The global online gambling industry nowadays is worth over $100 billion and still growing. But with this growth comes a growing need for strict regulations to protect players and ensure fair play. This is where compliance comes in.
“Regulatory compliance creates an environment in which companies can operate responsibly and ethically.”
With this definition, it becomes clear that being compliant does not only benefit the business itself but also the general public, a company’s staff, and its customers.
Many other definitions of compliance that you might come across, however, have a different take on the matter. They often state that the sole purpose of compliance is to reduce and mitigate the risks of non-compliance. Formulated like this, it sounds like the goal is to avoid the consequences of bad actions and decisions, not necessarily to prevent them from happening in the first place.
Focusing on the consequences of non-compliance is understandable if we look at what the possible consequences are; hefty fines, legal repercussions, reputational damage, or even the suspension or withdrawal of licences required to operate. An example of a large company that has had multiple non-compliance issues that have cost billions is Boeing, with their 737 aircraft.
Besides managing the risks and consequences of non-compliance, compliance serves four main goals:
Examples of how rules and regulations protect the general public can be found anywhere. Think about how the mandatory use of personal protective equipment helps to prevent work-related injuries or accidents. Safety netting on construction sites doesn’t only protect the workers but also the public walking or driving by.
Levelling the playing field, in this context, comes down to making sure competition is fair because your competitors are bound by the same rules and limitations as you are. An example of non-compliance in this matter is Vokswagen’s emissions scandal, better known as Dieselgate.
When Volkswagen was manipulating emissions tests, it gave them an unfair competitive advantage by having avoided investing in actual technologies to meet emission standards.
Maybe the type of non-compliance that can have the most impact on markets is non-compliance with competition laws. Very recently, Mondelēz, producer of the famous chocolate brands Milka, Toblerone, and Côte d’Or, was found to be involved in 22 unfair trade practices, according to the EU. By abusing its dominant position in the market, they imposed certain restrictions on distributors that kept prices 10–40% higher than in other countries.
Maybe the best example we can give here has to do with everybody’s favourite: taxes. Take the difference between tax evasion and tax avoidance. Where tax evasion is illegal, tax avoidance is not. Even though a company is just ‘being smart’ by using legal loopholes, in the eyes of the public, there is little practical difference between the two.
In cases like this, compliance should mean acting in the spirit of a law and not the letter of the law. Which company would you trust more and have more confidence in?
Many forms of compliance affect all businesses alike; employment laws, data privacy, workplace safety, anti-bribery, and corruption are always equally relevant. Some industries, such as energy, agriculture, and production, have additional regulations dealing, for example, with environmental issues such as pollution and carbon emissions.
When it comes to an industry that revolves around money and that is as competitive as the world of online gambling, compliance is mainly focused on two aspects: player protection and financial safety.
Player protection is one of the most important aspects of the iGaming industry, as gambling is seen as a ‘demerit good’. Consumption of demerit goods is considered harmful to the consumer themselves, and at the same time, there is a risk of overconsumption, much like with alcohol, tobacco, and fast food. Protecting players is about creating a safe environment where players can responsibly enjoy gambling while being protected from harm. Balancing
The first steps in player protection are age verification and KYC (know your customer). Age verification speaks for itself as a method to prevent underage gambling. KYC, on the other hand, is a term that not everybody might be familiar with, although the term is quite clear.
Knowing your customer entails identifying and verifying their identities by means of a photo ID and a proof of address.
This standard practice is common in industries that deal with sensitive information and financial transactions. It helps businesses protect themselves and their customers from fraud, comply with legal requirements, manage risks, and maintain the integrity of their operations. This information is also necessary to check if a player is not registered as an excluded player.
There are strict rules in place that determine how, when, and where certain information must be made available to players. This goes from the information about the games, such as the rules and payout percentages, to information about how the randomness of the games is guaranteed by so-called Random Number Generators (RNGs).
Responsible gaming or gambling is the most important aspect when it comes to preventing harm from gambling addictions. There is a fine line between healthy excitement and problematic behaviour. Online gambling operators must therefore offer players a variety of tools and options that can help them prevent excessive gambling. These tools include limits and self-exclusion periods that can be set, as well as providing information about professional help.
It is also required that operators have a way to identify and act on players that exhibit signs of problematic behaviour.
As mentioned, gambling, by nature, is already prone to excessive consumption. For that reason, there is an international trend to restrict the advertising and marketing options that operators are allowed to use. More and more countries have some form of advertisement ban, and marketing in the form of promotions and bonuses is also being clamped down on.
Especially due to market saturation and strong competition, finding a balance between attracting new players and retaining existing players on one side and not incentivising excessive play on the other can be tricky.
Every game in a casino or every wager at a bookmaker is a transaction. When you consider that a game on a slot machine takes only seconds and online casinos can have thousands of people online at any moment, we are talking about millions of transactions. All these transactions must be logged and kept in such a way that they are available to comply with financial regulations.
On the other side of a player’s account are the payments and withdrawals in real money. It goes without saying that these are processed via the same secure payment gateways that banks and other financial companies use and that the same rules apply.
Casinos and other gambling establishments have always been a method to launder money as casino winnings are ‘clean’. The most effective way to combat money laundering is, therefore, to keep track of the money coming in.
iGaming platforms must be vigilant about suspicious people and transactions. This includes monitoring for large or unusual deposits or withdrawals and transactions from high-risk countries. As anti-money laundering regulations are combined with anti-terrorism funding, it goes without saying that procedures are among the strictest in the world.
