Introduction

The Isle of Man is one of the world’s This document summarises the most attractive jurisdictions for the presentations of the various leading licensing and running of an industry figures who spoke on the day, eGaming business. as well as the questions and answers in the afternoon panel session. The KPMG eGaming Summit, held at KPMG’s hope in publishing this the Mount Murray Hotel on 23rd document is to retain the momentum November 2010, recognised and built and dialogue generated by the event. Kindly sponsored by upon this strength by bringing together We would also like to take this final key players from the industry, service opportunity to once again thank providers and members of the everyone who took part and Government to discuss the future of contributed to making the Summit the sector locally and globally. such a success. The morning session was opened by KPMG employs a number of eGaming The Honourable Allan Bell, Minister of industry specialists both in the Isle of the Department of Economic Man and globally and is committed to Development, and focused on the Isle cutting through the complexity of this of Man as an eGaming jurisdiction. constantly evolving industry. A number of key speakers from Government and the private sector discussed how the Isle of Man is ‘a good place to play’ and how to ensure A word from it remains competitive in a globally growing industry. The afternoon the Sponsor session then focused on broader issues affecting the industry as a At Continent 8 Technologies we whole, such as regulation, insurance believe the Isle of Man is the perfect and future trends. It drew to a close location for eGaming and eBusiness with a panel of experts fielding infrastructures. questions from the delegates. Over 150 delegates attended the The Island’s AAA Sovereign Credit event. Rating, stable, supportive Government and world-class telecommunications infrastructure ensure that. That’s why our multi-jurisdictional model for hosting and managed services links the Isle of Man to our data centres in today. We have supported KPMG in Europe, North America and Asia via producing this report in order to do our the Continent 8 private network. bit to keep the Isle of Man at the top of the global list of premier eGaming As such, we are deeply committed to jurisdictions. the eGaming community on the Island, I hope you find it an interesting read. and we are proud to have been a sponsor of this Summit. It was an Richard Ebbutt excellent opportunity to deal with the Continent 8 Technologies major issues affecting the industry

1 2 Welcome “The Isle of Man is in a strong position. Address We have a number of world leaders based on the island Allan Bell and a high level of Minister of the Department of professional support Economic Development here for the Isle of Man Government Allan Bell industry.”

The Summit was opened by The misunderstood that focussing on "The economic forecasts for 2010 they saw eGaming as a viable career “The Isle of Man is in a strong Mr Bell said improving market access Honourable Allan Bell, the Isle of terrestrial casinos was very different showed that the industry will support option. position. We have a number of world as countries began to regulate was leaders based on the Island and a high also vital for the Island’s eGaming Man’s Minister of the Department of from eGaming. Other jurisdictions had nearly 700 jobs and that makes it one Mr Bell said that since the last level of professional support here for industry and whilst the Isle of Man had Economic Development. stolen a march as a result. But since of the biggest employing sectors on eGaming conference on the Isle of the industry. You have the 100% done well to gain access to the UK’s then, Government had got its act the Island," said Mr Bell. Man three years ago there had been a In recognising the increasing support of Government and my white list, which had been hugely together and started talking to sea change in the world economy, importance of the eGaming industry to "The total spend for the Island in 2010 department has the responsibility for beneficial to the island, there were companies about where the brought about by the credit crunch the the Manx economy, he showcased the will be £154m;” he confirmed. “At a marketing eGaming and we will be outstanding issues to be resolved, opportunities lay. Government banking crisis and the recession. Island as “A Good Place to Play” and time when the economy is slowing working energetically to ensure your citing zero/ten taxation, VAT and the restructuring, and in particular the General economic turmoil was on the called on delegates to build down, this investment is massively business grows and develops,” said “thorny problem” of banking facility formation of the new Department of Isle of Man’s doorstep, said Mr Bell. relationships, knowledge and important not just to your own industry Mr Bell. provision for many eGaming Economic Development (DED) in April The World had changed. Most encouraged collaboration between but to the Island's wider economy as operations. “My hope was that we 2010, was also a significant step in countries were looking to rebuild and Highlighting the importance of public eGaming companies, service providers well," he said, adding that the eGaming would be able to generate money for helping the economy to diversify. Government were looking to replenish and private sector partnership, he said and the Manx Government in order to sector would raise £19m in taxes the banks with the new business their public finances. As a result, the DED was working closely with capitalise on the Island’s significant “We have now put in place a structure which would more than pay for the coming here but it is a matter of real attitudes were changing towards operators to ensure the industry eGaming credentials. on the island which has allowed the DED’s entire annual budget of £15m. frustration that eGaming businesses eGaming and former opponents now continued to expand on the Isle of eGaming industry to grow and have had difficulty using local banks to Mr Bell began by saying how delighted Mr Bell revealed that the average saw the sector as a way of developing Man and to encourage new operators prosper,” said Mr Bell. facilitate their business,” said Mr Bell. he was with the huge attendance and salary in the eGaming sector was different income streams. to be based here. “Most other said that the timing of the Summit was It wasn’t just big operators that would £50,000, making it probably the jurisdictions don’t enjoy that close In declaring the Summit officially open, The worldwide eGaming industry very appropriate. In contrast to the benefit. Opportunities had been highest paid sector in the Island per proximity of working and we have a Mr Bell re-iterated that eGaming would be worth $29bn by 2012, huge global economic events of the last two created in a diverse range of capita. The ICT sector, which was major advantage in plotting the way presented a great opportunity and the growth on the 2008 figure of $20bn. or three years, the most recent Isle of businesses such as hosting and largely the eGaming sector, grew by forward,” said Mr Bell. industry had his and the Government’s Man Treasury figures for 2008/9 software which had developed as 56% in 2008/9 which Mr Bell said was He said that competition amongst 100% support. He also recognised the Nevertheless, he warned against showed net growth of the Island’s result. The overriding concern, a phenomenal achievement and jurisdictions for eGaming business role played by KPMG which was a complacency. Many challenges lay economy in real terms of 4.7%. “The however, was protection of the Isle of demonstrated the strength of the would undoubtedly increase and it great supporter of the Island and were ahead. The eGaming industry was Isle of Man won’t go into recession on Man’s reputation as “a well regulated, industry in recent years. was important that the Isle of Man bringing the same level of energy and the back of that,” he declared. Yet it blue chip, AAA-rated jurisdiction to do mobile and it was important to keep He said the Government had recognised these challenges and found enthusiasm to the eGaming industry. was vital for a small economy, such as business in, free from rogue improving conditions to ensure that established eGaming training solutions. the Isle of Man, to be more diversified operators.” business remained sustainable into the programmes in conjunction with a local and to pursue new opportunities. In The United States was edging towards future. It was important that the He reported that the eGaming industry recruitment consultancy and these respect of the eGaming industry, this regulation, as were France and Italy conference debated all the issues and was growing apace on the Island. 22 were always considerably over- fitted the bill perfectly. and whilst it was important to face up the sector found solutions. Getting licensees were in place with a further subscribed. There were waiting lists to increased competition, the Island together to build relationships and He said previous attempts at the start eight now going through the approval which reflected the quality of the was well placed to do so. improve collaboration was a positive of the millennium to develop the process and a steady flow of new eGaming business and showed that move. gambling industry had faltered enquiries in the system on a regular more and more people locally were because the Isle of Man basis. willing to retrain in the sector because

3 4 Russell Kelly

Summit Opening

Russell Kelly works with a number Locally, online gaming was a Russell Kelly of eGaming clients providing audit “significant contributor” to the local and advisory services. economy, said Mr Kelly, with 22 live Director: Audit & Advisory online gaming licenses in issue, in Mr Kelly set the scene by stating excess of 700 direct jobs, plus many KPMG Isle of Man KPMG was very encouraged by the more employed in ancillary services. huge level of interest in the Summit. Annual spend on the Island was over This was testament to substantial £150m and tax revenues generated growth in the eGaming industry more than £20m. together with the Isle of Man having a leading position in the sector. The But Mr Kelly said it wasn’t just Island was committed to remaining at licensed gaming operators that made the forefront of the industry, he said. up the local market. Market leading software companies, payment and The Summit had been organised on telecoms providers, hosting the back of KPMG’s 2010 global “People have businesses, corporate service publication “Online Gaming – A “This wide variety of support providers, lawyers and accountants Gamble or a Sure Bet” which always gambled, were all playing a major part in the examined features and trends in the sectors ensures the Isle of growth of the eGaming industry. and will continue to online gaming industry. Two of its authors would speak later in the day. “This wide variety of support sectors Man is able to compete do so by whatever Mr Kelly explained that KPMG had ensures the Isle of Man is able to been involved with the industry on the compete strongly with other leading strongly with other leading mediums are Island for a number of years, acting jurisdictions such as Alderney, Malta initially for Betinternet who had been and Gibraltar and often acts as a key jurisdictions such as available to them, a license holder for 10 years. Since attraction to people looking to locate then they had become more and here,” said Mr Kelly, before outlining Alderney, Malta and Gibraltar especially through more involved. the Summit’s diverse range of expert speakers; the morning session focus and often acts as a key the internet”. Growth was inevitable. “People have being more on local developments always gambled, and will continue to with the afternoon looking at the global attraction to people looking do so by whatever methods are industry and generic issues affecting available to them, especially through the sector. to locate here.” the internet,” said Mr Kelly. “The industry has moved very quickly and continues to do so. We had the Unlawful Internet Gambling Enforcement Act (UIGEA) in 2006 and now we have an evolving regulatory position in Europe.” Research from H2 Gambling Capital forecasted a global market growing by almost 50% over a four year period to US$30bn by 2012 which showed that the industry was moving from a niche to the mainstream.

