Neil McArthur Keynote Speech – ARQ Conference
Malta, 30 October 2019
Thank you and good morning.
My name is Neil McArthur and I am the Chief Executive of the Gambling Commission.
I would like to thank ARQ for inviting me to speak today. I plan to cover three broad issues:
- Where have we come from and where are we now?
- What are the current priorities and the emerging issues that any gambling operator with consumers in Great Britain needs to know?
- What opportunities are there to collaborate?
For reasons I hope you will appreciate, the data I will draw on relates solely to gambling in Great Britain.
In contrast, the section on emerging issues is much more general, as in different ways, most gambling regulators around the world are facing the same challenges.
I want to start by looking back a few years.
Prior to the 2014 legislation, the Gambling Commission only regulated around 15% of the online market that was used by GB consumers.
In 2014 the Gambling Commission’s remit was extended in order to make sure that consumers in Great Britain were protected and that there was a level playing field.
Since the end of 2014 we have regulated all commercial gambling targeting British consumers, irrespective of where the operator is based. As the explanatory memorandum from the 2014 Act made clear, “an operator will need a licence from the Gambling Commission if their gambling facilities are used in Great Britain (even if no equipment is located here) and the operator knows, or should know, that the facilities are being used or are likely to be used in Great Britain. If the operator does not obtain a remote gambling licence, they will be committing an offence under section 33 of the 2005 Act.”
Regulating all online gambling to GB consumers
In a nutshell, what we have found as we undertake compliance activity has not been good enough. It has demonstrated why the law needed to be changed in 2014.
Here are just a few statistics to explain why I say that:
Last year we undertook a massive piece of thematic work, involving 123 online casino operators (out of total 189 (~1,700 urls) who are licensed) to look at compliance standards.
Following that compliance work:
- 45 online casino operators were told to submit an action plan to raise standards
- A further 14 online casino operators were the subject of enforcement investigations, following which:
7 operators paid £18m in penalty packages
5 operators surrendered their licences
3 PMLs surrendered licence
Other investigations are continuing.
It’s disappointing to note that currently, 24 of the 45 operators who had to submit action plans are based here. The same is true for 5 of the 7 operators who had to pay penalties and 3 of those which surrendered licences.
What are the lessons to be learned?
In 2018, the Commission published its first annual Enforcement Report. The second report was published in April. I urge those of you who have not read them to do so.
The purpose of these reports is to make operators focus on making gambling fairer and safer for consumers in Great Britain and beyond.
Later today, my colleague at the Commission, Executive Director for Licensing and Compliance, Helen Venn, will be leading a workshop on compliance. I urge you all to attend.
She will be setting out what we expect you to be doing in terms of Anti-Money Laundering, requirements for Personal Management Licences as well as general compliance more broadly.
Helen’s session is a perfect opportunity for you all to commit to raising standards for consumers.
Where next for enforcement?
Compliance with both the letter and the spirit of regulation is not optional.
In 2017 we consulted on changes to our enforcement approach. Key changes included:
- Changes to the Commission’s statement on financial penalties including introducing higher penalties for breaches, particularly where it sees systemic and repeated failings;
- Putting all regulatory tools, including licence review (both of the operator and personal management licences), on an equal footing by removing the current bias in favour of settlement;
- And using time-limited discounts to create better incentives for early settlement.
Where are we now
What are the current priorities and the emerging issues that any gambling operator with consumers in GB needs to know about?
A great deal has changed in five years, not least the growth in online gambling and the changes we have seen, good and not so good, due to the fast pace of change in technology and the way in which gambling businesses have exploited the potential offered by that.
Excluding lotteries the GGY brought in online now outstrips that brought in by ‘bricks and mortar’ gambling. Since the year 2014/15 online GGY has risen by 58% whilst ‘bricks and mortar’ has stayed relatively stable.
Online gamblers who use their mobile phones have doubled over the last four years. That means that 44% of 10.5 million consumers now gamble on their phone.
Operators based in Malta now account for over 30% of online GGY, or about one-eighth of the whole GB regulated market. That is up from around 10% in 2014.
