Legislative framework of gambling regulation
◊ Status: Law stated as at 01-Out-2016 | Jurisdiction: Channel Islands: Guernsey
Alderney is part of the Bailiwick of Guernsey, which comprises the three main islands of Guernsey, Alderney and Sark. The Bailiwick is a self-governing dependency of the British Crown, but is effectively independent of the UK and the EU. The Government of Alderney is administered by the States of Alderney. Since 1948, the States of Guernsey have exercised financial and administrative responsibility for certain public services in Alderney. Alderney is not part of the EU or European Economic Area.
The Gambling (Alderney) Law 1999 (Gambling Law) authorises the regulation of gambling through future ordinances. The Gambling Law established the Alderney Gambling Control Commission (AGCC) (section 1) and provides that all forms of gambling are unlawful, except as provided in any other legislation (section 5). The lawfulness of online gambling was established by various ordinances, including the:
- Gambling (Interactive Gaming) (Alderney) Ordinance 2001, which implemented and permitted applications to the AGCC for remote licences.
- Alderney eGambling Ordinance 2006 (superseded by the Alderney eGambling Ordinance 2009).
The most important pieces of Alderney eGambling legislation are the:
- Gambling Law.
- Alderney eGambling (Operations in Guernsey) Ordinance 2006.
- Alderney eGambling Ordinance 2009 (eGambling Ordinance 2009).
- Alderney eGambling Regulations 2009 (eGambling Regulations 2009).
- Alderney eGambling (Operations in Guernsey) (Amendment) Ordinance 2010.
- Alderney eGambling (Amendment) Ordinance 2015 (eGambling Ordinance 2015).
- Alderney eGambling (Amendment) Regulations 2015 (eGambling Regulations 2015).
The pieces of legislation that regulate land-based gambling are the:
- Gambling (Betting) (Alderney) Ordinance 1997.
- Gambling (Bookmakers) (Alderney) Ordinance 2002.
Until January 2014, Alderney had one land-based bookmaker, who has now retired.
Initially, Alderney planned to regulate telephone betting. However, in 2001 it moved into the regulation of online gambling, commonly referred to by the AGCC as “eGambling”. Alderney was among the first non-EEA jurisdictions to be white-listed by the UK, following the implementation of section 331(4) of the Gambling Act 2005, on 1 September 2007. In practice, this meant that Alderney and other white-listed jurisdictions were considered to have regulatory regimes of a sufficient standard to allow its operators to advertise and provide gambling services into the UK market without obtaining a Gambling Commission operating licence. However, this changed following the implementation of the Gambling (Licensing and Advertising) Act 2014, which abolished the white list. In an attempt to future-proof the regulatory landscape in Alderney and respond to technical innovation, the legislation was overhauled by the government in 2009.
Some of the main advantages of operating in Alderney include:
- A technologically advanced and forward-thinking regime with two types of licences:
- category 1 or B2C licences, for operators that use either their own platform or another person’s platform and have a direct contractual relationship with the customer; and
- category 2 or B2B licences, for operators that manage the platform and any games approved to run on that platform.
- Seamless transfer of players to Alderney.
- Multiple licensing.
- No gambling taxes.
- No corporation tax.
- No value added tax.
- Low income tax rates.
- Competitive and advanced data centres and networks.
- No capital gains tax.
- No capital acquisition tax.
- No other hidden duties.
Alderney is now widely regarded as the largest hub for B2B services in the world. It also transmits more internet gambling traffic than any other location in the world. Alderney has adapted itself. Its previous focus on the UK market changed following the implementation of a point of consumption licensing regime in the UK and has been replaced with a broader and more global base of licensees. In 2015, two changes were made to the regulatory framework governing online gambling in Alderney:
- The eGambling Ordinance 2015 introduced a revised licence and certificate fee structure. This Ordinance also implemented a new fee for gambling business associates. This fee reflects the work necessary to ensure that those who associate with eGambling licensees and category 2 associate certificate holders are suitable entities to be involved in online gambling.
- The eGambling Regulations 2015 were adopted. These created a mechanism for the reporting of gambling business associates and also specified certain requirements to be considered when approving business associates.
