UK Gambling Commission Consultation on High Value Customers
Expert Insight provided by Julian Harris, Partner, Harris Hagan

Following a breakfast briefing conducted by Neil McArthur in October 2019, the Gambling Commission announced the formation of three industry working groups, one of which was to focus on high value customer incentives. 

The proposals from the working groups, co-ordinated by the Betting and Gaming Council (BGC), was published on 1 April 2020 with operators agreeing to implement the changes rapidly, some by as soon as 14 April. At the time of publication of the proposals the Gambling Commission stated that it “would launch formal consultations to ensure that the new measures are incorporated into its regulatory framework.” The Gambling Commission further stated that it “expects the industry to implement its code as soon as possible and considers most measures should be implemented within 3 months” and that it “will monitor and support implementation of the industry’s code as an interim measure.”

The proposals made were to:

  • Restrict and prevent customers under 25 years of age from being recruited to high value customer schemes.

  • All customers must first pass through checks relating to spend, safe gambling and enhanced due diligence before becoming eligible for high value customer incentives.

  • Reward programmes will also be required to have full audit trails detailing decision making with specified senior oversight and accountability.

The consultation was published on 26 June 2020 and closes on 14 August 2020. 

New Licence Condition
The Gambling Commission proposes to introduce a new licence condition on rewards and bonuses. This will apply to all licences, except gaming machine technical and gambling software licences and will require that:-

  • any incentive or reward scheme must be designed to ensure that the circumstances and conditions are clearly set out and readily accessible to customers to whom it is offered;

  • neither the receipt nor the value is dependent on gambling for a pre-determined length of time or frequency, or alters or increases if the activity or spend is reached within a shorter time;

  • if the benefit comprises free or subsidised travel or accommodation the terms are not directly related to the level of gambling

  • if incentives or reward schemes are offered to customers designated “high value”, “VIP”, or equivalent, they must be offered in a manner consistent with the licensing objectives.

Most importantly, licensees are required – by use of the word “must” –  take into account the Gambling Commission’s guidance on high value customer initiatives.

New Guidance
In its guidance, the Gambling Commission goes further than the three points that are outlined above. For example, in addition to those, it requires:-

  • Specific policies and procedures for the operation and governance of HVC schemes, to include authority levels for key decision making, and appropriate oversight arrangements. 

  • A named individual, at senior executive level or equivalent, accountable for the programme’s compliance. Except for small scale operators this should be a PML holder.

  • Licensees should consider what additional steps are required to ensure staff are equipped and motivated to manage HVCs effectively, including enhanced training on safer gambling and AML risks specific to HVC management; job descriptions reflecting that protection of the licensing objectives are the basis for all activity carried out by staff involved with HVC rewards programmes; staff should not be incentivised or remunerated based on a customer’s loss, spend, or activity; the performance management of HVC staff should be consistent with the principle that commercial pressures should never override regulatory considerations or customer welfare; and ensuring staff managing multiple accounts retain their ability to assess risk on an individual basis.

  • HVC incentives should not be used to exploit vulnerable customers or to encourage problematic behaviour. Licensees must be able to evidence how their rewards and bonuses are compliant with the provisions in section 5.1 of the codes of practice. 

  • Licensees will be expected to take all reasonable steps to verify the information provided to them and conduct ongoing checks, with frequency of checks to be determined by the assessment of risk from ongoing monitoring of the customer’s activity, behaviour and circumstances. In the absence of any change in the risk assessment, licensees should as a minimum undertake a review of a HVC’s account at least quarterly.

It is important to note the Gambling Commission’s statement at paragraph 1.5 of the proposed guidance: “We have used the word ‘must’ to denote a legal obligation, while the word ‘should’ is a recommendation of good practice, and is the standard that we expect licensees to adopt and evidence. We expect licensees to be able to explain the reasons for any departures from that standard.”

The Gambling Commission has consulted on these proposals, as it is required to do under section 24(10) of the Gambling Act 2005, before issuing or amending a code of practice. However, the addition of lengthy and detailed guidance bears resemblance to the approach the Gambling Commission has taken to customer interaction. The VIP guidance makes it explicitly clear from the wording above that, despite using the word “should”, it expects licensees to adopt the standards set out and maintain evidence of doing so. This is essentially a requirement. The manner by which the guidance has been issued, arguably opens the door to the Commission taking similar steps to that which it took in relation to customer interaction, this time in relation to the requirements for VIP customers. Essentially the Gambling Commission will be able to amend this guidance, perhaps substantially, and to add onerous additional requirements, without consultation. Whether they will do so remains to be seen, but we highlight the point as a warning to operators to be watchful. The guidance is detailed, and as we know, the devil lurks in the detail.

We recommend to operators that they reply to the consultation, seek clarity as to paragraph 1.5, and make it clear that they expect the Gambling Commission to consult prior to amending its guidance further. 

With thanks to my colleague David Whyte for his invaluable co-authorship.