5 6 eGaming Sector Update Steve Brennan

The Summit began with an upbeat, Mr Kimber emphasised the rigorous It was important that there was a clear chose to locate here. “The Island does would also advise new entrants on Steve Brennan jointly presented Sector Update by framework the Isle of Man had separation between the GSC and the usually put on a good show,” he potential pitfalls, especially start-up Director Steve Brennan, Director of the Isle of adopted to build its reputation as a first DED to maintain impartiality. added. businesses. Man’s Gambling Supervision rate, high quality jurisdiction. The Mr Brennan explained that to reinforce The GSC’s three core principles Mr Brennan said operator advertising Commission (GSC) and Garth Government was both open to and this position a very recent piece of Isle of Man Gambling was carefully monitored to ensure it Kimber, Head of eGaming supportive of the online gaming sector legislation, the Gambling Supervision Mr Brennan outlined the three Supervision Commission didn’t target the young or vulnerable Development within the Isle of Man and was positively encouraging Act, was passed in the November principles which form the foundation and regulation stated that all players Government’s Department of operators to make a permanent base 2010 Tynwald. This moved the GSC of all of the GSC’s work and said that must be over 18. As the GSC didn’t Economic Development (DED). They in the Isle of Man. from under the wing of the Treasury all decisions were primarily influenced have departmental technical expertise explained the different functions of and turned it into a statutory board, by the need to ensure that games Garth Kimber Mr Kimber stressed that the growth of in the field of IT, test houses were also the Regulator and the marketing working closely with, but independent were fair, crime was excluded from the online gaming sector meant used to provide verification of all team charged with promoting of, the Government; like the FSC. the sector and that the young and Head of eGaming benefits extended beyond licensed games’ software. eGaming on the Island. He said the GSC had nine members of vulnerable were properly protected. Development operators. The fulfilment sector had a staff responsible for regulation and all Mr Brennan said there was also a duty Mr Brennan said under the terms and Mr Brennan explained that the GSC, major role to play in attracting new eGaming licenses on Island. Their under law to support the local conditions of the GSC, there needed to Isle of Man Government, established in 1962, consisted of an customers. It employed many people framework was to maintain an open economy and changes to the law were be a very open relationship between Department of Economic independent panel headed by a and contributed greatly to IOM plc. and accessible approach. “This will made if deemed appropriate. the operator and the player. For player Development Chairman and four members. Mr There were opportunities in hosting, ensure efficiency is maintained in the protection, the law required that Brennan’s main responsibility within IT, software, the legal field and, He said the application process was application process,” said Mr Brennan. mechanisms were put in place to the Commission was for the especially, for CSPs to attract new quite straightforward. New applicants ensure anyone depositing money with development and maintenance of the business. “I want CSPs to understand Another key benefit of the GSC’s needed to show a clear business plan, a failed operator would get their regulatory framework to license and that by helping their gaming clients to newly created independent status was solid income and realistic projections money back. Whilst the existing supervise all forms of gambling in the develop and become more that it was well positioned to work in but advised: “It is not our experience mechanisms were expensive, the GSC Island including the online sector. He independent, they will get more mutual assistance with other that everyone becomes a millionaire in had now drafted regulations to allow confirmed that there were currently business. We are actively looking for regulatory authorities. “A theme of three or four months.” operators to establish client accounts 22 eGaming licensees operating with a more large CSPs to come into the cooperation is starting to resonate Player protection, banking facilities and which held players’ money in trust and further nine applications now approved sector.” across Europe and we have the ability social responsibility were paramount. which would be much more cost and another seven applications in to be included in those talks,” he said. He said two banks on the Island effective than the existing process which was an “unusually high The GSC carried out background currently handled transactional The three main areas in which the mechanisms. He indicated it was due number”. checks to ensure any application was business for the sector, but also urged DED could help businesses to grow; “good to go”. Due diligence was to come into force at the December Mr Kimber was primarily tasked with the rest of the banking community to undertaken far and wide on all key Tynwald. “But this mechanism will Firstly by introducing new suppliers promoting the Island’s unique package support the eGaming sector and personnel regardless of their country only work if banking is on Island,” and potential partners and assisting of benefits for eGaming companies stressed that DED was keen to talk to of origin. Corporate structures were said Mr Brennan. businesses on the Island to grow new whilst ensuring the Government’s banking decision-makers. “Hopefully scrutinised to ascertain names of business models; secondly by To do away with red tape, recently, a reputational balance was retained and, we can show it is well regulated here beneficial owners, defined as anyone encouraging new business to the Gambling Forum consisting of the by association, that of all companies and nothing to be scared by,” said with a 5% or greater shareholding in Island through promotion at overseas Treasury, the DED and GSC had on the Isle of Man, not just gaming Mr Kimber. the company. “If an operator is not shows and exhibitions; and thirdly clarified guidelines to ensure that a operators. To date, Mr Kimber had prepared to reveal the identity of the Continuing the banking theme, working with the GSC in testing new whole raft of business activities no secured a number of the world’s top beneficial owner then that application Mr Brennan emphasised that the GSC business models and making sure new longer needed to be bound by online companies and assisted them could fail,” Mr Brennan warned. He could only protect players’ funds when businesses fitted with existing regulation. This extended to marketing with setting up in the Isle of Man. said that GSC approved testing houses they are deposited with an IOM based legislation and even changing and advertising activity, the provision were also used to assess the Above all, Mr Brennan said that whilst operator. “We can only cost effectively legislation if necessary. of software and hardware, the hosting suitability of new operators. the Government received direct do that if those banks are available on of client downloads and a number of “We want to show that the revenues from VAT and licence fees, the Island,” he stressed. It was rare to find disagreement associated activities which supported Government cares, is approachable maintaining the Island’s economic between the GSC and DED on the the gambling operators without Mr Kimber recognised the impact that and interested,” said Mr Kimber, reputation and retaining UK white list type of companies receiving licences, requiring licensing or approval. eGaming operators were already stating that 80% of new businesses status was the prime consideration. said Mr Kimber, adding that the DED showing to the Isle of Man, supporting looking at the Isle of Man actually “We don’t want operators that are many local charities and getting going to tarnish the sector,” he said. 7 involved in sports sponsorship. 8 “Regulatory cooperation is going to be the key as the EU landscape Garth Kimber opens up and the Isle of Man has got All licence holders were subjected to So why was the Isle of Man a good Q and A session drawn here as a result. But the terms Mr Brennan said that the Isle of Man a part to play in that rigorous on-going compliance. place to play? and conditions of white list status wanted to ensure that future licensing Russell Kelly then moderated a Frequent checks were made of were still under review even though wasn’t closed off to EU member It was down to a combination of question and answer session, covering and we will have operator websites and any breaches the list was currently closed to new states and the Isle of Man was talking factors, said Mr Kimber. “What we’ve the challenges and opportunities found would be quickly dealt with. As applicants. Mr Brennan said the Island to the EU to ensure that the granting got is a package of things. The support relating to the Isle of Man as well as the opportunity.” social responsibility was such a key had given a very good response of licenses would extend to specialist of the Gambling Commission, access upcoming regulation and legislation. theme of the regulatory framework, concerning betting legislation and the jurisdictions like the Isle of Man, to Government, people you can really the GSC would also look at specific VAT protection of betting consumers. where there was the comfort of white talk to, the ability as an industry to strategic risks covering all operators, Conclusions had yet to be reached. list status. Encouragingly, Mr Brennan generally take part in consultation to Mr Kelly began by asking if VAT was a such as compliance with self-exclusion Recently the GSC had met the UK said the Island was looking for shape things.” disadvantage set against rival requirements and on-page references Gambling Minister John Penrose but it confirmation from the current Belgium jurisdictions in the Channel Islands and to organisations who could advise and Mr Kimber said the Government was could be some time before the EU presidency that a broader Gibraltar. Mr Kimber agreed it was a assist problem gamblers. now well positioned to provide process was concluded. For the time framework approach would be tough issue but there were certain operators with full assistance. being “the threat remained. But there acceptable. All operators received site visits by corporate structures available to help Obtaining white list status with the UK should be plenty of warning of any GSC staff every 12-18 months and mitigate VAT and lower bandwidth “Regulatory cooperation is going to be was also highly important, the Island changes,” said Mr Brennan. regular intelligence sweeps were costs as well. It was also pointed out the key as the EU landscape opens up had a competitive cost structure and, carried out to detect any information that the VAT advantages of other Regarding access to Europe, there and the Isle of Man has got a part to unlike most jurisdictions gave financial that had become available in the public jurisdictions were not always as was confidence that regulation was play in that and we will have the assistance for business moving here. domain and which could constitute an beneficial in reality as the “no VAT” moving in the right direction. Mr opportunity,” Mr Brennan concluded. early-warning sign of a problem: “In the last three years we have built a headline suggested because of Kimber believed in the future it would specialist gambling blogs and feeds reputation where you are regulated establishment rules and in any case not be so much where the operator were a particularly rich source of fairly. We deliver what we say we will any VAT advantage a given jurisdiction was based but whether it was paying information. Companies were also and we do it more quickly than any enjoyed could easily be eroded by an taxes in that jurisdiction. It was all required to submit quarterly returns other jurisdiction.” In exceptional unfavourable judgement and so might about money, said Mr. Kimber. “We confirming their players’ fund- circumstances a licence could be not always be there. Mr Brennan’s are fairly confident that it would be protection cover remained adequate, processed from start to finish in as message was clear. “Come here and possible to do that from the Isle of amongst other details. little as six weeks, added Mr Kimber. work with us. We are probably in a Man just as easily as Malta. Mr safer position in the longer term.” Brennan cited the Danish example The economic significance of the No gaming company would move to where you could operate outside online sector was also highlighted. The the Isle of Man unless they felt they Staffing levels Denmark as long as you were not local industry spend was put at £140m had a Government and a Regulator Mr Kimber also revealed that at a time blacklisted. With the liberalisation of and operators contributed £3.5m to they can work with. “Partnership of Government cutbacks, a new European markets there was a move the Treasury in licence fees and makes things happen – we see that all executive level appointment was towards local licensing on a country by gambling duty, set against an overall the time when we talk to businesses,” imminent reflecting the DED’s country basis. Likewise, the United cost for regulation and marketing of said Mr Kimber. continuing determination to promote States appeared to be moving towards just under £1m. He said the annual growth in spend in the sector around the world. state by state regulation. Over 600 people were currently the economy from eGaming was Strategic issues working in the industry with over 30% running at 25%. “There are always of those in gaming coming from the issues but as long as we remain Mr Brennan said the biggest strategic finance sector with cross transferable competitive, fair and continue to issue over the next three to five years skills. “As business grows there are a deliver what we promise, we expect was the Isle of Man’s position within lot of people on Island who can fulfil growth to continue,” Mr Kimber the UK white list. It had been good for those roles,” said Mr Kimber. concluded. the Island and business had been

9 10 “Regulatory cooperation is going to be the key as the EU landscape opens up and the Isle of Man has got a part to play in that Zero-Ten Tax and we will have the opportunity.”

