Betting and Gaming horizon scanning: UK regulatory roadmap: Spring 2022 edition

The interim COVID-19 Responsible Gambling measures introduced by the Commission at the beginning of the first COVID-19 lockdown remain in place until further notice.

In February 2022, the Commission published further data for the period to December 2021 regarding gambling behaviour in Great Britain during lockdown and lockdown easing. The Commission comments that, while lockdown measures are easing, "operators still need to be mindful about the potential of some consumers to be increasing their spend on some of the more intensive products while going through financial hardship brought on by wider economics factors".

The data reveals:

• online gambling: online total gross gambling yield (GGY) was just below £421 million in December 2021, taking Q3 (October to December) GGY to £1.2 billion, a decrease of 6% from Q2 (July to September). The overall number of total bets/spins increased 4% from Q2 to Q3, while the number of active accounts stayed steady;
• online slots: slots GGY increased 1% to £568 million between Q2 and Q3. The number of spins increased 3% to 18.2 billion, while the number of active players increased 5% to 9.8 million;
• safer gambling indicators: the number of online slots sessions lasting longer than an hour increased by 8% (to over 8.1 million) between Q2 and Q3. The number of customer interactions in Q3 increased 8% to over 3.2 million, with the majority remaining automated in nature. The number of direct interactions undertaken by operators increased by 6%;
• offline betting: GGY from Licensed Betting Operators (LBOs) decreased 1% to £533 million between Q2 and Q3, while the number of total bets and spins increased to 3.3 billion.

The Commission confirms in the update that it expects extra vigilance from operators during lockdown easing, citing continuing impacts of the pandemic (e.g. uncertainty about personal or financial circumstances and readjusting budgets / time as life returns to normal) and the wider economic environment (presumably this refers to the ongoing cost of living crisis) as factors that may lead consumers to feel vulnerable.

The Commission also reiterates that it expects operators to: 

• continue to follow the additional formal guidance issued during the first lockdown;
• pay close attention to any data that shows consumers expanding their portfolio of games and spending more time or money than before;
• interact directly where triggers are reached, in addition to more generic email engagement;
• avoid any temptation to exploit the pandemic for marketing purposes, in particular as consumers adjust back to a new normal;
• be very cautious when seeking to cross-sell products; and
• take particular care when on-boarding new customers and making decisions over affordability checks.

Operators should ensure that customer on-boarding, safer gambling and marketing teams are aware of these recommendations and review current policies and procedures to ensure no steps are taken that could be viewed as being inconsistent with the above advice.

On 9 December 2021, the Gambling Commission published its annual Compliance and Enforcement Report.

The Report can be found here and includes the following sections:

1. Enforcement and Compliance Report foreword;
2. Anti-money laundering and counter terrorist financing;
3. Licensed operators and financial stability;
4. Special measures and licence suspensions;
5. Personal licence reviews;
6. Illegal gambling.

The Report covers the financial year 2020 – 2021 and summarises the Commission's findings from its enforcement action against licensees, highlighting certain regulatory failings and compliance issues that the Commission expects licensees to address.

Notably, the Commission's enforcement action in the period included:

• Suspension of five operating licences;
• Revocation of one operating licence and ten personal licences (eight personal functional licences and two personal management licences);
• A total of £32.1 million paid by 15 operators in fines and regulatory settlements;
• 25 full assessments of online operators and five targeted assessments of land-based operators;
• 83 website reviews and 262 security audits; and
• Commencement of 29 personal licence reviews and finalisation of a further 57.

The Report notes that in almost every case where enforcement action was taken, licensee failings included non-compliance with social responsibility and anti-money laundering obligations.

The "Financial stability"  section highlights the issues to consider in a planned close down of a business, and regulatory issues to be considered when a business enters administration.

The main focus of the "Illegal gambling" section was on illegal lotteries on social media.

We recommend that the Report should be read in full to better understand the Commission's approach to enforcement action and to learn from the regulatory and compliance failings of other licensees.

