The UK risk of terrorist financing has increased from low to medium, according to the latest Gambling Commission money laundering risk assessment.
The government document details the current money laundering/terrorist financing threat landscape and is designed to provide the regulated gambling industry with a resource when developing their own frameworks.
UK-licensed operators are required to ensure their policies, procedures and controls are effectively implemented, as well as updated, so that they remain effective.
The UK’s national ML/TF risk assessment, last updated by the Home Office and the Treasury in 2020, lists the overall money laundering threat level as low in the gambling sector.
Despite this, certain types of gaming still possess a high risk when compared to others.
For example, the Commission says remote casino, betting and bingo has a high ML/TF risk level, while the National Lottery is categorised as low risk.
Significant changes in 2023 assessment
The most significant change in the risk assessment compared to the previous version is that the Commission has increased the overall terrorist financing risk to medium from low.
This came after the regulator re-evaluated its terrorist financing classification in collaboration with UK counter-terrorism specialists.
Outside of this change, the risk levels for all types of gaming activity have remained the same. However, within each activity, the Commission still made several changes.
For iGaming, the regulator has lowered the risk resulting from high value customers, or VIP schemes. This was highlighted as an area in the 2020 report and raised questions about how thoroughly KYC checks were being conducted.
The UKGC also has evaluated additional risks that did not get a full rating in the previous report. This includes organised crime gangs acting as customers, which has been evaluated as high risk.
Other newly considered risks include the use of vulnerable people’s gambling accounts to disrupt a financial trail, so-called mule accounts, and failures to implement a closed loop system.
Meanwhile, the remote betting threat level has increased for smurfing – the practice of laundering bets in small increments – as well as peer-to-peer betting, both of which now stand at high.
Commission launches new online tipline
The regulator has launched a new online confidential service to report criminal and suspicious activity.
It encouraged people with knowledge on match-fixing, underage gambling, money laundering, unlicensed gambling and any other criminal activity to come forward with their concerns.
Users can upload documents to support their reports, as well as send information by email or by post.
A Tory MP has blasted the Gambling Commission for a “heavy-handed” approach to regulation.
The UKGC has faced criticism in recent months for how it has chosen to discharge its regulatory responsibilities, in particular surrounding its approach to so-called affordability checks.
Writing for Conservative Home, Tory MP for Calder Valley Craig Whittaker said the Commission “all too often takes a heavy-handed approach to their work, and at times strays beyond the boundaries set for them by the government.”
The MP cited the example of the recently closed consultation on affordability checks, arguing the Commission is suggesting a more intrusive version of the checks than was set out in the government’s white paper.
He argued that the original document favoured “frictionless” checks over requirements for bettors to upload bank statements and other personal documents.
In Whittaker’s view, this contrasts with the latest form of affordability checks as consulted on by the UKGC. “[Could this] inevitably lead to customers being forced to submit their payslips to gambling operators?” he wrote.
The debate around affordability checks rages on
This issue of how frictionless affordability checks become has turned into an intensely contested issue.
Some have argued that a failure to correctly implement a frictionless version of the checks will see consumers forced to upload banking documents, and could therefore turn away from the regulated market.
The Commission has repeatedly intervened in an attempt to correct “misinformation” in the media about its proposals on what it prefers to call financial vulnerability checks.
This included an open letter to the Racing Post, penned by UKGC CEO Andrew Rhodes, that the newspaper refused to publish.
In September, Rhodes said that payslips would only be requested in 0.3% of accounts. This would be for users who do not consent to data sharing via open banking.
What role should the Regulator’s Code play?
In the column, Whittaker pointed to the Regulator’s Code, the government’s framework for how regulators should engage with those they regulate, as a model the Commission should aspire to.
The issue of whether the Commission is failing to follow this code is common criticism levied against the body.
In particular, the code includes a section stating “regulators should carry out their activities in a way that supports those they regulate to comply and grow”.
Some believe the Commission’s work on regulation has been onerous enough to represent a violation of this framework.
