ENFORCEMENT PROCESSES FOR ONLINE GAMBLING

1. ENFORCEMENT PROCESSES FOR ONLINE GAMBLING Presentation by the National Gambling Board to the: Portfolio Committee:Trade and Industry 2March 2012

2. Background • The NGB developed a position paper on online gambling • The paper outlined key elements of regulation that need to be considered • Discussed by the Portfolio Committee’s Working Group on 16 February 2012 • Issues raised included licensing of online gambling in other jurisdictions, their successes, challenges and the recommended approach for South Africa • The NGB was requested to present an enforcement perspective on online gambling with a view to attend to concerns raised by the Working Group

3. Licensing Concerns raised • Over issuance and under issuance of licenses • Number of licenses issued must have a life span Recommended • Socio-economic research be done prior to operations as opposed to after licensing and operations Licensing measures • An appropriate licensing model will be explored

4. Licensing… • Forms an integral part of the regulatory environment in the gambling regime. • Licensing environment that would ensure a manageable number of licenses will be considered for online gambling . • Proposed that an appropriate number of licenses be allocated to online gambling operators. These should be determined and implemented in phases. • Issuance of the remainder of licenses will be informed by the NGB’s research studies. • Duration of this licence will be eight (8) years and after lapsing it will be readvertised. • Gambling operators shall be licensed nationally by the NGB. • Current stringent licensing procedures will be applied.

5. Compliance monitoring • Licensees will be required to put measures in place to ensure punters comply with legislative requirements. The following will be necessary • Pre opening inspections. • Monthly, quarterly and annual inspections • Financial audits will be conducted on a monthly basis. • Licensing requirements • Technical compliance Challenge • Rapid technological advancements

6. Compliance monitoring… Concerns raised • The NGB capability to execute the licensing and compliance monitoring function. • Fact that the NGB does not have regulatory operational experience in respect of online gambling Measures to implement effective compliance monitoring • NGB training strategy focuses on online gambling and addresses compliance monitoring. • To second staff to jurisdictions that are effectively regulating online gambling • Continuous research and training with specific reference to new trends and technological advancements

7. Consumer Protection • Consumer protection measures will ensure under age gambling is prohibited. • Operators to play a proactive role in enforcing responsible gambling programmes. • Measures will be put in place to protect gamblers against fraudulent operators. • All aspects of gambling will be regulated and operated in a controlled environment (to ensure that all games offered are controlled, fair and free from crime. Concern raised • Effectiveness of measures to prevent the under 18’s from participating in online gambling.

8. Consumer Protection… Measures for under age control • Client identification and verification measures will provide for age authentication. • In sync with the requirements of the Financial Intelligence Centre (FIC) in respect of client verification • Other mechanisms (e.g biometric verification) will be explored on a continuous basis Measures to implement effective consumer protection • Failure to comply with this legislation results in penalties. • The licensees will be required to put measures in place to check and verify the age of players registering to partake in online gambling • Education and awareness about the effects of gambling as well as under age gambling

9. Info security governance & system management • Stipulation, in the legislation, on measures to ensure a secured environment for the operators. • Control, traceability and auditable activities within the systems must be compulsory for all operators. • The system shall have minimum requirements, in line with ISO 27001 and 27002. Concerns raised • Protection of consumer information (identity numbers and credit card details) and • Protection of the security of the entire online operation.

10. Info security governance & system management… Measures to implement effective information security and system management • Technical security requirements will ensure that the punters’ information is protected. • Information cannot be accessed by unauthorized persons. • Frequent security test and audits will be performed on the storage facilities containing punters’ information. Challenge • Proper monitoring of security systems and persons who perform such activities • Expensive exercise that needs a good information security and system management model.

11. Anti-money laundering controls & player verification • To ensure that the operators meet the requirements of the Financial Intelligence Centre Act (FICA). • Measures put in place by international anti-money laundering bodies such as the Financial Action Task Force will be aligned to the South African anti-money laundering framework. • To ensure that the operators meet the requirements of the FICA. Concern raised • That money laundering through online gambling could escalate more as compared to the face to face casino environment Measures to implement an effective player registration • To ensure that the source of money is known & refunds are done only to accounts where the funds originated from. • No gambling transaction will occur until client verification has been conducted

12. Dispute management (user complaints) • Legislation must ensure that operators create a platform for dispute management, with minimum requirements and overseen by the national regulator. • The operator shall, at a minimum, keep records of all disputes (telephone disputes must be recorded) and • Attend to them within a minimum period of five days. • Board will make a determination on the dispute if the operator fails to comply with this requirement. Concern raised • How the regulator will deal with disputes since there is lack of face-to-face interaction with the punters. Measures to implement effective dispute resolution • Operator must develop dispute management and resolution measures • Disputes will be inspected and monitored to ensure compliance to the legislation, regulations and ICPs.

13. Sanctions and Illegal Operations • The Board will have the prerogative to revoke or suspend the licence and • May also assess a civil penalty against a licence holder who violates the National Gambling Act. Concern raised • How will illegal online operators be prevented from operating in a regulated environment and • Sanctions are applicable in this respect and how can they be applied? Challenges • Prevention of illegal operations through blocking of access to IP addresses is less effective • Effecting a penalty outside our jurisdictional domain, especially illegal operators who conduct business in our shores. • The prosecution of illegal operators who are based in other jurisdictions can be difficult and needs the participation by a number of government departments

14. Sanctions and Illegal Operations… Measures to implement effective sanctions and prevention of illegal operators • To conduct public awareness and to explain to the public the pros and cons of being involved with an illegal operations • Involvement of a multi stakeholder task team to find solution to online gambling. • Establishing gambling protocols with government departments and other agencies to deal with challenges in respect of online gambling (e.g Department of Communications, SITA, South African Reserve Bank etc).

15. Cross border administrative agreements • Facilitation of mutual co-operation agreements amongst jurisdictions, to harmonise regulatory practices. • To include, but not limited to, sharing of information, adaptation of best minimum practices and law enforcement. • Agreements on mutual cooperation from e-COGRA in an endeavor to enhance regulatory systems and cooperation. • Continuous advocacy engagements, policy and research sharing with regional and international forums such as the GRAF & IAGR Challenge • Some of the jurisdictions are reluctant to enter into these agreements and also • Do not have legislation that prohibits their licensees to operate in countries where online gambling is prohibited

16. Conclusion • Enforcement forms an integral part of online gambling regulation. • Enforcement measures in line with the National Gambling Act, FICA should be implemented to prevent illegal gambling and money laundering. • Continuous research should be conducted to investigate best practices and models in respect of online gambling regulations.

17. Thank You End