We note that the "customer interaction and social responsibility failings" and "triggers and customer affordability" sections of the previous Enforcement report are not repeated despite the Commission's continued focus on these areas in its enforcement activity. The Commission may consider that it has sufficiently directed operators' attention to those topics. However, in our experience, licensees' approach to affordability is always scrutinised and it would have been helpful if the Commission had included guidance on its expected approach to affordability in the Report.

The Report describes the special measures process as an "additional process… to ensure non-compliant operators could raise standards, at pace, to meet the full requirements of the LCCP," and details the Commission's requirements when a licensee is placed into special measures, as well as details of a case study. The special measures pilot was launched in September 2020, and its formal adoption is part of the Commission proposals in its consultation on updating the Licensing, Compliance and Enforcement Policy statement.

We would also like to highlight the following selected anti-money laundering industry learning points from the Report (the Commission sets out "Common poor practices" and "anti-money laundering health-check good practices"). In our experience, these issues are very important and should be given careful consideration:

Common poor practices

1. Inadequate customer due diligence (CDD) and enhanced due diligence (EDD) measures, including the failure to consider the full range of circumstances in which EDD should be applied (e.g. for politically exposed persons or when customers reside in high-risk jurisdictions);
2. High financial thresholds in place before CDD/EDD is undertaken, which may result in CDD/EDD being delayed;
3. Delayed customer identification and verification (CDD) checks;
4. Failure to consider the Commission's anti-money laundering guidance, sector MLTF risk assessment, and its publications generally when licensees develop their own risk assessments, policies and procedures;
5. Inadequate risk assessment methodologies, as well as providing little detail on the measures that are actually in place (the Commission gives the example of merely stating "customer monitoring" or "Know Your Customer (KYC) checks" within a risk assessment, but not including much detail on the specific measures);
6. Licensees' risk assessments not being used to inform their money laundering/terrorism financing (ML/TF) policies, procedures and controls (in contravention of licence condition 12.1.1);
7. A lack of consideration on how problem gambling can be linked to ML/TF risks.

AML health-check good practices (in addition to avoiding the "Common poor practices")

1. Basing CDD/EDD triggers not just on financial thresholds, but taking a range of risk factors into account, including customer profile, transactional and product risks;
2. Reviewing risk assessments at least annually in light of changing circumstances, including where new products/technologies are introduced, for new customer payment methods, and changes in customer demographic;
3. Ensuring the nominated officer has the requisite skills, knowledge and expertise to fulfil the role.

On 7 February 2022, the Gambling Commission (“The Commission”) reminded licensees of their responsibility under Licence condition 16.1.1 of the Licence Conditions and Codes of Practice (LCCP) to ensure that their adverts are not placed on websites providing unauthorised access to copyrighted content.

This includes the requirement for licensees to:

• Take all reasonable steps to ensure that third parties with whom they contract do not place adverts on copyright infringing websites; and
• Ensure that the terms upon which they contract with such third parties enable them to terminate the contract promptly if the third party has been responsible for placing adverts on such websites.

Despite a significant reduction in the number of adverts appearing on websites providing unauthorised access to copyrighted content, the Commission is not satisfied with the amount that still appear.

The Commission makes clear that adverts placed on websites that provide unauthorised access to copyrighted content contribute to the funding of those websites and therefore associate gambling with crime (in contravention of the first licensing objective under s.1 of the Gambling Act 2005).

The Commission has stated that licensees need to introduce additional controls or review the monitoring methods they currently have in place to ensure their adverts do not appear on copyright infringing websites. Although the Commission stops short of specifying any particular measures licensees should take, the reminder suggests that one such measure might include (but is not limited to) registering with and proactively monitoring the Infringing Website List (IWL) owned by the City of London Policy Intellectual Property Crime Unit (PIPCU) to enable decisions to be made to cease advert placement on illegal websites.

The reminder also refers to a guide designed to assist operators and affiliates with the registration process which can be obtained by emailing: pipcuantipiracy@city-of-london.pnn.police.uk.

The Commission increasingly expects licensees to take account of updates published on its website. We recommend that licensees register with the IWL and monitor it regularly.  Licensees should also consider if their policies and procedures for preventing adverts appearing on websites providing unauthorised access to copyrighted content (either directly or via affiliates) are appropriate and effective and make any necessary updates or improvements.