The AGCC has good relationships with other regulators and has been working to secure agreements with emerging European and international licensing jurisdictions, particularly as a result of the rise in point of consumption licensing. Alderney’s aim is to house and regulate gambling servers for B2B operators, who will work with B2C licensees (or obtain their own B2C licences) in target jurisdictions. In May 2010, the AGCC signed a memorandum of understanding (MoU) with the Kahnawake Gaming Commission to exchange information relating to past, present and prospective licensees for the purpose of ensuring effective regulation between both jurisdictions.
Similar MoUs were signed with:
- Antigua and Barbuda in February 2010.
- The Nevada Gaming Control Board in January 2011.
- The Danish Gambling Authority in June 2011.
- The Alcohol and Gaming Commission of Ontario in January 2012.
- The Casino Regulatory Authority of Singapore in October 2012.
- The UK Gambling Commission in February 2013.
- The Maltese Lotteries and Gaming Authority in October 2013.
- The International Olympic Committee in February 2014.
- The Fédération Internationale de Football Association (FIFA) in March 2014.
- The European Sports Security Association (ESSA) in December 2011.
- The Northern Territory of Australia in July 2014.
- The Jersey Gambling Commission in March 2015.
- The Isle of Man Gambling Supervision Commission.
The AGCC also signed a letter of intent with the gambling regulator for The Netherlands (Kansspelautoriteit) in January 2015, as a precursor to a full MoU at a later stage.
Additionally, Alderney has been in the vanguard of jurisdictions exploring the possibility of establishing pooling of liquidity across borders. The AGCC has been at the forefront of campaigning for international pooling as it believes it promotes dialogue between jurisdictions and international standards. This is achievable given the reputation of Alderney as a trusted jurisdiction, and would enhance its attractiveness to operators. In the past year, the AGCC has reached agreements with the US states of Delaware and Nevada. The AGCC is hopeful that similar agreements may be reached across Europe.
Any breach of the Gambling Law is, in the case of a first offence, subject to a maximum fine of GB£25,000 or up to six months’ imprisonment, or both . In the case of a second or subsequent offence, the maximum penalties are a maximum fine of GB£50,000 or two years’ imprisonment, or both.
Definitions of gambling
Key concepts are defined as follows (section 20, Gambling (Alderney) Law 1999 (Gambling Law)):
- “Gambling” means all forms of betting, gaming and wagering and any lottery.
- “Lawful gambling” means any form of gambling made lawful by an ordinance made under section 6 of the Gambling Law.
“eGambling” is defined as a gambling transaction with an eGambling licensee or category 2 associate certificate holder that is effected remotely by a customer by means of a telecommunication device (section 30(1), eGambling Ordinance 2009). A category 2 associate certificate is where the operator is the foreign-based equivalent of a category 2 eGambling licensee.
Online gambling is not unlawful where the following requirements are met (section 1, eGambling Ordinance 2009):
- The transaction is not effected by, with or through a young person.
- The transaction is organised or promoted by or with the holder of a category 1 eGambling licence.
- The transaction is effected by or with the holder of a category 2 eGambling licence or a category 2 associate certificate holder (formerly known as a foreign gambling associate certificate).
A young person is a person who has not attained the age of 18 (section 20, Gambling Law).
3. What are the regulatory or governmental bodies that are responsible for supervising gambling?
The Alderney Gambling Control Commission (AGCC) is the regulatory authority that is responsible for ensuring and maintaining the integrity of the online gambling industry in Alderney. Its objectives are to protect and enhance the reputation of Alderney as a well-regulated online gambling (eGambling) jurisdiction by seeking to ensure that:
- All electronic gambling on Alderney is conducted honestly and fairly.
- The funding, management and operation of electronic gambling on Alderney remains free from criminal influence.
- Electronic gambling is regulated and monitored so as to protect the interests of licensees’ customers, as well as the young and vulnerable.
Additionally, the duties of the AGCC include the following (section 2, Gambling (Alderney) Law 1999 (Gambling Law)):
- To grant the licences as may be necessary to a person who is applying to provide and operate any form of gambling.