With the exception of the Code ten. “For us the only thing on the “Where we are the moment is that the Group’s opinion, the programme of agenda was the ARI and that’s zero-ten system has not changed,” he work had been completed, Mr Couch because we considered that the zero- confirmed. Mr Couch stressed that the Malcolm Couch confirmed. On September 23rd 2010 ten tax system had already gone final policy considerations could not be delegations from the Isle of Man and through.” But he said that if the Code carried out until there was a definitive Assessor of Income Tax Jersey attended a Code Group Group had any concerns in relation to and detailed assessment from the meeting in Brussels, the first time non- zero-ten and the ARI, the Isle of Man Code Group. He accepted that this Isle of Man Government, Malcolm Couch member countries had been invited to had asked it to set them out in detail position caused uncertainty, and that Income Tax Division address the Group. “We were given so that they could be appropriately uncertainty wasn’t good for business; the opportunity to make a presentation addressed. although the Government was doing and we also answered any questions exactly what it had set out to do at the He said it was important that the Isle put by the EU member States,” said beginning of 2010. Malcolm Couch is the Assessor of was hidden about this” said Mr Couch. Code Group had some concerns in of Man was seen to be a good player Mr Couch. Income Tax of the Isle of Man and is He said that the zero-ten concept has relation to zero-ten systems and that and that its tax system was EU Being labelled as ‘harmful’ by a body responsible for all direct taxation been developed by the Isle of Man and an assessment of the ARI would likely “The thrust of the Isle of Man’s compliant “because if we are a like the Code of Conduct Group was and national insurance collection that Jersey and Guernsey had felt they involve a reconsideration of zero-ten. presentation was to review our financial services centre in a global not something that could be ignored, matters in the Island and had to slipstream us to some extent to company taxation system against the market place then there are rules said Mr Couch. Economic sanctions As a result, Mr Couch said the Isle of internationally, including maintain a level playing field. Code of Conduct criteria.” which you have to conform to. If you had been threatened against ‘non- Man announced a review of its representing the Isle of Man at don’t, you will be excluded.” cooperative jurisdictions’, but that In 2003, the Code Group stated and business taxation system using the “In our view, the zero-ten system does OECD and EU forums and hadn’t happened yet. the Council of Finance Ministers, following criteria: negotiating tax co-operation not affect, in a significant way, the Mr Couch added that if further change ECOFIN, agreed that a zero-ten location of business activity within the was necessary then the Isle of Man He felt there was a subtle shift from agreements. • It should meet the requirements of system would not in itself be EU. However, even if it could have wanted, as far as possible, to have a the UK since the election of the the Code of Conduct; Mr Couch said his aim was to provide considered a harmful measure. Mr such an effect, it is not harmful under system which would suit everyone. “It Coalition Government. the Summit with “a thoroughly open, Couch described this as “a key finding. • It should meet the needs of as the Code criteria because no measure would be nice if our tax system was Mr Couch said that the EU was not honest and up-to-date summary” of They can’t take back decisions they many domestic businesses as in the Isle of Man provides a lower not commoditised but had aspects that able to rule on tax rates in its member the issues relating to Isle of Man had already made,” he said. possible; effective level of taxation than the made people excited about wanting to states or other countries. The Code business taxation, focussing on the on- general rate of 0%,” said Mr Couch. go there because of its features.” The zero-ten system was finally • It should contribute to Group had no competence to impose going work of the EU Code of Conduct Over 95% of corporations and introduced in 2006, providing a competitiveness allowing existing Whilst jurisdictions such as the BVI, rates of tax, he said. Group (the Code Group). He also corporate income are taxed at zero. generally applicable rate of corporate businesses to continue to grow and Bermuda and the Caymans had zero reviewed the current status of the “We will almost certainly be able to income tax of 0%, with a special attracting new businesses to The logic of the Code of Conduct tax, Mr Couch said it was important to Island’s international tax cooperation sustain zero-ten for a period,” said Mr higher tax rate of 10% for income from establish on the Island and indicated that the additional “tests” offer other features. “It would be nice work especially in relation to the zero- Couch but, comparing our system with banks and property companies. set out in it didn’t therefore need to be if there were more USPs provided ten taxation issue. • It could potentially increase the the Irish 12.5% corporate tax rate, considered. Furthermore, as ARI was a through the tax system. We really But the system was deemed attractiveness of the Isle of Man as which had suddenly come to the fore He firstly moved to assure delegates personal tax measure, it was not have to keep striving to stand out to problematic by the EU, said Mr Couch, a location for businesses in during the recent bail-out negotiations that in answer to the burning question strictly within the scope of the Code of maintain the Isle of Man’s because it was accompanied by an economic sectors not currently as being resented by some forces in ‘Can the Isle of Man keep its zero-ten Conduct, Mr Couch added. competitiveness,” he said. anti-deferral measure, the distributable widely represented, if at all, on taxation’ by declaring: “Yes, I’m pretty the EU, Mr Couch said that he profits charge. “We were informed in the Island. sure we can.” “It is evident, based on a decade long He said that the Code Group’s most expected further pressure on zero-ten: October 2007 that the Code Group track record that the Isle of Man is fully recent meeting on November 19 had which meant that it would be To gather the necessary information, He began by providing background as considered this to be a harmful committed to tax cooperation”, Mr proved inconclusive. He said the necessary to keep under constant Mr Couch continued, the Isle of Man to how we had arrived at the present measure,” said Mr Couch. As a result, Couch continued. “Indeed, we have Group’s response had been review “the optimal system” to have Government announced it would: system. He said in 1999 the Code the Isle of Man abolished the measure been prepared to move ahead of other “convoluted” and it was as if they in the Isle of Man. Group assessed 11 tax measures in and, with effect from 6 April 2008, • Explore with the UK and EU small international financial service were deliberately trying to find Welcoming the opportunity of getting the Isle of Man and considered six of introduced the Attribution Regime for interested parties the rationale to be centres.” something harmful. He hinted that if to know all parties within the eGaming them harmful according to the criteria Individuals (ARI) whereby residents applied when the Code group any concessions were necessary in He said this was evident by the early sector, Mr Couch concluded: “As far of the 1997 Code of Conduct for with an interest in a relevant company considers business taxation future then perhaps ARI was the area adoption of a policy of concluding tax as your sector is concerned we want Business Taxation. would be charged with income tax on systems; to consider. their share of the attributed profits information exchange agreements and to maintain a symbiotic relationship of As a result, in 2002 the Isle of Man from that company. Mr Couch said this • Review business tax regimes in the the announcements of moving to The reality was that the Code Group sharing issues and sharing ideas, I’d gave a commitment to the Code Group had been a highly effective policy with EU member states (and regions or automatic exchange of information didn’t really know what to do about like to get to know all of you, so we to roll back the contentious measures only 300 or so ARI charges, even dependent territories); under the EU Savings Directive in zero-ten, said Mr Couch. One key point understand where we are all coming and indicated it would replace them 2011. was whether the Group was actually from.” though there were tens of thousands • Conduct a public consultation to with a zero-ten system of company even empowered to look at personal of companies registered on the Island. seek views on potential changes to “We believe the Isle of Man business taxation which was designed not only tax in conjunction with business tax; the business taxation system and taxation system conforms to the to comply with the principles of the “We have not yet been given an and this had led to difficulties. He said principles of the Code of Conduct. At Code but also to protect and retain assurance by the Code Group that it is • Engage Deloitte as external a new ‘High Level Working Party’ this point we have made no moves to business on the Island and add to its content that the ARI conforms to the consultants to support the whole would be set up by ECOFIN in 2011 to change it,” confirmed Mr Couch. competitiveness. principles of the Code,” warned Mr exercise. consider the scope of the Code of Couch. He added that the Isle of Man Conduct. “We told the EU exactly what we The Isle of Man’s view was that there learnt in September 2009 that the were doing and I don’t think anything was no case to answer regarding zero- 11 12 Making Sense of Payments

Dan Starr Executive Vice President Neovia Financial

Dan Starr is Executive Vice President In appraising the 2010 eGaming Money was the business of eGaming, and Chief Marketing Officer at Isle of market he said the ‘wild west’ days said Mr Starr, and it was critical that Man based Neovia Financial, which were now substantially over. Operator operators could offer multiple payment provides an alternative payment consolidation was now well underway types taking into account country by network for large global businesses. along with more enlightened regulation country variances like in Germany Mr Starr leads the Group’s brand, which was encouraging free where giro banking was very popular. positioning, marketing strategy and competition, innovation and growth. Alternative payment partners, communications, promotional and Furthermore, legitimate eGaming therefore, with global reach had product initiatives. His role also businesses wanted to come to well stepped up to provide frictionless includes P&L responsibility for the run jurisdictions like the Isle of Man. immediate deposits with high consumer business including debit He said that traditional payment conversions and high success rates on accounts and cards. He spoke on the companies had been, at best, payouts. Dependable and fast payouts subject of payments within the ambivalent to eGaming during its were also important to maintain regulatory framework of the period of rapid growth – hence the rise customer loyalty and trust and eGaming industry. of legitimate large businesses with merchants themselves needed both Mr Starr explained that Neovia had strong domain expertise, like Neovia. cheap and dependable payment been based in the Isle of Man since But whilst traditional companies were options. 2004, was globally proven since 1996 now more fully engaged and a more “To ensure a high success on payouts, and specialised in the gaming sector, coherent future was being created, it is critically important to work with processing billions of dollars annually. companies like Visa and MasterCard partners that have global reach,” said The Company was a trusted and were still getting their act together. Mr Starr. transparent payment provider offering “The question is will MasterCard innovative payment solutions through He demonstrated that high card actually tolerate gaming transactions or its core products such as Neteller and decline rates crippled operators and not – we don’t know,” he commented. Netbanx with overwhelming market that global penetration of Visa and recognition amongst operators and The services of alternative payment MasterCard was mixed. The challenge players. The Company had a reputation providers was varied but having for operators was finding payment for being safe and secure and offered capability in areas of risk and fraud was companies that could work in Dan Starr remote identity and fraud services. what had really paved the way for emerging markets like India, Russia “We are required to maintain 100% of money to flow in the gaming world and Brazil. Executive Vice President funds on deposit, in transit funds and and allowed the industry to grow. Mr Starr said operators also needed Neovia Financial cleared funds in trust accounts, so you High net worth VIP players wanted the help with risk and compliance would never get a run on a system like ability to transfer substantial amounts solutions, especially in situations ours,” said Mr Starr. of money, especially in US$ and the where payment companies operated Describing Neovia as offering “a traditional banking system couldn’t be indemnified transfers. It was essential strong value proposition” for the relied on to do this because they had to have good identity controls in place. eGaming industry, Mr Starr said the no domain expertise and could He also said that a good payment emergence of alternative payment routinely block transactions. provider should also be able to offer companies in the last ten years had Overall, despite enhanced regulation, shared purse facilities which allowed filled a void left by banks. “They the payment environment was still money to flow across multiple games haven’t shown up for the eGaming subject to card transaction declines, such as spread betting, poker and industry which is part of the problem,” blocked wires, payout card issuing sports. he declared. difficulty, lack of customer knowledge and ambivalent corporate banking. 13 14 He went on to expose the Payout needed to be hassle free, too, Ten things to look for when selecting shortcomings of card transactions, he ventured. Smart operators wanted a gaming payment partner. highlighting research carried out by H2 cheap and easy methods with a high They should be: Gambling Capital that was based on an success rate and customer aggregated cross section of eGaming satisfaction. Operators deployed • Gaming proven, related operator transactions in 2009. multiple payout methods such as • Have global reach, This showed that in Brazil there was a OCT/payback to cards, wires and 99.3% decline rate in card e-wallets. • Be resilient, transactions. South Korea and Japan He said it was proven that hassle free were also above 90% and even in the • Operate multiple payment types, payouts reaped rewards for operators UK the rejection figure was nearly in repeat business. He said that • Support core gaming requirements, 57%. following recent changes to the law in • Have solid fraud tools in place, What’s more, relying on cards alone Norway 90% of transactions that “Psychologically was not enough, said Mr Starr. Even in come out of gaming sites through • Have compliance regulation, a well regulated gaming environment Neteller went back to the operator • Offer simple integration, people don’t feel like the UK only 62% of UK adults had because of its simplicity. a card, a percentage that was declining • Have flexibility and white label “Psychologically people don’t feel they they have won until due to the credit crunch. branding and have won until they have cashed out. they have cashed “The hardest thing for the industry is By putting it into an e-wallet they feel • Possess the ability to take payments that the financial tool that the they have cashed out. It’s all about by multiple channels options. out. By putting it consumer has in their pocket generally understanding the psychology of “The right choice in partner enables won’t work,” said Mr Starr. consumers,” said Mr Starr. payments to become a business into an e-wallet they So it was important that operators He said Neovia needed to be experts facilitator rather than just a necessary should offer a variety of payment types in risk and indemnified transfers and cost of sale,” said Mr Starr. feel they have to allow money to flow, said Mr Starr. were also required by FSA regulation “Alternative payment companies will Alternative payment options such as to know who their customers were. continue to provide domain specific cashed out. It’s all those provided by other types of card, expertise to support the industry Whilst bricks and mortar financial bank pull/push options such as direct through its next phase. I don’t think institutions and bookies could look about understanding debit, e-wallets like Paypal which the banks and the card companies are their customers in the eye, eGaming allowed funds to be topped up and going to get there any time soon,” and payment companies couldn’t. the psychology of that could accept back winnings, he concluded. payment accounts and cash vouchers. So payment companies had, by Summarising, Mr Starr said the consumers.” This ensured eGaming operators necessity, to become experts in risk industry was becoming more mature experienced frictionless deposits, “because we are running things like and there was a lot of consolidation instant payments which drove higher indemnified transfers.” Solid anti-fraud going on. He pointed towards recent conversions and facilitated high limits measures needed to put in place along moves towards regulation in Norway for VIPs. with water tight chargeback and France although he said the management. Neovia used a whole “These are the tools by which French approach was “prohibition slew of technology, such as device alternate payment companies can help dressed up as regulation. Lots of sniffing, electronic identity, anti operators decide which would be the operators aren’t going there because impersonation checks to identify best payment method to use of the tax.” status, identity and age of customers. according to the country in which they It was important to know your He also urged operators to seek operate,” said Mr Starr. customers, for instance, to spot if they partner relationships with their He said that research in Germany were registering in Germany but payment providers. “I would showed operators providing four or operating an account from Taiwan. recommend you to really leverage more payment types increased the your payment relationship because Whilst banks and cards were not good likelihood of a successful purchase by your business is money and we can at dealing with remote consumers, 22%. help you move it,” said Mr Starr. there was lots of technology and innovation that alternative payment companies could bring to bear regarding secure transactions. 15 16 “The Isle of Man is a white list jurisdiction, meaning that 12BET.com can freely advertise in the UK. The Island has earned a reputation as a well Choosing the Isle of Man organised and regulated financial centre. This is a Rory Anderson positive association for 12BET.com.” Chief Executive Rory Anderson 12BET.com Chief Executive / 12BET.com