In January 2022, the Gambling Commission released updated guidance on age verification test purchasing in the non-remote sector, following its regulatory data consultation.

The test purchasing requirement applies to all casino operators, bingo, betting, adult gaming centre (AGC) and family entertainment centre (FEC) operators in fee category C and above.

The scale and frequency of age verification test purchasing will vary depending on the size of the business. As a minimum each premises should be tested at least once a year.

If licensees choose to take part in a collective test purchasing programme, they must assure themselves that the collective programme provides reasonable assurance that the licensee has effective policies and procedures in place to prevent underage gambling.

Tests should be unannounced and all test purchase results must be recorded and submitted to the Commission at the end of the financial year (broken down by financial quarter).

Where a premises fails a test purchase, staff should be informed and retesting should be carried out within three months of the failed test.

Licensees must tell the Commission when a child or young person repeatedly attempts to gamble on premises restricted to adults.

We previously reported that the Parliamentary All Party Betting and Gaming Group (APBGG) had launched an investigation into the competence and effectiveness of the Gambling Commission. The APBGG published the investigation report on 24 January 2022. It heavily criticises the Commission and calls for it to be placed in "special measures".

In producing the Report, the APBGG invited submissions and complaints from operators.

The Report broadly covers three categories of allegations: 1) that the Commission has acted ultra vires; 2) that the Commission has acted in breach of the Regulators Code; and 3) that the Commission is providing a poor and/or incompetent service.

Of particular interest and criticism in the Report are:

• the Commission's imposition of "affordability", without consultation or clear guidance to support or explain the Commission's expectations and its implications for civil liberties and consumer freedom;
• Legislation being introduced "by the back door", the replacement of regulations with "formal guidance" and a lack of clear, tailored advice and communication with operators;
• the continuation of COVID-19 restrictions after lockdown has been lifted – the implementation and status of these restrictions was already controversial (and arguably unlawful in the absence of any public consultation); and
• breaches of the Regulators Code, including a) a lack of transparency and communication, b) no advice from, or meaningful interaction with, the Commission except through audits and enforcement action, and c) a disproportionate approach, not based on risk, which actively seeks to reduce gambling.

The Report also looks at previous reports and investigations into the Commission, such as the Hampton Implementation Review in 2008, February 2020’s report by the National Audit Office, and the Report of the Independent Review of the Regulation of BetIndex Limited by Malcolm Sheehan QC in September 2021. It considers that the shortcomings identified in those reports still exist today.

The Report includes six key recommendations:

1. That the Department for Digital, Culture, Media & Sport (DCMS), as part of the Gambling Act Review (GAR), considers the future role of the Commission and in particular the question: "is it the Commission's job to actively seek a significant reduction in the number of problem gamblers?" If the answer to that question is yes, the Report recommends that a strategy needs to be brought before Parliament. It should set out how this will be achieved, clear targets and the evidence (science) behind the approach,. The Report emphasises that changes in social policy need the transparency of Parliamentary scrutiny.
2. That the Better Regulation Executive undertake an audit of the Commission on the basis of the Hampton Implementation Review, as the APBGG's evidence shows that the Commission in in breach of "practically all" the Regulators Code. The APBGG would like Better Regulation to review the evidence gathered by the APBGG and make formal recommendations for improvement.
3. That a QC is commissioned to undertake an independent investigation of the Commission's enforcement process, which should consider a) the status of the regulatory panel and overall appeal process, and whether it fits the considerations of natural justice and b) the process of awarding fines and the basis for determining the amount of fines.
4. That DCMS should temporarily take over the complaints process from the Commission, as "it is obvious that the industry is too scared to use it and the usual check and balance of a regulator's performance has been made inoperable".
5. That the GAR consider amending the Act to differentiate between high risk and low risk gambling operators so that the level of regulation can be made proportionate, and the Commission can be dissuaded of its "desire to penalise". 
6. That the DCMS put the Commission under "special measures", to see if it is able to change its culture and strategic direction. The Report adds that "Given the results of the investigations we propose being undertaken in the above five recommendations, how they result and how the Commission responds should be key questions as to whether the Commission is allowed by DCMS to continue as it is."

