SiGMA

FATF Greylisting and iGaming: your questions answered

Posted:: Jun 30, 2021 15:54 Category: Europe , Posted by Ramona

The FATF greylisting has given rise to many questions within Malta’s iGaming sector. Experts have spoken and suppositions have been made about the impact this may have on the online casino industry, but the blunt questions that everyone is asking in hushed tones behind closed office doors remain largely unanswered. Until now.

We gathered together a group of industry experts to discuss and debate the most pressing questions that everyone – from CEOs to M&A experts and media gurus – has been posing since the FATF made the grey-listing official last week.

1. Will Malta’s greylisting make an MGA license less attractive?
Probably, as increased regulation due to the grey listing may possibly make the process of obtaining an MGA license both more complicated and more expensive, which will mean that iGaming companies need to invest more money and resources into securing and maintaining the license. This will make other regulatory jurisdictions such as Gibraltar and Cyprus more attractive by virtue of a simpler due process.
There is also the issue that the attraction of holding an MGA license lies in acting as gateway to markets that do not as yet have their own regulatory framework and license. This benefit rests on other countries continuing to view an MGA license favourably – something that an FATF greylisting can very well jeopardize.

2. Will greylisting make it more difficult for iGaming companies to obtain licenses in other jurisdictions?
Very unlikely, as there are many other factors at play. As individual markets are becoming increasingly more regulated, the use of an MGA license as a ‘catch-all’ for multiple, unregulated jurisdictions is becoming less and less possible. Germany and the Netherlands are a case in point, offering markets that used to be targeted by the Malta license, but that now have their own regulatory framework.
In short, jurisdictions that have a regulatory and license structure will operate independently of any other licenses an iGaming company may hold.

3. Will greylisting make it more difficult for iGaming companies to conduct banking in Malta?
Yes, there is a high probability that this happens, as iGaming is classified as a high-risk industry and banks will be now following a strict de-risking policy. However, the impact on daily operations of Malta-based iGaming companies will not necessarily be as negative as one would expect, mostly because iGaming companies are already used to dealing with an extremely high-level of control and regulations in terms of accessing financial services.

The difficulties of pursuing banking relationships have already been highlighted by the gaming industry for the past years and, in this respect, a greylisting brings nothing new to the table, particularly to Tier 1 companies that have already created a diverse network of financial relationships and who are already well-equipped to deal with tough regulatory requests.

However, lower tier companies that have not yet built a strong administrative infrastructure are likely to suffer most in terms of shouldering additional costs brought about by increased regulation.

The biggest danger in this scenario would be if banks were to decide to stop servicing the industry altogether, although this would also be unlikely to have a heavy impact on Tier 1 iGaming companies, who can afford to shift towards other financial institutions for their transactions.

Malta iGaming Greylisting

4. Will it make it more difficult to move an international workforce to Malta?
Probably, especially as foreigners may find it more difficult to access local banking services for something as simple as receiving a monthly salary. The greylisting may also have a spillover effect on other economic sectors, such as increased home rental prices and a more expensive cost-of-living. The fact that Malta may be perceived as a less attractive iGaming jurisdiction also plays a role in whether Malta manages to continue to attract an international workforce.

However, the recent shift in trend towards offering remote work will mitigate this impact, as more and more iGaming companies are increasingly offering the option to new recruits to continue working from their chosen base without the need for relocation.

5. Will it affect the share value of iGaming companies based in Malta?
This may happen in this case of institutional investors who may find a conflict in holding their position. This can in turn affect a company’s ability to raise new capital and attract new investment, in turn leading to a negative turn in M&A initiatives, which the sector has been focusing on in recent years.

6. Will it cause iGaming companies to relocate from Malta?
Unlikely, unless Malta also fails the next evaluation. Tier 1 companies – which employ a sizeable workforce and run a considerable local infrastructure – will not uproot their operations overnight, and are likely to wait and gauge the impact on the industry and the likelihood of Malta being reinstated. Smaller companies, on the other hand, may be more willing to take a snap decision especially considering that a smaller infrastructure and workforce makes it much simpler to start afresh in another jurisdiction.

7. Will it make it more difficult for iGaming companies to expand operations to Malta?
Yes, this is a very likely outcome. iGaming companies will find it difficult to justify either a move to Malta or to increase operations on the island, given the current uncertainty. As of 2020, about 10% of the world’s iGaming companies were registered in Malta, with the online gaming industry responsible for circa 12% of Malta’s GDP, employing some 9,000 people and generating about E7000.

The industry has been on an upward trend for the past years, however, this growth is likely to be halted – in a worst-case scenario reduced – until Malta’s greylisting is resolved.

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