In a speech earlier in the month, Rhodes argued the code should be understood more as a set of guiding principles, rather than a rigid framework.
“The Regulator’s Code is not a long document – just seven pages,” said Rhodes. “It contains a number of very sensible guiding principles for regulators, but it is meant to be just that – a sensible set of guiding principles – it does not try to cover the exact application of regulation in all circumstances,” he said.
Whittaker also warned that if the UKGC falls short, then ministers could step in to “guarantee that the political direction they have set it is implemented”.
On Whittaker’s Register of Member’s Interests, the MP has listed several gifts and hospitality from the gambling industry and its trade bodies.
This includes a number of concert tickets given by the UK trade body the Betting and Gaming Council (BGC), as well as from Entain. The BGC also paid Whittaker £5,000 to present two seminars in July 2023.
The Gambling Commission has published the final experimental stage of the Gambling Survey for Great Britain, the new harms survey.
The “push-to-web” methodology is a change from historic efforts, which have traditionally relied on in-person interviews or telephone calls.
The survey is based on data from 4,000 responses gathered between May and April this year.
The Commission said it published the statistics so that users can become familiar with and understand the impact of the new methods and approaches before they become official statistics.
UKGC head of statistics Helen Bryce said: “This project is just one of the ways the Commission is looking to improve our understanding and build a stronger evidence base for our regulation, as set out in our evidence gaps and priorities for 2023 to 2026.
“We believe that better evidence, driven by better data will lead to better regulation, which in turn will lead to better outcomes.”
Findings of new harms survey
The new harms survey reported a headline problem gambling rate, defined as a score of eight or above on the Problem Gambling Severity Index (PGSI), of 2.5%.
This is significantly higher than the 0.2% figure, based on the quarterly telephone prevalence survey, that is often highlighted by the industry’s trade bodies. A further 3.5% of respondents scored between 3 and 7 on the survey.
The study also revealed that 50% of respondents said they gambled on any activity in the past 4 weeks, while 61% said they did in the past 12 months.
The discrepancy between the new and previous headline problem gambling rate has led to criticism from some quarters that the Commission needs to rethink its approach.
“The purpose of this figure is not only (as the GC implies) to compare trends over time, but is being used as we speak to inform gambling policy,” said Northridge Law LLP gambling regulatory lawyer Melanie Ellison LinkedIn.
“I can’t say which figure is right and which is wrong, but either the recent discourse has been based on a huge underestimate of the scale of the problem, or the GC’s new methodology is fundamentally flawed.
“Rather than calling this the ‘final step in the experimental stage of the project’, shouldn’t the GC be going back to the drawing board and seeking to find out whether it can have confidence in the new survey approach, before taking it forward?”
Strengths and weaknesses of new approach
The Gambling Commission said the new online methodology was “robust and future proof”, highlighting that several public bodies have switched to this method in recent years.
It also argued it is more cost effective than traditional methods, and as such, allows more people to be interviewed.
The regulator said this would enable it to do more detailed analyses than was previously possible.
Subsequently, the survey includes “more granular” information on each gambling activity, which is intended to gather information about both in-person and online gambling.
The Commission said the self-administered data collection methods should work to mitigate individuals lying about their gambling habits.
However, the new remote methodology involves a lower response rate. It also means the results cannot be compared to data from previous surveys, making it difficult to analyse trends in the short term.
Another issue is that studies conducted primarily online consistently produce a higher problem gambling rate than face-to-face methods.
“We are confident that with the work put in to develop and test our new methodology, allied with the scale of around 20,000 respondents a year that the Gambling Survey for Great Britain will have, we are doing everything we can to make sure our new methodology will be as relevant and robust as they can be,” said Bryce.
The UK government has tabled an amendment to the Digital Markets, Competition and Consumers Bill to exempt gambling contracts from new online subscription rules.
Under the new legislation, businesses will be required to give consumers specific information when they sign-up for subscriptions.
The new rules are included in the bill as part of an effort to tackle “subscription traps”.
