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Licensees should expect to be fined 10-15 percent of their UK revenue for the most serious breaches of gambling regulations under proposed changes to enforcement principles that were released for consultation by the UK Gambling Commission on Friday.
The proposed changes in the UK regulator’s approach to financial penalties were outlined alongside accompanying updates to licensing conditions related to the disclosure of investors in gambling companies, with responses to the consultation due by March 15, 2024.
In its consultation document, the Gambling Commission said it intends to update its 2017 Statement of Principles for Determining Financial Penalties to introduce a new, six-step process for determining the amount that UK licensees may be fined over regulatory breaches.
After first setting aside any amounts that should be paid as a “disgorgement” to reflect either direct harms to consumers or financial gains to the operator as a result of a regulatory breach, the commission would then apply a five-level scale for determining the seriousness of the offence.
Licensees could expect to be fined less than 1 percent of their UK gross gambling yield (GGY) for the past quarter for a minimal or one-off breach, but up to 10-15 percent of GGY for an offence representing “a very serious threat to the licensing objectives”, involving complicity by management, or affecting a very high number of consumers over a period of time.
The commission would reserve the right to impose higher penalties in “exceptional circumstances”, while also using a different basis to calculate monetary penalties where a GGY-based approach is not appropriate.
Under the commission’s proposed six-step approach, penalty amounts determined using the above thresholds could then be adjusted based on any aggravating or mitigating factors, whether the amount should be subject to a “deterrence uplift” or lowered based on the swift cooperation of the licensee, as well as consideration of whether the licensee can afford to pay the penalty.
Licensees could also still enter into a settlement instead of a financial penalty, under similar conditions as per the current enforcement guidelines.
The Gambling Commission noted in the consultation that it collected around £82m in penalties and settlement payments between August 2021 and July 2023, but nearly half of the licensees subject to enforcement actions through this period had either asked for greater clarity over how the penalty amounts were calculated or challenged whether the amount was appropriate.
The commission said these requests “ultimately lead to protracted casework often putting additional pressure on both the commission’s and on licensees’ resources and pushing the boundaries of the two-year limit on imposing a financial penalty.”
It said the updated guidelines were intended to “ensure a consistent process for the determination and imposition of financial penalties… provide greater transparency and clarity over how financial penalties are calculated, … allow a sufficient scope to exercise necessary judgment in the determination of the quantum based on individual case characteristics, and to mitigate the risk of legal challenges on our approach.”
“The proposed changes aim to make the commission’s approach to financial penalties more transparent, addressing stakeholder concerns about the lack of transparency and consistency with regards to the existing approach,” the commission said.
Investor Source of Funds Scrutiny
In addition to its financial sanctions guidelines, the Gambling Commission is also consulting on proposed changes to its licensing conditions regarding the disclosure of new investors in UK-licensed gambling companies.
The commission said it was now planning to formally raise the threshold for the reporting of a new investor from the current 3 percent to 5 percent, in part to align with requirements in other global jurisdictions, such as the United States.
However, reporting disclosure requirements would also be “significantly, but proportionately” expanded in other areas to require reporting on any partnerships, trusts and investment funds passing the 5 percent threshold, as well as any individuals who acquire £50,000 or more, or entities that acquire £1m in shares in the licensee over a rolling 12-month period.
Licensees would also be obliged to provide evidence of the source of funds for the individual’s or entity’s investment, with an expectation that this evidence would be gathered as part of the share-issuing process.
The commission said the proposed changes were designed “to take account of the increase in complexity of mergers and acquisitions, and the increased globalisation of gambling.”
“These consultations are part of our continued drive to ensure Britain has the world’s most effectively regulated gambling sector,” added Kay Roberts, executive director of operations at the Gambling Commission, in a statement.
The latest consultation released on Friday overlaps with, but is independent of, the series of proposed regulatory reforms that were set out as part of the UK government’s gambling white paper released in April of this year.
The UK Gambling Commission recently closed its first tranche of consultations on various aspects of the white paper, including proposals on affordability or financial-risk checks as well as the design of online casino games.
A second set of consultations related to bonus offerings and responsible gaming tools, among other things, was opened last month and is due to close on February 21.
The UK government’s Department of Culture, Media and Sport (DCMS) has also held a related consultation over proposed reforms for land-based gambling and a potential stake limit for online slot games. A further DCMS consultation on the creation of a statutory levy to fund problem gambling treatment and research closed on Thursday (December 14).
Neither the Gambling Commission nor the DCMS has yet published its response to the initial white paper consultations.
