Presentation by the National Gambling Board to the:

Portfolio Committee:Trade and Industry2 March 2012

ENFORCEMENT PROCESSES FOR ONLINE GAMBLING

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

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

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.

Licensees will be required to put measures in place to ensure punters comply with legislative requirements.

The following will be necessary1. Pre opening inspections.2. Monthly, quarterly and annual inspections3. Financial audits will be conducted on a monthly basis. 4. Licensing requirements5. Technical compliance

Challenge Rapid technological advancements

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

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.

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

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.

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.

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

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.

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

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).

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

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.

End

Thank You