Other rules involve reminding consumers before a subscription renews and ensuring they have a straightforward way to cancel subscriptions.
Some, including the society lotteries trade body the Lotteries Council, had argued the bill would negatively impact charity lotteries.
This would be due to the “increased legal, regulatory and marketing costs” required to maintain compliance with the rules.
It has been argued that society lotteries already face stringent subscription rules as part of the Gambling Commission’s consumer protection rules.
The Lotteries Council said many of the digital market bill’s rules would work to duplicate or be incompatible with the existing UKGC regulations.
While it noted it had been assured by ministers that society lotteries would be exempted, it had noted that this was previously not reflected in the text of the bill.
“Given the confirmed indications that the government do intend charity lotteries to fall outside the scope of the bill, we believe an explicit exemption… would be desirable in order to ensure clarity in law while also delivering on the government’s intention,” said the Lotteries Council in July.
Government amends bill in face of society lottery criticism
In the bill’s third reading in the House of Commons, secretary of state for enterprise and markets Kevin Hollinrake (pictured) said “it is certainly not our intention to capture those [society lottery] contracts” in the bill.
“We are therefore introducing an amendment to clarify that gambling contracts, which are already regulated under gambling laws, are excluded from the scope of the subscription contract measures.
“I trust that the amendment will offer them, and those in the industry, clarity on the matter.”
The amendment to exclude any gambling business from the subscription rules was welcomed in the third reading debate by SNP MP and spokesperson for business and trade Richard Thomson.
Thomson highlighted the risk of society lotteries being caught up as an unintended consequence of the legislation.
“I am absolutely delighted that the government appear to have listened, and have tabled government amendment 170,” he said.
The UK government has responded to a petition calling for it to abandon plans to implement so-called ‘affordability checks’ for gambling customers.
The petition, launched on 1 November, has more than 86,000 signatures at the time of writing.
The government is obliged to respond to any petition which exceeds 10,000 signatures. At 100,000 signatures, the petition must be legally considered for a debate in parliament.
In its written response to the petition, the Department for Culture, Media and Sport (DCMS) reiterated several previously argued points around the frictionless nature of the proposed checks.
“We are committed to a proportionate, frictionless system of financial risk checks, to protect those at risk of harm without overregulating,” it said.
Both the government and the Gambling Commission (UKGC) recognise concerns over the checks, it added.
The government and UKGC agree that the new system “should not unduly disrupt the millions of people who gamble without suffering harm, and should not cause unnecessary damage to sectors which rely on betting, in particular horseracing,” it said.
DCMS also suggested that the proposals will represent a “significant improvement” for businesses and customers alike when compared to the current situation.
At present, it argued, operators are applying “inconsistent” affordability checks on customers, often without clearly explaining why, and requiring customers to provide data to them manually.
The government has “challenged operators to be more transparent with customers in the interim,” it said, but the industry will benefit from the introduction of clearly defined rules by which all operators must abide.
Further, the proposed system will allow financial data to be “shared seamlessly with operators instead of burdening customers with information requests,” it added.
It also insisted that the government and UKGC will not mandate the proposed checks “until we are sure that they will be frictionless” for the vast majority of customers checked.
In its response, DCMS also pointed to the “important link between betting and horseracing” raised by the petition.
The government recognises the “enormous value of horseracing,” it said, both as a spectator sport and through its contribution to the UK economy.
It pointed to previously published estimates from the Gambling Act review white paper, which suggested financial risk checks would reduce online horseracing betting yield by between 6% and 11%.
That, in turn, would reduce the income of the racing industry by between £8.4m and £14.9m annually, it said, or around 0.5%-1% of its total income.
The drop in income would come about via a reduction in levy, media rights and sponsorship returns, it said, but the government is “working with racing and refining that estimate”.
It has also “commenced a review of the Horserace Betting Levy to ensure a suitable return to the sport for the future,” it added.
Both the government and UKGC continue to work with the industry to ensure checks can be implemented in an effective but proportionate way, the response said.
They are also “exploring the role of pilots or phased implementation to help ensure this.”