We assess risk by reference to:
- The person gambling
- The product they are gambling on
- The provider who is making facilities for gambling available to consumers
- AND the PLACE the consumer is gambling
Looked at through that lens, this data is very thought provoking.
WHAT IF THE WORLD WERE 100 PEOPLE
The latest data published yesterday shows that in the general population:
- 47% adults had gambled in the last 4 weeks
- 20.6% had gambled online, 18.4% last year
- Problem gambling 0.5% - stable
- Moderate risk of harm – 1.1% (down from 1.7%)
It’s too soon to draw conclusions on a long-term trend.
We must keep working to reduce harms.
WHAT IF THE WORLD WERE 100 PEOPLE (JUST GAMBLERS)
Of course, those numbers don’t give the full picture. Our data shows that if the world were 100 gambling customers, around 92 customers are not currently problem or at-risk gamblers, 5 and a half customers are low-risk gamblers. 2 customers are moderate-risk gamblers and almost 1 customer is a problem gambler.
WHAT IF THE WORLD WERE 100 PEOPLE (YOUNG PEOPLE)
Our data shows that if the world were 100 young people - under 25 - with multiple accounts who gamble in lots of different ways, 30 are not currently problem or at-risk gamblers. 15 are low-risk gamblers. 31 and a half are moderate-risk gamblers. 23 and a half are problem gamblers.
Now, I’ve used this data for illustrative purposes. I realise that there are challenges when interpreting all statistics, based on sample sizes and other factors. Please don’t get distracted by that – focus on the bigger picture. For me that bigger picture is brought into sharp focus by my 20 year old son. How many of you have a child under 25? Old enough to gamble but still new to the adult world? How many of you when you look at this, in that context, have serious concerns? We need to raise standards.
Opportunities to reduce risk
At the Gambling Commission we talk a lot about raising standards, but what do we mean when we talk about this?
Let’s start with a simple and straight forward question: how well do you know your customers?
Over the last two years we have been challenging operators to make progress on the following:
- Markers of Harm
- Customer Interaction
By ‘markers of harm’ I mean the activities or behaviours which could indicate a customer is experiencing or is at risk of developing problems with their gambling. We have published guidance on customer interaction for remote operators, which clearly sets the indicators operators should consider. Our Insights team also stands ready to support operators who wish to learn more.
By customer interaction I mean how you, as operators, identify and interact with customers who may be experiencing or risking problems with their gambling. This is an area where we have been leading co-creation workshops that bring together customers, operators and colleagues from the Commission to explore areas of good practice and opportunities to make them even better.
On Advertising, public concern remains about the level of exposure to gambling advertising in the media and online. We welcomed the announcement by Industry Group for Responsible Gambling of the whistle-to-whistle ban, as an important first step but we need to see rigorous evaluation of the ban’s outcomes.
Effective evaluation must, of course, underline all activity to raise standards for consumers. Without evaluation, resources are squandered that could otherwise be used to prevent harm and make gambling fairer and safer for your consumers.
How well do you know your customers?
So here is the punchline.
All of the things I have just spoken about can be boiled down into one question: how well do you know your customers?
Areas of focus for the Commission
We all need to focus on the outcome we want, which is safer gambling and check our interventions are having a real, positive impact on that outcome.
We at the Gambling Commission will play our part in Raising Standards as well. In the coming months we will be:
- Taking action to address our concerns around gambling with credit cards. This follows the current consultation.
- Gathering data on online play and what that means for stakes limits, including looking closely at the case for introducing further protections for consumers online as a means of further reducing the risk of harm.
- And exploring the use of all our tools to encourage or mandate changes in the interests of consumer protection around VIP schemes and inducements.
We also want to encourage collaboration by operators to raise standards. Earlier this month I set out three opportunities for collaboration and I need to be clear that these issues are not just the Gambling Commission’s concerns either.