While the Commission has not published a formal response to the Report, it is quoted in a Guardian news article as saying that: "Some sections of the industry are never going to be content with a regulator which continually pushes for safer gambling … As the industry regulator, we expect to hear from [the APBGG] in an official capacity to respond to views about the Gambling Commission and put straight inaccurate assumptions, as well as share our regulatory approach."

The Betting and Gaming Council (BGC) has distanced itself from the report. In an article on politicshome.com on 25 January, Michael Dugher wrote that: "[…] it was disappointing to see a report published from the Betting and Gaming APPG this week that was so critical of the regulator … The BGC is not perfect and is changing, but the regulator is rightly and importantly pushing forward steps to further raise standards on safer gambling." On affordability checks, he further notes that: "Change is coming. Warning about the dangers of arbitrary and disproportionate so-called affordability checks and being alert to the threat posed by the black market is not an argument for no change. It’s an argument for getting those changes right."

In January 2022, the Commission published information on its website about the use of cryptoassets in licence applications and updated guidance on its expectations of key event reporting. For the purpose of this update, we focus only on the latter.

The update guidance reminds licensees of their obligations under two relevant Licence Conditions and Codes of Practice (LCCP) provisions:

• SR Code 1.1.2 (responsibility for third parties): licensees must take responsibility for their third parties with whom they contract. In this regard, the Commission reminds licensees that the responsibility for third parties extends to conducting adequate due diligence on third parties including, but not limited to, how marketing partners raise finance used in connection with the relevant gambling business (which we interpret as the relevant gambling brand) in the context of white label arrangements.
• Licence Condition 15.2.1(8) (key event – change to customer payment methods): the Commission sets out the information it expects to be provided when operators make a key event notification under this provision. Specifically in relation to the acceptance of cryptoassets as a method of payment or the commencement of relationships with payment processors through which cryptoassets are accepted as a method of payment, it requires the following information (as a minimum):
  • The type of payment method
  • The provider
  • How the payment method was assessed in the anti-money laundering (AML) risk assessment
  • If the payment method is cryptoassets, are cryptoassets being accepted directly or through a third party (and if so, who);
  • If cryptoassets are being accepted directly:
    • how fluctuations compared to fiat currency will be dealt with (with regards to RG tools, AML triggers etc);
    • how the funds will be treated in the event of insolvency and how customers will be informed of this; and
    • what information has been provided to consumers to ensure they are aware of the risks associated with using cryptoassets as a payment method.

Finally, the Commission reminds licensees that LCCP 12.1.1 requires them to review their AML risk assessment when new methods of payment by customers are introduced. It gives examples of what it considers to be additional risks where payments are made directly in cryptoassets, including:

• adequately assessing the source of the funds;
• fluctuations compared with fiat value (and how this would affect deposit limits and AML triggers);
• scalability;
• the cost of fees; and
• the security of the funds held.

The Commission also notes that, where cryptoassets are knowingly accepted via a third-party provider, licensees should consider how they will obtain sufficient information to satisfy their regulatory requirements.

In our experience, the Commission is likely to expect licensees who accept payments directly in cryptoassets to update their risk assessments and relevant associated policies and procedures. They should address each of the risks outlined above (as a minimum), if only to confirm that they are not applicable. Licensees who knowingly accept cryptoassets via a third party should update their policies and procedures to ensure that regulatory requirements are met.

The Commission has long held the view that appropriate due diligence is made more difficult when payments or investments relate to cryptoassets (see for example its April and July 2020 e-bulletins on the risks associated with cryptoasset payments). 

There are recent examples of the Commission taking enforcement action in relation to insufficient consideration by operators of the risks associated with crypto payments. The significant fines levied against In Touch Games (March 2021) and Annexio (January 2022), for example, related in part to the operators not having appropriately considered the risks associated with cryptoasset transactions.

