KPMG REPORT GIB.Qxd:Layout 1

Thursday 19th April 2012 Kindly sponsored by

© 2012 KPMG Limited, a Gibraltar limited company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative 1 (“KPMG International”), a Swiss entity. All rights reserved. Introduction

Over the past fifteen years, Gibraltar Brennan of HM Treasury and Andy This report seeks to summarise the has established itself as one of the Grimsley of HM Revenue and Customs day’s events with a view to sustaining world’s leading on-shore European on the UK’s regulation and taxation of the impetus and enthusiasm jurisdictions for eGaming eGaming, with particular reference to generated by the Summit. KPMG businesses wishing to establish the UK Government’s recently would like to take this opportunity to themselves within a well-regulated announced Point of Consumption Tax. once again thank the speakers and and tax-competitive commercial KPMG’s Archie Watt then opened the delegates who attended, all of whom environment. Its reputation as a afternoon session with a presentation contributed to its great success. This secure and robust, first-class which commended the remarkable was the second such event held in gaming jurisdiction has resulted in resilience of the eGaming sector over Gibraltar, with a view to more in the its becoming host to many of the the past decade, upon which note he future as the industry continues to world’s major gaming operators, all introduced the focus of the remaining flourish. of whom have benefitted session as being concerned with the KPMG employs a number of eGaming significantly from the positive future of the eGaming industry. The industry specialists both in Gibraltar approach to eGaming taken by the Summit closed with a four-delegate and globally and is committed to Gibraltar Licensing Authority. panel session, moderated by KPMG’s cutting through the complexity of this Russell Kelly, entitled ‘eGaming and On the 19th April, 2012 at the Caleta constantly evolving industry. Beyond’. Hotel, the KPMG eGaming Summit sought to compound and elaborate upon Gibraltar’s demonstrably excellent reputation for cross-industry A word from discourse by providing a forum within which businesses and representatives the Sponsor could meet and discuss the current and future global presence of the At Continent 8 Technologies, our eGaming sector. investment in Gibraltar’s eGaming Gibraltar’s Minister for Education, sector is testament to our belief that Financial Services, Gaming, Gibraltar represents a globally Telecommunications and Justice, the competitive jurisdiction built on Hon. Gilbert Licudi, kindly opened the solid foundations of technological Summit with a welcome address innovation, co-operative regulatory which outlined Gibraltar’s ongoing practices and a robust political and commitment to providing a safe and economic environment. transparent operational jurisdiction The Continent 8 Technologies Gibraltar with internationally competitive data centre is the latest addition to the Summit was the perfect opportunity to regulatory and supervisory legislation. company's expanding global data demonstrate our commitment to The morning session then focused centre footprint. We believe it staying at the cutting-edge of this predominantly on the issue of represents the perfect accompaniment exciting industry. regulation within the eGaming sector to both Gibraltar’s flourishing eGaming both from a local and European Continent 8 Technologies was proud to industry and continued investment in sponsor the day’s events and we look perspective. Highlights included a an increasingly diverse technological much anticipated address by Maria forward to next year’s KPMG eGaming infrastructure set to become a global Summit in Gibraltar. platform for e-commerce. Richard Ebbutt We focus on the delivery of market- defining Internet technologies, Continent 8 Technologies products and services for global online gaming and this year’s KPMG eGaming

© 2012 KPMG Limited, a Gibraltar limited company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 2 Conference Opening The Hon. Gilbert Licudi QC

The Hon. Gilbert Licudi QC Minister

The Hon. Gilbert Licudi QC is disappointed the Gibraltar Government It had also been suggested that one of Gibraltar’s Minister for Education, and is a matter which has been the reasons for the licensing and Financial Services, Gaming, prioritised within the Licensing regulatory regime is the need to protect Telecommunications and Justice. Authority. Mr. Licudi confirmed that he the UK’s customers. Mr. Licudi agreed As well as his extensive role with had already engaged and will continue that online gaming is a leisure activity the Gibraltar Government, Mr. Licudi to engage with the UK Government on which involves some risks: “some is a Barrister specialising in this issue and that it was, in fact, the customers may exercise poor judgment commercial and trust litigation and subject of Mr. Licudi and Chief Minister and control and some customers may has been admitted to the Bar in both Fabian Picardo’s first meeting with commit or seek to commit crimes London and Gibraltar since 1992. officials in London following the 2011 against the operators. Yet Gibraltar has elections. Mr. Licudi also confirmed that shown that such risks are best managed Mr. Licudi opened the Summit by both he and The Hon. Mr. Picardo met when the providers are small in number, reassuring the floor that Gibraltar with John Penrose, the UK Minister for high in quality and tight in their remains committed to licensing only the Department of Culture, Media and regulation,” he stressed. As the industry the world’s best operators; “thereby Sports as well as the UK Minister of the has developed, remote gambling sustaining a critical mass of like-minded Treasury Chloe Smith. Maria Brennan of customers, both good and bad, have companies, which are like-minded with HM Treasury, who was due to speak at become increasingly astute and in their the Government, like-minded with each the Summit later that morning, was search for the best odds and deals are other and dedicated to providing safe also present at the meeting with Chloe sometimes drawn to sites which serve and secure remote gambling services Smith. as a platform for illegal markets. within and beyond Europe.” As such, However, Mr. Licudi maintained that “the Mr. Licudi reminded delegates that the Mr. Licudi confirmed that the Gibraltar black market has been squeezed out of Gibraltar Licensing Authority “expects Government will continue to lobby and to the UK by low cost but properly and requires its licensees to be as present its arguments to the UK regulated regimes like Gibraltar’s.” precious about their reputation as we Government and claimed that the are about ours.” decision was, in essence, a political Mr Licudi warned that the emerging UK proposal. The Gibraltar Government model provides a climate within which Key Challenges believes there is scope for the UK the black market will re-emerge as The key challenge concerning many in Government to re-consider its position surely as it has elsewhere, perversely the industry is the UK’s recent proposal and will make sure, as Mr. Licudi stated, creating a regime which, despite being to introduce a Point of Consumption Tax that the UK Government understands billed as necessary to protect UK in the UK in December 2014, along with that “what they call a fairer system of customers, may have precisely the a licensing and regulatory regime for taxation would operate with opposite effect. The new regime could foreign operators. The proposal has disproportionate unfairness to Gibraltar.” in fact drive those customers to

© 2012 KPMG Limited, a Gibraltar limited company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative 3 (“KPMG International”), a Swiss entity. All rights reserved. “some customers may exercise poor judgment and control and some customers may commit or seek to commit crimes against the operators.”

unlicensed and unregulated operators based in less reputable jurisdictions who will have no intention of paying the proposed Point of Consumption Tax in the UK. “But”, as Mr Licudi concluded, “this is not the ﬁrst threat that we in Gibraltar have faced”. In each case, Gibraltar has been able to meet challenges with resilience and determination and, after meeting those challenges, the eGaming industry has moved on and grown. It is important that the Gibraltar Government remains perceptive and responsive to these changes and is able to demonstrate sound judgment and the ability to act and adapt where necessary: “I have no doubt that the Government of which I form part will do precisely that and we will do so by talking and listening to, and working in partnership with our operators.”

4 Gibraltar Licensing and Regulatory Update Phill Brear

Phill Brear Head of Gambling Regulation Gibraltar Regulatory Authority

Phill Brear was appointed as Head of commissioning the recently completed experience the most disruption as a Gambling Regulation for Gibraltar in Europe India Gateway submarine result of the proposed changes. October 2007 following two years as telecoms cable; describing it as “yet Mr Brear reminded the Summit that Director of Operations with the another demonstration of Gib Plc’s the DCMS White Paper asserted that British Gambling Commission. In commitment to eCommerce and the there were five key reasons for the July 2011, he was appointed as Gambling industry.” He then outlined existing regime to change, all of which Gibraltar’s Gambling Commissioner his presentation as being a reprise of were and remain, in his opinion, in addition to his existing four issues of particular relevance to unfounded. The first and most responsibilities. He played a key part the eGaming sector: emerging UK damaging alleged that the technical in the roll-out of the UK Gambling policy, the European Commission standards in jurisdictions like Gibraltar Act and Gibraltar’s new Gambling Green Paper, ‘Black Friday’ and issues are not as reliable as those found in Act and has steered through a series surrounding integrity. the UK. However, Mr Brear stressed of changes to the regulatory regime Key Challenges that even if this were true, the real whilst working closely with issue is the monitoring and operators and their representatives. “UK Policy”, as Mr. Brear began, enforcement of regulatory issues by Mr Brear is also responsible for “remains the biggest cloud on the both operators and regulators. The liaising with such bodies as US industry’s horizon and encapsulates, to strongest technical standards in the regulators and the European a large extent, Gibraltar’s regulatory world, he continued, are inevitably Commission. agenda.” It had been two years since neutralised if the system itself is not the Department for Culture, Media and Mr Brear opened his presentation by properly applied by the regulator and in Sport issued its White Paper first addressing a number of domestic close co-operation with the operator; a consultation document concerning issues which had been touched upon situation which looks inevitable under licensing and remote gambling in Great during last year’s KPMG Gibraltar the proposed UK regime. Britain and Mr Brear maintained that eGaming Summit. Last year, Gibraltar’s this was always seen as a gateway to The second allegation focused on then Chief Minister, Peter Caruana, the taxation of eGaming in the UK. concerns surrounding the provision of announced a change of structure intelligence and information. In 2011, concerning the management of Gibraltar, Alderney, Malta and the Isle GREF, or the Gaming Regulators gambling in Gibraltar, which resulted in of Man were named specifically as the European Forum, conducted an exercise the co-joining of Mr Brear’s principal suppliers of remote gambling with the intention of measuring the department with the Government’s to residents in the UK and he ability of regulators to obtain and Gambling Division. Mr Brear considered this be a fair assessment. release customer data to each-other. subsequently became Gibraltar’s However, Mr Brear was keen to Gibraltar experienced little or no Gambling Commissioner. emphasise that, in terms of the difficulty in releasing properly qualifying aggregate balance of supply, Gibraltar Mr Brear also commended information. Indeed, the difficulty provided approximately 60% of the GibTelecom for its work in surrounding exposure rested with the UK’s demand and is, therefore, likely to