The UKGC is expected to set out more detailed plans related to the checks in due course.
The UK Gambling Commission (UKGC) has opted to reveal the full list of the next round of consultations.
The seven selected topics range from the UKGC’s work in actioning the provisions of the government’s Gambling Act white paper, as well as regulation not included in the document.
“We are rightly putting emphasis on implementing the government’s Gambling Act review recommendations,” said UKGC executive director Tim Miller.
“This goes hand in hand with our vital regulatory ‘business as usual’, to keep gambling safe, fair and crime free,” he added.
While officials have given details on the winter tranche of consultations in the past, this is the first time it has revealed the full list.
The consultations are planned to last 12 weeks, with an expected closing date of Febraury-March 2024.
Financial penalty transparency
One surprise that has not been previously reported is a consultation on financial penalties. Enforcement action has ramped up recent years, partly as a result of focusing penalties on repeat offenders.
UKGC chief Andrew Rhodes has spoken in the past about how a significant percentage of overall global regulatory penalties stem from the UK.
Miller said the regulator’s new proposals will change how the body calculates the penal element of financial penalties imposed following a breach.
“Our proposals will seek to bring greater clarity and transparency to the way we calculate such penalties,” he said.
“This will include measures to ensure that penalties are set at a level where the costs of non-compliance outweigh the costs of compliance,” he added.
UKGC to consult on free bets and bonuses
One item that has been well trailed by Commission officials will be a review of socially responsible incentives. This will include proposals surrounding free bets and bonuses to ensure they are not promoting harmful or excessive gambling.
In the white paper, the government said the consultation would look into measures like a cap on wagering requirements and an appropriate minimum time frame for customers to claim a bonus.
The UKGC also intends to investigate customer-led tools. This will look at potential improvements to deposit limits – such as making them opt out rather than opt in – as well as examining ways of making gambling transaction blocks as strong as possible.
Transparent protection of customer funds will also be on the agenda. The regulator said it intends to consult on proposals to increase the transparency to consumers if their money is held by an operator that offers no protection if it becomes insolvent.
The Commission added it will consult on removing the existing requirement for operators to contribute to a set list of research, prevention and treatment providers.
This comes as the government considers imposing a mandatory levy on gross gambling revenue to replace the current system of voluntary contributions.
In October, DCMS announced it had launched the statutory levy consultation, with a proposal for a sliding scale based on potential harms and capping out at 1%.
Making better use of operator data
The regulator will also be looking at increasing the frequency of reporting for licensees from annual to quarterly.
In an October update, UKGC director of research and statistics Ben Haden said the organisation planned to make better use of operator data.
He said this will grant the Commission an improved understanding of the impact of policy changes, in particular resulting from the Gambling Act review.
“When we evaluate, we want to be able to get early indications of impact, where we may need to take different action as a result. It may also mean less ad-hoc requests from operators in relation to each change.”
The Commission is also proposing a consultation to investigate financial key event reporting.
This will involve proposals amending its rules so that licensees provide information on their finances and interests, which the body said will enable them to strengthen its risk-based approach to regulation.
“This is particularly important given the changes seen in the sector over recent times, particularly the increase in complexity of mergers and acquisitions and the globalisation of gambling,” said Miller.
This latest batch of consultations are the latest to be launched by the Commission. The body recently closed the first tranche that had gone out in the summer.
Among other measures, this looked at the government’s proposed affordability checks, often considered the most controversial of the white paper’s provisions.
Andrew Rhodes, the Gambling Commission’s (UKGC) chief executive, has defended the regulator’s work in the face of an increasingly acrimonious national conversation.
In a speech to industry executives, Rhodes noted how polarised the debate around gambling has become in the UK, highlighting the body’s previous work in challenging “misrepresented statistics”.
“Everyone is entitled to their opinion, but some of what has gone on has been an unedifying sight and I am not sure is helping anyone,” he said.
As such, the Commission chief said he was committed to having difficult conversations with industry.
