A complex landscape for payment service providers

In early 2016 we predicted that local regulators would increasingly look to the payments sector as a means of stemming the flow of funds to offshore operators failing to comply with local regimes. This has proved to be the case with changes to the law in a number of territories and, in others, a renewed focus on targeting of financial institutions and payment service providers.

Most change has been evident in jurisdictions that have been seen as fair game by many reputable operators for a number of years. This stance has generally been taken by the operators on the basis of free movement
principles (in the EU) or on the back of point of-supply arguments and doubts as to the authorities’ ability to apply and/or enforce local law extra-territorially.

Irrespective of the strength of these arguments, which varies from jurisdiction to jurisdiction, the lack of a local nexus has made it difficult for regulators to take any meaningful enforcement action against offshore operators. They have therefore shifted their gaze to the service providers, with PSPs being an obvious target as they seek to follow the money.

In Eastern and Central Europe the proliferation of new legislation has been most apparent, with the likes of Hungary, Poland, Slovakia and Czech Republic all introducing specific prohibitions on the provision of payment support to operators who do not toe the local line. Meanwhile, the Norwegian Gaming Authority, having struggled to dissuade foreign B2C operators from targeting their market, has recently resorted to payment blocking orders.

In summary, the landscape has become more complex for those seeking to provide payment support for betting and gaming operators. It is fair to assume that this trend will continue, both within and outside of Europe. For those who understand the market, there remains much opportunity. However, knowledge, diligence and a coherent policy approach is more important than ever in mitigating risk.