© 2012 KPMG Limited, a Gibraltar limited company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative 5 (“KPMG International”), a Swiss entity. All rights reserved. “there is no evidence for a lack of data-flow out of the jurisdictions identified in the White Paper.” biggest and most bureaucratic London 2012 Olympic Games. revenues of the UK Government?” regulators, many of whom claimed that Likewise, Gibraltar has also been Concerning the Green Paper, Mr Brear they had neither the power nor authority seeking to establish and maintain a described the European Commission to obtain and release the requested generic memorandum of as being “caught between a rock and a data. Contrary to the claim, therefore, understanding with the UK. Mr Brear hard place.” Their rate of progress in Mr Brear assured the Summit that stressed the importance of such matters is unavoidably glacial due “there is no evidence for a lack of data- establishing this relationship in order to a legally dense landscape flow out of the jurisdictions identified in to be able to provide a rapid response surrounding the most contentious the White Paper.” to any reports of suspicious gaming areas of public policy, which now activity due to its potentially virulent Mr Brear then turned his focus towards includes gambling: “they develop their media and political connotations. the alleged non-reporting of suspicious policies based on bilateral and incidents, to which his response was Mr Brear then moved on to the very multilateral engagements and, like that such events are in fact reported to latest announcements that concerned glaciers, they can sometimes appear the UK by external regulators. Mr Brear the industry, the most recent of which to be moving backwards because the assured the Summit that he could not concerned UK Chancellor George climate has turned against them.” recall a single case that a UK regulator Osborne’s Budget Brief announcing Mindful of time restrictions, Mr Brear had brought to the attention of that “the taxation of the remote then moved briefly onto the issue of Gibraltar’s Regulatory Authority without gambling industry would be a good ‘Black Friday’, the anniversary of which its being already aware of the incident. thing for the UK, would protect UK took place just one week before the “Moreover”, Mr Brear continued, “we jobs and increase revenues.” Mr Brear KPMG Summit. Mr Brear explained are aware that the UK regulators responded by explaining that, in all the that, post-UIGEA, it was common already cannot accommodate and key jurisdictions, he doubted that knowledge that the only way remote process the existing reports that they many more than 2,000 jobs were gambling could work in the US was receive, they simply fall into a black outside of the UK due to the absence through the manipulation of the hole. This serves only to perpetuate the of tax and licensing regulations. There payment system, a technique which misconception that this is a significant are, he argued, many more thousands veered dangerously close to or was problem in terms of its scale rather of jobs within the UK precisely likely to be deemed illegal activity. than just in terms of its principle.” because of the current arrangement Some of the parties implicated, as Mr and there are many more industries The fourth issue was that of customer Brear remarked, “were always going to based in the UK which gain leverage complaints and the apparent lack of struggle to pass political due diligence if from jurisdictions like Gibraltar and visibility of those complaints once they not objective due diligence” and the which reinvest their profits into the UK are processed outside of the UK. The implications of licensing them were economy. DCMS claim that licensing and somewhat predictable. regulation within the UK will offer UK Mr Brear reinforced his contention by To close, Mr Brear also expressed his customers and non-UK customers better describing the modern business model wish to briefly touch upon the subject complaints management despite the for eGaming operators as being one of of ‘integrity’; “a topic which is in and Gambling Commission not, generally, dispersion to places where languages out of the news and which is investigating consumer complaints. Mr and IT skills reside in the interests of frequently misunderstood.” He wished Brear took this opportunity to raise an efficiency. The UK model that is to stress to the Summit that integrity important statistic: that the number of emerging is one which would has only become an issue of such complaints the GRA receives from the encourage further fragmentation of the significance to the majority of the jurisdiction’s ten million customers totals industry away from the UK. “Our industry because of a tiny minority of just 30 to 50 cases per year, all of which forecast”, he explained, “is that ‘punters’ with no regard for regulatory are investigated but only a handful of licensed operators will seek to reduce procedure. Mr Brear did, however, which are found to have any substance. their operating costs in an effort to implore regulators and the industry at- remain competitive with both a The fifth issue was one of more large to do more to co-operatively regulated market and the unregulated general regulatory co-operation and Mr negate the risk of further challenges to market that will surely emerge to Brear explained that, amongst his its collective integrity: “We remain chase the price gap that the new tax colleagues and indeed the majority of committed to addressing any and levy charges will create.” the Gibraltar eGaming industry, there significant attempts to corrupt or is a shared objective in its pursuit. For “We would move from a stable, unfairly exploit betting events and, let’s the past 12 months, Gibraltar has sophisticated and well-supervised not forget, other betting customers”, unsuccessfully sought to establish a industry to one that would be he concluded; “because it is they who regulator-to-regulator liaison challenged by the proliferation of start- eventually lose out from such arrangement with the UK for the rapid ups,” stated Mr Brear, “so I ask the practices.” reporting and examination of any question: is this the model to protect suspicious betting activity during the UK customers and increase the

Sector Update - Gibraltar Speciﬁc

Peter Montegriffo qualified as a transform Gibraltar from what might Peter Montegriffo Barrister in 1982 and became a have been described as an off-shore Partner partner of Hassans in 1988. Over the tax centre to an on-shore centre. past few years, he has been As Mr Montegriffo remarked, “we instrumental in drafting numerous Hassans have seen the development within the changes to Gibraltar’s legislation industry of much more B2B business, concerning trusts, financial services far more sophisticated White Label and gaming. He is a prolific arrangements and we are seeing publisher on the jurisdiction’s legal diversity in the complexity of system and is a regular speaker at arrangements which are developing international conferences. Peter was between local operators and global also Gibraltar’s Minister for Trade markets. That is likely to continue: as and Industry with responsibility for markets open up and the regulatory economic development and landscape becomes more financial services between May 1996 complicated, we will see increased and February 2000. diversity and different permutations By way of introduction, Mr Montegriffo within the industry but will, of course, first explained to the Summit those have to address the regulatory and aspects which make Gibraltar unique legislative complications which arise as as an on-shore licensing jurisdiction. a result.” Mr Montegriffo chose the image of 2011 Elections Gibraltar’s trinity of flags as being symbolic of the opportunity Gibraltar Mr Montegriffo described the elections presents to licensees and business which took place in Gibraltar last year and of its ability to build a firm and as being perhaps the biggest change stable economy. “It is these three likely to affect the eGaming sector. realities”, he explained: “our links to the Having been in power for sixteen UK, our fiscal independence and our years, the previous Gibraltar links to Europe, which have been the Government had built an excellent basis of how Gibraltar has defined its relationship with the eGaming economic development over the last industry. However, Mr Montegriffo three decades.” was keen to emphasise that, despite New Tax System having to absorb very quickly the knowledge base that has been Mr Montegriffo then explained that the established over those years, the new biggest development within the Gibraltar government is committed to eGaming sector concerned Gibraltar’s maintaining this relationship and to recent completion and adoption of a supporting the industry throughout the new tax system which, now entering process of acclimatisation. its first calendar year, has served to

© 2012 KPMG Limited, a Gibraltar limited company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative 7 (“KPMG International”), a Swiss entity. All rights reserved. Peter Montegriffo

The Gibraltar Model creating such a qualified and nuanced and mature market. Indeed, all policy articulation of the relevant principles considerations were exhaustively dealt Before dealing specifically with the that it became impossible for lawyers, with many years before this decision issue of threats, Mr Montegriffo first let alone operators, to make any sense and the 2005 UK Gambling Act wanted to remind the Summit of the of Europe’s view on a variety of crystallised the UK’s position after its ‘Gibraltar model’, which, he explained, different issues. The main problem at policy administration had been taken “has always been one that requires the European level is, therefore, a lack into account.” The UK’s current operators to have a substantive, bricks- of incentive and Mr Montegriffo urged proposals, by contrast, would in fact and-mortar presence in Gibraltar: it has the industry to push the Commission serve to “drag the UK, a leader in always been one that encourages to proactively engage in this matter. regulation and free-market principles, operators to be part of the mainstream back into the dark with other European economy.” He stressed that it is The second threat concerned the countries.” critical, when understanding the individual reactions of member states challenges faced by the sector, to and Mr Montegriffo was keen to “It is quite wrong, therefore,” Mr maintain that Gibraltar’s is not a explain to the Summit that none of Montegriffo concluded, “to draw a revenue raising exercise and that it these states, as opposed to the UK, similarity between what the UK is responds equally to regulatory came to the issue of regulating online proposing to do and what other accountability and the ways in which gambling because they suddenly European countries have acquiesced the eGaming industry impacts upon decided that it was a great opportunity of the Commission. What we are, other industries. that must be approached co- in fact, facing is a tax announcement in operatively and responsibly. Instead, a policy vacuum and I think that is Threats to the Industry Mr Montegriffo explained, all, or at- regrettable,” he explained. “As Hassans Mr Montegriffo then continued on the least the majority of these states, sees it, these measures are legally subject of threats, identifying three arrived at the issue of regulation open to challenge, unlikely to work and that are of particular relevance to because they were facing infringement are contrary to both UK and Gibraltar Gibraltar’s economy. The first proceedings due to their operating broader interests. We remain concerned the European debate and totally at variance with single-market committed to redressing these issues he emphasised that the real threat to concepts. “These were all closed in the future.” the industry was inertia at a pan- markets where darkness reigned”, Mr European level. He explained that the Montegriffo continued, “after a lot of legal and technical complexities of the pressure, an accommodation was sector create the risk of stultifying the reached with the European European Commission into being Commission which effectively allowed unable to act with any clear sense of for a qualified, open European market. deliberation. So from the darkness, some light emerges.” For a time, the European Court of Justice did begin to open up a Mr Montegriffo described the UK as discourse which promised to offer being a very different situation, “in the some direction to the industry. UK, light has reigned for many However, it ultimately found itself decades and the UK is a liberal, open

