Challenges in Compliance Survey

More than half of compliance professionals from the international betting and gaming industry believe the implementation of financial risk checks in the UK will have a negative impact, the SBC Media Challenges in Compliance Survey, commissioned by IDnow, has found.

The study surveyed 100 senior compliance representatives from operators in Europe, North America and Latin America about existing issues and concerns over upcoming changes to market conditions. The full report will be published in late February 2024.

One topic that garnered strong and polarising views was the UK’s proposed financial risk checks – the affordability checks that the UK Gambling Commission is currently running a consultation on – and their impact on the domestic and international market.

When asked about the impact the checks would have, 67% of respondents said they would lead to a reduction in customer sign-ups at licensed operators, compared with 26% who predicted the move would have no effect.

Interestingly, the majority expressed a degree of concern about the potential effect of the financial risk checks on the wider international market, citing fears it could lead to an outflow of players to the offshore market, a drop in registrations and revenues for licensed operators, and, in turn, reduced gaming tax receipts for governments. 

One compliance professional from a UK sportsbook suggested that the plan would actually strengthen the black market and that it represented unfair treatment of the gambling sector. They said: “Introducing checks in one industry and not others will create hypocrisy. Credit has been removed from the gambling industry and information should only be requested if there is a promise of funds, not actual funds.”

Representatives from businesses in numerous markets, including Brazil, Canada, Estonia, Germany, Poland and the US, predicted that the black market would benefit from an influx of players unwilling to share financial information. 

One compliance specialist from a multi-brand company licensed in multiple European markets went further and suggested: “More operators will close their doors […] due to the huge loss in customer sign-ups, retention and revenue.”

They added: “Businesses are not charities. There should be a clear guideline based on research and facts to justify why such financial risks checks are to be done at a specific stage. This is not a risk-based approach. Eventually the market will fail.”

Worth the risk?

However, not everyone was as pessimistic: 18% of respondents predicted the introduction of financial risk checks would have little impact outside the UK and 25% identified potential benefits, including the “elimination of fraud cases” and “less money laundering”.

One UK-based specialist said the change “may just see players doing it purely as they don’t have any choice”, while a US counterpart suggested that mass market operators targeting recreational players might not need to worry. They said: “As these are normalised, only those who wish to gamble beyond their means will be upset by ‘someone’ impeding their chances of winning big [but] in the near term, high rollers will likely gravitate to markets where checks do not exist.”

An issue that did concern many compliance professionals outside the UK was whether or not other legislators and regulators would follow the example of Europe’s largest gambling market. While some felt the impact of the change would only be noticed in the UK, a number of professionals based in Malta, Sweden and the US, among other markets, predicted that the practice would spread. 

However, not all thought this would be a bad thing, with some suggesting it could help operators to “identify and evaluate country-specific risks to determine the impact they might have on the business” and even encourage grey markets to regulate. 

Commenting on the results, SBC’s Content Director Ted Menmuir, said: “The findings illustrate the extent of the uncertainty about what mandatory affordability checks – even in the frictionless form outlined by the UKGC – really mean for the industry. 

“While it is no surprise that many operators are worried about the plan, it is interesting to note that some have already started to focus on the potential benefits of financial risk checks. This perhaps indicates an acceptance that the implementation of the checks is inevitable and a degree of confidence that technology suppliers will find a workable solution for them.”

Roger Redfearn-Tyrzyk, Vice President Global Gaming for leading identity verification platform provider IDnow, added: “First and foremost, it is the responsibility of the operator to provide a safe and responsible gaming experience because it is good for their business model. However, this must be facilitated by a reliable regulatory environment that is proactive in its fight against fraud and the illegal market. So the regulator must be an ally of the licensed operators. In the end, this is how players are better protected.

“If the mandatory financial risk checks really end up being as ‘frictionless’ as the UKGC promises, then this is an opportunity to improve the relationship between the player and the operator. However, if this is not the case, then the immediate effect is going to be a tremendous increase in the illegal black market, and operators not licensed in the UK and not abiding by the UKGC and LCCP rules are simply going to offer their services illegally to players in the UK.” 

The SBC Media Challenges in Compliance Survey addresses some of the key issues around compliance, player onboarding, fraud and technology. To attend the ‘What to expect in 2024: A perspective on future compliance challenges’ webinar discussing the full findings on 2nd February 2024 and receive a copy of the report when it is published, please complete the form below.