Blocked: Winning the money transfer wars

13 August 2019 by Graham A. Jarvis

European governments are taking different approaches to the rise of offshore online gambling. Sweden and the UK have introduced strict licensing systems that aim to both protect the consumers and create some revenue for the state. Countries like Norway, Germany and Italy are trying to stop the tide altogether with payment blocks and domain blacklists. A report shows the blocks aren't effective.

The online gambling industry is facing the ever louder calls of legislators and regulators around many parts of the globe. Operators, including in the UK, are facing restrictions on advertising to protect vulnerable groups and individuals; such as children and young people, and those affected by gambling addiction as well as by out of control debts. The essence of this is a wish to promote fairer and safer gambling, which the UK's Gambling Commission thinks is in the interests of UK consumers.

The UK Gambling Commission's strategy report for 2018-2021 says: "Gambling is a popular pastime in Britain. More than 46% of people play the National Lottery, resulting in significant contributions to good causes. 45% of people gamble on other products and the gambling market continues to grow, a trend driven in particular by the growth in online gambling and mobile use."

"This has created a highly competitive market which relies heavily on advertising, which has a broad public reach. Consumers are also turning to new gambling and gambling-style products, and new ways to pay for and monetise gambling are developing all the time."

Balancing interests

Like many regulators the UK Gambling Commission wants to balance the interests of consumers, including freedom of choice and the enjoyment of gambling against gambling's risks and their impact on the wider society. This doesn't negate the health of the gambling industry, which provides thousands of people with employment. However, it's widely thought that the industry still has work to do to raise its standards.

Action is therefore being taken in many countries to ensure that iGaming companies provide stringent Know Your Customer (KYC) anti-money laundering checks. There is a transfer war against illegal payments too. Another battle is raging to stop consumers from being able to access unlicensed operators with domain blocking.

A European Commission report says 16 European Union (EU and European Economic Area (EEA) member states have enacted measures that require payment processors to block transactions with unauthorised gambling operators. A further 13 member states don't do this at all. Of those that do, 53% block gambling operators' accounts. However, there is no formal framework for evaluating the effectiveness of their regulatory schemes, and co-operation is lacking.

Blacklist growth

Gambling Compliance's report, ‘Best of Data Analysis 2018-2019', writes in January 2019 that ‘European Blacklists Pass 50,000 URLs As Enforcement Intensifies'. In essence these blacklists involve domain blocking, and they have proliferated across Europe since Italy first introduced legislation in 2006 to crack down on offshore, non-locally licensed operators, to prevent them from targeting online gambling players within their jurisdiction.

This often affects payment processors – including PayPal. Brad Allen, writing for EGR on 11th July 2019, says that the online payments giant was identified as having received a cease and desist letter from the German State of Lower Saxony in June 2019, which told the company to "stop facilitating online casino transactions in Germany last month."

The Lower Saxony Ministry of Interior and Sports hopes that the letter to PayPal will send a clear signal to online payments providers and unlicensed operators. Gaming Intelligence explains in its article of 17th June 2019 that "the German state of Lower Saxony has taken steps to prevent online payment processors from facilitating financial transactions between German players and foreign providers of online casino games and lottery betting products.

This means that payment processors are required to adopt the policies of the Lower Saxony Ministry of Interior and Sports to "prevent transactions with illegal gambling operators or else face exclusion from the market." The ministry hopes that its policies will eliminate "an essential component of the infrastructure required for the operation of unauthorised gambling." This includes payments prohibition and the enforcement of action against illicit gambling.

Norway's warnings

Norway has also penned warning letters to six gambling operators that are licensed in Malta, and it has blocked transactions with them. This is because Betsson, Kindred Group, L&L Entertainment, Gaming Innovation Group, Dino Gaming and Co-Gaming Ltd are not licensed to operate within Norway.

Despite the Norwegian lawmakers' best efforts, unregulated gambling websites that are operated by companies in other jurisdictions remain very popular with local gamblers. Attempts to purge the local gambling market of unlicensed operations over many years have so far failed. Critics have commented that it's more to do with protecting revenues that out of concern for Norwegian gamblers.

Norway criticised

The European Gaming and Betting Association (EGBA) and EFTA have also criticised Norway's attempts to control the market through requiring national banks to block payments deemed to relate to online gambling transactions, and as a result of its flirtation with domain blocking. EGBA has gone so far as to accuse Norway's gambling authority Lotteritilsynet of regulatory overreach.

Instead of using payment blocking to try to prevent its adult citizens from making informed and free choices, we urge the Norwegian authorities to develop an online gambling regulation which is fit for the realities of the borderless, digital age.
Maarten Haijer, EGMA secretary general

On 17th June 2019, Gaming Intelligence reported that 'EGBA and Entercash challenge Norwegian gambling payments ban'. In the article, EGBA secretary general Maarten Haijer is quoted as saying: "In today's digital age it is virtually impossible to enforce national borders on the internet but that's what the Norwegian authorities are trying to do by introducing payment blocking for online betting".

He also told SBC News: "Instead of using payment blocking to try to prevent its adult citizens from making informed and free choices, we urge the Norwegian authorities to develop an online gambling regulation which is fit for the realities of the borderless, digital age."

The key: co-operation

In fact, in the UK, payment providers who've agreed to collaborate with the Gambling Commission are helping to disrupt illegal financial transactions by terminating payment processing contracts with unlicensed operators that seek to use these payment systems for illegal purposes. The Commission works closely with carriers of advertising and payment providers to tackle illegal gambling websites overseas.

This may be the right step forward because many of the initiatives such as domain blocking and strict advertising regulations have been worked around by consumers and by some online casinos. While the majority of European Union states deploy domain blocking, the European Commission's 165-page 'Evaluation of Regulatory Tools for Enforcing Online Gambling Rules and Channelling Demand Towards Controlled Offers' finds that domain blocking is popular but ineffective.

Beyond this, the report finds domain blocking does nothing to block mobile gaming apps and only Finland, Germany and the Netherlands have approaches app stores to remove any offending gambling applications. Therefore, co-operation between members states' regulators, payment processors and gambling operators is key to winning the money transfer wars, and it's the key to beating off the unlicensed gambling operators. Without it, there will be loopholes that will be exploited.

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