Clive Hawkswood has been Chief EU Level Issues Clive Hawkswood Executive of the RGA since its EU level issues included the European establishment in August 2005. Commission’s role as ‘Guardian of the Chief Executive Before that, he was the General Treaty’, the Green Paper process, the Secretary of ARGO and was head of road to harmonisation and the Court of Remote Gambling Association the Betting & Racing Branch at the Justice of the European Union (CJEU). British Department for Culture, Media and Sport (DCMS). Earlier in In Mr Hawkswood’s opinion, despite his career, Mr Hawkswood spent its official role as ‘Guardian of the several years in the bookmaking Treaty’, the European Commission had industry. He is also a trustee of the failed to uphold its position in terms of Responsible Gambling Trust. free market services. The Commission has had some small successes such as Mr Hawkswood sought to provide a the Danish State Aid Case but largely, forecast of how the regulatory and as Mr Hawkswood remarked, “they political situation in Europe is likely to have been impotent.” He was, develop. As such, his presentation began however, keen to remind the Summit by providing a visual overview of the that this situation is the fault of current status of Europe through a politicians rather than EU officials. series of colour-coded maps, which illustrated the cultural differences of He added that the Green Paper various states and the consequent process has given the European accessibility of their sports betting, Commission another excuse for poker, bingo, table games and slots inaction on infringement proceedings. betting licensing and regulatory regimes. However, Mr Hawkswood confirmed to the Summit that Gibraltar was Mr Hawkswood noted that, although expecting further communication with there is no clear degree of consistency the Commission on these and other in state attitudes, an obvious pattern issues later this year and that this does begin to emerge. “As a whole”, he would hopefully give the industry explained; “across Europe, regulators, some idea as to its future direction. governments and politicians are more comfortable with sports betting and “One of these issues”, Mr Hawkswood gambling where there’s an element of remarked, “concerns harmonisation, skill, and the further you move down and my personal view is that with the that spectrum towards what we call current climate, the current make-up, ‘pure-gaming’, or ‘pure-chance’, the more and the current balance of power in nervous they become.” Europe;

© 2012 KPMG Limited, a Gibraltar limited company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative 9 (“KPMG International”), a Swiss entity. All rights reserved. “it is crucial that we as an industry avoid dual taxation.”

harmonisation could be very agreements, which are perhaps the more licenses”, explained Mr dangerous for our industry.” best short-term hope. Denmark is Hawkswood. “Unfortunately that leads looking to sign them; France has come to market fragmentation, but we’re In Mr Hawkswood’s view, the CJEU, into agreement with Italy, and Spain going to have to make the best of it. formerly the European Court of with France. There’s a sort of spider’s It will also lead to companies perhaps Justice, had dealt successfully with a web developing which may come being more selective; I think there is number of high proﬁle cases, many of together to form a series of quasi- going to be a much greater degree of which were encouraging for the networks over a period of time. When cherry-picking for companies based on industry and were “sending the right you actually look at these MOUs, there where their traditional markets are or signals.” However, Mr Hawkswood is in fact not much substance behind where they see the best stressed that, in the majority of these them but they are something that, as opportunities.” cases, the CJEU worked from an an industry, we can be cautiously advisory position and not from one in “I also think there will be a slower optimistic about.” which European member-states had move towards common standards and had to comply with the ruling, Mr Hawkswood warned the Summit towards harmonisation of some kind rendering their input only marginally that there are, however, potential simply because common-sense relevant. downsides to the move, one of which dictates it. It is also helpful that, as concerns France “who have used these part of the Green Paper process, the Politics and the UK agreements to coerce other regulators Commission has brought together It was Mr Hawkswood’s opinion that into helping them close their markets.” regulators and it is no small job getting the proposed regulatory imperative did Governments do, therefore, need to these guys in the ring together to not hold much water and that the work increasingly together if they are to agree an agenda.” issue of taxation also did not provide move towards something resembling To conclude, Mr Hawkswood much incentive for regulatory change the Point of Consumption Tax “because explained that the saving grace for the in the UK. Instead, Mr Hawkswood it is crucial that we as an industry avoid eGaming industry is that there is believed the decision to be purely dual taxation.” inevitable growth. “We are riding the political. He noted that the Regulatory Co-operation crest of the e-commerce wave; online- Conservative Party heavily attacked the gambling is part of that demographic Labour Government for allowing the In the absence of mutual recognition, linked to societal change where more offshore gambling industry to develop. Mr Hawkswood described regulatory and more people are using the Internet When the Conservatives came into co-operation as the next best thing the for more of their activities. It is power, therefore, they were compelled industry could hope for, particularly the important to remember just how well to do something about it. Mr newer operators. “If they can go to the online sector is doing compared to Hawkswood also noted that these experienced regulators who can help other industries around and indeed measures enjoy cross-party support, them to get off the ground, for us, that other sectors within the gambling “and for a government in power, you would be a good thing: it encourages industry itself. We end, therefore, on a don’t get that chance very often.” regulatory consistency and reduces fairly hopeful note.” the risk of duplication and that may Mutual Recognition lead us towards a softer version of EU Mutual recognition between regulators harmonisation.” is, in Mr Hawkswood’s opinion, So where does that leave us? unlikely to happen for a variety of reasons. However, he also noted that “I think that, whether we like it or not, “what we could look for, and indeed we’re moving into a world where are starting to see, are ad-hoc bilateral companies are taking out more and

Player Security and Fraud Prevention: successfully managing risk on the poker table

Lucky Multani is a highly that could be considered suspicious Lucky Multani experienced Risk Management gaming activity. Those employed are Professional. During his time with often expert players who know the VP, Head of Fraud and Cassava, operators of 888.com, he game very well and are aware of the Risk Management has held several Risk Management sorts of actions that would ordinarily be related roles and has built-up taken in any given circumstance. It is for Cassava Enterprises significant expertise in such areas as them to decide what sorts of behaviours Anti-Money Laundering, Regulatory constitute unusual or fraudulent Compliance, KYC protocols and gambling. In achieving this aim, 888 various areas appertaining to Fraud creates a safer environment for its and Financial Crime. players, thereby increasing player confidence and, in turn, player retention. Mr Multani opened his presentation by first advising the Summit that, in his Things to Look Out For experience, the success of any poker Player fraud in poker room tables can room depends on its ability to instil in take a variety of forms, all of which its players the confidence that the have an adverse effect on player platform they play on is both fair and confidence. Common examples free from fraud. Unless they experience include payment fraud, game-play this trust factor, the platform will fraud or the use of artificial intelligence ultimately fail. “Confidence”, as Mr software, which are commonly known Multani repeated throughout his within the industry as ‘bots’ or robots. presentation, “equals profit.” Payment Fraud Mr Multani then explained that 888.com employs a dedicated Fraud and Risk Mr Multani described payment fraud as Management department, the primary being, in simple terms; “the use of a objective of which is to minimise poker payment method by a person or fraud on its tables. They are tasked with persons not authorised to do it”. It can analysing algorithmic data and player most commonly be linked to identity behaviours in order to spot any actions theft. Information is often obtained by

© 2012 KPMG Limited, a Gibraltar limited company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative 11 (“KPMG International”), a Swiss entity. All rights reserved. phishing, scamming or through the loss for poker-room operators to have strict often open a gaming account on the of payment credentials to fraudsters controls in place, to have limits on user’s behalf using theirs or stolen who will then use them either to funding for any given player and limits credentials.” Over the past few years, withdraw funds or to fraudulently re- on the amount of money placed on a the industry has witnessed a invest those funds back into the poker given table. Once these measures are proliferation of these various kinds of room. Payment fraud represents a in place, it becomes a lot easier for software and has responded with the significant danger to the industry poker-room operators to recognise development of equally sophisticated because it results in money that is not fraudulent activity and to limit its bot detection processes. legal being on the table: legitimate occurrence.” Our Aim players lose confidence and fraudsters Mr Multani described collusion as a illegally withdraw money from the To conclude, Mr Multani once again type of fraudulent activity in which system, resulting in often complex, reiterated the importance of maintaining a players share information over various retroactive chargebacks and disputes. healthy user experience within a given external media, such as Skype, poker room. Increased competition Game-play Fraud messaging services or SMS, in order to throughout the industry means that the cheat another player. As an activity This often takes the form of one of two erosion of player confidence represents a which gives unfair advantage to other norms: ‘dumping’ or ‘collusion’. A bigger danger to operators than ever players, it risks damaging the integrity simple way to describe ‘dumping’, as before. “To summarise”, stated Mr and reputation of the operator. “Once Mr Multani explained, is “when one or Multani, “when you’re talking about player again”, as Mr Multani stressed, “player more players deliberately tries to lose fraud from a player security point of view; confidence is the key here.” money to another, regardless of their once you as an online poker company hands.” Chip-dumping can take place for Bots and Robots ensure that strict controls are in place, a variety of reasons, the most common that you are identifying player-fraud These represent a relatively new but of which is to pass money from one behaviour and have made sure that you significant danger to the eGaming geographical location to another, often in have implemented the relevant processes sector. Bots, or Robots, as Mr Multani a bid to clean or launder money gained and controls; you will guarantee a safe explained, “are very sophisticated from illegal activities. “This”, as Mr environment in which players can interact. pieces of software designed to act as a Multani explained, “is where the Only once you do that will you be able to form of artificial intelligence which not importance of establishing game-play achieve your stated goal which, I think, is only play a game for the user, but will parameters comes into play. It is crucial profits for everyone.”

“It is crucial for poker-room operators to have strict controls in place, to have limits on funding for any given player and limits on the amount of money placed on a given table.”

