Protect Your License - A Regulatory Mode

If one intends to regulate any form of gambling, certain conditions should apply. In our team's (GGS) international travels, we've been exposed to many different ways to regulate gambling. This month, I attempt to collate the best of the best into what we consider to be a view of a "world's best practice" regulatory model for interactive gambling.

We suggest that the regulatory model will consider at least:

The reputation and integrity of the government and the regulator. If an operator or supplier to the industry needs to undergo probity (fit and proper status) it stands to reason the regulator should. Has yours?
Probity and capability of the compliance testing company, the financial auditors and those conducting probity investigations. Essentially, those third parties who help regulate the industry, by doing so, are key targets for corruption along with regulatory staff.
Probity of the applicant interactive gambling operator's business history, its key staff, owners and suppliers. Specifically, if a supplier of interactive software is taking a profit share, the same probity review should apply (as has been determined by the Nevada regulators, for example).
Assessment of the applicant interactive gambling operator's capability and capacity to establish and operate an Interactive Gambling business and pay prizes (includes, but is not limited to a review of business plan, internal controls procedures, and financial position).
Risk-based testing and assessing the technology, environment, security and operations against published technical, security and player protection requirements; we recommend this approach be risk based.
Compliance of the operations of the business and the technology with an approved and documented set of internal controls and operating procedures, as discussed in an earlier edition.
Government requirement for ongoing access to data, financial audits, inspection and testing of system upgrades.
A mechanism for handling patron complaints.
A commercially realistic approach to regulation. We recommend a "regulated risk management" approach.
A clear understanding of the nation's objectives for introducing interactive gambling (e.g. "soft" tax, promote technology, community support, support bandwidth infrastructure development, create jobs, etc.); an ability and willingness to measure success and make hard decisions in the interests of the nation, if the criteria are not being realized.
At all times an ability, through the above issues and associated maintenance of audit trails, to demonstrate due diligence and reasonable care.

International Regulation

Regardless of an individual jurisdiction's approach to regulation, what must evolve is a core international standard (perhaps with an appendix to accommodate different policy between different countries) to:

facilitate a basis of international cooperation between regulators;
permit jurisdictions complying with the principles to take bets from each-other;
facilitate tax remittance; and
Not overcomplicate compliance for suppliers and operators supplying more than one market.

It follows that IAGR, the International Association of Gambling Regulators, would be an appropriate body through which a common standard could be administered. We shall see how this evolves during the next 12 months.

Control Objective

It is without doubt that no system or business is infallible. Accordingly, the control objective of any effective regulatory body is to ensure there is no collusion. This objective becomes very important with information technology-based systems where a great deal of power may reside with a few individuals.

Moreover, a "Westminster System of Government" philosophy, specifically the underlying principles in relation to separation of powers, is generally viewed as the best approach to division of gambling regulation.

Until next time. . .