Guidance
Customer funds: segregation, disclosure to customers and reporting requirements
Customer funds: segregation, disclosure to customers and reporting requirements
Assessing whether you hold customer funds
Operators must comply with licence conditions 4.1.1 (remote operators only) and 4.2.1 (remote and non-remote operators) if they hold customer funds to the credit of customers. This includes, without limitation:
- cleared funds deposited with the licensee by customers to provide stakes in, or to meet participation fees in respect of, future gambling
- winnings or prizes which the customer has chosen to leave on deposit with the licensee or for which the licensee has yet to account to the customer
- any crystallised but as yet unpaid loyalty or other bonuses, in each case irrespective of whether the licensee is a party to the gambling contract.
For example, a betting operator who allows customers to deposit money into an account and keep those funds until they are ready to gamble or withdraw the money would be holding customer funds.
Similarly, any bonuses which the customer has earned, and which are not subject to any further terms before the customer can redeem the bonus would also be considered customer funds.
Examples of situations where funds would not be considered customer funds
There are a number of situations where customers may have an entitlement to funds, but where the operator need not meet the requirements of licence conditions 4.1.1 and 4.2.1 because the funds are not ‘held to the credit of customers’.
Examples of these situations where monies are not considered customer funds are:
- money staked on an event or process which has yet to be decided. This includes open bets. An ‘open bet’ is where the customer has paid money for a bet and the event on which the bet has been placed has not yet occurred. Money staked within open bets is not considered to be customer funds and is therefore not covered by any arrangements the gambling business has in place to protect customer funds if it goes bust
- a non-remote casino where customers can retain chips for their next visit but the chips are not held in a specific account for that customer
- a gaming machine business which uses tickets which may be held by the customer and ‘cashed in’ at a future date
- a betting slip held by a customer which may be redeemed at a later date
- fees or charges which have been withdrawn from a customer account, in line with the operator’s terms and conditions and so long as the fees or charges are fair and open.
Further examples of situations where funds would not be considered customer funds includes lottery proceeds. Where a customer pays for a lottery subscription in advance, the funds are considered customer funds until they are committed to a particular lottery and are therefore no longer held for future gambling - at this point they become lottery proceeds and are subject to the separate requirements for lottery proceeds. The point at which monies cease to be customer funds and fall to be proceeds will vary from scheme to scheme depending on how and when the monies are applied to the purchase of a ticket for a particular lottery. This may, but by no means need be, at the point the monies are received by the lottery operator.
Another situation where funds would not be considered customer funds are unallocated lottery subscriptions. Should a lottery operator receive funds that they are unable to allocate to a customer’s account (for example, funds received by standing order which does not identify the customer) the operator should clearly set out in their terms and conditions how these funds are dealt with (for example if the funds will be treated as a donation after a certain period of time) and ensure that this is applied to any such funds.
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Advice on implementing licence condition 4.2.1 (disclosure to customers)
Last updated: 25 July 2022
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