in the run-up to publishing the White Paper’.

I had hoped that all might become clearer when, on 14 April, the Commission published its long-delayed response to its Remote Customer Interaction Consultation (on which I say more below). However, now that has finally arrived no clearer indication has been provided with regard to the precise nature of the Commission’s current expectations on affordability checks

Will enhanced customer interaction requirements be set out in the White Paper?

The answer is ‘No’ because, despite Chris Philp stating on the issue of ‘enhanced requirements for customer interaction’ in his 8 March speech, that: “We’re going to address that in our review as well, to make sure the right protections are in place …. because there is a lot we must do through the Gambling Review to combat the risk of people falling into addiction”, the Commission has now at long last published its response to its Remote Customer Interaction Consultation, explaining what those new requirements will be.

I say ‘at long last’ because it is more than seven months since the Commission’s Executive Director assured us in his speech at the KnowNow ‘Social Responsibility for Gambling Operators’ conference that the Commission would be “publishing revised LCCP requirements on customer interaction in the coming weeks”.

The new customer interaction requirements, set out in a revised LCCP social responsibility code provision 3.4.3, will apply to remote B2C operating licence holders only. Described by the Commission as ‘stronger and more prescriptive’, they will come into effect on 12 September 2022.

The wording of the Commission’s own summary of the new requirements is that operators will be required to:

  1. monitor a specific range of indicators, as a minimum, to identify gambling harm
  2. flag indicators of harm and take action in a timely manner
  3. implement automated processes for strong indicators of harm
  4. prevent marketing and the take-up of new bonuses for at-risk customers
  5. evaluate their interactions and ensure they interact with consumers at least at the level of problem gambling for the relevant activity
  6. evidence their customer interaction evaluation to the Gambling Commission during routine casework
  7. comply with the above requirements at all times, this includes ensuring the compliance of third-party providers.

I don’t know about you, but I found the wording of number 5 completely baffling. It’s just as well then that the Commission is promising publication of new guidance that will be issued in June to “help operators understand and comply with the requirements”. It also says it “will engage with operators to enable the guidance to take account of queries we receive about the requirements following publication”.

In the meantime, the mysterious wording of requirement number 5 may be answered by the Commission’s following remarks within the main body of its response document: “Operators will be required to take account of problem gambling rates for the relevant gambling activity as published by the Commission, in order to check whether the number of customer interactions is, at a minimum, in line with this level. As the purpose of customer interaction is to identify customers at risk of harm, it is manifestly a failure if the numbers of customers being identified is lower than the problem gambling rates for the products.”

What about the Single Customer View?

Inextricably linked to the issue of affordability is of course the Single Customer View (‘SCV’) initiative and therefore we can expect quite a bit more on this topic in the White Paper. Indeed an assurance to this effect was given by the Gambling Minister on 21 March.

In addition, within the last month, the Information Commissioner’s Office has confirmed further progress in that the Betting and Gaming Council has entered Phase 2 of the Single Customer View (SCV) Regulatory Sandbox

Andrew Rhodes also spoke about the SCV in the following terms in his 11 April keynote speech at the World Regulatory Briefing (‘WRB’),

“We continue to work with industry and the Information Commissioner’s Office to develop a ‘Single Customer View’. The goal to make use of operator data to better protect consumers from harm, whilst protecting their personal data. The principles behind this are very simple. We know the average consumer who gambles has multiple accounts. For those at risk of harm, they will often have many accounts with many operators.

Today, it is possible for someone who is experiencing gambling harm and gambling out of control with one operator, to simply move on to another operator as soon as there is an intervention that stops or inhibits their gambling.

This can continue an almost infinite number of times, despite potentially every operator doing the ‘right thing’. What we are hoping will be possible through the Single Customer View is a position where those who are being flagged as being in distress can be intercepted at a much earlier stage as operators are able to safely alert each other. Of course, this will be complicated and there are many things to navigate, but we have the opportunity to stop the spiral of damaging levels of gambling much, much sooner than before.

So where will be the encouraging news for UK licensed operators?

 Back to Nigel Huddleston at the 29 March Westminster Hall debate whose comments gave cause for some optimism that the White Paper will achieve the same “appropriate balance between consumer freedoms and choice on the one hand, and prevention of harm to vulnerable groups and wider communities on the other” to which he referred when launching the Gambling Act Review back in December 2020.

He said on 29 March: “The White Paper’s measures will be based on the best available evidence to target risk proportionately. We want to prevent unaffordable losses and industry practices that exacerbate risk. We will also maintain the freedom for adults who choose to gamble to do so, and for a responsible and sustainable industry to service that demand”.

It is also to be hoped that the Gambling Commission will have sufficiently conveyed to the government the following message tucked away within his WRB speech: “We often talk a lot about what is wrong in the industry we regulate and the challenges we face. We are still too far away from where we need to be, but when I said earlier there are some universal truths, one of those for us is that we have seen a lot of improvements. Our compliance investigations are starting to find more evidence of good practice and clever interventions to make gambling safer”. It would be good to see some recognition of this too in the forthcoming White Paper.

Other UK regulatory news over the last month

I have deliberately focused above on White Paper musings, providing links to relevant further information. You can read on the Clifton Davies Consultancy website  related to wider gambling regulatory affairs and developments over the last month.

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David Clifton –  Director @ Clifton Davies

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