[WATCH] Understanding the regulatory climate in Sweden and the UK: SiGMA Europe 2021

Moderator Nick Nocton, a partner at Mishcon De Reya sits down with David Zeffman, a Partner and Head of Gambling and Sports at CMS and Henrik Norske Hoffman, Partner and Co-founder at Nordic Gambling for a regulatory update

From responsible gambling to the recent change of guard at the UKGC, there’s plenty to mull over in this discussion – held as part of Malta Week’s 3-day conference. The panel kicks off with a question for Hoffman – is there a legal obligation in Sweden to conduct affordability checks? 

A clear obligation is not really to be seen in the legislation and the regulations, opines Henrik. However, he believes that the administer to practice of the Swedish gambling authority suggests that there might be one, at least when it comes to AML – with the authorities having recently issued a guidance document on it. This means that when you hit a certain threshold (which comes in at around a 200 Euro spend), the operator has some obligation to find out whether the player can afford the spend.

When it comes to responsible gambling, it’s a different issue, both in Sweden and in Denmark, he says. 

“We see from the authorities when they are doing enforcement supervision, that they actually expect the operators to do that. The Swedes are probably more hardcore than the Danes on this matter because in Sweden your taxable income is public record and ultimately the same goes for debt that has been left for public enforcement with bailiff court.”

So the practice certainly suggests that operators are expected to look into income and carry out a proper affordability check. In Denmark there is no way to access that information, or to see how much tax they paid last year. 

“The threshold before any operator is expected to look into income and affordability is much higher and it’s a lot less clear. Even though there is no clear alleged legislative obligation, it certainly seems from practice that both authorities actually think that there is some sort of an obligation to check affordability.” 

On the other hand, when it comes to the UK there’s a bit of a disconnect between what is technically required on affordability and what’s actually happening in practice. There’s a consultation exercise and the ongoing Gambling Act review may now also cover issues of affordability.

So how can we expect it to pan out? Almost exactly a year ago the Gambling Commission published a consultation on introducing affordability thresholds and they only gave 10 weeks for responding, although that was extended by a few weeks.

The clear implication Zeffman says, was that pretty much as soon as that consultation was over the Gambling Commission would be introducing affordability thresholds. 

“So really the perspective that one got was that the consultation was just about where the affordability threshold would be set. Not whether there should be any or what the amount should be.”

The consultation detailed a spend somewhere between a hundred and 2000 pounds, but then a few days later when it published its latest enforcement report it was clear that they were going to be talking about something much nearer a hundred Sterling. 

Zeffman explains that the report suggested that customers wishing to spend more than the national average should be asked to provide information to support a higher affordability trigger, such as three months payslips, tax returns, bank statements, and so on. Reading further into the report, the national average  lies somewhere between a hundred pounds and five hundred pounds a month.

“That, however, was disposable income and the Gambling Commission requires you to deduct from disposable income things such as travel costs, petrol phone bills, and so on. So we’re talking about potentially a very low number. Then the following month, (December 2020), the government said that they were going to be reviewing the whole of the gambling legislation.”

He goes on to say that there was a strong pushback from operators, who believed that the Gambling Commission shouldn’t just introduce what would be a fundamental policy change with just a change to the codes. This should be something for the government to decide. The commission received 13,000 responses to the consultation – far more responses than they’d receive to any other consultation.

Then the Gambling Commission chief executive stepped down in March of this year, following the vocal index collapse. And he wasn’t replaced by an interim chief executive until a couple of months ago. In May of this year, the commission  gave an update, saying that they would be publishing a full response to the consultation this summer and  would continue to work closely with the government on the review.

However, the summer came and went with nothing from the commission. In September it was announced that they would be publishing revised requirements on customer interaction in the coming weeks. Which, according to Zeffman, is a bit like a lawyer saying to his client: You’ll get my advice shortly.

Watch the panel in full here:

“It’s a very elastic period of time. I’m sure affordability thresholds will be introduced at some point, undoubtedly as part of the government’s review. So, we’re seeing a lot of enforcement activity and I think that the commission has already de facto introduced affordability thresholds. Whereas a few years ago, most of the cases that the commission was pursuing involved millions of pounds of losses.

“We’re now seeing cases involving hundreds of thousands of pounds or in some cases, tens of thousands, and there is nothing specific in any of the licensed codes of practice to specify what the affordability threshold would be. When you look at the LCCP, one of the things that you have to comply with is commission guidance, you end up in a position where you actually are obliged to know more about the customer and what they can afford to spend.”

I think that there is a genuine question around whether what is being enforced in compliance assessments is actually the correct interpretation, but there’s no question that what’s happening on the ground is. 

