In a week that saw the UK’s gambling industry come to terms with a myriad of regulatory changes, we spoke to licensing expert David Clifton, who discussed the finer details of the regulations, as well their wider implications on the industry as a whole.

PaymentExpert: Firstly do you believe these changes, followed by the UK’s AML changes will usher in a year filled with regulatory hurdles for the UK gambling sector? 

David Clifton: The credit card ban and the AML changes are just the start of what looks set to be a whole year of increasing regulatory hurdles for the UK gambling sector. The real question is how effectively it will jump those hurdles or, better still, avoid them altogether. 

The height of the hurdles will largely depend on the outcome of this year’s parliamentary review of the Gambling Act 2005, the preparatory work for which has already started according to a Minister’s statement in the House of Commons last week. 

The emergent threat is the public health lobby, where the Chief Executive of NHS England, the National Mental Health Director and the Secretary of State for Health & Social Care have all come out with swingeing criticisms of the sector  – in some cases entirely unsubstantiated – in recent weeks. Every indication is that this will be a year of immense challenge.

PE: The latest ML regulations abide by EU guidelines, is this a matter of necessity or simply a coincidence and you believe this will change post Brexit? 

DC: Until 31 January, the UK is still a member of the EU. As such, it was required to implement the 5th Money Laundering Directive into national law by 10 January. Brexit timing uncertainties meant that all of the major preparatory steps for the new regulations were left until absolutely the last minute, including publication of the Gambling Commission’s updated AML guidance. 

So there is no question of coincidence here and I see no real possibility of any backtracking once the UK has left the EU. What’s more, during the Brexit transition period (which will last until 31 December 2020), all EU rules and regulations will continue to apply so I expect to see the UK adopt in December this year – at the same time as the remaining EU Member States – the principles embodied in the 6th Money Laundering Directive.

PE: How much of a challenge does the rapid implementation requested by the UKGC require of casino operators in terms of the updated AML guidelines? 

DC: The Gambling Commission has acknowledged that affected operators need time to implement changes to their AML/CTF risk assessments, policies, procedures and controls but it has made it clear that it expects them to act promptly and to invest appropriately (if technology is required to accommodate the changes). 

Urgent action is therefore required and any operators who have not yet commenced work on this should really get their skates on. The Commission has not specifically highlighted the precise changes it made to its AML guidance document, but you can find on the Clifton Davies website here a marked up a copy of that document, showing those changes highlighted in yellow, together with some accompanying comment.

PE: Could the onus fall on credit card companies and e-wallet providers to ensure that the credit card ban is observed? 

DC: Neither credit card companies nor e-wallet providers are regulated by the Gambling Commission so no onus falls on them from a gambling regulatory perspective.

However, the Commission has said that the new licence condition 6.1.2 imposing the ban with effect from 14 April “will impose a responsibility on operators to only accept payments via e-wallets in circumstances where the wallet provider can assure the operator that they can prevent payment for gambling by credit card”. 

It therefore urges operators “to make contact with their third-party wallet providers whose payment facilities are made available through the operator’s website or app, to ensure they understand how the wallet provider intends to proceed”.

As a consequence, e-wallet companies will need to work with credit card companies to ensure that the former can “demonstrably prevent the use of credit cards for online gambling through their wallets”. 

The three largest e-wallet providers in the gambling market have apparently told the Commission that they can build a solution but smaller providers will need to decide whether to develop their own solution  or instead withdraw from the UK gambling market altogether. You can find more information in these respects at paragraphs 3.77 – 3.79 of the Commission’s Consultation Response document.

PE: Where does the blockchain sector fit into the regulations?

DC: It may be thought by some that the credit card ban can be side-stepped by use of cryptocurrency. It’s not as simple as that. In the UK, the Gambling Commission would need to be satisfied that all money-laundering concerns and other risks to the licensing objectives have been adequately addressed before authorising licence-holders to accept payments by such means. 

What’s more, the 5th Money Laundering Directive, and hence the national laws of all EU Member States implementing that directive, have added an element of regulation and accountability to cryptocurrencies and those employing blockchain technology to use them. The UK’s Money Laundering and Terrorist Financing (Amendment) Regulations 2019 reflect this. 

With effect from 10 January 2020 (when those regulations came into force), the Financial Conduct Authority (FCA) has become the supervisor of UK crypto-asset businesses for AML and CTF purposes.

The Gambling Commission has advised its licensed operators to verify whether any business activities (including where crypto-asset money service business facilities are offered to consumers) fall within the scope of the Regulations and are therefore subject to supervision by the FCA. 

More information about the use of crypto-assets or blockchain technology (whether as a currency to be used for gambling, as a way to fund a gambling business or as a means to deliver gambling products) can be found on the Commission’s website here.