- To supervise and control, including by way of inspection and the imposition of conditions, the conduct and operation of any form of gambling licensed.
- To investigate the character and financial status of any person applying for, or holding a licence in Alderney or concerned with the provision, operation or management of any form of gambling.
- To ensure that all fees, royalties and other monies payable to the States of Alderney by a person providing or operating any form of gambling, are duly paid and accounted for.
- To perform any other functions assigned by the Gambling Law or by ordinances made under the Gambling Law.
The operational responsibilities of the AGCC are divided into two:
- Licensing activities. Licensing involves the investigation of new applicants to determine if they are fit and proper, as well as the maintenance of all required records regarding licensees and certificate holders. As part of “stage one” of the application process, the applicant and its key personnel are subject to probity checks.
- Compliance activities. In relation to compliance and as part of “stage two” of the application process, the AGCC will approve the licensee’s gambling equipment, internal controls and operating procedures.
Licences and certificates are granted for an indefinite period. There is no limit to the number of licences that can be granted. The AGCC specifies the provisions and conditions that apply to different categories of licences and certificates. See Question 7 for details on the licensing regime for online gambling.
Section 13 of the Gambling Law sets out the applicable offences and penalties (see Question 1). In addition to these criminal offences, the AGCC can bring regulatory proceedings where provisions of either the eGambling Ordinance 2009 or eGambling Regulations 2009 have been breached. The AGCC can take regulatory action where (section 12, eGambling Ordinance 2009):
- An eGambling licensee or a certificate holder is no longer a fit and proper person.
- An associate of an eGambling licensee or a certificate holder is not, or is no longer, a fit and proper person to be associated with the operations of the licensee or certificate holder.
- An eGambling licensee or a certificate holder has contravened a provision of the gambling legislation, or a condition attached to the eGambling licence or certificate in question.
- A temporary eGambling licensee is no longer licensed or properly licensed in another jurisdiction to conduct eGambling operations.
- The licensed activity is being, or has been, carried out by an eGambling licensee or certificate holder, or an associate of an eGambling licensee or certificate holder, in a manner which is inconsistent with the licensing objectives.
Sanctions available to the AGCC include:
- Issuing a direction to rectify.
- Issuing a written caution.
- Imposing a financial penalty of up to GB£25,000, which can be suspended.
- Suspending the licence or certificate.
- Revoking the licence or certificate.
Before a “direction to rectify” is made, the AGCC can also issue a “proposal to rectify”. In practical terms, this is an opportunity to rectify the regulatory breach within a specified period without the need for a regulatory hearing. A direction to rectify can also be issued without holding a regulatory hearing.
The most notable regulatory action taken by the AGCC was in 2011 in relation to Full Tilt Poker, which was operated by four Alderney licensees. On 15 April 2011, a date now known in the industry as “Black Friday”, authorities in New York announced an indictment naming 11 individuals, including two connected to Full Tilt Poker, relating to illegal gambling, bank fraud and money laundering. On the same day, the Full Tilt Poker domain was seized by the US Department of Justice (DoJ) and various bank accounts relating to Full Tilt Poker companies were restrained. The DoJ accused the Alderney licensees of defrauding online poker players out of US$440m and of giving misleading statements about the extent of their funds.
Three of the four licences were revoked. The fourth (non-operational licence) was suspended and, due to the striking off of the Alderney Company Register in 2013, is no longer valid. In addition to an internal review that was conducted by the AGCC, an independent review of the AGCC’s actions was conducted in 2012 by Peter Dean, a former Chairman of the UK Gambling Commission, to identify possible improvements. While the review highlighted that the AGCC fulfilled its statutory obligations and that its actions were appropriate, timely and fair, it also highlighted lessons to be learnt in relation to player protection, procedure for regulatory hearings, relations with licensees and resources.
See box, The regulatory authority.
Licensees in Alderney can offer multiple products with one eGambling licence from the Alderney Gambling Control Commission (AGCC). This includes bingo, casino games (including poker) and betting products.
