Guide to Gambling Regulation: The Role of the Regulator

The online gambling industry has really come into its own over the last few years and that is unquestionably due to the creation of regulated gambling jurisdictions around the world.

With the installation of various gambling authorities has come mainstream adoption of online gambling, a real discussion about the challenges of safer gambling and the oversight necessary to allow players to gamble with the peace of mind that comes with having regulation protecting your interests.

While we clearly understand the benefits provided by working with regulatory bodies what is not as clear is exactly what they do and what their responsibilities are. Join us as we look at the most recent Malta Gaming Authority (MGA) Annual Report by CEO Carl Brincat and try to understand more about this important aspect of the online gambling industry.

✓Core Vision and Functions

When it comes to overseeing the regulated gambling of an entire country there must be a unifying set of standards and objectives to ensure that the various departments are all working to achieve a common goal.

The MGA has outlined the following Vision Statement to help guide their decision-making processes:

• To sustain Malta’s position as one of the most reputable jurisdictions in the gaming industry.
• To raise standards within the global gaming sector to make gaming fairer and safer, thereby protecting consumers’ interests.
• To ensure gaming is kept free from crime by intensifying international collaboration efforts.
• To adapt Malta’s gaming regulatory framework to evolving market needs, aiming for excellence.

Their Vision Statement works hand in hand with their key list of functions which includes:

• Regulating gaming;
• supervising our licensees and overseeing their gaming operations;
• ensuring the fitness and properness of individuals and companies in possession of a gaming licence issued by the MGA;
• ongoing monitoring and ensuring that our licensees are in compliance with the laws and regulations;
• acting as a supervisory authority in accordance with the Prevention of Money Laundering and funding of Terrorism Regulations;
• assessing licence applications and issuing approvals that are in line with our requirements;
• supporting and investigating player complaints;
• advising the Government on new developments and risks in the sector; and
• submitting legislative proposals to address changes within the sector.

By simply following the news we report on here at GamblersPick is it easy to see that the MGA abides by these guidelines daily as they withdraw licenses from bad actors, collaborate with international bodies to shut down fraud rings and drive innovation in regulatory circles.

✓Ongoing Management of Regulatory Processes

Given the ever-evolving nature of any online-focused industry, a reputable gambling authority must not only create a regulatory process that can effectively deal with the requirements of today but also one that has the flexibility to allow for the unknown.

“Our main focus remains to improve the operational mechanisms to adapt to any external challenges that market conditions and industry developments may bring about, always acting within the spirit of the law that governs the gaming sector and our regulatory objectives as established thereby.”

An overly rigid legal framework can be hamstrung by changes in definitions and the invention of new types of gambling or gambling-adjacent products.

A key example of this how the rigid UK gambling laws are hampering their ability to effectively address the issues such as the impact of lootboxes in video games, despite their mandate to protect youth and children from gambling-related harms.

To this end the MGA has three key segments to their regulatory processes:

1. Licence Issuance
2. Compliance
3. Enforcement

Each of these covers a necessary part of the MGA’s jurisdictional responsibilities but in a manner that allows for review and even amendment without damaging the work done by other departments.

✓Issuing Gambling Licences

Once a valid application has been received it is evaluated using four specific processes. Each of these will ensure that once finally approved the applicant will be a provider that will treat players fairly and has displayed the characteristics the MGA consider important in a trusted licensee.

1. Fit and Proper checks – Checks the legal status of the applicant, determining whether there are deep-dive investigations required or if they appear fit to be considered for a gambling license.
2. Evaluation of business planning and feasibility – A committee of experts reviews the viability of the proposed business plan. This group takes into consideration the marketing plan, financial projections and even the HR plan of the proposal.
3. Review of operational and statutory requirements – A team of legal experts then considers the plan in terms of the current legal framework and whether the applicant has proven they can effectively comply with local and international laws.
4. System Review – The final step is for the applicant to build out their operation in a technical environment. This test build is then audited against the proposal and the standards of the MGA. If approved, it can then go live.

This four-tier approach allows the gambling authority to move beyond a theoretical understanding of the operators’ intentions and abilities, as the entire application can be denied right up to the final phase should they appear to fall below the MGA’s standards.

✓Ensuring Operator Compliance

With a clear objective to protect both their players and their reputation, the MGA takes the ongoing compliance management of their licenses very seriously. This is managed on a practical level through the use of several compliance instruments, which include:

• Prudential compliance mechanisms require licensees to submit to regular system and financial audits, as well as inspections of business and gaming premises.
• Ongoing reviews by the Financial Intelligence Analysis Unit (FIAU) aimed at uncovering any Money Laundering and Terrorist Financing activities.
• Strict adherence to Responsible Gambling requirements, specifically those aimed at protecting vulnerable and at-risk players. These must include both internal safeguards and external programs.
• Ensuring that all licensees have sufficient Player Funds on call to honour all player withdrawals and jackpot wins. They also ensure that procedures are in place to protect the financial prospects of players when a licensee loses their approved status.
• The analysis and control of approved marketing materials by the Commercial Communications Committee. This ensures that no illegal marketing methods are used which may attract at-risk players or youth to the operation in question.
• Taking a proactive stance on Sport Integrity to ensure that no licensee is involved in any activities which may be construed as match-fixing. This has included setting up a process to allow staff and punters to anonymously report suspicious betting practices.

These ongoing reviews and activities are aimed at ensuring that while the business of gambling is free to grow and make a profit it is never done in a manner that will harm the individual player, the integrity of the sports world or harm the reputation of the Authority.

✓Enforcing Adherence

While it would be fantastic if all applicants who have adhered to the stringent vetting of the MGA turned out to be honest and customer-focused that is sadly not the case. To deal with the bad actors in this case the MGA has installed a Compliance and Enforcement Committee which has the authority to investigate and apply the necessary enforcement actions.

The actions include:

• Suspending a license
• Cancelling a license
• Issuing warnings and imposing penalties

Where the breach of any related code of conduct also falls into the realm of criminal activity the MGA works closely with the relevant local authorities to bring about prosecutorial and other legal actions.

✓Dealing With the Unexpected

Once again, the need for the overall Vision and Function come into play when the MGA needs to deal with an unexpected event. The most notable in recent history is the onset of the Covid-19 pandemic.

It fell to the MGA and other gambling authorities to consider the broader impact of the pandemic on the gambling habits of level-headed players who displayed healthy gambling habits normally but who might be pushed into compulsive gambling through panic or loss of income.

They had to make decisions on how to approach land-based gambling venues, considering the close-quarters nature of the casino floor, the jobs at stake and the uncertain nature of the virus.

Not only that but they had to create policies to address advertising campaigns, should operators be allowed to speak about the pandemic, how to handle financial support for industry workers and much more.

Most impressive of all this entire process, during normal times and during the recent chaos is managed by only 176 staff members, including upper management. A testament to the efficiency and integrity of their processes.