Rory Anderson joined 12BET.com at The Company’s website now offered The reasons for choosing the Whilst advertising and sponsorship He also pointed out some key issues probable in most key European the start of 2010 with a remit to thousands of in-play events every Isle of Man was important in building customer that were emphasised to him, from countries, there was still huge grow its European business from month from the Isle of Man. “We trust and loyalty “having the Isle of the GSC’s perspective, namely the uncertainty about entry to these newly He said there were four key reasons scratch. Before joining the company provide customers with a recognised Man Coat of Arms on our home page ‘Know Your Customer’ standards, the regulated markets. why 12BET.com chose to be based in he spent eight years working in branded portal to conveniently enjoy is a rubber stamp that adds importance of anti money laundering the Isle of Man, ahead of rival However, from 12BET.com’s senior marketing roles for eGaming deposit gambling in a safe, tremendous value,” said Mr Anderson. policies and, at all times, to be a jurisdictions such as Gibraltar and viewpoint, being based on the island companies such as 888 Holdings, transparent, socially responsible responsible gaming company. Malta: “The Isle of Man is a white list was not seen as a barrier to operating Empire Online and PartyGaming. environment, regulated by one of the jurisdiction, meaning that 12BET.com For prospective new licensees going in the European eGaming sector. And premier remote gambling licensing • A Cooperative Governing Body, He spoke about the reasons can freely advertise in the UK. The through the process Mr Anderson also he was bullish about the Isle of Man jurisdictions,” said Mr Anderson. 12BET.com chose the Isle of Man to • Solid Infrastructure, Island has earned a reputation as a recommended that a well prepared Government’s ability to handle the be their preferred jurisdiction in which He said customer needs would always well organised and regulated financial application pack submitted ahead of Europe question. • Reputation and to apply for a Gaming Licence, come first and corporate activities centre. This is a positive association time would enable the GSC to “We simply don’t have the resources describing the company’s experience were conducted to the highest ethical • The Isle of Man Government’s for 12BET.com,” said Mr Anderson. familiarise themselves with the to have licences in each country. We throughout the application process. and professional standards. General Enthusiasm for the Sector. applicant’s business plan. “Any issues Focussing on the GSC’s approach, need a strong stance and a big effort that do arise can then be discussed Mr Anderson explained that the Mr Anderson provided examples of he said there was absolutely no from the Isle of Man Government to It was important to work with a and resolved ahead of the hearing company was established in 2007 as how 12BET.com had raised its profile. compromise on rules and regulation. ensure that we won’t be cooperative and communicative itself,” Mr Anderson said. an Asian based remote gambling The company sponsored the recent jurisdiction, he stressed. “The “What’s the point of a licensing disadvantaged in terms of access to company, offering live sports betting. 12BET.com World Open Snooker willingness of the Gambling authority if it doesn’t properly vet its As for the future, Mr Anderson was European markets. We have had “After initial success, the decision was tournament followed by sponsorship Supervision Commission to work licensees? This, for us, was very upbeat and said that 12BET.com was assurances from the DED that made to enter the European market of the UK Snooker Championships in closely with us throughout the process reassuring,” he said. delighted with its decision to be ensuring the Isle of Man is not providing competitive odds and December. The Company were official was great. I spoke on a weekly basis headquartered in the Isle of Man. disadvantaged in terms of EU access 12BET.com’s experience of the thousands of in-play events. The sponsors of Sevilla FC in the Spanish to our liaison officer at the GSC so we “We are confident in our product and is a top priority issue. From what we licensing process had been favourable. company was striving to be the best Primera Liga as well as being the were able to address and iron out any marketing initiatives.” have heard today we are very The hearing took place in April 2010. remote gambling business in the official betting partner for Newcastle problems very quickly. This was confident that they will deliver,” He said that timing of the license was The willingness of the Isle of Man European market by providing a United FC. “These deals give great refreshing as many places pay lip he told the Summit. key. “We were able to take our first Government to be proactive rather superior, unsurpassed core product. exposure in Europe but also in Asia service. The GSC was completely bet for the premier league season in than reactive on European issues was where there are restrictions on genuine,” said Mr Anderson. 12BET.com also expected the August, so we delivered on target. also important, said Mr Anderson. advertising for online betting,” completion of their acquisition by Furthermore, the Island’s stable said Mr Anderson. He warned that regarding access to former rival firm Asianlogic by January Government had created an “There is no doubt that being based in EU markets, with pan-European 2011 which would further underpin the independent and well-regulated the Isle of Man has added to our regulation not expected in the near Group’s activities in the Far East, but environment, conducive to growing an credibility,” confirmed Mr Anderson. future and local licensing looking the aim was to make the European eGaming business, said Mr Anderson. operation self sufficient, said Mr There were also several world class Anderson. data centres already established on 17 the island. 18 Staying in the Isle of Man

As Chief Development Officer of But in 1998, MIT started getting an Nick Nally Continent 8 Technologies, Nick Nally increasing number of calls about has almost 25 years’ experience in providing data centre services for the Chief Development Officer many sectors of the IT and developing online gaming market and Continent 8 Technologies telecommunications industry in following regulation by the Kahnawake Ireland and the US, encompassing Gaming Commission in 1999, MIT senior management, consultancy, started offering such services. Over sales, carrier relations, engineering the years, MIT has developed into a and business development. highly influential centre with some of the world’s largest online operators Joining Continent 8 in 2006, Mr Nally and software providers having started looks after business development and their operations in Kahnawake. strategy as it relates to the rollout of offerings to service the eGaming Mr Nally said that Continent 8’s aim market. He was previously an advisor was to take the principles learned in and consultant to the Department of Kahnawake onto the global stage and Nick Nally Communications within the Irish to develop global offerings. “We Government where he worked on a wanted to stay focussed on online Chief Development Officer number of initiatives including the Irish gaming but address it on a multi Continent 8 Technologies Connectivity Project and related data jurisdictional level,” he said. As a centre activity. result, Continent 8 was born – the eighth Continent referring to the He explained why the Isle of Man was, internet, beyond the seven terrestrial and remains, the right location for continents. Continent 8’s headquarters. In selecting a headquarters for the company, whilst competitive tax was Continent 8 - the Background to Continent 8 an option offered by a number of jurisdictions, there were other “softer Continent 8 Technologies is a data factors” that were as influential, said eighth Continent centre provider that looks after the Mr Nally. “We wanted to be able to technical infrastructure for online work with Government, with referring to the gaming operators, providing a full influencers and decision makers and range of co-location and managed with communities rather than internet, beyond the services. Continent 8 focuses on the countries.” He said that for a delivery of market-defining Internet successful data centre business, the seven terrestrial technologies across a global platform. two most important factors were top continents. Mr Nally said the company’s origins class power and telecommunications. date back to Mohawk Internet Technologies (MIT) which is based in Kahnawake, a 50 square kilometre Validation territory south of Montreal and home The decision to be headquartered in to approximately 9000 Mohawks. The the Isle of Man followed an intensive original intention was to set up a data review. The company had looked at a centre to service the financial services number of countries including sector. A key differentiator for this Guernsey, Malta and even Ireland. location was the fact that all of the Today, outside of MIT’s Kahnawake telecoms infrastructure from New York operation, by far the largest State passed through the Kahnawake investment by Continent 8 in any of territory. 19 20 its data centres is in the Isle of Man, us,” said Mr Nally. He told the Summit Stable local working practices were combination of solutions; to but it is important in the future, from where all Continent 8’s major that power levels in Continent 8’s data also a feature of the Isle of Man but incorporate disaster recovery, testing, especially if we are to win front-end company decisions are made. centre on the Isle of Man were were not necessarily as reliable in pre-production and even Cloud connectivity here in the Island.” “The aim was to provide a multi- engineered at 7.5 kVA per rack. This other Tier 1 markets. He said scenarios. “They want to be able to He said that Continent 8 didn’t want to jurisdictional model and attract was over 50% more than even some Continent 8 worked its suppliers hard leverage their assets that they are look at a base outside the Isle of Man companies who wanted to take of the best Tier 1 markets. In places and expected efficient, drop of a hat putting their money into,” said so it was important for the Island to advantage of that,” said Mr Nally. like France it wasn’t possible to get service at all times. “We built in the Mr Nally. nurture the necessary skill sets for the more than 4.5 kVA per rack but, even Isle of Man because we believe the The company has opened other The problem with technology was that future. “We need to see though the Isle of Man levels were Island will be here for a very long time. operations in Malta, Singapore, France it nearly always outpaced regulation, extremely strong, he hoped they could We are happy to facilitate our There is a lot of regulation and and the UK and there are plans to he ventured. Sometimes technology why we are winning be pushed even higher. customer base here but we remain development going on in Europe at the develop further centres in Europe and was being adapted to suit regulation. cautious about other jurisdictions,” moment and the outcome is not that North America. But when it came to Telecoms were also praised. Even “We think it should be the other way business and need said Mr Nally. clear. Mr Nally said it may be validating and setting up data centres though the Island was small, it had round, that regulation should be retrograde if there was a in other jurisdictions, the Isle of Man greater telecoms capacity than many adapting to technology in the market to consistently push fragmentation of technology and model now provides the benchmark. larger islands. It was important to have place,” said Mr Nally. The future infrastructure throughout the “In every one of those locations, if it access to multiple systems and that’s forward and do Complimenting the DED’s policy of continent. “It would be best if matches our experiences on the Isle of where other jurisdictions fell down, Looking forward, Mr Nally thought the marketing the Island to vertical market everything stays here and places like Man, that tells us if we are there or said Mr Nally. Malta, as an example, Isle of Man would need to keep some things that are companies like CSPs, he said here,” said Mr Nally. thereabouts in our decision making was for a long time reliant upon just evaluating its position in the overall Continent 8 was working hard to process.” said Mr Nally. two networks. “It amazes me that market place. The nature of the Whilst it was important to strengthen maybe a little closer encourage new business to come into businesses which are 100% online put industry was changing. It was no relationships with countries like France “We have found it an extremely open the Isle of Man. Often, decision themselves at the mercy of networks longer the domain of entrepreneurs and Italy, he said it was also vital to to the edge than place to do business and where we makers are based outside the Isle of that aren’t capable of handling the and start-up operations. Over the last focus on bilateral agreements with have been able to work with the Man, they are in places like Israel, business,” he pointed out. The fact 12 years Continent 8’s customer base other established jurisdictions, stating where we are at various stakeholders,” Mr Nally South Africa, London and Stockholm. that the Isle of Man had first class has changed. There were many CEOs that, in terms of technology, the Isle of confirmed, citing the Manx Electricity “We have to be continually working to operators like Cable and Wireless and coming into the business from other Man could lead the way in talking to present.” Authority (MEA) as an example of move out into those markets to bring Manx Telecom made it “a very sectors and vertical markets, bringing other forward thinking jurisdictions. where Continent 8 had been one of those operations and personnel into attractive place as far as networks are in some established practices like the first commercial bodies on the Isle the Isle of Man,” he said. “Everything points to a very successful concerned,” said Mr Nally. business compliance procedures. of Man to support the MEA’s new market place in the Isle of Man but Similarly, highly qualified and There were other challenges that the fibre network service. Likewise on the And whilst other jurisdictions had when you look at the number of experienced IT professionals from Isle of Man faced but stressed the regulatory side, Continent 8 had some good data centres, the Isle of licensees here, I don’t think anyone telecoms companies and island’s need to be competitive. provided strong input into the Man was very fortunate in having at would agree that we have as many as multinationals are entering the online Government’s disaster recovery and least three world class data centres, “Although we have a fairly attractive we want,” Mr Nally ventured. Places gaming sector. “So we have to be exclusion regulations. Mr Nally said said Mr Nally, highlighting Manx bandwidth cost here in relation to like Malta, Gibraltar, Kahnawake and more on our game every single day,” this had been “a very positive Telecom’s and Domicilium’s centres other gaming jurisdictions, that’s not Guernsey were “massively installed he said. experience.” as examples. enough for us to rest on our laurels,” places for licenses” and the Isle of Many customers no longer want just warned Mr Nally. “If we are to be Man needed to work with these He said that they had also been As far as skill sets were concerned he one gaming licence, they want competitive – and I do believe that jurisdictions. It was important to positively influenced by the number of didn’t envisage this being a problem at multiple licences for a variety of there is a jurisdiction out there that encourage more large operators into their own customers who had also the moment but as Continent 8 market and company related reasons. one day will get everything right – then the eGaming market place. “We need based themselves in the Isle of Man. expanded its customer product Many customers want disaster there has to be a better local cost to see why we are winning business portfolio this might impact on the The Island’s technical infrastructure is recovery but very few of these structure and costs need to be and need to consistently push forward company’s ability to recruit the also first rate. There is an abundance customers have the financial ability to continually driven down. We have to and do some things that are maybe a necessary skills here in the future. of power on the Island. “The put in a disaster recovery system in be aware of this. I don’t want to be little closer to the edge than where we Government has put a lot of money in isolation. Instead, they wanted a antagonistic towards suppliers here, are at present.” and it is paying off for companies like 21 22 Introduction to the Afternoon Session Mark Summerfield