The AGCC publishes guidelines for the preparation of an internal control system that sets out the regulatory and technical requirements in respect of each type of game. These can be found on the AGCC’s website (www.gamblingcontrol.org).
Poker falls within the definition of gaming (see below, Casino games).
“Pool betting” means bets made by a number of persons in any of the following ways:
- On terms that the winnings of the persons who are winners must be, be a share of, or be determined by reference to, the stake money paid or agreed to be paid by those persons, whether the bets are made by means of a totalisator, or by filling up and returning coupons or other printed or written forms, or in any other way.
- On terms that the winnings of the persons who are winners must be or must include an amount (not determined by reference to the stake money paid or agreed to be paid by those persons) that is divisible in any proportions among the winners.
- On the basis that the winners or their winnings must be at the discretion of the promoter or some other person.
“Winnings” includes winnings of any kind.
“Gaming” means the playing of a game of chance for winnings in money or money’s worth, whether any person playing the game is at risk of losing any money or money’s worth or not. Gaming does not include the making of bets by way of pool betting (see above, Betting).
“Game of chance” includes a game of chance and skill combined and a pretended game of chance and skill combined, but does not include any athletic game or sport.
Bingo falls within the definition of “gaming” (see above, Casino games).
The bookmakers licence is available for land-based gambling. Until January 2014, Alderney had one land-based bookmaker, who has now retired.
In Alderney, the licences and certificates available depend on the nature and type of activity. They are broadly divided according to the scope of the activities that they cover, which are either B2C or B2B in nature. Licences and certificates are not limited in number.
As at 31 December 2015, there were 47 registered licensees consisting of:
- 13 category 1 licence holders.
- 15 category 2 licence holders.
- 19 holders of both category 1 and 2 licences.
There were 11 category 2 associate certificates in issue and 36 core services associate certificates.
Licences. The following licences are available in Alderney:
- Category 1 eGambling licence for B2C activities, which authorises the licensee to organise and prepare gambling operations, including the contractual relationship with customers, the verification and registration of players and the management of player funds.
- Category 2 eGambling licence for B2B activities, which authorises the operator to effect gambling transactions located within an approved hosting centre in Alderney/Guernsey.
- Temporary eGambling licence.
It is possible to obtain one or both of these licences, depending on the relevant business model. A category 1 eGambling licensee can work in conjunction with a number of category 2 eGambling licensees or category 2 associate certificate holders, who will host games on their server, and players will be sent to the category 2 eGambling licensee or category 2 associate certificate holder wherever they are situated. In addition to partnering with a category 2 eGambling licensee, category 1 eGambling licensees can also have a category 2 associate certificate (formerly known as a foreign gambling associate certificate) for effecting gambling transactions with the customer. Following recent changes, a category 2 associate certificate can be upgraded to a category 2 licence without loss of any residual value.
A category 1 licence holder can subsequently apply to also hold a category 2 licence, and vice versa. As investigations will have already been carried out, the timescale and cost of the application is likely to be reduced.
Both categories of licences can only be held by an Alderney registered company. However, the company no longer needs to be formed before the application is made to the Alderney Gambling Control Commission (AGCC), provided that the applicant commits to form an Alderney registered company during the application process and before a licence is issued.
A temporary eGambling licence allows a licensee, who is licensed/approved in another jurisdiction, to conduct an equivalent form of gambling, to conduct a gambling transaction under limited circumstances. A temporary eGambling licence authorises to conduct gambling transactions for either:
- No more than 29 days continuously.
- An aggregate of 59 total days within any six-month period.
On the 30th day of continuous use, or on the 60th day of aggregated use within any six-month period, the AGCC will require the licensee to apply for a category 1 eGambling licence and/or category 2 eGambling licence within 42 days. A temporary licence will be available to an operator using Alderney servers for disaster recovery purposes.
Certificates. The following certificates are available in Alderney:
- Category 2 associate certificate (formerly known as a foreign gambling associate certificate) for B2B activities, where the operator is the foreign-based equivalent of a category 2 eGambling licensee.