Yesterday I met with the Malta Gaming Authority. We have always collaborated with other regulators but as the gambling market becomes more global in character, this work has become ever more important. Our relationship with the MGA is therefore a vital part of our work. Just over a year ago, the MGA joined us in signing the joint declaration of Gambling Regulators raising concerns related to the blurring of lines between gambling and gaming. We are also both members of the GREF e-gambling and Responsible gambling working groups and the CEN working group, which is considering standardisation of reporting. And the MGA share our concerns about the need to raise standards.
Opportunity to Collaborate 1: Game and Product Design
We know that the success of many technology companies and digital content creators depends on their ability to establish and maintain the engagement of their consumers on their web, mobile apps.
We know that this can be done by behavioural techniques which can change behaviour without the consumer’s knowledge and not always in good ways.
So, I am challenging you – both mobile and online game designers – to work together to produce an effective Industry Code for Game Design, which can be published no later than next spring’s Raising Standards conference. If such a Code is developed to address the risks, the Commission will move to bring it into LCCP and Technical Standards to ensure a level playing field for all.
We’d expect the code to set out:
- the techniques that the industry plans to use when designing apps and online games
- the risk associated with each product and how they can be mitigated
- a clear explanation of what is not acceptable.
To support this the Commission will:
- provide support to you and act as a sounding board for ideas
- ask our Digital Panel, a group of experts from the technology and social media industries, to collaborate around the challenge
- run collaboration workshops ahead of the Raising Standards Conference to help frame and inform that discussion.
Opportunity to collaborate 2: Inducements to gamble
I have already mentioned how concerned the Commission is about the prevalence and impact of the various incentives the industry offers to VIP consumers. We already have LCCP provisions which cover this but the evidence we get from our enforcement work, our compliance work and the feedback we receive from consumers suggest that the current requirements are not effective.
We know that conversations have already been taking place about the question of the treatment of VIPs and associated inducements to gamble. As a result, we recently received an offer from one major operator to lead the development of a code of conduct in this area.
We want to take up that offer and hope to see firm commitments in this area soon, including a pacey timetable for that work.
Opportunity to collaborate 3: Advertising technology
We are still awaiting the final report from the major research report that Gamble Aware commissioned on gambling advertising and its effects on children, young people and vulnerable adults. We do, however, have the interim report.
The Interim Report shows that ad spend has surged over recent years and that Children, Young People and vulnerable adults are being exposed to significant levels of gambling ads online - including via social media. This concerns us, it concerns our experts on the Advisory Board for Safer Gambling, and it should concern you. Remember that chart I showed you earlier: if the world were 100 young people - under 25 - with multiple accounts who gamble in lots of different ways, 15 are low-risk gamblers. 31 and a half are moderate-risk gamblers. 23 and a half are problem gamblers.
Whilst I am not suggesting that children, young people or vulnerable adults are being actively targeted – the research found very little evidence of ad tech being used to proactively target ads away from them either.
I want you to explore how you can make better use of technology to minimise the risk of exposure of gambling advertising content to children, young people and vulnerable adults.
We want you to come together and start work on a plan which sets out new standards for how industry will embrace ad-tech for social responsibility purposes – actively targeting away from vulnerable audiences.
Again, the Commission stands ready to help bring you together for this work if necessary but however you do so, we want to see tangible progress.
I started by saying I would cover:
- Where have we come from and where are we now?
- What are the current priorities and the emerging issues that any gambling operator with consumers in GB needs to know about?
- What opportunities are there to collaborate?
I hope all of you will engage with the opportunities to collaborate that I have just outlined. Game and Product Design, Incentives to Gamble and Advertising Technology are all areas where the people and operators I see before me can make an impact. For those of you who want to get involved, we stand ready to work with you and others to make progress.
And that brings me to the question I started today with. Where have we come from and where are we now? The Commission is clear that although progress has been made in the regulation of the online market since 2014, far more needs to be done to raise standards. So let today be the start of a fresh commitment:
- A commitment to raise standards and to collaborate with us to make more progress more quickly.
- In return the Commission commits that we stand ready to help in these efforts. But rest assured, we also remain ready, when needed to take enforcement action.
Posted on 30 October 2019