The Commission is clearly alert to the potential risks involved with crypto payments from a due diligence and AML risk perspective. Any operator with any funding derived from cryptoassets, or that accepts payments in crypto from customers (either directly or following conversion into fiat by a third party) should seek advice on the appropriate consideration of risk and the processes in place to ensure that adequate CDD is obtained.

On 16 February 2022, the Commission published updated guidance on fair terms and practices.

Although the updates are not apparent from the Commission's website, the main updates can be summarised as follows:

• Transparency – licensees are reminded that consumers must be able to understand all the terms that govern their play. Licensees are further reminded that literacy levels vary significantly across the population and some consumers may not have English as their first language. The guidance indicates that there are freely available tools that can assess the reading level required to understand a piece of text, such as the terms and conditions. The Commission stops short of suggesting specific tools but we are aware that Microsoft Word has a readability scoring tool which can be activated via Options > Proofing > Show readability statistics. Once enabled, run a spelling and grammar check and once completed, information about the reading level of the document will be displayed. This includes the Flesch reading ease score (which rates text out of 100 and the higher the score, the easier it is to understand) and the Flesch-Kincaid Grade Level (which rates text on a US school grade level). 
• Undue discretion – the guidance indicates that a term that gives a licensee the discretion to decide when and how a term is applied would be unfair under the Consumer Rights Act 2015 (with which licensees are required to comply by virtue of licence condition 7.1.1 of the LCC). In particular, the guidance indicates that licensees should not have terms that say the licensee "may" or "reserve[s] the right" (or similar) to void or withhold a customer's winnings in certain situations including for suspected illegal, irregular or fraudulent play, use of multiple accounts and third party use or funding of accounts. The guidance indicates that the wording in italics is problematic and that consumers should know exactly what action the licensee would take in those circumstances. However, the Commission is still likely to criticise operators if they are unable to demonstrate that the decision was justified by reference to the operator's anti-money laundering obligations. As such, it is important that operators keep a written record of the rationale for enforcing such terms against consumers in case they are asked to justify their actions in the future.
• Confiscation of un-staked deposits – licensees are reminded that customers' un-staked deposits remain their property and licensees must not have terms that allow them to confiscate un-staked deposits, other than where necessary to comply with licensees' regulatory obligations.

Reducing winnings on open bets must not be unfair – the guidance states that terms designed to permit a licensee to reduce potential winnings on open bets must not be unfair within the meaning of the Consumer Rights Act 2015. It further indicates that the Commission would consider that terms that oblige consumers to accept reduced benefits in the form of lower pay-outs would create a significant and unfair imbalance between consumer and operator. The guidance indicates that operators must not use terms that permit the reduction of pay-outs in exceptional circumstances" or those linked to commercial success. However, the guidance does acknowledge that terms capturing Rule 4 and situations where these is a clear and obvious error in the odds offered may fairly amend potential returns on open bets. Rule 4 is a general rule of betting which relates to the reduction of winnings when a horse that is backed wins or is placed. Reductions are made when a horse is withdrawn from a race because it becomes easier for the other runners to win and an amount of money is taken out of winnings to balance the effect of the non-runner.

Dispute resolution – the guidance warns against obstructive behaviours that the Commission has become aware of including suggestions by licensees that: the Commission has 'approved' their T&Cs (on the basis that no issues were raised during a recent compliance assessment); they are not a party to any undertaking with the CMA so their terms must be satisfactory; and adjudicating disputes based on fairness or transparency is outside the remit of ADR providers; all of which the Commission considers to be incorrect.

We recommend that you make all necessary amendments to your T&Cs and rules of play, whilst bearing in mind the requirement under licence condition 7.1.1 to notify customers of material changes before they come into effect.

If you do not consider any updates to be necessary, we recommend that you keep a note outlining the reasons for this in case the Commission asks for evidence that the updated guidance has been considered. This development is particularly noteworthy given recent consumer protection reforms, including increased CMA powers to impose significant financial penalties for consumer law infringements.  See the firm's article on this topic here.

