The white paper – Proposals to update UK gambling legislation (VI)
We continue to publish extensive extracts from an important project subject to public debate by the British Government, the so-called White Paper.
By Dan Iliovici, Vicepreședinte ROMBET
Benefits of gambling
Gambling can be sociable, can help tackle loneliness and isolation, can enhance the enjoyment of other activities, and can be a valuable pastime in its own right, although quantifying these benefits is inherently difficult.
There are also economic benefits to having a well regulated industry to service this demand.
The gambling sector also contributes significantly to other industries, including sport, advertising and racing. (…)
Gambling can also contribute to tourism, for instance to seaside towns across the country, or high-end casinos attracting wealthy overseas visitors who spend across a number of other sectors while in this country.
Additionally, some gambling products enable charities and other non-commercial organisations such as sports clubs to raise valuable funds. ”
After this clarification, we continue the detailed presentation of the document.
Our conclusions
34. Operators are already required to identify customers at risk of harm and take action accordingly. Considering a customer’s losses in the context of their financial circumstances can be an important part of this. While many operators have already introduced systems, interventions often come too late or not at all, and the measures are inconsistently applied across the sector.
35. To further raise standards, a more prescriptive and risk-based model will be introduced, where remote operators are required to investigate the customer’s financial circumstances in response to certain loss triggers to understand if their gambling is likely to be harmful to them. Given that most gamblers are not spending more than they can afford or otherwise experiencing harm, we are mindful that these checks need to be proportionate. As such, our position is that they should only impact a minority of engaged customers, and involve unintrusive checks at moderate levels of spend to help identify particularly financially vulnerable consumers, and more comprehensive although still frictionless assessments for those spending more heavily.
36. The Gambling Commission will launch a consultation on the proposals for financial risk checks outlined in Box 3 below, with the aim of introducing changes in the licence conditions and codes of practice. The consultation will also consider how operators should respond to any findings from these checks in concert with their wider assessments of customer risk. Neither the government nor the Gambling Commission will set universal rules on what proportion of a customer’s income they should be permitted to gamble, but the intention is that these checks should be used to detect and prevent harm alongside all the existing obligations to consider a range of indicators of harm.
38. We recognise these proposals have significant implications for collection and handling of sensitive consumer data, raising important questions around privacy, data protection, proportionality, data accuracy, and reciprocal data sharing. The Commission’s requirements will specify that these checks should only be undertaken at the appropriate time and for legitimate purposes like harm prevention rather than to inform marketing tactics or disadvantage successful customers. We will also make sure consumers’ financial lives are not impacted through these checks, with credit scores being unaffected and potentially adverse consequences of reciprocal data sharing avoided. The Data Protection and Digital Information (No.2) Bill, currently before Parliament, includes some important clarifications to the rules around lawful processing and the circumstances in which personal data collected for one purpose can be used for other purposes, which should make the law clearer in this area.
39. While a wide array of evidence submitted to the Commission and this Review has shaped our proposals, three key information points have been important in helping to make sure our proposals are proportionate and properly address the identified risks. These include: (1) the amounts customers currently spend on gambling; (2) population level information about discretionary income (to assess how much money people have available to spend on gambling without being harmed); and (3) problem gambling rates and other information about harms. Our intention is that the thresholds and checks based on these considerations will be standard across the online sector and allow for financial risks to be monitored alongside the existing obligations on all operators to prevent harm through considering a range of indicators.
40. Some operators have argued that financial risk checks based on self certification (where customers declare their financial circumstances) could be sufficient for the new more prescriptive framework, or at least serve until frictionless checks are developed. While self certification can have a role in customer interaction (not least in encouraging customers to reflect on their spending at appropriate moments), it is unlikely to be an adequate basis for a thorough and accurate risk assessment, especially as those being harmed by gambling might be less willing to provide transparent or externally verifiable information. In our view, the more objective and accurate process outlined below is a more robust basis for assessment.
41. It is for the Gambling Commission to decide whether existing licence conditions and codes of practice are being met by operators, and the inclusion of proposals in this white paper does not in itself create new obligations. The specific thresholds and proposals below are based on the premise that frictionless checks will facilitate operators gathering the necessary information without disruption to the customer experience, for instance through needing to ask for payslips or bank statements as some operators do now. New requirements will not come into force until such a time as they are ready. 37. The Gambling Commission has been working with the Information Commissioner’s Office, financial services sector and others to develop the necessary framework to facilitate the sharing of credit reference agency data to enable checks which are frictionless from the customer’s perspective, and to enable a consultation to take place. We expect the checks’ development to involve advice from the Information Commissioner’s Office, the Gambling Commission’s public consultation, and a period of testing by credit reference agencies and operators, with live data only going to gambling firms once the necessary licence conditions including data safeguards are in place.
