Gaming in Alderney: overview

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:

The most important pieces of Alderney eGambling legislation are the:

The pieces of legislation that regulate land-based gambling are the:

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:

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 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:

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.

General definition

Key concepts are defined as follows (section 20, Gambling (Alderney) Law 1999 (Gambling Law)):

Online gambling

“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):

A young person is a person who has not attained the age of 18 (section 20, Gambling Law).

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:

Additionally, the duties of the AGCC include the following (section 2, Gambling (Alderney) Law 1999 (Gambling Law)):

The operational responsibilities of the AGCC are divided into two:

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):

Sanctions available to the AGCC include:

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

Poker falls within the definition of gaming (see below, Casino games).

Betting

“Pool betting” means bets made by a number of persons in any of the following ways:

“Winnings” includes winnings of any kind.

Casino games

“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

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.

Not applicable.

Available licences

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:

There were 11 category 2 associate certificates in issue and 36 core services associate certificates.

Licences. The following licences are available in Alderney:

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:

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:

Eligibility and application procedure

The Alderney application and approval process can be divided into three parts:

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:

Following receipt of the application, the AGCC will arrange a meeting with the applicant to facilitate a better understanding of:

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:

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:

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:

For a core services certificate, a category 2 eGambling certificate and a hosting certificate, the following fees are payable:

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).

Requirements

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:

The relevant sections of the eGambling Regulations 2009 can be summarised as follows:

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:

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:

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.

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):

A category 2 eGambling licence permits a licensee to effect gambling transactions, including (regulation 5, eGambling Regulations):

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.

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:

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:

Any advertising carried out by, or conducted on behalf of, a category 1 eGambling licensee must (regulation 4(c), eGambling Regulations 2009):

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).

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.