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Of all the mechanisms in the regulator’s enforcement toolkit, financial penalties are getting the most use and attention lately writes Susan Hensel, co-founder and partner, Hensel Grad PC.
More and more frequently, we are reading attention-grabbing headlines about large fines being levied against gaming operators.
Recently, there was the £19.2m fine issued to William Hill by the GB Gambling Commission for consumer protection and money laundering failures. There was also the AU$30m fine targeting Crown Resorts by the Victorian Gambling and Casino Control Commission for improper check procedures.
In the US, enforcement actions that took place soon after the launch of sports wagering in Ohio resulted in more than half a million dollars in fines against sportsbook operators for advertising violations.
The use of large fines is nothing new. In 2013, Las Vegas Sands paid US$47m to end a federal probe into suspicious deposit activity. However, substantial fines have historically been the exception.
But this has changed in recent years. The size and frequency of regulatory financial penalties around the world are on the increase.
Rise in fines
Already in 2023, regulators in the United States, Australia, UK, Sweden and the Netherlands have imposed more than £64m in fines, according to the website gamblingindustryfines.com.
In 2022, that number topped £220m. As reported by USA-casino.com, fines in 2022 increased by 444% over the approximately $50m levied by these jurisdictions in 2021. While some of the increase can be attributed to the spread of online gaming and sportsbook operations to new jurisdictions, there are other reasons.
Malcolm Bruce, founder and senior partner at Gambling Integrity, says that a “systemic failure on the part of the industry” is to blame.
Observing operations in the UK, he believes the industry is currently “perceived as toxic, making it hard to recruit good people for compliance positions.”
He also sees a growing corporate problem. He says there is a lack of “good compliance people with experience and the gravitas to challenge colleagues who have a more commercial agenda as well as recruitment of board members without sufficient experience.”
Without an experienced compliance team and committed leadership, it is difficult to create a culture of compliance.
The compliance failures that have resulted in recent fines run the gamut from accepting prohibited wagers to marketing to underage or excluded people. Others include breaking other advertising rules and violating anti-money laundering rules, and even operating before being fully licensed.
In an industry where compliance is the golden rule, such violations, especially repeat violations, result in the use of fines.
Matthew Schuler, executive director of the Ohio Casino Control Commission, says that fines are a good incentive for an operator to clean up its act.
“When working with licensees, the Commission seeks long-term compliance with all laws and rules,” he says. “Financial penalties are just one tool the Commission has at its disposal to help achieve ongoing compliance, and we have found that in cases where we have taken administrative action against entities, the fines and other compliance requirements levied usually resolve the issue.”
“Commission staff also regularly follow up to ensure entities remain in compliance.”
Fines are part of the regulator’s progressive system of enforcement. In most jurisdictions, there is a ladder of enforcement actions. These actions can begin, for instance, with a conversation. This can progress to a warning letter or compliance conference, ratchet up to a consent agreement and peak at licence suspension or revocation.
Which level of enforcement action to impose is generally within the regulator’s discretion, as is the size of any fine.
The regulator will consider the impact of the infraction on the integrity of gaming by evaluating its nature. This assesses the severity of the matter, whether it was self-reported or discovered by the regulator, and whether it was an isolated or ongoing incident.
In the US, the typical regulatory mindset is to identify the proper enforcement tool to incentivise compliance, though as seen through the industry lens, the fines can sometimes be viewed as being punitive.
Regardless of the viewpoint, the goal is to avoid having the triggering incident, or incidents, happen again.
Schuler sees the Ohio Casino Control Commission’s mission as being part of a much bigger picture in this regard.
“The Ohio Casino Control Commission’s mission is to ensure the integrity of gaming in Ohio, including that licensees are following the rules and regulations laid out in the law, as well as the Ohio Administrative Code and operators’ detailed, Commission-approved internal controls,” he explains. “The Commission seeks to resolve issues without needing to pursue formal administrative action.”
“In cases where repeated efforts to gain compliance are unsuccessful, the Commission does have the ability to issue fines and other sanctions when necessary.”
How much is too much?
As gambling continues its spread around the world, there is growing debate about the effectiveness of regulatory fines.
How big is big enough, and are fines leading to a greater level of compliance? Will the industry improve its business practices, or will it consider fines just the cost of doing business? Will it factor them in as line items to annual budgets?
Bruce fears the latter, especially where private equity has taken over ownership. He believes today’s regulator needs an even bigger stick.
“The solution in the UK is to remove the personal licence from key executives and ultimately remove operator licences from one or two big companies,” he says.
“Unless these steps are taken, it is inevitable there will be more and larger fines.”
Susan Hensel is co-founder of Hensel Grad PC, a law and consultancy firm. Hensel is the former director of licensing for the Pennsylvania Gaming Control Board and the former two-term president of the International Association of Gaming Regulators. She has been recognised by iGB as one of its Most Influential Women in gaming. Susan has spoken around the world on gaming law and regulation. All opinions expressed are hers alone.
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