The afternoon session was Nevertheless, potentially, many of consolidation at an undreamt of that didn’t mean the door was closed international structures rather than just Mark Summerfield introduced by Mark Summerfield, those offline issues could affect the speed,” he said. to European operators. an Isle of Man or Gibraltar base.” That Head of Audit for KPMG Europe’s eGaming sector. “They do show that required having a greater appreciation He said he could also see bricks and “When I look to who might succeed, Head of Gaming European Gaming Group. there is one global gaming industry of local employment laws and mortar companies acquiring because I look to those businesses who already with thin walls between online and providing sophisticated remuneration KPMG Europe Leading the firm’s relationships with they would have to diversify earnings have a legal US presence, such as offline,” said Mr Summerfield. packages, he added. Ladbrokes, the Rank Group and outside of their own domestic Betfair and Sportech, or those PartyGaming, his gambling team is markets. In the UK the demise of the software providers, such as Playtech The impact of moving from dot com based in London, Gibraltar and the Isle traditional bookmaker was long and 888 who have both a strong B2B to dot national, he reasoned, was Industry consolidation of Man, working with Gala Coral, 888, predicted in favour of more convenient operation and existing US apparent from bwin’s Q3 results which bwin, PartyGaming, Betfair, William Despite previous false dawns, he transaction methods. In particular, the relationships,” he predicted, adding highlighted the change in earnings and Hill, SportingBet and most other major believed the industry had now reached emergence of the smart phone would that “To understand the US you really revenue profile from the loss of casino “Despite all the players in both the online and bricks a tipping point, with the merger of force bookies into the mobile world have to be in the US” and bingo, initial entry costs and costs and mortar sectors. bwin and Party forcing the industry and beyond. associated with adapting platforms to There was no consensus view on down the path of consolidation. “It many different national models. challenges facing His personal experience includes the when US legislation would come but it might take a while to bed down but provision of audit and transaction was inevitable. “You can’t ignore the “What’s interesting is that the lack of the combined group will have a strong Merger or acquisition - How will the online gaming services and various forensic and IT level of demand that exists or immediate returns may well prevent market position in every country and consolidation happen? investigations. Recent industry effectively criminalise that many new players from other industries, leading software, in all verticals, and industry, I remain projects include work for Business in Despite the recent successful IPO of domestic voters,” said Mr notably media, moving heavily into this first rate IT, marketing and customer Sport and Leisure (“BISL”) and the Betfair listing, Mr Summerfield Summerfield. sector,” said Mr Summerfield. relations teams – the best of both more upbeat today Gambling Commission. Mr believed it would remain difficult for organisations.” Summerfield is a member of BISL’s listed companies to access acquisition than ever before.” Gaming Working Group and a Trustee He said that further acquisitions by the capital from shareholders. And with The move from dot com to dot Emerging jurisdictions of the hospitality charity, Springboard. newly combined group could simply the continuation of European market national Referring to KPMG’s recent report be about buying players, “Take over a regulation at a national level, the actual Mark’s opening address gave an Mr Summerfield believed the concept ‘Online Gaming: A Gamble or Sure business with NGR of $150m and timing and uncertainty of exit and re- overview into the four key themes that was here to stay with the UK, Italy, Bet’ which looked at emerging costs of $130m and then take, say, entry strategies of different verticals, KPMG believe are facing the sector Germany, France, Sweden and Spain jurisdictions such as the BRIC $60m out of the cost base. Suddenly together with the cost of market entry, beyond the Island’s shores and how leading the way in European gross countries, Asia Pacific, Argentina and you really start to see the power of the would all continue to cause volatility in the global eGaming industry was gaming yields. “But for the type of Australia, Mr Summerfield said they all first mover who seriously sets out to earnings. This would continue to make developing. growth in major European markets had advantages of a developed consolidate,” reasoned Mr it difficult to raise money. “In these forecast by the likes of H2 Gambling banking system and large populations Mr Summerfield opened by saying he Summerfield. circumstances, the main way of pulling Capital, deregulation must continue,” with a penchant for gambling. was disappointed that the key themes off large scale consolidation is likely to Despite suggestions by some analysts he urged. France, Spain and Denmark and issues facing the industry had be through mergers,” said Mr A move to a dot national approach in that certain impediments made would grow strongly in the next three changed little over the past few years. Summerfield, adding that it would be Europe would help companies better mergers unlikely, such as US legacy years although France’s licensing In the UK, for instance, arguments commercially imperative for understand that people were not risk, shareholder interests, cultural framework review “may not bring all were still raging about selling the Tote, companies to overcome their homogenous and that regional differences, geographic revenue risk; the hoped for benefits”. US facing funding of horse racing and the myriad differences in order to agree variances existed, so each country companies that waited to see how the operators, Pokerstars and Full Tilt, of UK taxation structures which were merger terms. would need to take these factors into Party/bwin merger panned out “would would continue to gain market share best summed up as “a working model account when formulating an operating be taking a flawed approach”, he said. Regarding the US market, the big in European poker, he predicted. to the rest of the world of how not to model, he said. unanswered question remained how do it.” So he was delighted to hear the Over the next three to five years Mr He said all companies had to focus London-listed companies could gain “Despite all the challenges facing the Isle of Man Tax Assessor Malcolm Summerfield envisaged the possibility increasingly on tax, especially the access to the US gaming market post online gaming industry, I remain more Couch’s Summit speech earlier in the of just three big online gaming location of intellectual property, to regulation, especially with the US’s upbeat today than ever before,” he day “giving a more enlightened companies emerging. This assumes invest heavily in IT and achieve cost tendency towards protectionism. He concluded. approach to taxation.” the US aren’t involved, with favourable efficiencies in each country. “The suggested that any regulation would US legislation “We could see the fundamental message is that they will likely favour American companies, but American super casino brands driving have to recognise the need to run 23 24 Regulation in the Sector

Archie Watt Senior Manager: Advisory KPMG Isle of Man

As one of the industry’s foremost IT “Gaming is a leisure activity and Kahnawake, Antigua and the Isle of experts, Archie Watt joined KPMG successful operators are those that Man, said Mr Watt. Isle of Man in July 2010 from KPMG combine the enjoyment with the Consequently there was a London, where he was working as means of making money for fragmentation on regulation an IT Advisory Senior Manager for themselves,” said Mr Watt. At requirements in Europe and the rest of Archie Watt the Information, Communication present, there was a patchwork of the world which meant that operators and Entertainment practice, with a regulation. In some places it was had to separate out their business Senior Manager: Advisory particular focus on online gaming better than others. The UK was an models, with all the resultant clients. example of having a good regulatory KPMG Isle of Man complexities, according to whether framework although “what they forgot He has worked for KPMG since 2006 they were dealing in France, Italy, to do was put in place the necessary and before that with BDO in London, Denmark or Spain,” said Mr Watt. tax structures to go with it,” he added. where he worked on the public listings There was a whole range of legislation of 888, Playtech and PartyGaming “The Isle of Man has not made the that operators in the sector had to amongst others. He recently co- same mistakes,” he continued. comply with to ensure that money authored the KPMG report ‘Online Instead, they had brought in a far more laundering didn’t take place. These Gaming: A Gamble or a Sure Bet?’ comprehensive, understandable and included the Third European Union enforceable regulatory regime than in Mr Watt spoke extensively about Directive (2005), Money Laundering other jurisdictions. regulations in the sector, covering the Regulations 2007, Proceeds of Crime growth in regulation, how we have got Kahnawake, in North America, was Act 2002 and the Terrorism Act 2000. to where we are and the influence of one of the early exponents of online “Contrary to what some Governments the EU. gaming, Mr Watt continued. There believe, in reputable jurisdictions no were a number of casinos on their online gaming sites are operated by Mr Watt said, at present, the sector territory and they naturally evolved into money launderers,” said Mr Watt. itself was not widely understood and the online sector, principally to provide “That is categorically not the case in that education was required both on sports betting options for people living the Isle of Man. If it was, they and off island to show where eGaming in the US, although since 2006 this wouldn’t even be shown the front fitted in to the regulatory environment was prohibited to Americans. But door. That is not what happens.” as a whole. anyone in the world could go online to Attempts at money laundering are As with the financial services sector, play legally on a website which was in spotted very quickly by responsible he continued, the eGaming industry a properly licensed jurisdiction. organisations, he continued. If an was also sitting on large deposits of operator suspected a crime then he customer money at any one time and had a responsibility and requirement to customers wanted that money back. Range of regulations report it. “If they don’t then it could In the Isle of Man’s case, the role of Controversially, France and Italy have mean going to jail. So it is in an the GSC was to allow companies to gone down their own routes on operator’s interest to have well make best use of that money but to regulation, where to provide services constructed and well regulated ensure that it was returned to to their citizens the operator had to be procedures in place to protect them customers in due course. licensed in that jurisdiction. This was and prevent illegal money coming in to completely contrary to the approach of their organisations,” said Mr Watt. jurisdictions such as the UK,

