Under the new rules, operators will be required to establish that spending is “affordable and sustainable” and perform a source of funds check. Their past gambling behaviour must also be assessed for any evidence of gambling related harm before they can be considered a VIP.
In practice, this means operators will have to ensure they have up-to-date evidence of the player’s identity, their occupation, and an indication as to where the money being used to fund their gambling comes from. These checks, as well as gambling harm assessments must regularly be carried out once the customer joins a VIP scheme.
Gambling Commission chief executive Neil McArthur warned that if operators did not abide by the new rules, the Commission may have no choice but to ban the schemes entirely.
“Operators can be in no doubt about our expectations,” he said. “If significant improvements are not made, we will have no choice but to take further action and ban such schemes.”
The new rules, which come into effect on 31 October, follow a consultation on high-value customers, aiming to significantly ramp up controls for VIP schemes.
In terms of the additional know-your-customer (KYC) and source-of-funds checks on VIPs, the Commission said respondents to the consultation “generally agreed” that this was necessary. Some pointed out that requirement of a source of funds check for all VIPs would go beyond the BGC’s voluntary code, however, as it would require checks on a large number customers significantly below the anti-money laundering threshold.
The Commission, however, argued that such checks were still necessary, as high-spending customers would be incentivised to spend more once they become VIPs.
“We note the concern that source of funds, ordinarily prompted by anti-money laundering (AML) concerns, may currently be conducted at a higher threshold than is typically required to qualify for high value customer (HVC) incentives,” it said. “However, we consider these checks justifiable given the unique arrangements made to incentivise HVCs to spend at significantly higher levels than the wider customer base.
The Commission clarifed that any source of funds check must be supported by evidence requested from and provided by the individual, rather than based on open-source data such as property values.
One respondent also argued that the requirement for an affordability check suggested the Commission had already pre-determined the outcome of an upcoming consultation on affordability checks, which the Commission said would launch in the coming weeks.
The rules also require licensees to take “significant steps” to check whether a player has self-excluded, which should be a “significant factor” in determining whether a player should become a VIP.
While the Commission noted concerns this could dissuade some potential problem gamblers from self-excluding, it said it believed the fact there wasn’t an outright ban on those who have self-excluded should alleviate this concern.
The new rules also require greater oversight of VIP schemes. Operators must maintain “a full audit trail” including notable events with these customers at all stages of the relationship, while VIP schemes must have a specific individual in charge of their compliance.
While one respondent anticipated a large revenue loss from these audits, the Commission said a majority approved of the rules.
The Commission, however said, “much of what we are proposing will not represent a significant additional burden to compliant licensees as it draws together pre-existing requirements and how they should be applied to HVCs”.
A further rule change required VIP managers to rotate the customers they manage, “to ensure objectivity in decision making is maintained”.
“We note the concern that in some instances, customers could be more willing to share information with staff they are familiar with,” the Commission said. “However, a lack of objectivity by HVC staff managing designated customer accounts has been a recurring theme of our casework and is a risk that needs to be addressed.”
The Commission also suggested VIP managers to receive “enhanced training” on safer gambling and anti-money laundering and job descriptions that reflect their compliance duties, while these staff must not receive remuneration or bonuses based on customer spend or losses. However, it said that operators “should consider” these changes, rather than requiring them.
Incentives offered as part of VIP schemes, meanwhile, must “not encourage risk behaviours such as chasing losses, excessive time or money spent gambling, or accelerating frequency of gambling”.
“We expect licensees to pause any customer incentivisation should any indicators of potential harm require investigation and consideration,” the Commission said.
The BGC’s voluntary code also includes measures restricting VIP schemes to players aged 25 or over, something not included in the new rules, though the Commission did note that customers aged 18-34 are more likely to be problem gamblers and so extra caution may be required with younger customers.
Gambling Commission chief executive Neil McArthur said the rules came about because of a high level of misconduct in VIP schemes.
“We have introduced these new rules to stamp out malpractice in the management of VIP customers and to make gambling safer,” he explained. “Our enforcement work has identified too many cases of misconduct in the management of VIP schemes and this is the last chance for operators to show they can operate such schemes appropriately.”
McArthur noted that the industry itself had taken steps to use the schemes more responsibly, changes in the LCCP were still required.
“We understand that the number of customers signed up to ‘VIP’ schemes has already reduced by 70% since we challenged the industry to get its house in order, last year,” he continued. “While that is a sign of the positive impact our innovative approach to collaborative working can have, these new rules are designed to ensure progress continues to be made to protect vulnerable customers.”
Many of the proposed rules were the product of a working group established in January and led by GVC Holdings, and have already been adopted by UK industry body the Betting and Gaming Council (BGC). This included limiting the schemes to players aged 25 and above,
The House of Lords’ gambling select committee report into regulatory changes, meanwhile, revealed that based on data from nine operators, just 2% of customers were considered VIPs, but accounted for 83% of deposits. The All-Party Parliamentary Group on Gambling-Related Harm called in June for the schemes to be banned entirely.
In addition to the upcoming affordability consultation, the Commission also launched a call for comments on changes to game design alongside the high-value customer inquiry.
Last week, the Betting and Gaming Council announced its members will limit spin speed to 2.5 seconds per spin as well as banning turbo play, which allows players to speed up games and multi-slot play, where players play multiple games at once, a code again developed through a Gambling Commission working group.
However, at the time the code was announced, the Commission said it did not go far enough and its consultation included a proposal to ban auto-spin and “false wins”, where a player receives a messaging implying a win, despite winning less than their stake.