On 01 July 2024 the Isle of Man’s Gambling Supervision Commission (“GSC”) revised enforcement-related policies came into effect. This followed an outreach session in June, with the enforcement policies now forming part of the GSC’s regulatory framework.
In the Isle of Man, the GSC must regulate gambling with a view to securing compliance with AML/CFT legislation and, in doing so, it has the power to conduct investigations into breaches where it considers it necessary. The threat of enforcement action is intended by the GSC to facilitate a number of measures, including to act as a deterrent for future contraventions, to safeguard customers and to demonstrate that regulatory standards are being upheld, which in turn maintains market confidence that the Isle of Man is a world class destination for gaming companies. It should, of course, be noted that enforcement is only one of a number of tools that the GSC possesses and in appropriate cases a failure to comply with regulatory requirements may instead be resolved through, for example, a supervisory response.
This article is intended to summarise certain provisions within the revised enforcement-related policies, the full contents of which can be found on the GSC’s website and within:
- Enforcement strategy
- Referral to the GSC Enforcement Policy
- Decision-Making Process: Enforcement & Sanctions
- Settlement Policy
- Discretionary Civil Penalties
- Referral to the Police and/or The Attorney General’s Chambers
- Prohibition Policy
- Publication Policy
- Use of Appropriate Experts Policy
The Decision-Making Process
Where a division within the GSC considers there to have been a breach of regulatory requirements it will consider (along with the Enforcement Division) whether a regulatory response is appropriate and, where appropriate, will make a referral to the Enforcement Division.
Certain serious matters including cancellation or suspension of an operator’s licence, discretionary civil penalties and imposition/variation of prohibitions are subject to the provisions of the Decision-Making Process: Enforcement & Sanctions policy while other matters (such as administrative decisions as part of the GSC’s supervision and decisions to request/compel production of information or attendance for interview) are not. For the significant matters subject to the “Decision-Making Process” there is a five stage process which, amongst other things, involves the GSC drafting and disclosing a draft enforcement report to the licence holder. Following the drafting of the final enforcement report, the Serious Case Review Panel will meet with the GSC’s Board of Commissioners and ultimately (after concluding its deliberations) written notice of the decision is presented to the licence holder or other appropriate subject(s) of the decision.
The Next Steps
If, following the process, there is to be enforcement then one of the options open to the GSC is to enter into a Regulatory Settlement Agreement (“RSA”) with the operator in breach, providing that this would assist the GSC in achieving a regulatory outcome that is proportionate, effective and in the public interest. In coming to this decision the GSC will weigh up a wide range of options with the ultimate decision as to whether an RSA is appropriate being a matter solely for it to determine.
Another option open to the GSC, given to it under the relevant AML/CFT legislation, is to impose a civil penalty on the operator, although this is not an option that is available if the operator is being prosecuted for the same offence or if the GSC is intending to revoke the operator’s licence. Any imposition of a civil penalty will be subject to the GSC’s Decision-Making Process: Enforcement & Sanctions (for which see above) and is capable of being appealed to the Gambling Appeals Tribunal if grounds exist. It should also be noted that while the legislation does not impose any upper limit on the level of the financial penalty, the guidance in “Discretionary Civil Penalties” points to this as being £1,000,000 or another sum not exceeding twice the amount of the benefit derived from the contravention.
When the GSC enters into an RSA or issues a civil penalty it will publish information about this when it is permitted or required by law to do so. If there is a discretion to publish the information then there is a presumption in favour of publication.
For individuals, the GSC has the power to prohibit those individuals who it determines are not fit and proper to perform one or more of their functions in relation to regulated gaming activity carried on by an operator. It will do so, recognising the serious consequences that this could have, by having full regard to a wide range of factors and in accordance with the Decision-Making Process: Enforcement & Sanctions policy (for which see above).
Finally, it should be noted that the GSC has the ability to refer matters to the police and/or Attorney General’s Chambers if there are grounds to believe that a criminal offence may have been committed, taking into account whether the matter can otherwise be adequately addressed by the use of any regulatory powers or sanctions available to the GSC.
What is this likely to mean for industry?
Over the past couple of years, we have seen an emerging trend amongst regulators generally towards taking a more robust, prescribed route to compliance with regulatory obligations and it appears the GSC will be no different in this regard. With the advent of this guidance and noting a MONEYVAL assessment is approaching for the Island, we anticipate there will be increased activity by the GSC in the enforcement sphere. We therefore expect that operators will see the GSC becoming more involved and scrutinising more closely any breaches or perceived breaches of regulatory requirements.
However, those operators who also have a presence in the financial services market can be comforted by the similarities in the GSC’s proposed enforcement processes and those already adopted by the Isle of Man Financial Services Authority (the “FSA”). These similarities suggest it is unlikely there will be a marked difference in the approaches adopted by the two regulators. It is too early to say for certain, as the process will need time to be embedded into the GSC, but it seems likely that learning experiences from FSA enforcement action in the financial services sector will be helpful in understanding the GSC’s likely approach to similar issues.
As a general rule, we would always recommend clear and consistent messaging with the regulator around potential breaches and any enforcement action and to ensure that any communications with the regulator are properly detailed, preferably in written form, and retained somewhere easily accessible by the operator’s senior management and compliance function.
Operators should also be aware of the regulator’s wide-ranging powers to request and compel information and have in place policies and processes to follow when such requests may be received. If an operator is ever unsure about whether or not it ought to comply with a request from the regulator, it is encouraged to reach out for assistance at an early juncture.
Conclusion
In its guidance, the GSC makes a clear commitment to ensuring that its approach to regulatory investigations and enforcement outcomes is fair, proportionate and in fulfilment of its regulatory objectives. In doing so it is well equipped to deal with breaches in a broad number of ways. The best defence to operators and licence holders is and will remain having in place a comprehensive and effective AML/CFT framework with processes and procedures that are fully compliant with the legislation and the GSC’s guidance.
For gaming regulatory advice, including applications for GSC licences, please contact Cains’ leading eGaming and Regulatory teams or your usual Cains contacts.
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The guidance in this note is for information purposes only and is not intended to be exhaustive. It is not intended to constitute legal or other professional advice, and should not be relied on or treated as a substitute for specific advice relevant to particular circumstances. Cains only advises on the laws of the Isle of Man and accepts no responsibility for any errors, omissions or misleading statements or for any loss which may arise from reliance on the information in this note.