12 UK Gambling Taxation: a place of consumption based regime

Presenting on behalf of HM Treasury and HM Revenue and Customs, Maria Maria Brennan Brennan and Andrew Grimsley’s much anticipated speech concerning the Branch Head of UK’s now conﬁrmed plans to tax the gambling industry on a place of consumption basis represented the highlight of the morning’s proceedings. Gambling Taxes

Her Majesty’s Treasury The Current Regime Ms Brennan then turned the attention of the Summit to a few key points Ms Brennan opened the joint which appear to have caused some presentation by first providing the Andy Grimsley confusion within the industry. Firstly, Summit with an overview of the she emphasised that the UK is not Branch Head of Gambling current taxation regime in the UK, planning a wholesale replacement of which includes seven different Excise Duties the seven taxes currently in place but gambling taxes. Depending on the is “planning a reform of the existing Her Majesty’s Revenue type of activity involved, as Ms taxes and effectively moving them to a Brennan explained, remote gambling is and Customs place of consumption basis, leaving subject to one of three of these the existing taxes in place.” Secondly, existing taxes: remote betting is and of particular interest to the subject to General Betting Duty (GBD), industry, Ms Brennan confirmed that remote gaming, such as poker and the assumption, so far, is that the 15% bingo, is subject to Remote Gaming rate of taxation currently applied to Duty (RGD) and remote pool-betting is remote gaming duty, pool betting duty subject to Pool Betting Duty (PBD). All and general betting duty will remain. of these taxes are currently charged on However, she also said that this rate a gross-profits basis and the tax liability will be kept under review following the is based on operator location, meaning ongoing consultation. that UK based operators, at the moment, pay tax based on world-wide Policy Rationale profits, whereas anyone based outside Ms Brennan reminded the Summit that of the UK does not pay UK gambling the reasons for the UK’s proposed duties. taxation were threefold. The first is Proposed Changes primarily concerned with fairness and creating a level playing field between In the 2012 UK Budget Report, UK UK and overseas operators in terms of Chancellor George Osborne the UK duty liability: “obviously now announced that remote gambling is to there is a very big difference in terms of be taxed on a place of consumption the amount of UK duty an operator is basis, meaning that tax is effectively liable to pay depending on where it is going to be linked to where the located” she remarked. The second customer, rather than the operator, is concerns improving the based. Any operator, based anywhere competitiveness of the UK tax system, in the world, Ms Brennan confirmed, and Ms Brennan was keen to remind will now be taxed on the profits they the Summit that “at the moment, UK generate from any customers based in operators pay tax on their world-wide the UK. This also means that UK profits. As the new system is operators, who are currently taxed on implemented, the amount they pay will their worldwide profit, will effectively decrease, thereby removing the pay less tax because they will only pay disincentive for being located within on the profits generated from the UK.” The third, as Ms Brennan domestic customers.

© 2012 KPMG Limited, a Gibraltar limited company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative 13 (“KPMG International”), a Swiss entity. All rights reserved. explained, “is quite simply to improve the sustainability of the UK’s tax base and to ensure that remote gambling makes a fair contribution to public finances.” The Process Ms Brennan confirmed that, in the autumn of 2011, HM Treasury conducted a policy review that included many key members from the eGaming industry and which culminated in the UK Government’s decision to proceed with the reform. She reiterated that “the decision has been taken to the Gambling Act.” Ms Brennan also some links between taxation and proceed; meaning that the consultation confirmed that, in addition to the regulation legislation for enforcement process is not now concerned with proposed taxation changes, the UK’s purposes.” whether or not to implement but how Department of Culture, Media and The Ongoing Consultation best to design the characteristics of the Sport announced in July 2011 that it will reform.” Ms Brennan said that the exact be making changes to the regulatory Mr Andrew Grimsley of HMRC then dates of some of the next steps had framework surrounding remote took over the presentation in order to not yet been set, but confirmed that, gambling. This means that operators provide an overview of the ongoing sometime after the consultation period, based anywhere in the world with UK consultation and design process of the a summary of responses will be issued. customers will be required to hold a reform, the administration of the duties It is then intended that draft legislation regulatory licence. Ms Brennan and some of the key points which are will be prepared and, as per the normal stressed that the motivations behind likely to impact the industry as a whole. standard practice for tax policy making, the tax and regulatory changes are Mr Grimsley began by explaining that will also be exposed to technical different. “Likewise,” she continued, the consultation will be a joint Treasury consultation. Ms Brennan took this “the processes by which they will be and HMRC initiative. “For those who opportunity to remind the Summit that taken forward are also different: the don’t know”, he continued, “the the implementation date is planned for taxation changes will be legislated for in Treasury currently leads on taxation 1 December 2014, but that this date the Finance Bill and the regulatory scope; what is liable to tax, and HMRC will be kept under review. She also said changes will be legislated for in a leads on the administration and that the Government will definitely not separate regulatory bill. Having said enforcement of taxation so, effectively, be legislating in this year’s Finance Bill. that, they are both moving towards a both departments have an interest in all customer based approach, so in that Taxation vs. Regulation of the consultation but are leading sense they are complementary. In different aspects.” Ms Brennan said that, in many order to ensure consistency between countries, taxation and regulation are the two and minimise burdens for The consultation itself, he explained, is effectively legislated as a whole but businesses, we are working very all about the detailed policy design and emphasised that this is not the case in closely with the DCMS and will be not whether to implement the reform. the UK: “taxation is legislated within tax looking to implement both within a Mr Grimsley confirmed that law and social legislation is covered by similar timescale. We are also planning consultation began on 5th April, is due

“You’ve all got a part to play in the process and we want your feedback. Final design decisions have not yet been made.”

to finish on 28th June, and is designed Enforcement paid out after the time of change, it may to pose a number of significant be that you are entitled to use the As with all taxes, Mr Grimsley questions whilst also inviting more winnings to offset the tax liability even explained that there will be a range of general feedback. Mr Grimsley also though the stakes were not subject to sanctions enforced in the event of non- wanted to stress to the industry at duty.” compliance, including a civil penalty large that “the responses to the regime and criminal sanctions in the Double-Tax Relief consultation will inform the design of event of serious failings. For these the regimes and so, to that end, we Mr Grimsley expressed his desire to particular reforms, however, he noted urge you to respond. You’ve all got a touch upon the subject of double-tax that consideration is also being given to part to play in the process and we want relief (DTR). It had been mentioned linking the tax legislation to the your feedback. Final design decisions earlier in the Summit that arrangements regulatory regime and that these links have not yet been made.” for DTR had been introduced in this may enable or possibly require the year’s Finance Bill, the reason being so Of the seven taxes, Mr Grimsley withdrawal of a regulatory licence in the that UK businesses did not suffer both explained that Bingo Duty, Lottery Duty event that non-compliance to taxation UK and foreign taxation liability. “There and Amusement Machine Licensing reaches a certain threshold. However, is an argument that these Duty, which is being replaced by this is again subject to further arrangements would no longer be Machine Games Duty and Gaming consultation over coming months. needed if a place of consumption tax Duty, are effectively already subject to Accounting was introduced”, explained Mr Grimsley, place of consumption taxation and, “so it is likely that the procedures for therefore, will not be required to Mr Grimsley confirmed that the DTR could be relatively short-lived.” undergo any significant changes. decision has yet to be taken over However, he confirmed that “we do whether HMRC will introduce new Data Information think changes will need to be made to accounting systems for the duties that To conclude, Mr Grimsley highlighted GBD, PBD and RGD.” are affected by these reforms. the questions in the consultation about Depending on that decision, there is Mr Grimsley also explained that the the size of the remote market and the possibility of harmonising the consultation documentation outlines in future growth rates. registration process concerning taxes more detail the operational changes and the accounting periods for those these measures will precipitate, taxes, one possibility being a move including that the UK Government will towards quarterly returns and quarterly expect operators to take reasonable accounting periods. “Whatever we do”, measures to determine where in the he predicted, “I expect that there will world customers are betting from. be a facility for special tax period ends However, he confirmed that the to reduce burdens on business. There consultation also expects operators to may be a case for e-filing returns and provide feedback as to how these aims e-registration and I particularly welcome are to be best achieved. your views on this.” Mr Grimsley then went on to contrast The Transition the current charging provisions for the existing duties, the significance of the “This subject may be minimal in the operating licences and the potential for overall context but it is still quite changes. He also outlined the need for important,” stressed Mr Grimsley: further industry involvement on the “essentially it may be that, after the issue of critical partner liability to implementation date, both stakes due taxation, both of which subjects are, and winnings paid out can be included again, further elaborated upon in the in the new arrangements. In other consultation document. words, if you receive stakes before the time of change but those winnings are

Archie Watt Head of eGaming KPMG Gibraltar

Mr Watt is a specialist in the leisure and something that my children do. I explained that the Asian gaming market sector, with a particular focus on was discussing the future of the is already beginning to have a online gaming clients. He has worked industry with a couple of delegates, significant effect on the Isle of Man for KPMG since 2006, and before this James Lowery and Duncan Fisher, just industry and that a number of local worked on the public listings of 888, earlier,about social media and about operators are already beginning to Playtech and PartyGaming, amongst social games and,” he continued, “I focus successfully on the Asian others. have to admit, I don’t do any of those. sportsbook market. “We hope that But I told them that I know a number of Warwick’s extensive insight can also Mr Watt opened the afternoon session people who do and that I recognise that help companies based in Gibraltar be by observing that the messages of the we are now in an age where ‘silver more successful in Asia than they are morning’s session clearly put across surfing’ is where it’s all at and that already.” that the sector is truly global and is people of my age are the fastest only going to be more so, albeit in a Mr Watt then moved on to the subject growing demographic of Facebook regulated and fractured manner. “But”, of John Kamara’s much anticipated users. As such, I am very much looking as he continued, “this sector is presentation concerning social media forward to hearing about how this remarkably resilient. It has shown, for and customer acquisition in a changing industry can capitalise on that the past ten years, that not only can it marketplace. “I had the pleasure of demographic and target markets that weather storms; it can come out of speaking to John last month”, he have never before been reachable.” those storms much, much stronger.” remarked, “and he came across to me Mr Watt recalled that, in 2006, he Mr Watt then drew the attention of the as being one of the most enthusiastic worked very closely with a number of Summit to Joanne Lawrence’s and energetic public speakers I have eGaming companies, a significant forthcoming presentation concerning ever met. This is a man who is really portion of which lost up to 80% of ‘Payment Solutions’. “Barclaycard”, as excited about the business he is in and their customer base as a result of US Mr Watt explained, “are one of the I am sure that he will be able to share implementation of The Unlawful forerunners in contactless technology and convey some of that enthusiasm to Internet Gambling Enforcement Act of and, as we move into new territories, the Summit this afternoon.” 2006, or UIGEA. “But you have now, new countries, new jurisdictions; “To close the day’s proceedings, the as an industry, recovered to far innovative payment solutions are where panel session this afternoon is going to surpass those levels,” he confirmed. it is all going to be at. I am sure we are be focusing on eGaming and beyond”, “Why? Because you focused on what all looking forward to Ms Lawrence’s explained Mr Watt. “This reflects back you’re good at. You focused on presentation later on this afternoon.” on some of the issues that the Hon. maximising returns, identifying with Following on from Ms Lawrence, as Mr Minister and Peter Montegriffo were your customer base and providing Watt continued, was Warwick Bartlett talking about this morning: what else them with what they want.” on the US & Asia. “As we’ve all seen Gibraltar can do; how else it can “This morning’s session,” Mr Watt with the US”, he remarked, “it seems to broaden its market base, not just in summarised, “covered all of that. What be one step forward, two steps back at eGaming but in other industries equally we’re looking at for this afternoon’s times. We’ve had very positive views as important and yet still session is where we are going in the coming out of the Department of complementary to our sector.” Mr Watt future.” Justice just before Christmas; the ‘Wire invited the Summit to submit any Act’ doesn’t apply to casinos and questions they may have for the panel The Speakers doesn’t apply to poker but quite what on the question cards provided. He Mr Watt went on to admit to the that means for the likes of Pokerstars then introduced Mr James Lowery of Summit that he is of an age “where and the rest of our industry, we’ll just Latitude Group as the first speaker of social media is something I read about have to wait and see.” Mr Watt the afternoon.