- Core services provider associate certificate, which is granted to a third party entity with which an eGambling licensee or category 2 associate certificate holder contracts directly for the provision of gambling software, a player fund deposit or company management.
- Hosting certificate for the accommodation of gambling equipment, which must be suitable, secure and meet the AGCC’s technical standards.
- Key individual certificate. A key individual is a person who is, or will be:
- an associate of a licensee or certificate holder;
- someone who occupies or acts in a managerial position for a licensee or certificate holder;
- someone who carries out managerial functions for a licensee or certificate holder; or
- someone in a position to control or exercise significant influence over the operations of a licensee or certificate holder.
Eligibility and application procedure
The Alderney application and approval process can be divided into three parts:
- Fair games.
- Adequate processes.
These three parts can be run in parallel or in series. The AGCC states that live activation is routinely achievable within six months of the initial application. However, this depends on the speed at which the applicant progresses through the process.
Gambling servers must be located within Alderney or Guernsey at hosting premises approved by the AGCC by way of a hosting certificate, unless otherwise authorised under a special agreement with the AGCC. Where hosting premises outside the Bailiwick of Guernsey are approved, the premises do not need to hold a hosting certificate. The AGCC will expect, at a minimum, that the disaster recovery capability is sufficient to ensure protection of customer entitlements and audit ability up to the point of the disaster. Any disaster recovery plan can contemplate continuation of part or all of the business outside the Bailiwick of Guernsey in other licensed jurisdictions.
Stage one of the application process. At this stage, the applicant must carry out all of the below:
- Submit the corporate application form and supporting documents.
- Submit the applications for key individual certificates.
- Pay an initial investigation deposit of GB£10,000.
- Form an Alderney registered company, for a category 1 and/or category 2 eGambling licensee.
Following receipt of the application, the AGCC will arrange a meeting with the applicant to facilitate a better understanding of:
- The business plan and proposed operations.
- Potential business and executive associates.
- The corporate entities involved in the application.
- Persons who may need to submit applications for key individual certificates.
If the application is successful, a licence will be issued on payment of the relevant licence fee, and the licensee will proceed to stage two.
Stage two of the application process. At this stage, the AGCC will approve the applicant’s:
- Internal control system (ICS).
- Gambling equipment.
- Capitalisation status.
The AGCC assesses a licensee’s conformity with the law and regulations by assessing the correct application of procedures set out in the licensee’s ICS, which must be approved as part of the application process. The ICS, defined as “a system of controls and administrative and accounting procedures used by an eGambling licensee for the conduct of eGambling”, is a detailed document following the AGCC’s prescribed sections covering:
- Section 1: corporate structure and staffing.
- Section 2: accounting systems.
- Section 3: customer registration, verification, banking and management.
- Section 4: eGambling.
- Section 5: computer controls.
The ICS is designed to allow a licensee to describe how it proposes to mitigate the risks associated with its business, including protection of customer funds and disaster recovery. For more information, see the AGCC’s Technical Standards and Guidelines for Internet Gambling Systems (www.gamblingcontrol.org/wp-content/uploads/2015/06/ICSG-Version-4_1-FINAL.pdf).
Once an ICS is approved, the AGCC will expect the licensee to adhere to the provisions and controls it contains. Any changes to an approved ICS will require AGCC approval.
All equipment used to operate games must be located in approved premises in either Alderney or Guernsey, unless specifically agreed with the AGCC. This essentially means that the game server, player databases and transaction databases must be in Alderney or Guernsey. Any personnel or any back office functions need not be located in Alderney or Guernsey.
Gambling transactions can only be lawfully effected at approved premises, that is, premises controlled by the holder of a hosting certificate. It is usual for eGambling licence holders to use premises provided by hosting certificate holders such as Cable & Wireless Guernsey, Itex (Guernsey) Limited and BM IT Limited.
Licensees must hold capital, subject to a liquidity adjustment in respect of investment in fixed assets, which is equal to or exceeds the sum of qualifying overheads using the formula below, subject to the relevant account groupings as they appear in the reports specified in Schedule 18 to the eGambling Ordinance 2009 and submitted under regulation 242(2) of this Ordinance. Shareholders’ funds, minus an adjustment that is equal to the total of fixed assets, must meet or exceed the quarterly reported value of net gaming yield (NGY) less any operating profit, excluding the cost of affiliate fees (as approved by the AGCC).