As part of this, Rhodes called for a more “grown-up relationship” with the sector. He argued this involves being transparent about important issues and taking a collaborative approach in addressing them.
Debate around affordability checks rages on
Certain aspects of the governments planned reform of the gambling industry, as laid out in April’s Gambling Act review white paper have been subject to controversy.
A particular flashpoint has been the imposition of affordability checks. The Commission has said light checks will trigger at a £125 net loss over 30 days, with more rigorous credit checks to kick in for customers spending £1,000 in a 24-hour period.
Much of the debate has centred around the UK racing industry, which depends heavily on gambling income. Some campaigners are sceptical the checks will be truly “frictionless” as promised by the government.
A petition launched by the head of the Jockey Club to halt the introduction of affordability checks has reached 77,000 signatures as of 10 November.
Rhodes argued the debate around horse racing has become “exceptionally difficult and sometimes very bitter”.
He cautioned that the regulator would not give the horse racing sector special treatment.
“It is not the job of the Gambling Commission to consider or advise on the wider implications for any given sport – that is the role of DCMS,” he said.
“However, that doesn’t mean the Commission does not therefore consider what is proportionate or is indifferent.”
To this end he highlighted the Patterns of Play research highlighting that horse racing betting receives disproportionate revenue from a small group of customers, even more so than other forms of sports betting.
“The current campaign from many in the horseracing industry is to petition that there should be no checks at all on how affordable someone’s gambling is on horseracing,” he said.
“This is a point of principle disagreement – it does not matter whether checks are frictionless or not, the point of the argument is there should be no checks at all.
“The call being made here is for unlimited and, quite literally, unchecked gambling losses on a sport, to support the growth and continuation of that sport.”
Rhodes ultimately rejected the arguments from the racing industry, suggesting that the industry was only in this situation because there have been too many egregious cases in the past.
“Socially and politically unacceptable”
These stories, he said, have become “socially and politically unacceptable” as such enforcement action escalated and ultimately a line was drawn.
“A year ago I set out, at a high level, how I wanted our relationship to work,” said Rhodes. “There is an unavoidable and inescapable tension between the regulator and the regulated. However, that does not need to be adversarial as a point of principle.
“Compliance is non-negotiable and having a better relationship, a more constructive mutual relationship, does not mean standards drop. It can mean, however, we navigate difficult things in a better way and that is very much my intention.”
The Gambling Commission (UKGC) has appointed Nick Rust as the chair of its newly established Industry Forum.
The forum was announced in September, and will be made up of members from Britain’s gambling industry in order to provide further insight to the regulator on the views of operators.
It is expected to comprise 10 members, representing the wide range of operators in British gambling, and will share industry views with the UKGC on topics including account management, industry consultations and the regulator’s data programme.
The forum will sit alongside a range of stakeholder engagement initiatives undertaken by the UKGC, including its Lived Experience Advisory Panel, Advisory Board for Safer Gambling and Digital Advisory Panel.
Rust will assume his role as chair of the Industry Forum from November, the UKGC said, and will serve for a period of two years.
Nick Rust background
In the past, Rust has held several prominent positions within the British gambling industry, including six years as the CEO of the British Horseracing Authority (BHA).
He currently serves as the chair of the Starting Price Regulatory Commission and as a non-executive director of Redcar Racecourse.
Rust is also a founding partner of GVS EQ, a specialist consultancy in the horseracing sector, and a trustee of the Injured Jockeys Fund.
His former roles include managing director of retail for Ladbrokes, managing director for remote gambling and Coral retail at Gala Coral Group, and managing director of Sky Bet.
“I am delighted that Nick has been appointed as the inaugural Chair of the Commission’s Industry Forum,” said Gambling Commission chair Marcus Boyle.
“Nick’s extensive knowledge of the gambling sector makes him a valuable asset, and I am confident he will work with us to create a productive and insightful Industry Forum.”
Earlier this month, DCMS secretary Lucy Frazer MP appointed seven new commissioners to the Gambling Commission Board of Commissioners, the regulator’s oversight body.