© 2012 KPMG Limited, a Gibraltar limited company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative 17 (“KPMG International”), a Swiss entity. All rights reserved. “this sector is remarkably resilient. It has shown, for the past ten years, that not only can it weather storms; it can come out of those storms much, much stronger.”

© 2012 KPMG LLC, an Isle of Man limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 18 Social Gaming – Identifying Influencers, Creating Communities and Measuring Impact

James Lowery has been a consistent innovator within the SEO or Search James Lowery Engine Optimisation industry and leads one of the UK’s largest SEO teams at Latitude Digital Marketing. He has 11 years’ experience across many Head of SEO and Social Media sectors, including work on award-nominated campaigns for the Latitude Group Independent and Haven Holidays. Mr Lowery is also a regular speaker on the industry circuit and blogs on leading industry websites.

Mr Lowery opened his presentation by reiterated that online gaming is not an remarking that his ﬁve years as Head unsocial activity: people interact within of SEO with Latitude Group have a social framework via the Internet: coincided with an extraordinary step- they swap ideas, strategies and look change in the way people interact for tips. Indeed, there is a culture of online. “Over the last ﬁve years”, he tribalism surrounding most sports- explained, “the Internet has returned betting in general. People engage to its conversational and social roots. closely together and want to be a part Social media channels have made of something and, as part of that huge changes to the ways in which interaction with the game, people will businesses have had to represent bet on the outcome: “It lets them take themselves in order to recognise and an additional reward in the win.” engage with their audience.” Communities The ‘Brutal Truth’ At any period of any given day, explained Social media gaming from the Mr Lowery; we form part of a number of perspective of the eGaming industry, Mr different social communities, all of which Lowery explained, “is a particularly have a common shared experience, a interesting subject because, on the characteristic and an objective. However, whole, gambling and betting online is a it is the process of translating that typically asocial activity: people don’t community structure into an online necessarily talk about it. There are still medium for use in business which is certain social stigmas and cultural important. differences surrounding the subject, There are three aspects which create a which result in players not publically community, he continued: “a gaming and gambling.” However, Mr community needs an objective; the Lowery was keen to emphasise that ‘group-think’ that delivers the structure although people play alone, immersed in and reason why the community exists. the activity, they do not play on their own. A community also needs to identify the The main social stigma surrounding needs of the members so that they get gambling online concerns losing – something out of it, and it needs to “losing is the primary reason why have an incentive for membership; an people don’t talk about their online objective and a goal which is set by the gaming.” However, Mr Lowery members themselves.”

© 2012 KPMG Limited, a Gibraltar limited company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative 19 (“KPMG International”), a Swiss entity. All rights reserved. Influencers market are public winners and they are marketing campaigns is often also the people that the industry wants measured on how many new accounts Mr Lowery then turned the attention of to identify to their customer base. they generate but, with social media, the Summit to the work of the this isn’t always the case.” Incentivised theoretician, Dr. Jakob Nielson, who But it is, of course, the clarity and ad-campaigns, he demonstrated, created a theory known as coherence of their message that become, over time, increasingly limited ‘Participation Inequality’, founded upon matters most. Businesses don’t just in value. But one of the main things the ‘90-9-1 Principle’. This dictates that need to identify those who speak with social media is that it is about the the vast majority of any group - the predominantly about a subject, but also ongoing conversation; how often you 90% - do not participate within a whether or not people pay attention to can get people to return to your site community. Instead, “they consume, their opinions. “This is important”, and how happy they are to recommend they are the audience and they are explained Mr Lowery, “because if it to other people. “Word of mouth essentially the customers who you someone is the most intelligent poker marketing is a lot more important than want to reach within a given player in the world but no-one trusts we give it credit for.” community.” The 1% are responsible for their opinion, then they are not going to the majority of the content within a share the information to others. People “The most important thing about social given community, “but it is the 9% who need that validation in their ideas, which media, therefore”, Mr Lowery concluded, edit this content and who are often the they share as a badge in social media.” “is that it is about people and it is about most influential.” relationships. You can’t necessarily Measuring Impact measure it at the point of a click; you can Moreover, Mr Lower explained that, As Mr Lowery explained to the Summit, only measure it over the lifetime value of a within gaming, the people who are the “most of the time in eGaming, we’re given customer. It is hard to do and I think most influential are the winners; they looking for new, funded accounts and that’s why a lot of companies struggle constitute the percentile that people new users but what we should also be with social marketing.” look up to, respect and want to focusing on is delivering better emulate. Influencers within the gaming customers. The success of most

Joanne Lawrence Relationship Manager Barclaycard

Joanne Lawrence is the Primary What is an Acquirer? customer journey first involves their Gaming Relationship Manager for being driven to a business’s site, “An Acquirer is a bank or financial Barclaycard Global Payment whether it is an online or ‘bricks-and- institute that processes credit and debit Acceptance. Jo has worked in mortar’ location. Following that, an card payments via the Visa and Acquiring for twelve years, Acquirer will assist in attracting Mastercard card schemes”, began Ms specialising in Gaming for the last customers to play, not only in coming Lawrence. “An Acquirer can interface six. She also has extensive to a site but also making a transaction direct with a business and offer an end- knowledge of the eCommerce and or purchase. Upon registration, an to-end solution or via a third party, so cardholder-not-present transaction Acquirer tends to assist primarily with there is a multitude of different ways environments. Jo previously worked the depositing of funds, after which we can work with businesses.” as Fraud Relationship Manager for the operator is then concerned with Barclaycard Credit Risk Operations, The Customer Journey customer fulfilment. The Acquirer will building particular specialisms in then assist with the withdrawal of As Ms Lawrence explained; from the Credit Risk and the delivery of Fraud winnings. Customer retention and perspective of an Acquirer, the Prevention/Training and Education. loyalty is dependent upon the smoothness and efficiency of that Payment of Winnings past thirteen months also showed that, entire process, which in turn dictates compared to all other sectors, fraud is “For years now, Visa has been the whether or not they will return to a rife in gaming. However, Ms Lawrence card-scheme that is ‘gaming friendly’ given operator. stressed that “this does not necessarily with regards to payment winnings, mean that gaming is showing a loss from Accepting Payments card-present and card-not-present”, fraud but that reported incidents of fraud explained Ms Lawrence. Ms Lawrence took this opportunity to are disproportionately frequent within the Predominantly, issuers throughout dispel the misconception that Visa and industry.” Europe and globally accept payment of Mastercard purely operate credit and winnings without issues. “But we then Online Fraud in Gaming debit cards. In actual fact, she go into the slightly newer world of explained, there are a number of layers As with all other aspects of financial Mastercard and Maestro payment of to card schemes and, over the past transactions; the public is now better winnings or ‘Payment Transactions’, decade in particular, these have educated than ever before on the finer which have a slightly different way of significantly increased in number. Credit points of ‘Charge-back Rights’. This has working,” she warned. “Barclaycard as and debit are still predominant, resulted in the proliferation of types of an Acquirer introduced this on May however, the likes of ‘pre-pay’, fraud relating to customers pretending 31st, 2011 as part of a scheme ‘premium’, ‘business’ and ‘purchasing’ that a transaction was not their own in released in conjunction with Maestro schemes are becoming more prevalent. a bid to recuperate lost funds. These migrating. This scheme is not All have the code-badge of Visa and types of ‘friendly fraud’ often result in mandated. Although from our Mastercard and if a company has an complex charge-back cases, which, as experience it can be used, it is costly Acquirer, they can process any of these an Acquirer, Barclaycard aims to equip and not widely supported compared to card-types. “But in the gaming sector”, gaming operators against. This also the Visa alternative at the moment. explained Ms Lawrence, “what your applies to money laundering and Some issuers do not have the Acquirer should be looking to do is identity theft, which, again, is now capability to process payment of educate you about the different card- more common than ever before. winnings by Payment Transaction and types because each comes with its the payment is often returned. This Similarly, Bot-gaming continues to own unique restrictions.” damages customer experience.” present a significant danger to the As an Acquirer, Barclaycard has gained online-gaming industry. Ms Lawrence Fraud in Gaming: Protection in years of extensive experience in explained that Barclaycard has seen a Every Direction transaction management and variety of sophisticated identity-fraud witnessed substantial pitfalls, fines As a business, Barclaycard has facilitators, including websites which and penalties, causing the company to recognised the need for a fraud operate almost as a supermarket for remain cautious in its approach to solution or tool. As an Acquirer, identity theft: “funnily enough, they transaction types. As such, Ms Barclaycard has partnered with various don’t accept credit card payments”, she Lawrence explained, “what you should third-party solutions such as Silvertail remarked. be looking for your Acquirer to do in Solutions in a bid to assist the gaming What Can We Do to Stop Fraud? helping with payment solutions is help market with multi-layered, non- you build a business case to manage intrusive and effective approaches to To conclude, Mr Lawrence again your authentication process. There are fraud prevention. emphasised that “no device or person different tweaks and bespoke can work on its own: speak to one Protection, Detection and solutions that, as an Acquirer, we can another but also speak to other Management help you to accomplish.” For example, organisations,” she advised. “Gaming she continued, “in the environment Barclaycard works with a substantial does touch base with a lot of other that you are in or with sportsbook; if portion of the gaming market and, in a sectors so really do pick people’s there was an event taking place such bid to demonstrate to the Summit what brains and make use of it. Fraud costs, as the Grand National, you need the Barclaycard sees, Ms Lawrence provided but with just a few simple steps you capabilities internally as well as from a snapshot of the types of fraud which can work to reduce this loss. There an Acquirer to switch rules. Whether have taken place since March, 2011. isn’t a ‘silver bullet’ out there but there they be fraud rules or acceptance ‘Card-not-present’ was by far the most are measures that will help you reduce rules; they need to be able to move frequent type, followed by ‘stolen’ and your own fraud.” with the market that you are in.” ‘counterfeit’. A line-graph demonstrating the ‘monthly fraud to sales ratio’ over the

