KGC Launches White Label Advice Hub
The UK’s Gambling Commission has launched a new online hub laying out its expectations of operators forming partnerships with third parties. The regulator is encouraging gambling businesses to ensure that they are familiar with its compliance responsibilities. The creation of the hub comes in the wake of a spate of enforcement actions against operators that failed to conduct adequate due diligence checks on third parties.
The Gambling Act Review has highlighted compliance issues around white label arrangements.
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Responsibility on Licensees
The Gambling Commission has launched a new hub detailing important advice for operators to follow. The hub can be found by navigating through the ‘Licensees and businesses’ section of the Commission’s website to the ‘Compliance’ tab. There, operators will find a section titled ‘Licensees responsibilities for third parties’.
The hub hones in on the responsibilities of operators when working with non-licensed entities, including white label partners. Detailed are the requirements outlined in the regulator’s License Conditions and Codes of Practice for operators collaborating with third parties. The hub also includes specific advice for those engaging in white label partnerships.
The regulator is keen to remind operators that the compliance of gambling sites, include those hosted by white label providers, falls under the responsibility of the license holder. Announcing the new hub, the Commission added that it will continue to closely monitor licensees engaged in these business relationships.
According to the LCCP social responsibility code 1.1.2, licensees are not only responsible for the third parties they contract with, it is up to them to ensure that those third parties conduct themselves in line with regulatory standards. That means that license holders can be held accountable for the shortcomings of third parties acting on their behalf.
Essentially, operators must make sure that any businesses carrying out activities in their name are adhering to the same license conditions all gambling firms are subject to. Carrying out thorough due diligence checks on third parties and white label partners is therefore a vital component in ensuring that they themselves are not in breach of regulations.
The Commission has made it clear that the onus is on operators to see that their third-party partners are competent and reliable. All operators working with third parties to carry out any business relating to licensed activities should make sure that they have sufficient oversight and controls in place, particularly when it comes to social responsibility and anti-money laundering requirements.
Compliance Issues
The regulator issued a stark warning to operators, stating that failure to maintain adequate control of third parties could result in regulatory action. This may involve the suspension or loss of an operating license. The Commission has highlighted LCCP codes 1.1.2 and 1.1.3 as being of particular relevance, regarding responsibilities for all licenses and those holding remote licenses.
The hub also includes a section on white label partnerships. It reiterates the point that responsibility for compliance of all gambling websites, including white labelled sites, sits with the license holder. This responsibility cannot be deferred to any other party.
The ability of operators to maintain their UK licenses may be called into question if they don’t adhere to the Commission’s LCCP requirements or if they fail to conduct their business in a way that minimizes risk to the licensing objectives. The Commission added that licensees must know their customers and be able to prove knowledge, oversight and proactive interactions when necessary.
Further guidance on how licensees should conduct themselves when it comes to white label partnerships can be found in section 7 of the ‘White Label Partnerships of the Compliance and Enforcement Reports 2019 to 2020’.
Speaking at the KPMG Gibraltar eSummit earlier in June, Deputy CEO of the Gambling Commission Sarah Gardner said that the regulator would initiate projects to bolster the responsibilities of operators dealing with third parties and white label arrangements. She explained that the Commission is committed to updating its advice and engaging with stakeholders.
The Gambling Act Review white paper, published earlier this year, included a recommendation that the regulator consolidate its guidance on the responsibilities around white label partnerships. The proposed changes to the UK’s gambling regulation don’t set out any curbs on such arrangements, but it does make clear that there are issues around compliance.
White Label Arrangements
The Commission’s new hub has been created to address misunderstandings within the industry over who is responsible for such compliance failures. A number of recent cases have seen the gambling watchdog crack down on operators that failed to carry out the necessary due diligence checks on third parties.
In April, the regulator fined TGP Europe Limited £316,250 over anti-money laundering and social responsibility failures. The operator, which is responsible for nineteen websites, was also given an official warning and had conditions attached to its license. These require the operator to take additional steps to ensure thorough due diligence checks.
While TGP Europe may not be a household name, many sports fans will recognize the brands behind the websites it hosts. Betting operators like Dafabet, Stake.com, W88, SBOTOP and Fun88 all use TGP Europe to manage their UK sites. These firms require a white label agreement in order to legally advertise themselves in the UK, in this case on the shirts of Premier League footballers.
These arrangements are lucrative for betting firms, as many British sports boast international appeal. The goal is not to attract new customers in the UK, but to enhance brand recognition in overseas jurisdictions. Recent years have seen a growing backlash against the rise of gambling sponsorships in football, especially in the Premier League.
The majority of last season’s front of shirt gambling sponsors operate as part of white label agreements. The Premier League has now agreed to phase out the use of gambling marketing on players’ shirts by the end of the 2025/26 season.
Not all white label arrangements in the gambling industry are constructed around advertising. Arrangements, such as those with Sun Bingo and Virgin Games, allow a licensee to partner with a third party to attract new customers. In the UK, it is estimated that there are currently around 750 active white label arrangements across nearly forty licensees. Of these, the vast majority are provided by a handful of license holders.