DCMS minister Lucy Frazer has defended the government’s approach to affordability checks as industry criticism mounts.
In an op-ed in the Racing Post, which has been highly critical of the proposals on affordability checks, Frazer said the checks will be frictionless, apply only to “the very highest” spenders and would not apply on the racetrack or in betting shops.
While the minister warned against pre-empting the Gambling Commission’s consultation on the measure, she said the government was committed in standing by these promises.
“I can assure Racing Post readers we will never roll out the proposed checks until we are certain they do what they say on the tin,” she said.
Also dubbed financial vulnerability checks, affordability checks are considered to be among the most controversial provisions of April’s Gambling Act white paper.
Critics include gambling industry heavyweights, horse racing executives and members of parliament.
Anti-affordability checks petition launched
A 1 November petition calling for the government to “abandon the planned implementation of affordability checks” has reached 38,000 signatures as of Friday morning.
Introduced by Jockey Club CEO Nevin Truesdale, the petition has a 1 May deadline to hit 100,000 signatures. If this takes place, then the petition must legally be considered for debate in parliament.
Frazer, however, argued the current industry system of spotting unaffordable losses is neither beneficial to punters or business.
She argued current checks “are often inconsistent, ad hoc and can be unnecessarily onerous, with customers having to manually provide reams of personal data to navigate a maze of different tick-boxes”.
She added: “This government is not in the business of telling people how they can and can’t spend their money.
“But we know, for some, gambling leads to a dangerous cycle of addiction that can feel impossible to escape. We have a duty of care to those at the greatest risk of devastating and life-changing financial losses.”
The debate around affordability checks has heated up in recent months.
In a September speech, Gambling Commission CEO Andrew Rhodes blasted “deliberate misinformation designed to muddy the waters of debate and to torpedo the implementation of government policy”.
The exact details of what these checks will look like in practice is not settled.
The Commission received more than 3,000 consultation responses from interested parties for their summer tranche of consultations, of which affordability checks was included.
The exact workings of the measures will depend to a great extent on the Commission’s published response to the affordability checks consultation.
Earlier this week, UK-licensed operator Kindred Group said it was broadly in favour of affordability checks, but only if they are “truly frictionless” for the end user.
DCMS secretary Lucy Frazer MP has appointed seven new commissioners to the Gambling Commission Board of Commissioners, the regulator’s oversight body.
The new commissioners will join their six existing colleagues on the board, as well as the chair Marcus Boyle (pictured).
They will serve a mix of four- and five-year terms, as well as receive £14,160 per year for their work.
The Board of Commissioners oversees the work of the regulator’s executive team to ensure it is effectively meeting its licensing objectives.
Commissioners are appointed to bring a range of perspectives and experiences to the organisation, with most coming from outside of industry.
The new members include Lloydette Bai-Marrow, an anti-corruption specialist and economic crime lawyer.
Bai-Marrow is founding partner of economic crime consultancy Parametric Global Consulting and sits on a number of boards and committees.
DCMS also announced Charles Counsell OBE will be one of the Commissioners.
In addition to his work as CEO of The Pensions Regulator, Counsell has also served as chief executive of the Money Advice Service.
Helen Dodds OStJ, Human Tissue Authority board member and trustee of St John’s Eye Hospital Group, will also sit on the board. Dodds is a solicitor by training and a director of LegalUK.
Other board members comprise financial services and compliance expert Sheree Howard, criminal law and regulation barrister Claudia Mortimore, public and private executive Helen Phillips and civil servant David Rossington CB.
Gambling Commission work in 2023
Following the April publication of the long-awaited Gambling Act white paper, the Commission has been engaged in the work of bringing about reform.
This has involved a number of consultations on many of the specific provisions, including that of financial vulnerability checks, often dubbed affordability checks.
This is often considered to be among the most controversial measures as outlined in the white paper.
Other ongoing projects include the pilot of the Single Customer View, the development of a new gambling participation and prevalence survey, and the day-to-day regulation of the UK gambling sector.