Innovations in Identity

Online gambling laws are becoming stricter as new regulations around money laundering and age verification come into effect.

New regulatory era for online gambling laws

Online gambling laws are becoming stricter as new regulations around money laundering and age verification come into effect.

Gambling laws and regulations continue to evolve. For example, on January 10, 2020, online gambling operators that are doing business in the EU or the UK have to comply with the 5th Anti-Money Laundering Directive (5AMLD), among other requirements. In contrast to other regulations that come into effect without harsh penalties being enforced right from the start, 5AMLD is already generating enforcement warnings.

UK gambling and 5AMLD

The UK Gambling Commission issued a Statement of supervisory expectations: updated Money Laundering Regulations on December 20, 2019. They point out that they are publishing the fifth edition of their guidance for remote and non-remote casinos to coincide with 5AMLD and that it comes into force immediately. Furthermore, the Gambling Commission “expect to see that operators have acted promptly, invested appropriately (if technology is required to accommodate the changes) and implemented changes with the requisite urgency.”

Considering that the Gambling Commission handed out at least £5 million in penalties in 2019, their “expectation” should not be taken lightly. With the enactment of 5AMLD in May 2018, it was clear that gaming operations faced extended requirements to ensure that they are trying to prevent laundered money from being placed in their operations; they’ve had ample time to deploy effective AML procedures. For remote betting, conditions and codes of practice  to improve AML include:

  • Conducting risk assessments on (at least) an annual basis, or on any material change, including new products, technology, payments or customer demographics
  • Ensure appropriate policies, procedures and controls to prevent money laundering and terrorist financing
  • Implement, review and revise the policies, procedures and controls to ensure that they remain effective and take into account updated guidelines

German sports betting licensing

Other European countries are also changing regulations around gaming. Perhaps the most significant is the third amendment to the German State Treaty on Gaming, which opens up the licensing of online sports betting in Germany. Private operators can now apply for licenses, even foreign-based companies, and the number of licenses is not limited. However, this amendment is considered a stop-gap measure until more comprehensive legislation is passed that covers all the different types of gaming. Even more complicated, each state within Germany is responsible for its own gaming laws.

EU cross-border gaming and identity verification

The multi-jurisdictional nature of gaming laws in the EU also complicates cross-border compliance. As stated by the European Gaming & Betting Association (EGBA), “Europe’s current online gambling regulation is highly fragmented causing many problems for consumers, gambling authorities and online gambling companies.”

The European Commission issued guidelines in 2014, but in a 2018 study by Dr. Margaret Carran prepared for the EBGA, “Consumer protection in EU online gambling regulation”, only one country had fully implemented the guidelines. Only 14 member countries had a register for self-reporting problem gamblers. Only half of the member countries allowed modern identity verification methods that would help prevent underage gambling, fraud and money laundering.

The guidelines recommend that member countries “adopt electronic identification systems in the registration process.”

  • Upon registration, the laws should oblige licensees to collect personal data that would enable them to confirm the player’s identity.
  • Such data, at a minimum, should include the name of the player, their address, date of birth, and email address or a mobile telephone number validated by the player but also confirmed through an independent process by the operator.
  • The verification process should be carried out in a reasonable time and in a manner that would be most efficient and least cumbersome to applicants and to gambling operators.

It’s important to note that these are just guidelines, and each jurisdiction has created its own requirements. As Carran points out, the situation “creates more opportunities for unscrupulous providers to exploit the situation and undermines overall consumer protection.” It is also antithetical to the whole EU strategy of a digital single market, “where citizens and businesses can seamlessly and fairly access online goods and services, whatever their nationality, and wherever they live.”

Fortunately, online gambling in Europe continues to grow, with numbers for 2018 indicating 11 percent growth. But, as Maarten Haijer, secretary general of the EGBA states, “its increased popularity reinforces the need for more consistent and strong consumer protections and industry standards across all EU countries.”

Dramatic changes in the U.S. sports betting market

The EU is not the only gaming market experiencing significant growth; the total handle for legal U.S. sports betting was $7.8 billion for the first nine months of the year, compared to $6.6 billion for all of 2018. The number of states that allow sports betting continues to increase, as do the types of games allowed and the legality of mobile or online sports betting.

As with Europe, each U.S. jurisdiction has its own rules and regulations, so gaming operators need to understand the regulatory requirements, have flexible solutions and be ready for changing conditions. As the U.S. market is really in its infancy (except for Nevada), the market should continue to see dramatic changes, with major players finding partners, making deals and creating new operations. Some big moves in 2019 include:

  • Flutter (Paddy Power, Betfair and FanDuel) acquiring Stars Group (PokerStars, FOX Bet) to make the biggest gaming company in the world, in a preeminent position to dominate the U.S.
  • DraftKings signing sponsorship deals with the NFL, MLB and NHL
  • Yahoo connecting with MGM to provide promotion for the BetMGM sportsbook app
  • DraftKings will be combining with sports betting technology provider SBTech to become a public company

While these moves are significant, they really are only opening parries; some experts predict that the legal U.S. sports betting market will be a $100 billion business in the ‘20s. Considering that $150 billion is currently spent on sports betting (much of it illegal), $100 billion per year is well within reach given a fully legal framework, the convenience of mobile betting, the added excitement and interactivity of in-game betting, and all the promotional power of the biggest sports entertainment brands on board.

The future is now, though. For operators that want to partake in this modern-day land rush, it’s time to create systems that can scale to meet the demand, ensure all necessary compliance and security measures are in place, and create onboarding measures that are efficient, seamless and enjoyable.

Want to learn more? Talk to a solutions consultant at ICE London.

Disclaimer: Trulioo provides no warranty that the information contained in this document is accurate, up to date or complete and in no circumstance does such information constitute legal advice. Any person who intends to rely upon or use the information contained herein in any way is solely responsible for independently verifying the information and obtaining independent expert advice if required.

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