Approach with caution: a look at the BGC’s voluntary code on affordability limits

There was lots of excitement last week thanks to the long-awaited publication of the Gambling Commission’s (GC) Summer 2023 consultation response. There’s plenty to unpack and no doubt there will be ample commentary in the coming weeks, but for now I wanted to share some thoughts on another notable development – the Betting and Gaming Council’s (BGC) ‘Voluntary Code on Customer Checks and Documentation Requests Based on Spend’ (and yes, ‘customer checks’ is another new term to throw into the mix).

The BGC code, which is “developed jointly with the Gambling Commission and backed by government”, seeks to bring consistency across the regulated sector for operators that wish to adopt it until the regulator’s financial risk check pilot can be undertaken. For context, the pilot is due to start at the end of August and run until the end of March 2025. And, with plenty of work to be done of both sides of the regulatory fence after that, it’s fair to assume the code will represent the only stab we have at increased consistency for at least 18 months.

So, what will this ‘new normal’ look like? To give the highlights, customers reaching £5,000 net deposits in a rolling 30-day period (dropping to £2,500 for 18 to 24-year-olds) will be subject to a ‘risk assessment’. The code outlines five different options to undertake a risk assessment and states that operators must conduct one or more. Among others, these include self-declaration of income via live chat and a background check using what sounds very much like one of the automated affordability tools that most operators already have in place.

Only at £25,000 net deposits across a rolling 12-month period will accounts need to be suspended while enhanced due diligence takes place (usually including source of funds requests). Although it should be noted that customers hitting the £5,000 threshold three months in a row, without a risk assessment being undertaken, also face the prospect of having their accounts frozen until the check is completed.

Who’s happy?

On the surface, it’s great news for operators. Not only is the monthly threshold significantly higher than those implied to be acceptable by historical Gambling Commission Enforcement Reports and through feedback provided at regulatory assessments; the methods of acceptable income verification are much less onerous. On this basis, it’s safe to assume that commercially focused execs celebrated potential ‘new normal’ opportunities well into the bank holiday weekend. It’s also safe to assume that compliance PML holders had a collective facepalm moment when the news broke on Wednesday morning, knowing that in the coming weeks their work would be cut out for them, while firmly bracing themselves for a series of challenging, internal conversations.

I do understand what’s trying to be achieved here (namely, a more level playing field and a reprieve from the subjective limbo in which we’ve found ourselves) and I also appreciate the GC’s positive intentions in backing the code. However, us long-toothed, compliance professionals who’ve experienced more regulatory assessments than have seen new gambling ministers come and go, feel the code and its numbers should be approached with care and taken with a slight pinch of salt.

Let me explain my somewhat conflicted view further. In fairness, the BGC document opens in bold text with: “Nothing in this voluntary code replaces an operator’s legal duties or the conditions of its operating licence.” This is great and I’m glad it’s been included. What I find problematic, is that taken at face value, I feel its content and spirit is potentially, and worryingly, misaligned with LCCP SR Code Provision 3.4.3 around Remote Customer Interaction.

To give a little more context, the overarching licensing objective to protect “vulnerable persons from being harmed or exploited by gambling” is underpinned by the licensing conditions, the LCCP. In turn, compliance with the formal interaction guidance is mandated under LCCP Code Provision 3.4.3. The guidance contains a lengthy clause on affordability, making it clear operators should not allow customers to spend more than they can afford. With references to financial thresholds that are often “inappropriately high” (evidenced by a link to GC casework going back seven years), ONS data around typical household income (a whole lot lower than £5,000 a month) and the difference between “disposable” and “discretionary” income, how could operators justify adherence with regulatory expectation by allowing all their customers to spend up to £5,000 in a rolling 30-day period?

There’s a long wait for the end, or even for the beginning of the financial risk check pilot, not to mention the work which must come after. During this interim period, participating operators that go through compliance assessments are likely to get a feel for how the regulator will view the implementation of the code in the real world. However, we’re less likely to see the formal outcomes of those assessments being published, ahead of the pilot ending. While I’m completely confident that there is a strong drive for consistency of approach from the top of the GC, we know that this takes time and it’s something we must be mindful of. As history has shown, it’s not beyond the realms of possibility that outcomes of assessments in practice may not mirror what is being said about key issues in public. So, operators beware and proceed with caution.

Those that do decide to align with the code should ensure they are covering all the wider player protection bases with gusto because those controls just became ever so much more important. There should be robust, documented justification for why the new thresholds are suitable for a specific customer base, implementation of a clear framework of harmful gambling identification measures and escalating interaction processes, options for account restrictions early in the customer journey, consistent evaluation processes which evidence the effectiveness of the controls, and future-proofed systems with flexible configurability to support further changes as they come down the line.

Last but by no means least, remember there’s rarely safety in numbers and it would be inadvisable to put all your regulatory risk protection eggs in one BGC-shaped basket. Every operator that goes down this route will interpret and implement the code differently, and how that should look from a compliant perspective is still very much up in the air.

Kirsty Caldwell has worked in the industry her whole career. She initially climbed her way up through the ranks of the William Hill compliance department before founding Betsmart Consulting, a leading, multi-jurisdiction compliance and AML consultancy in 2019.

Caldwell is also a member of the inaugural Industry Forum panel, which was recently established by the Gambling Commission.