On 6 November 2020, the Gambling Commission of Great Britain (the “Commission“) published its first ever National Strategic Assessment (“NSA“). The NSA was published alongside the Commission’s (now) annual Compliance and Enforcement Report, which highlights the learnings the industry should take away from the compliance and enforcement work undertaken by the Commission over the financial year 2019-20.

Publication of the NSA comes as the Government prepares to conduct a major review of the Gambling Act 2005, following three public reports published this summer from the Gambling-Related Harm All Party Parliamentary Group, the Committee of Public Accounts of the House of Commons on the gambling sector, and the House of Lords Select Committee on the Social and Economic Impact of the Gambling Industry.

What is the NSA? 

The NSA sets out what the Commission sees as the key issues faced in making gambling in the UK “fairer, safer and crime free“, and assesses the various risks that gambling poses to society at large and to gambling consumers specifically.

A foreword in the NSA from Neil McArthur, Chief Executive of the Commission, reinforces the Commission’s “determination to make gambling safer” with “the licensing objectives … always at the forefront of our minds”.

As to the purpose of the NSA, Mr. McArthur said:

“Identifying issues and risks must be a dynamic process, as technology and consumer behaviour constantly change. …This assessment is the foundation for prioritising action over the coming months and years.”

An obvious precedent is the Review of Online Gambling, published by the Commission in early 2018 and in which the concept of affordability first emerged. That Review lead to a number of regulatory changes, including to age verification and identity checking procedures.

The Commission has collated data, statistics and evidence obtained from its compliance and enforcement work in order to undertake the assessment, in addition to drawing on the advice of its Advisory Board for Safer Gambling (ABSG) and Digital Advisory Panel (DAP), as well as the Interim Experts by Experience Group which consists of those with direct experience of gambling harm.

The executive summary states that, overall, gambling participation rates have remained stable in recent years. Moreover, the rate of problem gambling has been stable in statistical terms since 2012. However, the Commission says it wants the industry “to do more to understand their customers and end the distinction between regulatory and commercial considerations.”

Additionally, the Commission wants to see more “proactivity” from the industry in identifying and addressing the risks within their businesses. Such aspirations are accompanied with the usual threat by the Commission to use its formal regulatory powers which will “continue to damage the industry’s reputation, restrict activities and result in escalating penalties.”

Findings of the NSA

The NSA divides the assessment of the issues and risks into four categories: the person gambling, the place gambling occurs, the products available to customers, and the provider of facilities for gambling. The Assessment is led by the ‘key issues and risks’ relating to each category.

The Person

It is not surprising to see the NSA finding that gambling is popular in the Great Britain, with 24.7 million adults, or 47%, participating in some form of gambling over the last four weeks. However, the Commission recognises that this rate has been consistently between 45% and 48% since 2015, showing that gambling participation is not increasing. Once lottery participation is removed, the rate falls to 17 million adults, or 32%.

The Commission also acknowledges that problem gambling rates have also been stable since 2012, however it says that the approximately 340,000 problem gamblers in Great Britain is “simply unacceptable” and “needs to be drastically reduced“.

Another issue the Commission cites is that industry Gross Gambling Yield (“GGY“) has increased, whilst participation levels have decreased, suggesting that the average gambling losses per player are higher.

Key issue and risk: Ineffective ‘know your customer’ approaches including affordability checks

The Commission states that knowing customers is “crucially important“, and acting early and quickly could help prevent harm.

The NSA contains case studies of failings at various undisclosed operators where customers were said to be exhibiting clearly “unaffordable gambling behaviour” which was not picked up satisfactorily. In some cases, affordability assessments were carried out “too late” to prevent unaffordable or excessive gambling spend, and in others insufficient affordability checks were carried out by operators which wrongly estimated customers’ income.

In order to reduce unaffordable gambling, the Commission has published its consultation and call for evidence on remote customer interaction on affordability, vulnerability and identifying and acting on indicators of harm. The consultation will close on 12 January 2021.

Key issue and risk: Early identification and effective responses to at-risk behaviours

The Commission acknowledges that identifying customers at risk of, or experiencing, harm can be complex, and that some consumers “respond negatively to interventions by licensees“, but stresses that behavioural indicators are linked to risk.

Identifying at-risk behaviour and interacting effectively are central to harm prevention, the report states. In November, the Gambling Research Exchange began a trial project with a representative sample of operators to share information about customer interaction approaches.

The Commission also highlights the potential for High Value Customer (“HVC“) schemes to aggravate situations where indicators of harmful gambling have been missed by operators. The Commission’s Guidance on HVC schemes was published on 30 September following a consultation, and operators had to comply from 31 October. You can read Wiggin’s take on the new rules here.

Vulnerability is also highlighted as a key issue, and the Commission will publish a statement setting out the principles and key areas of its work surrounding vulnerability.

