The Italian job: How Italy-facing operators must adapt to the fast pace of changing regulation
Maxima Compliance managing director Antonio Zanghi discusses the increasing need for an agile approach to compliance in the Italian market for new market entrants following a significant increase on the regulatory burdens for operators
Italy has not been the easiest place to operate over the past couple of years. For a market long-established as Europe’s second most important after the UK, a new wave of regulatory burdens, advertising restrictions and licensing complications has made the landscape considerably less appealing. The new challenges are multifold. In April, Italy’s advertising regulator Autorità per le Garanzie nelle Comunicazioni (AGCOM) laid out how it will enforce a ban approved by legislators back in June 2018, confirming that sponsorship, direct and indirect advertising and even promotional communications would all be prohibited.
Meanwhile, tax rates were also hiked at the start of the year, with online casino and bingo now taxed at 25% of gross gaming revenue, and fixed odds betting up to 24% of gross gaming revenue. Against this backdrop, it would not be a surprise to see operators and suppliers turn their back on Italy. But instead it continues to be among Europe’s most competitive; according to figures from Ficom Leisure, regulated egaming revenue rose 16.8% in 2018 to €1.53bn.
Navigating Italy’s new restrictions
In February, after many long delays, Italy’s gaming regulator Agenzia delle Dogane e dei Monopoli (ADM) finally issued a new set of online gaming licences, with 70 companies approved, including many of the biggest names in the industry. The challenge facing these companies will be to remain compliant against a backdrop of increasing restrictions and heavier compliance burdens. One of the key features of the framework enforced by the ADM is the requirement to report all transactions for validation by a central system run by the regulator.
This means linking operators to the regulator via the SOGEI system and providing a technical project which outlines your internal infrastructure. For operators large and small in Italy, getting this right is a critical component of success. It is, however, a major drain on resources and requires a great deal of specialised expertise, particularly for smaller operators new to the market.
One answer is to look at third-party solutions. During the early stages of Italy’s regulated market, operators were forced to develop their own systems and infrastructure to sync with the regulator. Today, it is possible to integrate via API with third-party systems that handle the full reporting process.
What next for Italy?
With a volatile political outlook and the full impact of the advertising ban yet to be felt, these are uncertain times for Italy’s egaming sector. But the size of the market means that many operators and suppliers simply cannot afford to write it off completely.
The companies that will enjoy the most success in Italy over the coming years will be those which remain agile to the shifting regulatory environment. This means operating a world-class compliance function and placing it at the heart of the company. This covers every element of your business, from technical integrations to product development. With the advertising ban and higher tax rates, finding creative ways to offer innovative new products in a compliant fashion is now the name of the game.
The communications ban makes both acquisition and retention a tougher challenge, so dominating on product has never been more important. This means swift rollouts without long hold-ups across certification and compliance. In many respects, Italy is now the model for the future of the regulated European egaming jurisdictions. From Sweden to the UK, compliance has been tougher, nor more important.
Changing the way you meet your regulatory expectations is now your most important business area.
Antonio Zanghi is an online gambling compliance expert with years of experience in the field. He has previously worked at IGT where he was involved with both regulatory and technical compliance, successfully managing compliance in the Canadian and European regions. He now runs Maxima Compliance, a full-service compliance consulting firm supporting online gambling businesses.