Duncan’s remit includes planning, Mr Fisher then drew the attention of Duncan Fisher strategy, delivery and innovation for the Summit to a chart, which showed clients across all paid digital the market penetration of various Digital Media Director channels. Recent innovations within communication channels in both Europe Latitude Group the industry have been heavily and the UK. Smartphone usage in the focused on the emergence of mobile UK now constitutes 52.6% of the and Duncan’s team have produced market whilst in Europe, particularly in White Papers on this subject. As well Italy, Germany, France and Spain, as providing regular industry updates average smartphone usage enjoys to clients, Duncan has also delivered 45.2% of the overall market-share. The product insight presentations at majority of this usage involves the use external national events. of browsers and ‘apps’ or digital applications, although social media is The Importance of Mobile swiftly becoming one of the key chosen Mr Fisher opened his presentation by methods of communication via mobile confirming to the Summit that, despite devices. various commentaries claiming the In terms of mobile operating systems, same of previous years, 2011 was iPhone continues to enjoy the majority indeed what the Gaming sector would market share, with a 71% rate of uptake. refer to as ‘the year of mobile’. He Google’s Android OS continues to enjoy went on to qualify his statement by a significant portion of the market, explaining that, by 2013, Latitude although it has undergone a decline in Group is expecting customer volumes popularity over recent months due to the to gaming sites through mobile and recent release of the iPhone 4S. smartphone devices to exceed those through desktop, meaning that What does this mean for operators who have not done so advertising? already should seriously consider “Ultimately”, explained Mr Fisher, “if the mobile as a marketing device. current rate of uptake continues; we “Mobile is bridging the gap between expect to see a billion pound spend in online and offline worlds”, Mr Fisher mobile marketing by 2015. We have assured the Summit. “It is important to already seen a 157% rate of growth understand that there is a very real year-on-year since 2002 and are synergy between mobile and TV confident that we will see similar advertising, for example, so it really is figures next year.” becoming a very important area for Tablet Growth digital marketing as a whole.” “Tablet usage is becoming more and The Rise of the Smartphone more widespread,” explained Mr Fisher, “The reason why we’re seeing such “in the UK, there are now over 3 million massive trends, in terms of an increase tablet users and this figure could rise to in volume, is ultimately affordability,” over 6 million by the end of this year. explained Mr Fisher. “In terms of how There has been a 72% rate of growth in we consume data, mobile is much tablet sales over just the past 7-months, more affordable and, as devices which makes them a great opportunity become much cheaper, these volumes for advertising.” will continue to increase.”

© 2012 KPMG Limited, a Gibraltar limited company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative 23 (“KPMG International”), a Swiss entity. All rights reserved. “Mobile is bridging the gap between online and offline worlds...”

Duncan Fisher

The Four-Screen Approach and continuing and, as Mr Fisher remarked, 2012 Focus Responses to Media “by the end of this year, we expect to To finish, Mr Fisher turned the focus of see an increase in these figures to 30%.” “We are now seeing a significant his presentation to market projections increase in TV advertising for gaming Sector Insight for 2012. “Further device releases, such clients, particularly during and around as the launch of the iPhone 5 are going Mr Fisher explained that Latitude Group major sporting events,” explained Mr to continually drive the market”, he works with a number of industries, Fisher, “and it is important, when although gambling constitutes a assured the Summit. “Advertisers are companies take part in this activity, that significant portion of its client base. likely to spend up to 30% of their they maintain a sense of representative As such, he took this opportunity to budget online through mobile, and consistency across all messages and compare the cost-per-click for paid search mobile advertising optimisation is going across all devices. Ultimately, what a activity for gambling with other sectors. to quickly become a priority. company does not want to be doing is Some key search terms such as ‘casino’ Technologies such as Near Field encourage users to search for their and ‘gambling’ were shown to be very Communication, or NFC, will also company following an advertisement, expensive by comparison to other key change the way in which people use not be able to find your site online and sector terms. However, Mr Fisher mobile as it increasingly becomes your go to the competition - it’s common reminded the Summit that “costs per- constant companion.” sense really that you do maintain a click can be driven down significantly by joined-up approach.” the strength of your brand.” Display Advertising Best Practice “This is an area that is going to grow Best practice for paid-search activity and grow”, Mr Fisher assured the consists primarily of conducting Summit. “As mobile sites become more thorough research into key word use, popular, more advertising opportunities explained Mr Fisher. Different key will present themselves. There is also words perform differently on mobile going to be increased opportunity for and tablet devices compared to interactivity with mobile banner ads. desktop and understanding where to This, when coupled with the fact that of position these key words, at what time the £60 million spent on advertising last and on which platform can give year, 29% was spent on mobile, makes companies a competitive advantage. “It sounds obvious”, he continued, “but them a significant area that should be it is also important to write specific focused on.” mobile ads and to send traffic to Paid Search Data optimised pages. These should include compelling copy, which includes display 66% of all mobile ‘adspend’ was spent URLs, mobile specific USPs and mobile on paid search in 2011, while close to specific calls to action. It is then 20% of all online spend came to important to continually test, measure companies through a combination of and refine,” emphasised Mr Fisher. tablets and mobile. This growth is still

Warwick founded Global Betting and and taxation changes that have taken So which Government suits the Gaming Consultants (GBGC) in 1998. place in the UK since 1961, when industry the best? Originally from an operational gambling was first legalised. It was “It seems like Labour likes to tax the background, Mr Bartlett now has over punctuated throughout by changes most” explained Mr Bartlett. “The 40 years’ continuous experience in the made by the Labour, Conservative and Conservative Party has always been gambling industry and continues to Coalition governments. quite cautious on gambling matters but chair and present at numerous UK and “Betting Tax was first introduced to the in 1972, they reduced on-course race international gambling conferences. UK at 2.5% in 1966 by the Labour betting tax to 4%. Why? Because they He is regarded as one of the industry’s Government, which started the rate of wanted to encourage people to go to top experts. taxation very low because they were race courses to support the horserace Overview pre-conditioned by history,” he industry. They then abolished it later explained. “When the UK introduced a on, so you had this differential of no Mr Bartlett opened his presentation rate of tax at 5% on turnover in the tax on the race course and tax off- with reference to the last time he had 1930s, bookmakers found ways to course. The Conservative Party has travelled to Gibraltar in 2008 to present evade the tax and in the end it was always favourably treated the horse- a message he described as being quite scrapped, much to the embarrassment race industry – and still does.” gloomy: “We looked at our economic of Government. Fast forward to 1966 forecasts, looked at what happened “But the interesting thing,” as Mr and Labour Chancellor, James after Lehman Brothers and we said Bartlett pointed out, “is that from 1963 Callaghan introduced betting tax at the that, basically, the industry was going through to the 2001 Budd Report, low rate of 2.5%. This time the to go through quite a torrid time.” there were relatively few changes. bookmakers paid but made the Since then, the industry has had to “But the good news is”, he continued, mistake of absorbing the tax and not contend with changes almost every “although times have been really tough, passing it on to the gambler. The result four months and what this tells you, in the industry has consolidated; they was that in the next budget the tax my opinion, is that with the 2005 have reduced their costs, all of the was increased to 5%! If there’s one Gambling Act, they got it wrong. With unknowns are now known and I think lesson you take from history, it is the 1963 Act, they got it right.” that the growth story is back on the always pass the tax on.” agenda. Add to this the prospect that The Timeline for Italy Betting tax increased again to 6% in the industry may be able to gain access 1970, 7.5% in 1974 and again, in 1990, Mr Bartlett then drew the attention of to the US market and you can clearly to 8% under the Conservatives. “But the Summit to a timeline correlating see why prospects have improved.” what the Government did was test the various legislative changes with Italy’s “I also think we’ve reached a tipping system to destruction,” Mr Bartlett Gross Gaming Yield since the Gambelli point in taxation”, explained Mr Bartlett. surmised. “Bookmakers suddenly had Case of 2003. He noted that over the “I think, depending on which country falling turnovers and compensated by past 9 years, Italy’s GGY has increased you are looking at, governments have making the deduction from the from €6.3billion to €18.9billion per realised that you cannot tax the customer 10%. That set off illegal year. “But the interesting thing is that industry to death without giving rise to gambling.” Gambling tax was eventually turnover has gone up” he remarked, illegal gambling.” dropped to 6.75% in 1996, “so this ”GGY has gone up, the tax has gone process of testing the system took 30 up, but the percentage of tax to Gross Politics and Gambling in the UK years and, eventually, we ended up with Gaming Yield has actually gone down, Mr Bartlett then drew the attention of 15% Gross Profits Tax.” and I think that’s a case for optimism.” the Summit to a timeline of legislative