Box 3: Summary of proposed financial risk check model to be consulted on by the Gambling Commission
i) Financial vulnerability
● At a moderate loss threshold (we propose either £125 net loss within a rolling month or £500 net loss within a rolling year), operators should conduct a financial vulnerability check, considering the types of open-source indicators which many already routinely assess such as County Court Judgements, average postcode affluence, and declared bankruptcies. These checks should take seconds to process and would be frictionless for the consumer. We estimate only around 20% of accounts in a calendar year will trigger this check as most never lose this much gambling. Net loss means the loss of deposited money with a particular operator, and does not include the loss of restaked winnings from that operator.
● If the check raises concerns and no robust evidence to the contrary can be provided, operators will need to respond accordingly. A range of actions may be appropriate, depending on the risks identified and the customer’s broader risk profile, and this will be considered further in the Gambling Commission’s forthcoming consultation.
ii) Binge gambling
● In line with the Commission’s advice, we propose that any account with net losses exceeding £1,000 in a rolling 24 hour period should be subject to an enhanced spending check which provides much greater insight into a customer’s financial situation by accessing more personalized data to consider factors like discretionary income. Such rapid losses are highly unusual and exceed the discretionary income nearly all people likely have available for a day’s activity, so are therefore highly indicative of risk.
● The Commission is currently working with the financial services sector to explore how more detailed checks could work in practice and the expectation is that the majority would involve credit reference agencies and would not interrupt the customer journey unless the check raises concerns. We would expect the credit reference agency would be able to provide an overview of pertinent information for the individual customer, for instance an estimate of overall disposable income, rather than providing all the raw data to gambling firms. Where this is not possible, information may need to be collected directly from the customer, although there may be scope for streamlining this process using open banking (subject to safeguards to be explored through the Commission’s consultation). As now, this data will be used to inform an assessment of whether a customer’s level of spend is likely to be harmful to them. Again, a range of operator responses may be appropriate depending on findings and the wider risk profile, including applying limits to an account or ending the customer relationship completely where there are serious concerns. The details of the expectations on operators will be explored through the Commission’s forthcoming consultation.
iii) Sustained heavy losses over time
● Unusually high losses over a period of weeks or months are also sufficiently indicative of risk to be worthy of thorough investigation. In line with their advice to this Review, the Commission will consult on a proposed threshold of £2,000 net loss within a rolling 90 day period to trigger the enhanced checks outlined in section ii above.
● Alongside assessing the risk of harm, these financial circumstances checks give an opportunity to fulfil operators’ wider ‘know your customer’ obligations, for instance by considering customers’ source of wealth and whether that presents any additional risks, for instance if it may be linked to money laundering or other crime.
● We additionally propose that Personal Management Licence (PML) holders should be more clearly accountable for ensuring that these checks are completed at the right time for all customers and that appropriate action is taken based on the findings. This is in line with the Commission’s efforts to increase PML holder responsibility for the businesses as a whole, and will be explored further by the Commission through consultation.
iv) Young adults
● A case was made through submissions to our call for evidence and in the Commission’s advice that those who are legally old enough to gamble but still relatively young (for instance those aged 18 to 24) may be at particular risk of gambling-related harm – explored more fully in section 5.4 below. The reasons for this include lower impulsivity control and other common life stage factors such as moving away from parents or managing money for the first time. Data included in the Gambling Commission’s remote customer interaction consultation*1 shows that those aged 18 to 24 have the lowest average discretionary income of any adult age band, and according to Patterns of Play*2 they also have the lowest average gambling spend.
● Given these factors and the risks associated with remote gambling outlined at the start of this chapter, we think there is a clear case for extra vigilance on the part of operators when a customer aged 18 to 24 spends an unusually large sum gambling online. We believe halving the investigation thresholds in parts ii and iii above (i.e. to £500 net loss in 24 hours and £1,000 in 90 days for enhanced checks) is likely to be justified, and the Commission will explore this further through its forthcoming consultation.
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*2. https://www.begambleaware.org/sites/default/files/2021-03/PoP_Interim%20Report_Short_Final.pdf