25 26 Why have these regulations The reason the state lottery gave was How can the rules be applied? On deposit He said that online operators arguably in place? that it was to prevent fraud and that had more controls in place than most With potentially hundreds of If you had a bank card BIN number the subtext of this was that bwin of the banks. “They have to be more Above all, for operators, it helped thousands of bets taking place daily, from the UK but claimed to be from wasn’t preventing fraud. “But it was in and more sophisticated as the level of provide peace of mind for their players, how was it possible for operators to somewhere else then immediately a the interest of bwin to prevent fraud. knowledge of the operator grows.” he said. “If you have got the Isle of know that customers were who they warning would be sent to the Fraud cost bwin money, so why would Man badge on your site, that’s good say they were? asked Mr Watt. operator’s site which could block the He concluded by stating that to they want to encourage someone to enough for them. They assume there application before it was submitted, he comfort those with little or no previous defraud them. This was not the case,” For ease, most organisations used a are processes in place to protect them, said. experience of the eGaming sector it said Mr Watt. four stage automated application that there is a regulator sitting on top was a well regulated and well run process to verify players. of them making sure that it is a safe It was also in the interests of online industry. On win and secure place to play” he said. operators to know who their “But those with experience, you can customers were. “If you are a sports Regulations are normally drawn up as On registration If it was found that someone was be comforted that your views and your book, you’ve got to know that the a response to state monopolies that winning consistently it might be hopes and beliefs are being fulfilled. player has the money to pay you if There were third party operators who ran lotteries. “Those state monopolies because they were lucky but they I am very positive for the sector, I love they lose,” said Mr Watt. They would could look into customer validation, have been losing money hand over fist might also be in collusion with it and I have worked in it for over 10 also want to know if the player was often using Government websites and to online gaming operators,” Mr Watt someone on the operator’s site, said years,” said Mr Watt. part of a betting ring because if they databases. Whilst Mr Watt ventured said. Why? Because online operators Mr Watt. He gave an example of a were then the sports books would lose that this was all rather “big brotherish” have provided far better returns to poker operator where a friend of the money. Equally it was important to it was done to make sure only the right their players. online player worked for the operator know if someone was involved in people were getting access to the and was able to tell the player the “Gaming is a leisure activity and terrorist activity, so knowing your He said state lotteries claimed “to system and to play fairly. “If we aren’t identity of the cards on the table. customers was a key part of have a divine right to prevent fraud.” who we say we are or where we say The individual’s identity was traced successful operators are those that regulation. The message they gave out was that we are, then that is going to get and they were caught. no fraud happened on a state lottery. caught,” he said. It was also a requirement to know if combine the enjoyment with the means Consequently, Mr Watt added, online people were old enough to play and to operators were having to fight against block them if they were not. “All these On withdrawal of making money for them.” that perception very hard. He gave an sites have procedures in place to example of the European Court of To comply with money laundering prevent and protect against under age Justice hearing an appeal by the legislation, any payouts of over $2000 play,” said Mr Watt. Portugese authorities against bwin for had to be recorded and checks on an sponsoring local football. individual’s identity would also be carried out, Mr Watt revealed.

27 28 Safe and Fair “In order to make it safe and fair we also look at the software provider. We make sure we conduct reviews at both the Tex Rees operator and the software provider to eCOGRA Limited Tex Rees protect players thoroughly.” Fair Gaming Advocate

Fair Gaming Advocate Tex Rees operators offered best practice. Shortly place for the player to go if they have a that had risen to 826. Ms Rees said assessment teams, operator and program. “We are looking at an currently runs responsible gambling after, they were joined by Ongame problem,” she said. the increase was attributed to more software supplier Work Programs and operator from a holistic point of view, initiatives and dispute mediation (bwin) as a Founding Member. In the sites becoming eCOGRA approved and a review of the Payout Percentage and to ensure that they are continually She highlighted that eCOGRA run services for eCOGRA (eCommerce ensuing years, eCOGRA has also because players were more RNG methodology. compliant and always up to best onsite training programs, the majority and Online Gaming Regulation and completed almost 500 onsite reviews, knowledgeable about where to go for practice,” she said. on responsible gaming, where they As a result of intensive data analysis Assurance). each lasting between three and five mediation. work face to face with player carried out, eCOGRA issues over 3000 As well as the onsite audits and data days. They have reviewed She joined eCOGRA in 2003 with more interfacing company staff, to make She emphasized that eCOGRA offered certificates annually on key reviews it was often dispute mediation approximately 200 sites against eGAP, than 15 years of management and sure they are made aware of problem a player mediation service and not an performance indicators such as payout that acted as an early warning signal of the EGBA Standards and for customer relations experience in both gaming issues and responsible arbitration service. If an operator didn’t percentages and RNG (Random a potential problem with an operator. compliance with regulations at land-based and online gaming operator conduct. agree with what eCOGRA felt was a Number Generator) relating to casino, “Players are the first ones to tell us if different jurisdictions. Of those 145 businesses. Ms Rees has mediated reasonable resolution to a dispute, poker, bingo and live dealer studios. there is something wrong. We need to operators now hold the eCOGRA Safe It’s important that players keep their thousands of player disputes however, the matter would be taken to listen to them, which is one reason & Fair Seal. gambling activity within budget and Ms Rees explained that the method originating from eCOGRA Approved the eCOGRA Board where the why dispute mediation is so that operators have the tools in place used for testing data was output based Sites. She established eCOGRA’s To gain approval, each organisation decision could be made to suspend important,” said Ms Rees. to encourage sensible gambling by and known as the Total Gaming Responsible Gaming Requirements receives a visit from an eCOGRA the eCOGRA Safe & Fair seal. “So providing opportunities for deposit Transaction review. The objective of She described the strict Governance and continues to ensure they are Compliance and Advisory Services there are teeth behind the mediation limits, cooling-off and self exclusion, which is to show fairness by Structure adopted by eCOGRA. correctly implemented across over 140 (CAS) team member on site looking service,” she said. said Ms Rees. demonstrating uniformity and Stressing that no seal would be leading online gambling websites and at all areas of the business. The CAS Ms Rees said that on average there independence. granted unless the Seals Compliance mobile operations. She has also team member then prepares a “The great thing about the online was less than half a dispute per month Committee was absolutely sure that created responsible gambling training compliance report for management gambling industry is that we have a per operator. “In my opinion that is a an operator had achieved 100% programs for a number of eCOGRA comments and once he is confident greater ability to successfully track superb number when you consider Compliance and Advisory Services compliance with the requirements. certified operators. that the operator has complied with players and provide tools to help them how many transactions there are and (CAS) all of the requirements as set out in keep their gambling in the realms of In summary, Ms Rees explained that Ms Rees explained that eCOGRA’s how many disputes there could be.” eGAP, the report is presented to fun, than one would in a land based The CAS team’s role is to assess and eCOGRA’s main objectives, contained role as a UK based, non-profit The majority of disputes received are eCOGRA’s Seals Compliance environment,” said Ms Rees. “You assist on site with the compliance of within its eGAP (Generally Accepted organisation is to help make the global over withdrawals, bonuses, locked Committee, made up of Independent can’t effectively stop players entering online gaming operators, software Practices) document were online gambling industry safe and fair accounts and fairness of the software. Directors, who decide whether the a gambling establishment whereas suppliers and service providers against demonstrated in three main areas; for all players by providing assurance operator is awarded the Safe and there are a number of ways of blocking She itemised various examples of industry best practice and jurisdictional Player Protection, Fair Gaming and that operators are honest, games are Fair Seal. online players.” correspondence received by eCOGRA regulations. Responsible Conduct. fair, monetary deposits are safe and from both players and operators that winning bets are paid in a timely The department has moved from a “An informed player is the best player. following successful mediation on manner. eCOGRA is about player pure audit or assessment function to We will not have players coming back Responsible gambling initiatives Dispute mediation issues such as slow payment, protection, she said. an advisory and assessment role. The if their first experience is bad. We miscommunications between players Responsible Gambling is often Ms Rees revealed that dispute objective now is to assess and assist need to make sure that they have the But this doesn’t mean simply and call centre agents as well as misconceived as only being about mediation is offered to all eCOGRA the client comply to with the relevant ability to become informed players,” scrutinising operators. “In order to technical errors. problem gambling, said Ms Rees. sites, as well as to the EGBA. To date standards. she said. make it safe and fair we also look at “Although it plays a large role it’s not she has handled in excess of 4000 the software provider. We make sure Although it can take up to a year to just about the vulnerable. It’s about disputes. She highlighted the we conduct reviews at both the Data analysis bring an organization up to best making sure that the operator works in importance she placed on being given operator and the software provider to practice levels, operators who meet a responsible environment.” The aim access to an operator’s management In 2007, eCOGRA brought the data protect players thoroughly,” she said. the required high standards receive the is to protect the underage and to ensure that any disputes were services previously performed by PwC Safe and Fair Seal. There are also eCOGRA is a fully transparent, vulnerable, to ensure that operators settled in a timely fashion. Normally in-house and recruited a dedicated Certified Software and Affiliate independent standards authority act with integrity and that promotions disputes are resolved within 72 hours. team that would maintain the TGTR Program Trust Seals. established in 2003 and was originally are delivered in a responsible manner. approach. They also engaged KPMG to The mediation service was started in a Microgaming and 888 initiative to “If you are a responsible operator then perform an annual quality assurance She stressed the importance of 2004 and in the first year there were demonstrate that they and their you are going to make sure there is a review. The review covers the internal undertaking a continuous compliance 151 requests for assistance. Last year 29 30 Insurance: Not a Gamble Philip Tompsett