Duration of licence and cost
Licences and certificates granted by the AGCC are valid for an indefinite period.
The application process in Alderney generally takes about three to six months from receipt of the full application and payment of investigation costs.
While investigation costs total about GB£5,000 to GB£10,000, no application fees are payable. The applicant makes an initial deposit of GB£10,000 on submitting the application, from which these costs are drawn. The unused balance of investigation costs is refunded to the applicant or licensee. Each key individual application will require an initial deposit of GB£1,000.
The following fees are payable for an eGambling licence:
- Initial deposit: GB£10,000.
- Supplementary deposit: GB£5,000.
- Modification fee: GB£100.
- Approval of ICS: GB£10,000.
- Changes to ICS: GB£5,000.
- Approval of gambling equipment: GB£5,000.
- Inspections of operations: GB£7,500.
- Special investigations: GB£5,000 (GB£2,000 supplementary deposit, if required).
For a core services certificate, a category 2 eGambling certificate and a hosting certificate, the following fees are payable:
- Initial deposit: GB£5,000.
- Supplementary deposit: GB£5,000.
- Modification fee of GB£100.
Annual licensing fees in Alderney range from GB£35,000 to GB£400,000 per year, depending on the NGY, as follows:
- Category 1 eGambling licence: GB£17,500 for a new licensee in Alderney, for its first year.
- Category 1 eGambling licence (Band A): GB£35,000 after the first year of operation for a licensee whose NGY is less than GB£500,000.
- Category 1 eGambling licence (Band B): GB£60,000 after the first year of operation for a licensee whose NGY equals or exceeds GB£500,000 but is less than GB£1 million.
- Category 1 eGambling licence (Band C): GB£80,000 after the first year of operation for a licensee whose NGY equals or exceeds GB£1 million but is less than GB£5 million.
- Category 1 eGambling licence (Band D): GB£130,000 after the first year of operation for a licensee whose NGY equals or exceeds GB£5 million but is less than GB£7.5 million.
- Category 1 eGambling licence (Band E): GB£200,000 after the first year of operation for a licensee whose NGY equals or exceeds GB£7.5 million but is less than GB£20 million.
- Category 1 eGambling licence (Band F): GB£290,000 after the first year of operation for a licensee whose NGY equals or exceeds GB£20 million but is less than GB£30 million.
- Category 1 eGambling licence (Band G): GB£400,000 after the first year of operation for a licensee whose NGY equals or exceeds GB£7.5 million but is less than GB£30 million.
- Category 1 eGambling licence: annual gambling association fee of GB£3,000 per business associate.
- Category 2 eGambling licence: GB£17,500 for a new licensee in Alderney, for its first year.
- Category 2 eGambling licence: GB£35,000 annual fee (fixed).
- Category 2 eGambling licence: annual gambling association fee of GB£3,000 per business associate.
- Category 2 associate certificate: GB£35,000 for a new holder in Alderney, for its first year.
- Category 2 associate certificate: GB£50,000 annual fee (fixed).
- Core services associate certificate: GB£10,000 annual fee (fixed).
- Temporary eGambling licence: GB£10,000 annual fee (fixed).
The general conditions that apply to each category of licence and certificate are set out in the eGambling Regulations 2009. They include requirements relating to:
- Third parties.
- Customer funds.
- Key executives.
- Notification requirements.
- Shareholder changes.
- Gambling equipment.
- Anti-money laundering (AML).
The relevant sections of the eGambling Regulations 2009 can be summarised as follows:
- Part I:
- Chapter II relates to the conditions attached to category 1 eGambling licences;
- Chapter III relates to the conditions attached to category 2 eGambling licences; and
- Chapter IV relates to the conditions attached to temporary eGambling licences.
- Part II:
- Chapter II relates to the conditions attached to the associates providing core services; and
- Chapter III relates to the conditions attached to category 2 associate certificates.