In February 2022, the Commission announced that it had worked with the Government Agency Intelligence Network and Facebook to shut down illegal and unlicensed lotteries operating on the social media platform. The Commission noted that such lotteries pose a risk to consumers and vulnerable people.

The Commission commented that: "illegal lotteries, including those taking place through social media channels, will continue to be a focus for our enforcement work this year as we link up closely with platforms like Facebook to pinpoint not only the activity, but those behind it and those who are breaching gambling rules and social media standards."

Earlier in the year, the Commission announced that it would also be generally monitoring ‘win a house’ or ‘win a cash prize’ competitions, which have risen in popularity. While these are often designed to operate as free draws or prize competitions, the Commission will monitor and take action if it considers that they are not being run in compliance with the Gambling Act 2005 and/or are in fact lotteries.

On 9 March 2022, the Dutch court overturned a fine imposed by the Netherlands Gambling Authority (NGA), ruling that loot boxes in the FIFA video games published by Electronic Arts do not contravene Dutch gambling law.

In 2018, the NGA took the position that games containing loot boxes should be treated as gambling if the loot boxes could be purchased for cash, and if the prizes had a real-world value (because they could be bought and sold between players for cash). This is similar to the position taken in the UK by the Gambling Commission.

In 2019, the NGA had imposed fines on EA on the basis that the loot boxes in FIFA constituted games of chance being operated without a licence.

The Court has now ruled that the loot box mechanic should not be regarded in isolation, but in the context of the game as a whole. It was necessary to consider whether the game as a whole (containing loot boxes) was a game of chance. In this case, the Court determined that FIFA is predominantly a game of skill, albeit with an element of chance. Therefore the game as a whole was not a game of chance.

The Court's decision will be welcomed by the video games industry, but it should be noted that the outcome turned on the specific facts of the case. The NGA has indicated that it will revise its guidance on loot boxes following the Court's decision.

The release of the UK government's white paper on the Gambling Act 2005 review has been delayed and is not expected until the summer of 2022.

On 8 March 2022, Chris Philp, MP and Under-Secretary for Digital, Culture, Media and Sport, delivered a speech organised by the Gambling Related Harm All-Party Parliamentary Group, stating that the gambling landscape is in need of "significant reforms". He also gave a speech in parliament on 23 March 2022 where he spoke about the need to go "significantly further" to make sure that people are adequately protected.

His speeches focused on:

• the need to better regulate online gambling (which was in its infancy in 2005); 
• the use of data to protect the public, by having a regulator that has the powers and capability to obtain that data and properly analyse it to ensure gambling operators are intervening when there is a problem;
• introducing a Single Customer View, where there is data sharing and affordability checks; and 
• the Government's commitment to opening  15 gambling clinics over the next two years.

He also highlighted instances where an NHS worker who was earning £1,400 a month was set a deposit cap at £1,300 a month and another customer lost £37,000 in a short period of time with no checks being carried out by the operator.

Reforms to gambling continue to be debated in the House of Commons and the House of Lords.

While it is impossible to know exactly what will be included, it can be inferred that the white paper will focus on:

1. Customer protection – including possible obligations to perform affordability checks and set deposit restrictions.
2. Data protection regulation – the collection, processing and sharing of customer data.
3. Problem gambling – proposals and obligations on operators to help prevent problem gambling and fund treatment.
4. Advertising – restrictions on advertisements regarding sports betting. This is a topic has come under increasing public and political scrutiny recently.
5. Protection of children - including further requirements to reduce children's exposure to gambling.

The Gambling Commission has published new requirements for identifying at-risk customers and interacting with them to minimise the risk of gambling harms. The new provisions (in the form of a new Social Responsibility Code 3.4.3) will come into effect on 12 September 2022 and apply to remote B2C operators. However,  the consultation response is also critical reading for B2B platform and technology providers.

The new Social Responsibility (SR) Code provisions set out some minimum requirements under, broadly, the three main areas of its existing focus, being 1) identifying customers at risk of harm; 2) the requirement to "act" (rather than "interact"); and 3) evaluation.