Philip Tompsett Phil Tompsett is Head of General Insurance for Aon (Isle of Man) Ltd. industry was particularly vulnerable to by virtue of having a website, had the laws, but every jurisdiction was He was formerly head of Aon’s operations for the North West of England and technology and not necessarily at the same legal responsibility as a different and nothing specific had been Broking Director has held many senior positions across the Aon Group. His client experience front end of the operation either. The publisher. Indeed, he suggested that rolled out yet. “But at least the PCI is encompasses complex risk and insurance programmes for domestic and back end of the business was this amounted to even greater trying to make sure that everyone is Aon (Isle of Man) Ltd international businesses across the public and private sector. especially open to attack in areas such responsibility for the eGaming sector singing from the same hymn sheet,” as its method of invoicing, the way it because “if you operate on the he said. provided a white label service for internet then you are not just subject So in a relatively lawless environment, clients, through its service level to the legal laws in your jurisdiction – the internet was “a fantastic place” to agreements with third parties and you’re out there on the world wide Gareth Tungatt is a specialist underwriter at Barbican focussing on launch criminal activity. You could walk Gareth Tungatt internet connectivity. “If your system web.” e-Commerce risks. into a bank with a gun and expect to is down or certain aspects of it, such This even included defamation, libel get life imprisonment but because the e-Commerce Underwriter He brings to the operation the benefit of 13 years experience of underwriting as your payment partners operation and slander. “You are responsible for internet was virtually unregulated and and placing technology and cyber risks in the London insurance market. He has are not operating properly, then your everything about your website, there were generally no extradition Barbican Syndicate at Lloyds developed substantial sector expertise, contributing to several industry business grinds to a halt,” he warned. of London publications on insurance risk management for the e-Commerce sector and including intellectual property,” said Mr laws, criminality abounded. Whilst every network’s functions were Tungatt. Any branding or endorsement working with a number of blue-chip organisations in a specialised risk Data extortion and blackmail demands, unique and streamlined to meet a carried on the site, for instance, had to consultancy role. fraud, phishing and pharming were all company’s own requirements, an be cleared for use in the jurisdiction of commonplace examples of criminal eGaming operation was reliant on a operation. Particular attention needed Their joint presentation outlined key He said there was an increasing activity. “I’m sure everyone has had an wide range of supporting businesses to be paid to blogging activity. He said risk issues for the sector which amount of non-physical exposure email from their uncle in Nigeria at and activities such as payment he had seen many examples, in North conventional insurance does not cover, emanating from the internet and some time in their life who was going processing, in-game betting, real time America especially, where there were supported by real life uninsured loss computer networks and these to deposit half a million into your transactions and interfacing with more stringent privacy laws than in the examples and highlighted the exposures were broadly split into two account. We understand these type of affiliates. Consequently the speed and UK, of uploading information which specialist cover now available for the main areas: first party, which was a scams have about a one per cent complexity of the IT function made had not been cleared for use. And he eGaming and supporting sectors. company’s own exposure and own penetration rate,” he said. eGaming companies especially warned that stricter laws could follow losses as a result of having access to Mr Tompsett explained that the focus susceptible to cyber risk, said Mr here in future. technology and the way the company Electronic security breaches involving of the presentation was on some of Tungatt. hacking, time or logic bombs, trojan operated. In North America, he continued, if you the sector specific risks, in particular horses and computer viruses were He said people didn’t tend to think of were to obtain information such as cyber risks, and said that he was But the wider subject, he said, was on slightly different to criminal activity but their computer network as a business credit card numbers or people’s names delighted to have brought along Gareth third party or one’s liability to others. could also be a significant nuisance. in its own right which was a mistake. and addresses, there was a duty of Tungatt, the key sector underwriter “In short, what is your organisation’s Internet hackers had to be taken “It certainly is,” he countered. “In fact, disclosure. It was necessary to contact from Lloyds of London to provide exposure to a third party as a result of seriously, citing the example of a many of my clients would describe all those people by letter which was “cutting edge” information for the technology?” Mr Tungatt questioned. hacker that recently infiltrated the their computer network as the crown costly and, depending on the State, it Summit. Pentagon’s computer. “That’s meant Cyber risk was a subject covered jewels of their organisation.” was also often necessary to provide to be one of the most secure places in Mr Tungatt said that cyber liability was almost on a daily basis in the national credit monitoring services such as He explained that first party exposure the world. If they are at risk then a prevalent in many different aspects of papers, he said. Stories were Experian to make sure any information would involve any risk to an operator’s financial institution or a gaming the eGaming industry and began by commonplace of computer hacking, of being used wasn’t compromised. own network. This might be loss of company is certainly not beyond it,” explaining exactly what cyber liability people stealing data, of disks being data, system failure, damage to both Statistically, around two billion people said Mr Tungatt. was. Unlike property, motor or house lost in the post containing information the network and the Company’s worldwide now used the internet and insurance, cyber liability was anything about millions of people. He also highlighted internal sabotage, reputation and any loss of business this created a huge amount of that was non-tangible, he said. “I am such as where a malicious insider, He said it was a common revenue or increased costs of working potential plaintiffs, said Mr Tungatt not talking about technology insurance perhaps a disgruntled employee from misconception that companies could as a result of disruption. Furthermore, there was currently no or physical assets like lap tops. It could an IT department, would take a system only be exposed to cyber risk if they single regulation relating to the be anything you say or do, any He said as far as third party exposure down. were a technology company. “That is internet. The payment card industry information that is contained in a non- was concerned, it was important to completely incorrect. I can’t think of had gone some way to establishing tangible format. It could be the way remember that eGaming companies, any industry in the world that isn’t reasonably consistent card processing your mobile phone operates with the exposed in some way in terms of network.” cyber risk.” He said the eGaming 31 32 “When we have these forums it’s quite And he warned against complacency. He also focussed on an example of The seven modules comprised: “When we have these forums it’s external hacking where a man was • Technology and miscellaneous quite interesting to speak to your charged with hacking into the interesting to speak to errors and omissions in the technical guys who are always very protected computer of a Las Vegas rendering of professional services your technical guys tight lipped. They say nothing can ever hotel, resulting in a total cost of go wrong with their network. Well we intrusion and theft of data of nearly • Multimedia liability from internet, who are always very see this from an insurer’s point of view $6m. The defendant faced up to five marketing and advertising activities and let me tell you that you certainly years in prison. • Security and privacy liability from do have some network security breach tight lipped. They say And, finally, data extortion. On the day breach of privacy or privacy issues.” of a major multi-national sporting regulations nothing can ever go Mr Tungatt then provided a snapshot event, a leading bookmaker was the • Data recovery and loss of business of the types of cyber risk faced by an victim of a multiple distributed denial income wrong with their IT network ranging from human error of service attack where a demand of to system malfunction, from virus to £250,000 was made to bring the • Privacy and regulatory defence and network. Well we see fraud and malicious attack. “I know disruption to an end. It caused penalties there are different ways of mitigating significant business interruption from this from an insurer’s different exposures but as you can see loss of unplaced bets. • Crisis management costs it’s not just physical perils which you • Data Extortion point of view and let have to deal with. There is more exposure to a computer network than So what protection was available in me tell you that you there is to a tangible property.” the market now? certainly do have Mr Tungatt said there were gaps in traditional coverage. Currently just five Case studies some network per cent of companies were insured He then highlighted a number of cases for cyber risk. The reason being that security breach to show potential areas of concern for cyber liability was concerned with the eGaming sector. intangible assets and most organisations only purchased issues.” Firstly, of inside sabotage, where a traditional coverage e.g for property. computer programmer for a major There was no trigger in those policies online trading entity had a grievance, for hacker attack, sabotage or systems wrote some malicious programme malfunction. Because there was no which caused the outage of all physical damage, most policies ecommerce activities for 48 hours over excluded coverage. the busiest trading period of the year. Aon/Barbican eRisks solution, An example of infringement of however, now provided a one stop intellectual property was where a comprehensive cyber risk solution games development firm suffered a designed specifically for e-commerce claim for damages after including clips exposures including eGaming and which were available as an online supporting industries. download. The content hadn’t been cleared for use by the freelance The product was broken down into content provider who went bust, seven modules which could be whereby the games development firm bought as a package or individually, found itself facing defence costs of Mr Tungatt. £5m against one of the largest music companies in the business. Breach of Privacy also featured. Rogue software was found to be installed in a company network with the aim of collecting credit/debit card numbers as they were processed. It affected 1500 individuals and three major banks issued legal proceedings against the company for £6m to recover their losses.

33 34 East Meets West

Bill Mummery Executive Director Celton Manx Limited

Bill Mummery has enjoyed an region and it was clear that this was Why the Isle of Man? international career in both Africa not of a sufficient standard to move It was seen as being a premier and the Far East before completing the business forward, said Mr licensing jurisdiction, of high quality a management buy-out from Mummery. with the right levels of due diligence. Granada Group in 1991 which Climatically, too, the region was prone Legislation and regulation was of a brought him to the Isle of Man. to typhoons bringing the threat of high order and a legal system based on Part of the eGaming industry since disruption to external networks. There the English system. Its time zones 1998, Bill helped establish and float was also a level of political uncertainty fitted with what SBOBET was trying to one of the 'first to market' entrants on and risk which meant business could achieve. AIM in 2000. As eGaming Ambassador grind to a halt. Bill Mummery Crucially, the Island also had a world for the Isle of Man Government from They also faced a lack of banking class telecommunications late 2004-2007, he aided with the Executive Director facilities. It was very difficult to infrastructure, capable of handling development of the Island as one of establish a business to consumer significant volume processes. “On a Celton Manx Limited the premier global jurisdictions in the model when credit card processing premier league Saturday, we process industry. facilities were not available. anything between 300 and 500 Joining SBOBET in 2008, he Furthermore, UIGEA legislation in the transactions a second. That is a established their European operation, USA had also had a direct impact on massive overhead on the Celton Manx Limited, on the Isle of SBOBET’s core markets. Whereas a infrastructure,” said Mr Mummery. Man. He is a strong supporter of the large number of major brands had He also revealed that during the recent economic development for the Isle of been operating with a singular focus football World Cup, on mobile Man and the contribution that the on product, currency and market, platforms alone, SBOBET processed eGaming sector will continue to make. UIGEA meant that operators were seven million transactions. “I am looking for substitute revenues. He spoke on the reasons for eastern certainly not looking to denigrate Suddenly there was an awareness that operators choosing the Isle of Man, Ladbrokes as a brand, but during the there were other geographical the lessons learned, threats and same period they celebrated the locations in the world, including Asia, opportunities and his view of the achievement of 100,000 transactions where there was the chance to landscape for the Isle of Man as a on mobile platforms.” provide at least a partial substitute for jurisdiction for the next three to five their lost revenues. So for the first The sheer scale of this activity could years. time, operators had a rival looking to only work effectively if it was Initially, he explained why SBOBET had play in their back yard,” he said. supported by high quality professional made the decision to relocate from support services and the Isle of Man “Against that backdrop, I know a Asia to the Isle of Man. Around five had these in abundance, he said. number of operators allowed years ago there was a small cluster of “When one is moving this amount in a themselves 12 months to do their highly successful, cash regenerative massively cash generative business homework and perhaps carry out a sports betting businesses in Asia. people have to work very hard at the little bit of a beauty parade in this part They faced a number of strategic coal face. The services available to us of the world and, as a result of that, issues, however. Apart from a special on the island are very important.” this jurisdiction was able to attract two economic zone in the Philippines, of the largest operators,” said Mr there were considerable limitations on Mummery. quality licensing and regulation in the 35 36 “The future is very bright and it’s here in the Isle of Man.”