- Part III: Chapter II relates to the conditions attached to hosting certificates.
- Part IV: Chapter III relates to the conditions attached to key individual certificates.
The internal control system (ICS) guidelines establish detailed compliance requirements in relation to eGambling licensees or category 2 associate certificate holders (see Question 7, Eligibility and application procedure: Stage two of the application process). The ICS is submitted to the Alderney Gambling Control Commission (AGCC) for approval in accordance with regulations 175 and 176 and the form set out in Schedule 11 to the eGambling Regulations 2009.
Once their licence has been granted, licensees must submit monthly and quarterly financial and operational reports, which include information relating to player activity, suspicious transactions and significant player deposits or losses. Licensees must also have their financial accounts audited every year.
Within 12 months of live activation of the site, and annually thereafter, the AGCC will visit the main operational centre of the licensee to check that the licensee complies with the relevant licence conditions and that the approved games and ICS in use are those that have been previously approved. The AGCC’s inspection will examine a broad range of the licensee’s operations, including:
- Corporate structures, staffing and staff training.
- Financial reporting.
- Player registration, verification and associated banking procedures.
- AML and terrorism financing procedures.
- Game fairness and player protection.
- Security policies and procedures.
- Operation of approved games and gambling equipment.
The annual licence fee is payable on or before the anniversary of the grant of the licence (see Question 7, Duration of licence and cost).
Anti-money laundering legislation
There is no single piece of legislation that regulates AML. The Bailiwick of Guernsey has both primary and secondary legislation relating to AML, including the:
- Terrorism and Crime (Bailiwick of Guernsey) Regulations 2007.
- Transfer of Funds (Alderney) Ordinance 2007.
- Disclosure (Bailiwick of Guernsey) Regulations 2007.
- Disclosure (Bailiwick of Guernsey) Law 2007.
- Terrorism and Crime (Bailiwick of Guernsey) Law 2002 (Consolidated 2010).
The AGCC is keen to ensure that internationally agreed standards are maintained in relation to AML and counter-terrorist financing (CTF). The legal framework is based on Financial Action Task Force (FATF) standards. As Guernsey is not part of the EU, it does not need to implement Directive 2015/849/EU on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing. However, the AGCC is in the process of reviewing its AML/CTF framework to identify changes that will be necessary to meet the requirements of the FATF recommendations published in February 2012. The Bailiwick of Guernsey, through its membership of the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), is in the process of revising its AML/CFT framework to ensure that it continues to meet appropriate international standards.
Where two AML regimes apply, licensees and certificate holders must comply with the regime that provides the highest standard of compliance by reference to the FATF recommendations (section 11(2), Schedule 16, eGambling Regulations 2009).
All active licensees are inspected within one year of the approved start of their live operations and annually thereafter. These inspections include a thorough review of a licensee’s payment systems, due diligence records and AML/CTF controls, including a mystery shopping exercise.
B2B and B2C
There is a distinction between B2C and B2B operators.
A category 1 eGambling licence permits a licensee to contract with customers to organise and prepare a customer to gamble, including (regulation 3, eGambling Regulations):
- Entering into an agreement with the customer.
- Registration and verification of the customer.
- Engaging in financial transactions with the customer.
- Managing the customer’s funds.
- Offering or promoting gambling to the customer.
- Other actions that the Alderney Gambling Control Commission determines to be activities that can only be carried out by a category 1 eGambling licensee.
A category 2 eGambling licence permits a licensee to effect gambling transactions, including (regulation 5, eGambling Regulations):
- Striking a bet.
- Housing and recording the random element or gambling transaction outcome.
- Operating a system of hardware and software on which the gambling transaction is conducted.
Effecting a gambling transaction does not include engaging in a financial transaction with the customer.
In other words, a category 1 eGambling licensee is a B2C operator and a category 2 eGambling licensee or category 2 associate certificate holder is a B2B operator. A core services associate certificate is issued to those closely involved in online gambling but who are not undertaking the primary activity (including gambling software suppliers).
ISP blocking and payment blocking measures are not currently in place.
Mobile gambling and interactive gambling
The legislation is also applicable to mobile gambling and interactive gambling on television.