© 2012 KPMG Limited, a Gibraltar limited company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative 25 (“KPMG International”), a Swiss entity. All rights reserved. What are the prospects for the USA? “But if we do accept that the US will solutions to operate in those un- eventually allow Internet gambling and banked markets. Most also operate on The USA is the world’s largest continues to be the largest gambling credit, making it very difficult for gambling market, explained Mr market in the world,” explained Mr European operators to penetrate that Bartlett, “and on the 23rd December, Bartlett, “we have to ask; where is the market because they do not have the 2011, the US Department of Justice best place in which to serve the global connections in place. gave the lotteries a huge Christmas market and in which to base your present by saying that there is now Looking Forward headquarters? Which state or country nothing to stop them selling tickets on is likely to give operators the best “I’m more optimistic than I have been the Internet. So far, Illinois and protection when they trade overseas? in the past because all of the Massachusetts are to go ahead, but The most likely place to base your unknowns are now known. As we’ve what of the rest?” headquarters would be the US and the already demonstrated, changes do not GBGC finds that most simply are not most likely state would be Delaware happen as quickly as we would like interested. “People will queue block because of its tax advantages and them to because they move ahead at after block for a rollover lottery ticket close proximity to Washington and Governments’ pace and not our own. so why aren’t states taking advantage New York. Given that the US is the So I think we’re looking at a 5 to 7 year of online? Is it because to do so, they world’s largest market; were the US to cycle for taxation where Governments, would have to open themselves up to follow the UK example of adopting a due to necessity and a lack of other forms of online gaming and are place of consumption tax where profits understanding, begin tax at a higher reluctant to invite competition or that on all foreign income would be taxed rate only to move down later. We’re at they just want everything to stay the in the US; this would not bode well for a high stage of the cycle at the same? This remains to be seen. In the the offshore jurisdictions. However, moment in Europe but I’m pretty meantime, operators are betting big this is very long-term, ten years at confident that it will come down to money that the market will open up by least” he reassured the Summit. realistic levels. All this is predicated on forming strategic partnerships, “Sports betting drives Internet the Internet remaining as free as was mergers and acquisitions” he gambling and the US is a long way originally intended,” Mr Bartlett confirmed. from legalising sports betting.” concluded, “thank you.” How will the US market open up? Looking to the future Since the Summit, Mr Bartlett kindly What is the timeframe? submitted to the report the news that on “I envisage lower taxes and a more May 15th, 2012, Italy lowered the rate of Mr Bartlett explained to the Summit open market in France and Italy, tax on slot machines from 12.6% to that gambling is still a politically toxic particularly during the next 5 to 10 12.1% of turnover due to revenue falling subject in the US, which poses the years” predicted Mr Bartlett. “But the as a result of high taxation. question; will the market open up real growth story, of course, is Asia.” through state or federal legislation? European operators have, historically, Due to the politically sensitive nature had little success in Asia, explained Mr of the subject, “federal law changes Bartlett. But domestic sites are all very will only happen during the first two successful in their own markets. years of a given presidency and, if the Indeed, some are making £6million net Republicans win, legalisation of profit per month. These sites, he Internet gambling is unlikely to continued, understand the Asian happen,” he predicted. “Mitt Romney gambler and perhaps more has already stated that he is opposed importantly, have the payment to gambling.”

“I think, depending on which country you are looking at, governments have realised that you cannot tax the industry to death without giving rise to illegal gambling.”

John Kamara is the Co-founder of bingo players in the UK is aged 23, John Kamara Spadesocial, the largest video based single mother in Sunderland,” he social network for casino, poker and explained. “So the people are changing Director sportsbook. The site aggregates and and if we as an industry don’t Spadesocial categorizes gaming related content understand this, we will have a for users and helps operators to problem.” increase their direct customer Social Media acquisition using content, social engagement and precise marketing. “The bottom line is the traditional marketing we engage in will still live, Customer Acquisition but a lot of that traditional marketing and the Marketplace will do so within social networks” An energetic and enthusiastic speaker, predicted Mr Kamara. “Facebook is Mr Kamara opened his presentation by becoming the Internet on its own. In first noting that one of the most China, their social networks are also interesting aspects of the gaming becoming the Internet on their own. As industry was encapsulated by the the market changes: player behaviour morning’s session on regulatory changes. They get younger, they get environments. “If we were to put it [the more Internet savvy and they will have industry] to a map”, he enthused, “we been taught from an early age that would see that the landscape is social media is where they live.” changing because of regulation and that “If I go to Facebook or another social everything centres on it. But this will network I can collect data about what change and one of the things that people like, what they do; their effects change is social media. interests” Mr Kamara told the Summit. “A question I am asked all the time, “If they like casino or poker I can however”, he continued, “is: ‘Can I engage with them before I start serving convert people from social into real them products and I have the data gambling?’ My answer is: don’t try to, it sitting in my database that I can match is a process that will happen organically with this.” by itself, if you do the right things.” “But if I receive an email offering me Changes in Consumer Behaviour $100 credit on my first visit, I will just delete it because I’ve seen a million of Mr Kamara went on to explain to the those. People are changing,” Mr Kamara Summit that the industry’s customers stressed. “There is a very, very unique are getting younger. “The winner of the interaction between social games and Poker World Series last year was just 24 online gambling. But the problem is, you years old and the top 8 competitors cannot try to justify one with the other. were aged between 21 and 23 years As an industry that enjoys innovative old. They each won between $1million technology, intelligent staff and high and $8million. Online, these people are profits – you can develop social games even younger: the average profile of that actually make money.”

© 2012 KPMG Limited, a Gibraltar limited company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative 27 (“KPMG International”), a Swiss entity. All rights reserved. John Kamara

Social Games understand their foot-pattern, both asked to take in information is not a online and offline. Angry Birds made reality. “Video-marketing,” he explained, Mr Kamara then went on to explain that more money from virtual goods sales “is one of the most effective ways of social games are built predominantly to than any gambling company could in a acquiring and retaining users in the appeal to the casual, friendly player. “A year. How many gambling companies current web and online marketing grinder, an addicted gambler or can say that, within six weeks, they can space. As an industry, we have to find a somebody who loves to play casino or acquire one-million users who pay a different way of reaching these people: poker will find the best site for them minimum of $1 each? These companies they are still there but what they are regardless of what you do or do not do, are doing these things because they consuming is changing. The way they so we’re not really worried about those are appealing to something that is very are interacting with us is changing.” people” he explained. “But what we simplistic; they are not solving any should be concerning ourselves with Innovation problems, they’re just creating the are those that play maybe $20 every social experience and entertainment To conclude, Mr Kamara touched upon two weeks. They don’t really care about that we want online, on-mobile, the topic of innovation. “We are a very winning, they come for an experience, everywhere around us, because that’s innovative industry. But with the social they come to see if there is something what we do as people.” part of it, we are just sitting on the new that you are creating for them and fence. As an industry, we have the tools those are the people you want to create Entertainment: acquiring and already and are in the right place. We that social experience for.” retaining users have the right types of products for us The Change in Behaviour Mr Kamara drew upon the subject of to go back and think about the right video as an example of the value of kinds of social experiences that we are Mr Kamara implored the Summit to entertainment to the online marketing going to create for our users. Based on recognise that there is now an adequate industry. He explained that customers that, we can begin to innovate with new enough amount of data available through watching an online video-marketing tool products that bring users closer to us. social media to chart how customer will consume information both more We’re talking about a huge chunk of the behaviours are changing and that it can quickly and thoroughly. Whereas, if you market here. Social gaming brings to us now be acquired more cheaply than ask a customer to read two paragraphs people that we would never have through traditional channels. of text; their attention will quickly otherwise been able to talk to and “We also cannot keep not providing diminish. The success of social these people will feel more comfortable customers with the social experiences entertainment, he contended, is based with sharing the experience of playing they need,” he added. “You need to on a company’s ability to convince the on your site with others.” engage with the user and try to customer that the reality of their being

“The bottom line is the traditional marketing we engage in will still live, but a lot of that traditional marketing will do so within social networks”

The panel session was moderated by Russell Kelly. The panel consisted of Tim Bristow (Gibtelecom), Archie Watt (KPMG Gibraltar), Dominik Kofert (Poker Strategy) and Jason Bird (Silvertail Systems)

What additional capability will the 4G network provide for mobile gaming and mobile platforms?

Tim Bristow - “Speaking to an educated audience,” Mr international bandwidth was an issue but this has since been Bristow began, “I think everyone knows that 4G will be able resolved many times over. Gibtelecom is currently using less to handle mobile gaming much better than 3G.” Gibraltar than 10% of its overall international capacity and is a founding currently supports both 2G GSM and 3G with HSDPA, or shareholder in the submarine cable project, the EuropeIndia High-Speed Downlink Packet Access and, although like many Gateway. Some 90% of the extra capacity generated through countries throughout Europe Gibraltar has not yet licensed this partnership will now be sold globally, making Gibtelecom 4G, it will eventually do so. a global carrier of international connectivity. “I think the international connectivity issues that existed a while back in On infrastructure generally, Mr Bristow explained that Gibraltar are now a thing of the past,” Mr Bristow assured the Gibtelecom is a leading telecoms provider in Gibraltar. He Summit. reminded the Summit that a decade ago, when the eGaming industry ﬁrst began to ﬂourish in Gibraltar, availability of

In the current economic climate, where cost-control is of paramount concern; could companies beneﬁt from outsourcing activities such as social media, marketing and staff training?

Archie Watt – “Gaming companies are already outsourcing Jason Bird – Mr Bird agreed that outsourcing provides an a significant part of their marketing efforts. All of those that I excellent way of benefitting from the experience of others, have dealt with here and on the Isle of Man have dedicated particularly when many outsourcing companies already have marketing teams who historically have focused on online experience with larger concerns. However, he recognised marketing but I think where they are struggling is with that many companies may be reluctant to outsource due to social media.” Mr Watt also emphasised the importance of the risk of losing specialist skills and employee focus: “no- companies first recognising what it is they are trying to one really takes your business as seriously as you do”, he achieve before choosing the right outsource partner to remarked. deliver a strategy.

© 2012 KPMG Limited, a Gibraltar limited company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative 29 (“KPMG International”), a Swiss entity. All rights reserved. Staying with the theme of social media, education and entertainment: at what point on the spectrum of social gaming do you think gambling would best fit?

