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A White Paper to Future Proof Malta's Gaming Legal Framework July 2017

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A White Paper to Future Proof Malta's Gaming Legal Framework July 2017 A White Paper to Future Proof Malta’s Gaming Legal Framework July 2017 Contents Foreword ................................................................................................................................................. 2 1. Policy Background ........................................................................................................................... 5 2. Proposed Gaming Legal Reform ..................................................................................................... 7 3. Key Priority Areas in Focus ............................................................................................................ 27 4. Next steps ..................................................................................................................................... 30 Draft laws Annexes: Annex 1 – Gaming Act (Part I Bill of Parliament Annex 2 – Gaming Definitions Regulations Annex 3 – Gaming Authorisations Regulations Annex 4 – Gaming Compliance and Enforcement Regulations Annex 5 – Gaming Commercial Communications Regulations Annex 6 – Gaming Player Protection Regulations Annex 7 – Gaming Premises Regulations Annex 8 – Gaming Tax Regulations Annex 9 – Gaming Licence Fees Regulations Annex 10 – Social Causes Fund Regulations Annex 11 – Repealing Provisions (Part II-IV Bill of Parliament) 1 Foreword The proposed legal reform governing Malta’s gaming industry has been on the agenda for the past three years. In keeping with one of our legal functions, our primary aim is to advise the Government of Malta about reviewing and enhancing the existing regulatory regime, in order to enhance current good regulatory practices garnered through years of experience, as well as to ensure that the governance arrangements in force, underpinned by an organised and skilled workforce, are able to support and encourage ongoing improvements and react expeditiously and effectively to technological disruption. Whilst the latter initiatives alone are not enough to obtain a high standard of regulatory outcomes, we believe that the improvements in our governing framework are the catalyst for a sustained and consistent upward regulatory trajectory. We have come to appreciate that our structure, practices and processes need to reflect the fast moving industry that we regulate, against a backdrop of challenges and political forces influencing the context along the way. We have performed several structural changes within the Authority these past years, aiming to improve the governance arrangements, in conjunction with this policy and legislative review, which, we believe, in turn, shall improve our performance. We have consulted with the industry on various topics, and conducted numerous studies looking into risks and the mitigating measures and further in-depth analysis which may be required, all feeding into this proposed overhaul of the legal framework. Supported by extensive internal work and collective efforts, we remain confident about the strategic direction embarked upon in the best interest of the jurisdiction, whilst believing that this targeted approach will assist us in achieving the highest possible benefits in pursuit of regulatory excellence. Indeed, Malta’s long-standing experience in the regulation of the gaming industry has allowed us to reach this particular juncture, wherein alternative measures in focused priority areas are being proposed so as to meet our regulatory objectives, whilst considering improvements from a policy point of view, in line with Government’s public policy standards. All the regulatory obligations have been assessed and we are proposing technology- and game-neutral forms of licensing gaming activities, where possible and desirable, whilst capturing relevant participants performing critical or essential activities which today are absent from our watch. Our aim is not to overburden the industry: on the contrary, we want to focus on areas that truly matter in order to streamline our supervision. The aim of these proposals is also to modernise the gaming framework and embrace the future through logical and well-thought-out processes, eliminating duplication of requirements and promoting simplification of regulatory burdens to what is strictly necessary and justified, whilst adopting a risk-based approach to compliance, focusing on the areas which require the regulator’s attention most. We are striving to narrow the gap between technology and the law and, to this effect, we will be directing our attention on outcomes and objective-based regulation, embracing an evidence-based approach where possible. Key Thrusts In addition to the above objectives and approaches being proposed, this overhaul seeks to achieve a regulatory framework which embraces the following key thrusts: 1. Raising the jurisdictional profile of Malta from a regulatory perspective; 2. Empowering the Malta Gaming Authority to be more agile and flexible in its decision- making against checks and balances on principles established in the main Act; 3. Incentivising areas which have been identified as key for the continuing growth of the sector, such business-to-business operators; 2 4. Enshrining best-in-class player protection and responsible gaming measures and further enhancing alternative dispute resolution (ADR) mechanisms for player disputes; 5. Establishing objective-oriented standards as opposed to prescriptive requirements which hinder innovation; 6. Strengthening further supervision on operators which are deemed to present a higher risk profile; 7. Introducing the concept of administration to protect an operation in distress and, if necessary, to assist the winding down of an operation, thereby protecting jobs and player funds; 8. Decreasing any unnecessary regulatory burdens on all gaming operators established in Malta by streamlining processes and reducing burdens which are not conducive to the regulatory objectives; 9. Widening the Malta Gaming Authority’s powers under the compliance and enforcement functions, including through the introduction of the possibility to perform mystery shopping; 10. Moving towards automated reporting, facilitating adherence to regulatory obligations and strengthening the Authority’s oversight; 11. Increasing the duration of a gaming services licence to ten years from the current five; 12. Introducing an approval for material gaming supply for suppliers of non-critical services; 13. Streamlining taxation into one flow with two main layers; 14. Exempting business-to-business licensees from gaming tax, thus increasing Malta’s competitiveness as a hub for these services providers; 15. Introducing a moratorium on a part of the licence fees for start-ups, subject to certain criteria; 16. Segmenting the Key Official role into various key functions within a licensed activity, requiring approval, for direct scrutiny and targeted supervisory controls, thereby raising the bar for persons of responsibility within a gaming operation;1 17. Introducing new and more effective processes for criminal and administrative justice, including the allocation of appeals from decisions of the Authority to the Administrative Review Tribunal and the introduction of a distinction between administrative and criminal offences; 18. Streamlining the criminal process to ensure more expeditious and effective sanctioning of illicit operations; 19. Introducing privileged ranking for gaming tax and administrative fees; 20. Improving the protection of player funds via segregation and the power to impose a gaming reserve; 21. Introducing obligations with respect to reporting suspicious transactions as per anti-money laundering obligations;2 22. Introducing new obligations on operators to monitor sports betting and report suspicious bets, in order to prevent match-fixing in line with the efforts being made by the National Anti-Corruption Task Force in which the Authority also participates actively. These proposals are based on a number of initiatives including: 1. Various public consultations; 2. An economic and financial impact assessment; 3. Regulatory experience; 1 Further to a consultation paper published by the Malta Gaming Authority in September 2015, entitled ‘Revision of the Key Official fitness and propriety requirements as a means to achieve enhanced compliance capability of remote gaming licensees - Consultation Document’. 2 To be published with the implementation of the 4th Anti-Money Laundering (AML) Directive 3 4. Comparative assessments with other regulated markets; 5. Jurisprudence of the Court of Justice of the European Union; and 6. A forward-looking outlook at new potential niche sectors depending on societal risks being posed. In adopting the above regulatory logic, we have focused on improving regulatory compliance through a number of innovative internal and external approaches to improve our performance. We shall keep on investing in embracing innovation in the way we perform, so that we excel in our regulatory compliance and digital performance to manage the future ahead, whilst maintaining a reliable infrastructure that caters for growth through an adequate regulatory design. This paper is the first package of proposals seeking your feedback in line with our consultation process. It will be followed by Parliamentary consideration and, with we trust, eventual endorsement. This paper shall be followed by three other specific consultations on responsible gaming standards aiming for an evidence-based approach, on the processes which shall be adopted by the Authority, as well as on proposals dealing
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