Key issue and risk: More engaged gamblers who participate in multiple products across different providers

Individuals who circumvent operators’ controls by gambling with several different companies remains a significant challenge, the NSA says. 56% of online gamblers have more than one gambling account and on average they have 3 accounts.

Progress has been made with the implementation of multi-operator self-exclusion schemes and other player-centric gambling management tools, and the Commission is working with providers to develop solutions which provide a ‘single customer view’ to enable operators to continue to keep customers safe who gamble with multiple gambling companies.

Key issue and risk: Underage gambling

Underage gambling continues to require vigilance from licensees, even though 9 out of 10 test purchases the Commission carried out pre-Covid-19 to check age verification were passed. The Commission also mentions the indirect impact that gambling can have on children and young people, through neglect or financial harm.

The Commission strengthened the rules for age and identity verification in online gambling last year and says it will continue to support test purchases in land-based premises.

Key issue and risk: Gaps in the evidence and understanding of gambling-related harms

“Building and maintaining a first-rate evidence base on gambling harms is essential to inform effective regulation” the NSA says. The Commission wants to tackle problems with evidence collection by reviewing its existing approach to tracking gambling participation and improving surveys. It will publish a consultation on the issue later this year with a view to implementing outcomes in 2021.

The Commission will also establish a permanent Experts by Experience advisory group, following the valuable input the interim group created last summer has provided.

Gambling harm measurement involves the number of problem gamblers at a high level, but also the different types of harms caused by problem gambling at a more granular level. The Commission are piloting a new set of questions on its quarterly online survey, with the intent this will allow more complex data on problem gambling to be tracked and captured.

The Commission also states that longitudinal research may improve understanding and measurement of gambling-related harms, and it will assess the feasibility of a longitudinal study of gambling behaviours and problem gambling.

The Place

The Commission wants to ensure gambling is safe whether played online or in premises. As has been clear for some time, the report states how the number of licensed premises and gambling participation rates in premises are declining. Conversely, online gambling is increasing, with 21% of adults reporting they had gambled online during the past four weeks in a 2019 survey, compared with 17% in 2016.

Key issue and risk: Accessibility of online gambling

In the NSA, the Commission draws out the key issues which affect gambling harm risk at each stage of a customer’s online gambling interaction. For example, during play, that game features may encourage harmful play or support safer play. The Commission will continue to take targeted action using its regulatory powers to improve standards, and use the expertise of its advisory groups to give it access to expertise on digital industries and emerging technologies, helping to ensure the regulation it provides remains up-to-date and responds to new and emerging risks.

Key issue and risk: Anonymity within premises-based gambling

The opportunity to engage with customers face-to-face in premises is counteracted by the difficulty to track gambling behaviour and the fact that much of premises-based gambling can be undertaken anonymously, the Commission says. The use of cash and the proximity of customers to employees can also make premises more likely to encounter money laundering and violent or abusive behaviour. The severe impact of Covid-19 on premises-based gambling is also recognised. The Commission will continue its compliance and enforcement work to raise standards in gambling premises.

Key issue and risk: Advertising

The constantly evolving advertising domain presents marketing options which are far more personalised than traditional forms of advertising. Digital marketing, whilst presenting some risks, also presents the opportunity to target gambling adverts away from vulnerable audiences using personalised restrictions.

The NSA also reiterates the need to advertise responsibly, and notes that the increased gambling ad volume and expenditure seen in recent years does not necessarily mean increased exposure, given that the number of marketing channels has greatly increased. Marketing affiliates are also mentioned, with the Commission emphasising the need for licensees to ensure that affiliates are acting in full compliance with the relevant rules and the licensing objectives.

The Commission has already directed operators to utilise ad-tech to proactively target gambling marketing away from vulnerable audiences, and says it will monitor the effectiveness of the updated Gambling Industry Code for Socially Responsible Advertising which came into effect on 1 October 2020. It will also gather evidence on how best to prevent bonuses being offered to consumers exhibiting harm indicators, which will build on its interim guidance issued during the first Covid-19 national lockdown.

The Product

With online slots being the largest online gambling product by GGY, the Commission wants to focus on this area of higher risk products and ensure games are made safer. It has conducted randomised controlled trials into anchoring and commitment devices with three large operators and will publish the findings.

The NSA also focuses on how operators can communicate information about the various gambling products clearly in order to enable players to make an informed choice about which products to use.

Key issue and risk: Online game and platform design

Online slots are associated with a higher problem gambling rate, says the Commission. To tackle this, a consultation on the design of online slots games was launched back in the summer, and the Commission will publish a response in due course.

As reverse withdrawals are also seen as a potential for increased player risk, the Commission will publish a response to its proposal to ban reverse withdrawals, following its instructions to operators to remove the option for customers earlier in the year.