While the Alderney Gambling Control Commission has expressed a regulatory interest in social gaming, it has not issued any formal guidance on this issue.
Gambling debts are not enforceable in Alderney.
There is no corporate tax, gambling duty or VAT in Alderney.
The income tax rate is 20% with a maximum charge of:
- GB£220,000 per year on Guernsey-sourced income.
- GB£110,000 per year on non-Guernsey income.
More than 90 days in Guernsey will establish residency and 180 days will establish sole or principal residency.
Social security contributions are levied at a rate of 6% on an employee’s gross salary and are capped at annual earnings of GB£120,000.
The corporate tax regime for Guernsey and Alderney companies has been approved by the EU. Under this regime (referred to as “zero-ten” regime), companies with non-resident shareholders are not liable to corporate tax. Therefore, the effective rate for a foreign-owned company is 0%. To benefit from the 0% corporate tax regime, a licensee must demonstrate both that:
- It is resident in, and managed and controlled from, the Bailiwick of Guernsey.
- Its main permanent establishment that generates all or the majority of group profits is in the Bailiwick of Guernsey.
Any advertising carried out by, or conducted on behalf of, a category 1 eGambling licensee must (regulation 4(c), eGambling Regulations 2009):
- Be truthful.
- Not be distasteful.
- Not promote gambling by, with or through persons under the age of 18 years, and this factor must be taken into account when determining media selection and placement of the advertising.
- Not encourage people to engage in excessive participation in online gambling that would be socially irresponsible or could result in harm to them or others.
- Not imply or convey any message that a person’s status, general abilities or social success can be attributable to gambling.
- Not challenge or dare people to participate in online gambling.
- Not, having regard to the expected returns to customers through online gambling, promote or suggest any unrealistic expectation of winning.
- Not bring into disrepute the Island of Alderney, the Alderney Gambling Control Commission or in any broader context, the Bailiwick of Guernsey.
- Comply with any requirements relating to the content or nature of advertising imposed in the jurisdiction covering the target market for that advertising.
Similar provisions apply to temporary eGambling licensees (regulation 8(1)(c), eGambling Regulations 2009). Category 2 eGambling licensees and category 2 associate certificate holders also have the same obligations, although they are unlikely to conduct direct advertising (regulations 6(c) and 60(b), eGambling Regulations 2009).
Developments and reform
Following the implementation of the Gambling (Licensing and Advertising) Act 2014, the UK introduced a point of consumption regime that requires Alderney licensees wishing to advertise to, or transact with, customers in Great Britain, to hold an operating licence from the UK Gambling Commission. This, in effect, abolished the white list system under the Gambling Act 2005. Alderney licensees were eligible for transitional rights and existing Alderney licensees will be able to retain their servers in Alderney and obtain a UK licence.
In addition, in 2015, the AGCC took part in a multi-jurisdiction testing framework working group with the Isle of Man, Denmark and the UK. This move towards harmonising testing requirements increases the speed at which games can be approved for release, and minimises costs and regulatory duplication.
There are currently no proposals for reform.
The regulatory authority
Alderney Gambling Control Commission (AGCC)
Description. The AGCC was established in May 2000 and consists of the Chairman and three members. It is independent and non-political and regulates online gambling (eGambling) on behalf of the States of Alderney. The AGCC ensures that its regulatory and supervisory approach meets the very highest of international standards. The AGCC’s primary objective is to protect and enhance the reputation of Alderney as a first tier regulatory jurisdiction by seeking to ensure that:
- All electronic gambling is conducted honestly and fairly and in compliance with good governance.
- The funding, management and operation of electronic gambling remains free from criminal influence.
- Electronic gambling is regulated and monitored so as to protect the interests of the young and the vulnerable.
- Without compromising its primary objective, there is communication and collaboration with other agencies in the development of eGambling activities regulated by the AGCC.
Alderney Gambling Control Commission (AGCC)
Description. The official website of the AGCC includes legislation, resources on anti-money laundering and counter-terrorist financing, and information on fees and application forms.
Source: Practical Law