Changing tack slightly, Henrik believes that we’re seeing a trend in the Swedish political environment and also in some of the enforcement cases from the SGA emerge, where it is evident that they would really very much like to control how much money is allowed to be spent on gambling. 

The Swedish Gambling Authority has released a guidance document recently for AML where they suggest that on average, Swedish people spend 11% of their taxable income on leisure activities.

By setting that threshold, if you hit 11% or more of your average Swedish income, then at least the operators should check for taxable income. That’s quite far from an actual affordability check however, because the capital gains taxes and so on is not necessarily included there.

“There are definitely trends in the political environment that indicate gambling should be limited. And we’re hearing some of the same voices in Denmark calling for more control.

That being said, in Denmark there’s very little information available. We’ve had the equivalent of the Swedish duty of care, where you are supposed to monitor and profile your players from an RG for two years now. All the enforcement cases we’ve seen are older than that, and it’s all been for AML.”

It’s regulated in the AML Act in Denmark. You are obliged, he says, to obtain this information on income based on the amount of play, and you should actually have applied that to responsible gambling. You’re supposed to collect this data and are expected to share this data with your RG team.

On the contrary in Sweden we’ve seen another kind of strange guidance emerge, opines Henrik. The Swedish gambling authorities stated that they don’t think they can enforce any sanctions against an operator that chooses not to share affordability and income due to GDPR restrictions, even if it’s within the same organisation – an interpretation he questions.

“Ultimately, if there isn’t a clear legal obligation to collect this data and to process it to see if people are spending more money on gambling that they have, then you need to have a provision in the privacy policy that you collect as part of the consent, the right to use the data in this way.”

Henrik admits that he finds it a bit strange to have AML legislation that suggests that you need to collect this data and share it across all entities in a group of companies when it comes to responsible gambling while still saying they don’t think they can enforce it. After all, this was ultimately one of the main reasons both Denmark and Sweden decided to open their markets to private operators – to get more control so they could protect the players.

Similar issues arise in relation to what’s called the single customer view in the UK – David agrees that there’s been some recent developments there. 

The single customer view he explains, is a holistic view of a customer’s online gambling behaviour to help reduce gambling harm. This cross operator view of the customer’s gambling activities could help identify and prevent potential gambling harm to those who hold accounts with more than one gambling company. 

“It’s a laudable objective. If your aim is to protect gamblers themselves, then you really need to be aware of all of the gambling activity going on. Otherwise, if one operator restricts their activity or closes them down, then they’re just going to go to other operators. 

“However, putting aside the not inconsiderable technical challenge. It raises a whole range of legal issues, data protection, obviously, but also privacy rights, competition law, human rights, consumer law, just to name a few.”

The first of those, data protection, was addressed by the information commissioner’s office, which is the data protection regulator in the UK. They published their preliminary views last month, and the gambling commission’s idea of having a single customer view is something that the ICO considered.

From the Gambling Commission’s perspective, what the ICO said made it all seem very straightforward. So the Gambling Commission, chief executive, once the ICO had published its views, said that they know it’s technically possible, the ICO has published on how it can be done safely,to protect people’s data, so it’s now for the industry to try the solution. 

David remains unconvinced by this, saying he thought the the ICO’s advice was littered with caveats – in particular, when the ICO cautioned that for the purposes of the sandbox, the conceptual model of a single customer view was considered and then its conclusions would be subject to changes due to factors such as the technical specification, the architecture, or the construction of the solution. And they also stress that analysis would be required to ensure that the processing of data was necessary and proportionate. 

“I think proportionality is actually a big issue here, not just in relation to data protection.”

In the UK problem gambling rates are coming down and are already low by international standards. So is this system where every person’s gambling – a leisure activity – will be collated in a central register and shared among competitors? David asks. Let alone, he says, the likely huge technical expenditure. Is it really justified?

“Coming back to the conversation we just had about affordability. There is a slippery slope there. Once you’ve got some activity being collated centrally, it’s not a big step to say we should have income information on there. My personal view is that this is a sledgehammer, a very big sledgehammer to crack a nut, which is shrinking.”

Nocton closes things off with a final question for David. There’s a new chair and CEO of the Gambling Commission. Do you think that that heralds a change of approach? What can the industry expect?

“I’m probably a bit cynical about it, to be honest. Maybe that’s just a function of being alone. But I think that the trouble is that the Gambling Commission has been the subject to such heavy criticism from parliamentarians, the media, that they’re erring on the side of being more and more aggressive in their interventions and enforcement action, because if they go too far they’re not going to be criticised by politicians and anti gambling campaigners and the operators won’t like that, but that’s not their concern now.” 

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