OneComply webinar: What have we learned from gambling industry fines?

Webinar on Gambling industry fines
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Serious regulatory fines continue to make headlines and impact operator bottom lines. With increasing pressure to expand into new regulatory markets quickly while maintaining good standing in existing jurisdictions, fines are at the forefront of many minds. A recent SBC Webinar, Gaming industry fines – how they can be prevented and what they mean for the future is open for presenters, tackled that exact subject.

OneComply CEO Cameron B Conn moderated a panel comprised of:

  • Peter Murray, Head of Gaming for Veriff
  • Maria Cobos, Head of Compliance USAbility
  • Rob Kammerzell, President and Founding Member of Kammerzell Consulting Services

What is the purpose of gambling industry fines?

The discussion began with the important point of what purpose a fine serves.

“Fines are viewed absolutely as a tool, and it’s a tool of deterrence. The chief goal of the regulator is to make sure that licensees comply with the rules and regulations in the law, but also to instill public confidence in the industry. If you don’t have public confidence in this industry, it won’t be successful. It’s a means to an end in trying to ensure that the licensees are doing what they’re supposed to do and they’re held accountable for their actions,” Kammerzell explained.

In the US, building up this trust through stringent regulations is particularly important because the industry is so new and perceptions around gambling are being formed by the population. Plus, as Murray pointed out, it is essential to establish solid self-governance or face more stringent regulations and laws.

“I think there’s a level of responsibility and a level of restraint because we’ve seen it time and time again that if we don’t head down that route of taking control of this ourselves, it will be taken from us. We will get the regulation we deserve if we don’t put some sort of brakes on this.”

“This isn’t just about paying out the fines, the fines that will be coming from, say, the US or Latin America or whoever will ramp up because that’s by nature of what they do. This builds into a bigger picture around trust for the sector,” Murray added. “Yet we work in a sector that, to various levels, suffers from a bit of a very big focus from the politicians and the media. So we need to be delivering on those, those responsibilities that we have, especially when it comes to trust and sustainability.

Building compliance in as you scale

The panel used an example of an operator in Colorado who somehow managed to let its license expire, operated for 13 days without a license, and amassed a $130,000 fine. The panelists noted all the measures that should be in place to flag an expiring license months in advance. However, the group also noted that keeping pace with regulators in the rapidly expanding North American market is difficult.

“It’s important to have a centralized tool to control these activities as the company grows and it’s expanding to more and more jurisdictions, meaning more and more licenses need to be maintained. So there must be an automated, collaborative, like a single document control repository for the whole organization and it’s transparent and visual to the management who can support those activities,” Cobos suggested.

Moreover, compliance is increasingly becoming something that other departments beyond the compliance department need to worry about.

“Whether you are a digital operator or you are a bricks and mortar casino, every single one of your employees is involved in compliance and you have to have kind of that onus of understanding that,” Cobb noted.

Ontario is proof positive that compliance is a company-wide issue

Ontario is a prime example of this idea in action. Marketing has been the source of millions in fines for Ontario online gambling operators so far. The Alcohol and Gambling Commission of Ontario (AGCO) does not pre-vet marketing materials for operators, so the onus is entirely on the operator to make sure marketing is compliant. If the marketing department does not work closely with compliance, problems ensue. In Ontario, the same goes for the affiliate team, as affiliates are not licensed and it is up to the operator to make sure their affiliate partners are compliant.

Yes, these expectations can be onerous, but they are also par for the course. Which, as Murray points out, makes it increasingly difficult for operators to claim mea culpa when it comes to finable offenses.

“The challenge I think the sector has now is where we’re running out of excuses for continuing to fail to comply. Those historical fines are coming closer and closer to the present day. So the excuse that we’ve changed, that we’re looking for it, that we’re doing something different is becoming less relevant.”

Pandemic caused regulators and operators to rethink how things are done

It is true that things have changed, both for the good and for the bad.

“I think we’re in a unique point with coming out of the pandemic and the relationships between regulators and licensed businesses have changed or evolved, I would say by necessity, because during the pandemic we had to look at different ways of communicating, different ways of sharing information, and different ways of collaborating with one another to make the system work,” Kammerzell said.

That has resulted in growing pains for the regulators too.

As Kammerzell noted, “Regulatory agencies are not immune to, you know, the concept of working from home. It seems like a strange concept, but Colorado division of gaming is a perfect example of reducing the floor, created their office space, and they have background investigators, auditors, all of those people working at home. And so how do they share that information? How do they monitor the businesses when they’re doing it from home? So I think those changes in how we conduct business are really going to push forward the need for us to have real-time data sharing and interaction between the regulator and the industry.”

Colorado is also a great example of a regulatory body dealing with the challenges of working for home and a reduced workforce, which has led to some problems flagged by state auditors. For the panel, the hope is that at least one regulatory realizes this situation is not tenable and promotes changes.

What is the path forward for improved compliance?

All it takes is one enlightened regulatory agency to say, you know, we’ve got to change the way we do business. And I think there’s one out there, and I think that the industry is going to demand it. And that’s not only regulatory compliance or compliance, that’s also procedure controls, practices, marketing, advertising, anything surrounding affiliates and service providers,” said Kammerzell.

Many in the industry wish there was more compliance across jurisdictions to standardize things, but each state in the US at least seems intent on working in a specific and bespoke manner.

“I think the dreaded C word and collaboration across regulators is thrown around a lot. I think if you’re an operator or to be fair, a customer or anybody you would love the ability to have a pretty set standard across that. But for whatever reason it is, the sector we all support or work in seems incapable or doesn’t want to do that,” Murray observed.

With more than 30 states now all doing their own version of state sports betting, Murray is right that standardization is not something to hold out hope for. However, to Kammerzell’s point, if one forward-thinking regulatory makes changes with incredible results, it does seem that is the path to get multiple jurisdictions to follow suit.