Dominik Kofert – Mr Kofert explained that there are two explained, the industry needs to consider whether or not aspects that the industry should be concerned with. The the game itself is open to education. Poker, for example, is first concerns the complexity of the activity, i.e. is it an easy a very complicated game but a player’s enjoyment may be or complicated game to play? If it is easy, education is not derived from the process of education itself. Bingo, necessary as a conversion tool, however, if it is however, does not lend itself to education but may be more complicated, then education through social gaming is open to social entertainment as a complementing factor. definitely beneficial to the industry. Secondly, as Mr Kofert

There are already quite a lot of social gambling and poker sites operating from the US: do you think these sites are at an advantage with the US opening up?

Dominik Kofert – “With regards to the US, everybody is educational and social components, if a company operates a indeed trying to ready themselves for regulated poker, so the poker room alongside a social community and alongside a challenge that these companies are facing lies in building good poker-school, they will get ahead even before the their competency in operating poker and in building their market opens. It is this kind of positioning game that US databases,” explained Mr Kofert. “With regards to the operators are playing at the moment.”

How much revenue does HM Treasury feel that they will generate from the place of consumption tax?

Russell Kelly – Having been furnished with a series of Speaking from the floor, Maria Brennan again emphasised figures by Maria Brennan of HM Treasury, Mr Kelly explained that all figures are subject to review during the ongoing to the Summit that, based on a 15% rate of taxation and a consultation process and that, consequently, “these figures 2014 date of implementation, HM Treasury expects to raise should not be taken as a given.” £70million in additional revenue per year by 2014/15, rising to £250million by 2015/16.

30 Questions from the Floor

Building on the tax points, the Minister and Phill Brear this morning seemed fearful that, if the UK gets its way on the tax regime, many operators would leave Gibraltar. Do the Panellists share these fears?

Tim Bristow – “I think it is a difficult question because the and marketing, I.T. and telecoms “are going to go 20% licence holders in Gibraltar are all very different companies. further than they would do in the UK.” Whilst a point of Some are predominantly UK orientated, meaning the place of consumption tax in the UK is a pressing concern, from a tax consumption tax could have a dramatic effect, but for others perspective there are many other compelling reasons for the UK market is a relatively small part of their business.” Mr operators to remain in Gibraltar. Bristow explained the importance of considering the entire Archie Watt – Mr Watt reminded the Summit that it is also ‘package’ that Gibraltar offers to operators. As a territory, important to maintain that the costs of employing people in Gibraltar enjoys stable governance, good fiscal arrangements Gibraltar are significantly lower than in the UK. “Payroll taxes, and is well regulated: “there are many things in the mix that for example, are high in the UK. Indeed, the UK is, would make for the decision of a particular company”, he comparatively, a high-cost place in which to do business, explained, “so I don’t think any changes would be as dramatic which is another incentive for operators to remain in smaller as it might first appear.” jurisdictions such as Gibraltar, the Isle of Man and Malta. The A delegate from the floor also added that Gibraltar emphasis on education here can also only be beneficial to operates a system that does not include charges on VAT, the industry and Gibraltar itself,” he remarked. meaning spend on other industry aspects such as advertising

What three things would each member of the Panel do to improve Gibraltar’s situation as a whole for e-business, to make it a more attractive destination for new e-business, to improve the local talent pool and to improve Gibraltar’s reputation globally as an e-business hub?

Jason Bird – “Infrastructure is a key part of Gibraltar’s course be very difﬁcult to resolve, Gibraltar’s border attraction to operators, as is the added value the jurisdiction arrangement and the subsequently limited availability of living offers around security and services and, of course, the lower space does provide a disincentive for employers to relocate. rates of charges for employing personnel. These are all Archie Watt – Mr Watt raised the issue of providing a secure advantages that Gibraltar currently enjoys and would do well power supply to operators as his ﬁrst concern. Secondly, he to maintain,” Mr Bird remarked. advised the Summit that the issue of work permits is something Dominik Kofert – Mr Kofert expressed his desire to see Gibraltar needs to be conscious about if it is to continue to attract more tax treaties between other countries and Gibraltar. He high-calibre staff. also noted that, although there are plans for improvement, if telecoms infrastructure is to become a major selling point of Gibraltar’s, then globally competitive Internet connectivity must become a part of everyday life and be available in every household. Finally, Mr Kofert noted that, although it would of

© 2012 KPMG Limited, a Gibraltar limited company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative 31 (“KPMG International”), a Swiss entity. All rights reserved. Tim Bristow – “Absolutely vital to your question is successful education system, traditionally a lot of young technology,” began Mr Bristow, “without any shadow of a people tend to go on to train as lawyers and accountants. doubt, none of the eGaming businesses in Gibraltar would be He suggested that, in order to meet the demands of here if the telecommunications network was not up to Gibraltar’s increasingly diversified employer base, particularly scratch.” Mr Bristow also thought it necessary to respond to within the e-commerce world, it needs to diversify its the Panel’s concerns surrounding Internet speeds, noting educational resources. “Third is the government generally,” that, unlike in Gibraltar, actual broadband speeds in other explained Mr Bristow. “Although they are very supportive of countries rarely meet those advertised. “We are also the eGaming industry, I think that they too have to be more currently installing the technology to deliver 40Mb broadband ‘e-wise’ because that is the world we now live in.” access to every household in Gibraltar”, he added. Secondly, Mr Bristow explained that, although Gibraltar enjoys a very

Which of the European regulatory models do you think has been the most effective over the last 3 years?

Archie Watt – “I think this question comes down to the Dominik Kofert – Mr Kofert agreed with the sentiments of definition of ‘effective’”, began Mr Watt. “If you are trying to Mr Watt and Mr Bristow, adding that, from an online poker say that you are protecting people, preventing under-age perspective and indeed the Internet in general, he was playing and so on, then the French system has been very strictly opposed to regulatory models that serve to ring- good. In terms of controlling the flow of cash deposits and fence a single country to its market. “These kinds of going through a ‘suck it and see’ process of releasing new developments are strictly against the nature of the Internet”, types of gambling to their population, the Italy model has he stressed, “and I think that they are measures that no gone down very well indeed. The UK model has also been good regulator should take.” great because it took the spirit of the Treaty of Rome to Jason Bird – “I think the more you drive those regulations heart and allowed for the free movement of goods and and force people into playing on sites that are based in non- services. As a Libertarian, my view is that the UK model, regulated territories or those that are based underground, as it was, was the best one. I am, therefore, somewhat the more dangerous it is to the industry” warned Mr Bird. disappointed to see that protectionist principles are now “We see thousands of attacks on Internet-consumers daily being employed by what was previously a liberal within regulated sites, let alone those where there is less government in the UK.” control, so I think anything that helps drive that security and Tim Bristow – “Well I think the answer is that the perfect keep people within a regulated environment where we can European model is Gibraltar’s” remarked Mr Bristow. “I think keep them safe and protected has got to be a great thing another good model was the UK but I think they may now be and should be encouraged.” going to lose the plot. I think they will find that they had a good Tim Bristow – “I just want to add that, in this industry, the model and that the problems that they are trying to remedy will technology is ahead of the politics and the politics is always not be resolved by taxation.” Mr Bristow explained that it is the going to be catching up. It may take many, many years but I overall package and climate in which to do business that would believe that the politics will eventually find a way of attract companies to the UK. “The UK is a great place; it is embracing all that the industry has to offer.” highly regulated and very well respected but I don’t think their current taxation solution is going to meet their ultimate objective. So, my vote would be with Gibraltar, a world-leading online-gaming community.”

Russell joined KPMG in 1993 and has since worked for KPMG in the Isle of Russell Kelly Man, Gibraltar, London and Jersey. His client experience encompasses financial services, telecommunications, real estate and eGaming. Russell Director, Audit & Advisory also undertakes transaction services and SAS70 work, which includes acting KPMG for clients with respect to acquisitions, disposals and flotations. In particular, he has advised on flotations on the LSE, AIM, Luxembourg and New York Stock Exchanges.

On behalf of KPMG, Mr Kelly Mr Kelly enthused, “and this is due, to expressed his delight at being given the a large extent, to the solid foundations opportunity to run the second KPMG laid by Gibraltar over the past 10 to 15 eGaming Summit in Gibraltar and to years by the previous government and see the fantastic levels of support by the businesses that were first in to KPMG received from speakers, the jurisdiction. It now falls to the sponsors and all those in attendance. sector to build on that infrastructure KPMG were proud to see an excellent and to take things forward.” turnout from a very broad cross-section “I would also like to thank all of our of the eGaming community and were speakers and also our sponsors - glad to hear the reassuring messages Continent8, Silvertail Systems, People offered by both Government and key Dimensions, Chesterton, Barclaycard, industry figures throughout the Summit GibTelecom and Callcredit Information concerning the future of the industry as Group - for making the day possible. a whole. Finally, I would like to confirm that KPMG “Gibraltar’s commitment to remaining will be hosting its third eGaming Summit at the forefront of the eGaming in Gibraltar next year and we hope to see industry and to being the premier you all again soon. Thank You.” jurisdiction within Europe is fantastic,”

“Gibraltar’s commitment to remaining at the forefront of the eGaming industry and to being the premier jurisdiction within Europe is fantastic...”

All of the speaker presentations from the day are available for download at http://www.kpmg.com/GI/en/IssuesAndInsights/ArticlesPublications/Events/eGaming-2012/Pages/Summit- Programme.aspx If you have any further queries regarding the Summit or the topics covered, you can contact KPMG Gibraltar on +350 200 48600

© 2012 KPMG Limited, a Gibraltar limited company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative 33 (“KPMG International”), a Swiss entity. All rights reserved. © 2012 KPMG Limited, a Gibraltar limited company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG Limited All of the speaker presentations from the day are available for download at Tel +350 200 48600 http://www.kpmg.com/GI/en/IssuesAndInsights/ArticlesPublications/Events/eGaming- www.kpmg.gi 2012/Pages/Summit-Programme.aspx If you have any further queries regarding the Summit or the topics covered, you can contact KPMG Gibraltar on +350 200 48600

The information contained herein is of a general nature and is not intended to address the © 2012 KPMG Limited, a Gibraltar limited company and a member firm of the KPMG circumstances of any particular individual or entity. Although we endeavour to provide accurate network of independent member firms affiliated with KPMG International Cooperative and timely information, there can be no guarantee that such information is accurate as of the (“KPMG International”), a Swiss entity. All rights reserved. date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.