Keeping up with the compliance juggernaut

As the gaming industry continues to grow, so too do the increased regulatory obligations for operators to ensure they are compliant. In particular, there is intensifying responsibility regarding ring fencing within the industry, which is causing growing concern for operators in or looking to enter regulated markets. Regulatory obedience is by no means new; however, the expectation of egaming providers is not only to be compliant, but to assess the effectiveness of their own compliance and be cognisant of responsible gaming obligations. Regulators are more concerned than ever about protecting the consumer and will make bold actions against non-compliant operators to guard them.

The 5^th Anti-Money Laundering (AML) Directive, which requires Member States to implement it into national law by 2020, places increasing emphasis on the adoption of a risk-based approach. The impact is that operators face a diverse assortment of legal and regulatory AML obligations which must be adhered to. The potential nuances between jurisdictions, and failure to comply with them, may lead to serious sanctions against non-conforming operators.

The regulatory differences reach far beyond AML and Countering the Financing of Terrorism (CFT) requirements. Responsible Gambling laws, marketing restrictions and the regulatory financial reporting of each country must also be carefully considered. The extent of regulation which must be adhered to is broad and where operators conduct business across various jurisdictions, the knowledge and understanding of the operator’s compliance becomes increasingly paramount.

On a global scale, countries are continuing to establish their own egaming laws and regulations. Sweden adopted its own regime in January 2019 and The Netherlands has approved its own regulations, which are targeted for enforcement by 2021. It is ever more apparent that operators must have a full understanding of the requirements of each market they wish to target.

Failure to comply with regulatory obligations may lead to various sanctions and, dependent on the severity, a revocation of licence. In recent months, there have been a handful of occurrences where individuals who hold key functions under their licences have been subject to sanctions for the neglection of responsibilities towards the gaming licence.

What can operators do to get on top of it?

It is paramount that operators are proactive in maintaining a full understanding of the rules and regulations of the various markets that they operate in. This can be achieved through regular reviews of the regulators’ website, subscribing to appropriate news articles and publications and undertaking comprehensive training on a regular basis.

Training should be mandatory for all relevant staff members to ensure that there is a continual appreciation of compliance with the regulatory bodies’ requirements. Key training should be undertaken by staff across all areas, including:

• the various product channels;
• the requirements and restrictions of marketing to customers and;
• the obligations of the operators to monitor and report cases of suspicious activity and fraud.

Comprehensive procedures and systems should also be put in place for regular health checks.

It is now common practice for operators to have a team of in-house compliance experts, responsible for ensuring the complete adherence to regulations in the various jurisdictions they operate. It is however unfeasible for the operator alone to be able to maintain a high standard of compliance and so they should look to work with specialist third-party experts to keep on top of the ever-changing landscape.

An audit can be sprung upon a firm by the regulator at any time, and often identifies severe deficiencies in the operators’ compliance, leading to urgent remedial actions. It is at that point that operators often engage with third parties to assist in the rectification of the identified deficiencies, often at great financial cost, rather than seeking support to remain compliant in the first instance.

Author: James Lees, regulatory compliance officer, SMP egaming

Bio: James Lees joined SMP eGaming in 2018 as regulatory compliance officer and holds a first-class law with business degree from the University of Northumbria. James is currently studying towards a diploma in Legal Practice, and a master’s degree in Professional Legal Practice.