1. Identifying customers at risk of harm

New SR Code 3.4.3(5) provides for a range of "core" indicators of harm which must be monitored (as a minimum), and which (under 3.4.3(4)) will require monitoring from the point of account opening. Those core indicators are:

• Customer spend
• Patterns of spend
• Time spent gambling
• Gambling behaviour indicators
• Customer-led contact
• Use of gambling management tools
• Account indicators.

A significant new provision in SR Code 3.4.3(3) is the requirement for operators to: "consider the factors that might make a customer more vulnerable to experiencing gambling harms and implement systems and processes to take appropriate and timely action where indicators of vulnerability are identified."

The Commission has also included a provision (3.4.3(6)) emphasising the effect of existing SR Code 1.1.2, under which operators are responsible for ensuring compliance with the new requirements in circumstances where it contracts with third party B2B providers.

2. Requirement to Act

New SR Codes 3.4.3(8) and (9) provide that operators are required to take action in a "timely manner" when the risk of harm has been identified, and that the type of action taken must be tailored to the number and level of indicators of harm exhibited. This must include (but not be limited to):

• tailored action at lower levels of indicators of harm which seeks to minimise future harm;
• increasing action where earlier stages have not had the impact required;
• strong or stronger action as the immediate next step in cases where that is appropriate, rather than increasing action gradually;
• reducing or preventing marketing or the take-up of new bonus offers where appropriate; and
• ending the business relationship where necessary.

SR Code 3.4.3(11) further provides that where strong indicators of harm are identified, automated processes must be implemented. Automated decisions must also be manually reviewed by the operator in each customer's case and operators must allow customers to contest any automated decision which affects them. 3.4.3(10) also provides that marketing and new bonus offers must be stopped where there are strong indicators of harm.

3. Evaluation of Effectiveness

The new SR Code provisions relating to evaluation largely echo the existing customer interaction guidance. However, the new SR Code 3.4.3(14) also requires operators to: "take into account of problem gambling rates for the relevant gambling activity as published by the Commission, in order to check whether the number of customer interactions is, at a minimum, in line with this level. For the avoidance of doubt, this provision is not intended to mandate the outcome of those customer interactions."

As heralded in the initial consultation, published in November 2020, the measures mark a clear shift towards a more prescriptive approach. The Commission has indicated that in June 2022, it will also publish guidance (which must be taken into account) to assist operators with implementing the new rules. 

Critical questions around "affordability" and in particular what thresholds the Commission may set and what actions will be required at those thresholds, are not addressed and will be additional requirements following a further consultation, expected to be launched this summer. We expect to see the Government's soon-to-be published White Paper in the Gambling Act Review to propose a legislative framework for "affordability", but the detail will be determined by that consultation. The language used to describe the risks the Commission will seek to address may be instructive: unaffordable binge gambling, significant unaffordable losses over time, and identification of consumers who are particularly financially vulnerable. 

While this may reassure the industry that the Commission has taken heed of the calls for proportionality, privacy and freedom of choice, it is clear that "affordability" requirements will soon follow. This, along with the more prescriptive approach to customer interaction taken by the Commission in the revised LCCP provisions (and guidance), may at least provide clarity and consistency across the regulated industry, which currently does not exist.

The revised LCCP provisions on customer interaction are themselves significant. They are a more prescriptive evolution of the current Customer Interaction guidance and also focus on identification, interaction and evaluation. Further emphasis is placed on indicators of harm (although we await the guidance for more detail), monitoring accounts from the point of opening, timely action when potential harm is identified and tailored interactions, which reflect the nature and seriousness of indicators of harm. Additional emphasis is also placed on the obligation to evaluate the effectiveness not only of interactions, but of the overall approach the operator takes to customer interaction.

The more prescriptive approach will be welcomed by some and the regulatory risks addressed are obviously important. Our biggest concern, however, is whether some of the new provisions are drafted in a way which makes them very difficult (even impossible) to comply with fully. In this regard, the Commission's upcoming customer interaction guidance in June 2022 is likely to reveal critical details, along with the planned further consultation on issues relating to affordability requirements.

For further analysis, please see our article about this development.