Changes are coming to gaming regulation - will your business survive?

Changes are coming to gaming regulation - will your business survive?

The online gaming industry first reared its head two decades ago, and has changed almost unrecognisably since its infancy. The past ten years have been the most transformative however; turning it into a global billion pound industry that’s not only still growing, but is facing ever more intense scrutiny from media and regulators alike.

The recent regulatory changes gaming has undergone echo many of those faced by the online financial services sector in the past, likely a result of the similar challenges faced by both industries. The synergies between the two mean that financial services may well provide a window into what is yet to come for compliance in the world of gaming – and in the case of businesses that fail to comply, it’s a very ominous picture indeed. The FCA has issued a grand total of £1,981,582,538 worth of fines since 2013, and has seen over 100 firms close their doors in the consumer credit sector alone since they took over-regulation.

The UK Gambling Commission (UKGC) continues to grow in both size and regulatory powers - a result of some companies’ failure to prevent under 18’s and vulnerable individuals from gambling, as well as to prevent fraudsters from gambling using stolen money and falsified identities.

Gaming businesses are beginning to react, with many taking great strides in ensuring compliance. Many operators have introduced responsible gambling teams, or advocates within their businesses to ensure that problem or vulnerable individuals are identified and are protected accordingly.

The ever-changing nature of regulations has made the compliance process far from easy, however, particularly for smaller businesses that are then left to look to the global operators to understand what procedures they need to put in place. The constant threat of UKGC audits has put pressure on businesses to react faster than ever, but even those that do put procedures in place have still fallen foul.

Over the last two years, a number of large-scale gaming companies have had short notice audits, aimed at assessing their verification processes for new customers. Online ID verification has been a problem area, with businesses being told they must enhance them in line with changing regulations. The main focus of this enhancement is on “casino” and “enhanced due diligence” customers, with them now being required to be linked to multiple verification databases. This stringent level of verification is often referred to colloquially as a “2+2 check”, or more formally as an "Anti-Money Laundering Check", and requires two pieces of information about an individual to be verified against two separate databases in order to verify that they are both who they say they are and are of age to gamble.

Separating different types of customers is of course an almost impossible challenge for gaming businesses – their casino customers may also be sports or poker customers, using a single account across multiple products. As a result they’re now being forced to run these checks against their entire customer portfolio, covering both those new to the business and those already on their books.

With the many more changes in regulation still yet to come however, this approach is unlikely to ensure compliance for long. Some companies are seeking to future-proof themselves, rolling out these checks to include areas of their business not yet covered by regulation. With operators anticipating new regulatory changes in the next twelve months, those that aren’t taking action may soon find it’s at their peril.

One thing at least is certain; the time to act is now if you want to safeguard your business. Don’t leave it to the 11th hour when the UKGC audit lands through the letterbox - with the right preparation future-proofing your compliance can be a considered and well executed process. 

For more information about the coming changes in gaming regulation, or for help future-proofing your own business, please contact us.

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