Key issue and risk: Higher risk products

Gambling products which permit high-frequency participation are most attractive to problem gamblers. The NSA also discusses the increase in in-play betting opportunities with the growth of online and mobile gambling, and the importance of in-play betting, in GGY terms, to operators. Licensees’ use of appropriate consumer protection measures and controls to prevent excessive gambling is therefore important to mitigate the risk to consumers, and clear player information should be available on how in-play betting operates and any associated risks.

Key issue and risk: Product innovation

The Gambling Commission highlights betting exchanges and new business models as examples of where product innovation has the potential to raise risks. It says that “some product innovation has not given due consideration to any possible impact on the licensing objectives“, and reiterates that licensees must comply fully with the requirements of the Gambling Act and the LCCP, including Social Responsibility and Anti Money Laundering (“AML“) provisions.

The Commission will continue to engage with the Department for Digital, Culture, Media and Sport to advise on the resources required to regulate effectively, continue to understand new technologies, and continue to improve its understanding of new products, delivery mechanisms and payment methods.

Key issue and risk: Gaming machines

With the shift towards online and mobile gambling, the Commission says it remains mindful of the issues and risks involved with playing gaming machines in premises. The Commission regulates the speed of play on gaming machines via technical standards, and two significant, recent interventions have been to cut the maximum stake for B2 gaming machines to £2 from £100 in April 2019, and the impact of Covid-19 meaning licensed premises containing the machines were closed and have been subject to restrictions since opening again.

A number of risks in relation to gaming machines are highlighted in the NSA, whilst the Commission says it has not seen robust enough evaluation of the impact on players where gaming machine developments have occurred, such as with the facilitation of cashless payment systems.

The Commission will review the regulation of gaming machines to ensure player safety, adequate player information and fairness. It will also provide confidence that the machines meet accreditation standards by implementing enhanced test house framework and ensuring the UK Accreditation Service assessments of Test House are robust and effective.

The Provider

The report details how the British gambling market is diverse in terms of the size and business models of licensed operators, with small-scale owner-operated businesses through to the largest multi-national gambling companies in the world. An interesting statistic shows that public trust in gambling has fallen from 49% in 2008 to 29% in 2019. The Commission says it needs to understand how this drop compares with other industries.

Customer complaints are also mentioned in the NSA, with the Commission saying that it will improve its data systems and capacity to ensure consumer issues are identified and acted upon quickly.

Key issue and risk: Ownership and governance of gambling providers

The provision of gambling services is becoming global, and many licensees provide services in several markets around the world. The Commission says this means the risks it faces are international, including money laundering and betting integrity.

Consolidation in the gambling market can result in complex ownership structures that the Gambling Commission says requires “additional investment in forensic accounting skills, to assess… complex financial arrangements in ownership and funding structures and specialised legal opinion“. It also says some applicants have not provided complete information when changes of corporate control happen.

The Commission says it will continue to apply stringent licence application procedures and publish the results of its consultation on changes to the corporate governance framework, including its approach to Regulatory Panels.

Another interesting issue the Commission highlights is its assessment of licensees’ compliance in regulatory interventions. We have seen several operators being put into licence review, sometimes without clear and objective information on why this has happened. Whilst the Commission says it will publish clear metrics to measure the effectiveness of its regulatory interventions, this may not go far enough to tackling some of the issues with licence reviews we have seen to date.

Key issue and risk: Unlicensed gambling

The NSA states the shift to online gambling has increased the risk of unlicensed gambling. Illegal gambling websites threaten consumer protection measures due to their unlicensed nature.

The Commission says it will continue to review its resources and powers to ensure it can tackle this problem, in addition to ensuring effective payment blocking. It will also increase its understanding of the problem, increase its capacity to use accredited online investigators to find illegal gambling websites, expand the availability of the software tools it uses and explore different disruption techniques.

Key issue and risk: Tackling suspicious gambling activity

Whilst the UK regulatory framework is considered a global leader in working to prevent economic crime, all gambling operators have a responsibility to keep economic crime out of gambling. The NSA highlights some failures by operators in relation to AML risk assessments, staff training and effective customer risk profiling.

The Gambling Commission will continue to apply “international best practice” by implementing the Fifth Money Laundering Regulation, and will also update its AML risk assessment. This will be an opportunity for operators to take note of any changes the Commission makes, and update their risk assessments accordingly.

What should operators take away from the NSA?

The NSA is relevant to operators’ businesses in several ways; it gives an insight into the areas of compliance that the Commission will be focussing on, contains advice from the Commission about its expectations of operators, and gives examples of non-compliance in the form of case studies.

We recommend that operators, and particularly MLROs, read the NSA and take note of the key messages to the industry, and consider whether their risk assessments or policies could be updated in light of any of the contents of the Assessment.