Access to the UK white list was also He said operators faced a dilemma. “We are operating on a 1% gross Man, most especially that they are criticised the domestic policies of US Opportunities important, although not simply Did they chase licenses only to margin which is pretty unique guaranteed to get their tax take, then and the influence they brought to bear He said there was very significant because of the access it provided to become late entrants and fringe compared to the gross margins of over time I believe there may be a on the wider market. “They end up business to consumer growth potential the UK market but also further afield. players or was doing so a cue to future other betting models.” route forward.” interfering with businesses like ours from existing geographical locations He said there was a perception that growth. “It’s also a question of that have no exposure to the US and An average fixed odds operator would He said it might result in one-on-one and markets. They were still “almost the Asian gaming companies who whether you’re seen to be diversifying no intention of exposure to the US, but offer 200 football markets in a week, agreements where it was understood virgin territory”, especially since sponsored Premier League football and reducing your dependency on it is massively disruptive. I’m afraid compared to the 1500 available that “we undertook to run our broadband coverage was as low as were primarily looking to build brand traditional markets, particularly when that is probably something we are through SBOBET. “So you have two businesses at least to the standard of seven per cent in some places which awareness in European markets. “The your business is being scrutinised by going to have to live with,” he said. very compelling arguments about theirs. Why wouldn’t they allow was both a constraint and a massive reality is that that is a bonus,” said Mr potential investors and the investment value and depth of content but this still access?” He hoped effective solutions could be opportunity. Mummery. “There is no more community generally,” he said. has to be communicated,” said Mr found but warned, as things stood, it effective vehicle than if a premier He said the one caveat was that a With the regulatory restrictions in Mr Mummery said the Isle of Man was Mummery. was not ideal to be dependent upon league soccer team carries your logo number of jurisdictions in Europe still mainland Europe, Mr Mummery said also an excellent base for developing one bank to handle all payment every single week.” He said that every The generic benefits of taking the new operated a turnover tax. “In my view new geographical locations such as a business-to-consumer platform. processing. This was because if you game was transmitted to 200 Asian handicap business model to this is simply not defendable. It will not South America, Australia and parts of He said that this had not been possible were reliant on a bank that had assets countries many of which didn’t have market was a significant responsibility work,” he said. “It drives very poor Africa all had their challenges but across Asia despite the huge volume scattered around the world, making conventional marketing mechanisms. and required an education process value out for the consumer.” But he offered great potential. of business that was done in those acquisitions around the world, you So that by using SBOBET’s “before you start to spend any said if jurisdictions considered a gross markets because it was impossible to could wake up one morning and the He briefly touched on the recent sponsorship deal with West Ham significant amounts of money on your profits tax model and the regulatory identify and establish the right sort of dynamics of their operation could have Betfair flotation as being a business United as an example “what is very own Brand marketing.” He said it was system was in place then “as organisational connections there. changed completely. “The safest way model that “is absolutely not without noticeable is that when those pictures important to look long and hard about operators we would embrace that and However, a massive business to to have continuity of processing is to its risk” and questioned whether their arrived in Asia, the brand that was how a vendor site was presented, how I think it would be a win win situation.” consumer opportunity existed in those find a bank in a creditable jurisdiction, parochial fixed odds betting model recalled was certainly not West Ham, it functioned and presented its data core markets that could be leveraged The UK white list had been key in the with all the controls but where they would fit into new markets. “If I was the brand that was recalled was and it had to be sensitive to cultural from the Isle of Man “because in the Company’s decision to locate to the have neither international aspirations, an investor today I would be asking SBOBET. We have demonstrated that differences. “I’d be the first to say Isle of Man we have been able to Island. Without this, they couldn’t have nor international assets scattered where does your future growth come Premier league sponsorship is we haven’t got that right yet,” develop very effective and very sponsored UK football teams. He around the world. They would be less from? The risk section of the Betfair massively beneficial in our core market Mr Mummery admitted. efficient platforms for processing.” explained that everyone was now risk averse than some of the bigger prospectus was enormous,” he said. and that is something that is not SBOBET had been live in the Isle of awaiting results of the white list brands,” said Mr Mummery. necessarily understood,” said He said it was now possible to put real As for the Isle of Man, it had Man for two years and had proved to review. If its purpose, Mr Mummery Mr Mummery. time data on the LED boards around He also railed against the eGaming established itself as one of, if not THE be a sound move. “We believe we said, was to ensure the protection of premier football grounds. He said the industry’s “massive promiscuity” in premier jurisdictions. The Island had Furthermore, the Isle of Man was well made the right business decision, we the UK consumer this was “a non access to this technology, coupled the way it enticed customers with ever met and exceeded the aspirations of known and respected by the City of made the right choice and we are event” for the Isle of Man. “But my with the availability of mobile platforms more bonuses and free bets. This was its licensees and was well understood London but it wasn’t simply as a actually heading in the right direction. concern would be, that despite all the was lapped up by customers and now pushing down operator profits and in the City of London as a jurisdiction. vehicle to penetrate the UK market. assurances to the contrary, sooner or accounted for up to 65% of gross wasn’t good for operators or He said there might be a partial Five years ago, Europe had also been later it may be part of a revenue stakes placed on any football game. customers. “I think it is endangering resolution in the constraints relating to seen as an realisable objective. But he Threats generating measure. Hopefully not,” the good health and stability of some Europe which would “benefit all our said subsequently there was a real But he cautioned that because the he said. Without question, regulation was a of the brands,” he said. existing licensees” but by focussing danger of a situation emerging where Asian handicap model was still major obstacle, said Mr Mummery. In He said that the banks were on the quality end of the business Europe would have 27 licensing relatively new to the European market a number of jurisdictions it had been historically extremely nervous of the rather than volume was something jurisdictions. He questioned other it still needed explaining at a generic used as a mechanism to protect state gaming sector but as time had passed that would stand all Isle of Man operators who had chosen to go to level if progress was to be made in monopolies. But he said a lot could be and operators had demonstrated that licensees in good stead. other jurisdictions because it would Europe. The customer benefits and the learned from the Isle of Man’s unique they were highly technology driven give them a passport across Europe. value proposition was persuasive. He “The future is very bright and it’s here circumstances. “If those entities in and responsible, this had fostered “In my view that is a perceived benefit said that the Company pushed back in the Isle of Man,” he concluded. Europe could all understand the quality good relationships with the banks. much more than a deliverable one,” 99% of all stakes by value and of licensing regulation in the Isle of This had been rather derailed in recent he said. redistributed them as winnings. times, he cautioned. In particular he 37 38 Future Trends in Online Gaming Warwick Bartlett

Warwick Bartlett founded Global For the answers, he said that GBGC The eGaming industry was also one of business,” said Mr Bartlett. He said Warwick Bartlett Betting and Gaming Consultants had looked at a number of companies the few that felt it had to buy current global broadband penetration (GBGC) in 1998. Originally from an to assess their competitive edge in the customers through generous sign-up was still under 7%, forecast to grow Founder and Partner operational background, he now has market place using the Porter model bonuses and dormant account to 8.3% by the end of 2011. But he GBGC over 40 years continuous experience from The Harvard Business School. incentives. Despite this, few warned that it could take a decade to in the gaming industry, continuing This was based on five forces that customers read the bonus rules which fulfil broadband’s potential and to chair and present at numerous impact on an organisation – led to disputes and complaints to the eGaming was at the mercy of UK and international gambling Competition, New Entrants, Suppliers, regulatory authority. telecoms operators who needed to conferences. He is regarded as one Customers and Substitutes. “Because improve technology and access as “This is the soft underbelly of the of the industry’s top experts. of the special nature of our business well as lowering consumer costs businesses. If the industry does not we have added a sixth – the Role of outside Western Europe. Mr Bartlett delivered a presentation put its own house in order I believe Government,” said Mr Bartlett. “The question now based on the Harvard Business School the authorities will,” warned Mr Many offshore jurisdictions also had “Porter” model to analyse the forces Bartlett, predicting that lotteries limited supply of data centres and that challenge the industry and how entering the European market would telecoms providers which meant is that after our Competition best the eGaming sector on the Isle of have easy-to-understand bonus switching suppliers was often difficult. initial advice of Man should face up to the future and He said more than 2,100 websites systems which would potentially pay succeed in a competitive market place. offered gambling services, most out faster than current operators. targeting European customers with Substitutes some two years He began by explaining that he had He said that a recent EGR Live Yahoo English overwhelmingly the pre- migrated GBGC to the Isle of Man in survey into online gambling revealed Mr Bartlett said there was little long dominant language although Italian and ago, where does 2007 on the back of a slowing down in 38% of people gave the main reason term advantage of new products Spanish also featured. the global economy and out of control for opening an account was so they because if something proved popular, the online industry spending of the UK Government. A handful of operators dominated each could claim a free bet, 24% because other firms would simply add that sector with a mass of smaller of brand trust and 18% because of the game or product to their own sites. In late 2008 and early 2009, he said he stand today?” companies. “All sectors operate on odds offered. The research showed Betfair’s betting exchange model was made three speeches to the industry very tight margins and have to work there was little to choose between perhaps the best example of in Gibraltar, Malta and the Isle of Man extremely hard to attract new rival companies – they all had similar innovation. Yet that was a decade ago warning that “times were going to customers. The business model works products and similar websites. and it hadn’t led to the demise of the become more difficult than they had well in low tax environments to enable traditional bookmaker “But it has been in the past.” high payouts to customers,” said Mr certainly shaken up the bookmakers But he stressed: “For me, the story to Bartlett. New Entrants and had an effect on betting margins be told was one of good news for on horseracing and football in the UK,” Sports books aimed for margins of 8- Despite competition, new entrants those companies that were prepared he added. 10% but, using figures from the were still keen to come to market, to take the necessary steps to prepare operator Unibet as an example, this said Mr Bartlett. Wealthy individuals Social gaming sites offered an for recession.” Due to quantitative revealed a range from 6% to almost saw eGaming as an easy way to make alternative but they were different easing he reckoned that the current 12%. Increased competition meant money with its low barrier to entry, business models and didn’t give recession was not yet as severe as margins would come under further even though there was a high barrier customers the chance to gamble and those of 1972, 1982 and 1992. pressure, said Mr Bartlett. To to success. win money. He produced figures from a number compensate, bwin were at the of leading eGaming businesses which forefront of in-running betting but even showed rising turnover from 2007 but their margins had fallen from 8% to Suppliers The role of Government not matched by PBT. “The question 5.5%, he added. Telecom providers, payment providers, With its influence over tax rates and now is that after our initial advice of banks, software suppliers, affiliates licensing requirements, Government some two years ago, where does the and media suppliers were all influential was arguably the greatest influence on online industry stand today?” to an eGaming operator. “We see the the European eGaming market, said take up of broadband internet as a key Mr Bartlett. Where monopolies didn’t driver of the internet gambling exist, the combination of gambling and 39 40 “So far as the Isle of Man is concerned, Government has put in place a structure that enables internet gambling to prosper – zero corporation tax, great IT and a great place to live and work.”

the internet was a nightmare to most gamblers decide to walk with their differing advantages over the Island. governments. “The key issue for the mouse offshore, then it is they who And he stressed that a VAT rate of next decade is – will we end up with will cause Government to lower tax 20% from January 2011 would 28 markets and 28 licences in the EU. rates and not all the reasonable increase costs for gambling companies Or maybe just one licence to serve the pleading of responsible gambling on the Isle of Man which they whole of the EU with one tax rate?” operators.” He said that was precisely wouldn’t have to face if they were he questioned. what happened in 2000 when big UK based in other jurisdictions. bookmakers went offshore. He argued that regardless of tax Suggesting a radical solution, he revenues collected, onshore Despite some deflationary forces, ventured: “Government, therefore, Governments typically retreated to because of the fall in currency and needs to take account of this and I policies of tax and spend because it quantitative easing, Mr Bartlett think the time is right to abolish betting won votes. So as far as gambling was wagered that inflation would rise tax for eGaming Companies,” Mr concerned it would be “those based which would be positive for remote Bartlett urged. offshore, the businesses that I call the gambling. “Inflation is ideal for a He said there was an opportunity to ‘Pirates of the Caribbean’, who will raid business model that has high volume create jobs and prosperity which France and Italy, regardless of law and and low fixed costs. The reverse is should be grasped. “Rather than consequences, and offer better value true for the land based business where follow the rest of the market in catch than those onshore.” consumer income lags inflation but up, the Isle of Man should now be costs rise immediately with inflation. He said this was a possibility worth positive and lead the market,” he considering especially since the top “So far as the Isle of Man is concluded. five unlisted private companies were concerned, Government has put in at least four times more profitable than place a structure that enables internet the major five listed internet only gambling to prosper – zero corporation companies. tax, great IT and a great place to live and work,” said Mr Bartlett. Would those companies drain the market of liquidity? Would Italian and But the Island still had significant French customers ignore brand in challenges to face if it was to retain its favour of value and risk? status as a premier jurisdiction for eGaming. There were a finite number “We note that the gambler is 30% of worthwhile operators to attract and worse off betting under the new laws there was competition from three of France,” said Mr Bartlett. “If those other major jurisdictions which had

41 42 What about product innovation in the future. Where do you Panel Session think the industry is going to go from a product point of view?

John Spellman – Moderator Director Question to Roger Raatgever MeGA “Without doubt, further product innovation would enhance Raatgever considers connectivity as a huge issue. our customers’ (the operators) performance,” Broadband penetration needs to be developed. Raatgever said Microgaming are developing richer products and “At present, players are spoilt with an absolute bevy of needed to do so at an accelerated rate to achieve growth. feature rich technology” exemplified by convergence. Roger Raatgever Continuing, Raatgever referenced that the internet is now Consumers are used to new technology and, indeed, they CEO 20 years old and it wouldn’t be long before a device was expect it. “So it’s no longer a product push when it comes available that would be able to do everything. “So we have Microgaming to marketing, it’s a pull,” said Mr Raatgever. New products got to start tailoring our product development to make sure and technology are needed to take this into account. it can cope with all that richness.” Claire Milne Chair, GSC Partner, Appleby Where do you think UK white listing will actually go and over what time period?

Warwick Bartlett said it was difficult to answer because the Bill Mummery agreed that this would be a probable Bill Mummery UK hadn’t been very clear on it. The Gambling Minister outcome, he said this would be acceptable as long as it was John Penrose had said there was unfinished business as far a license that recognised your primary licence or your place Executive Director as the internet was concerned, but that he didn’t want to of residency and was largely there as a bolt-on to give Celton Manx Limited alter the 2005 Gambling Act, Mr Bartlett observed. He permission to advertise. “But I hope it is not a smokescreen thought the UK Government was under a lot of pressure for additional revenue generation.” from the horseracing lobby. They were opposed to firms going offshore because they were not paying the horse race betting levy. “Although as a percentage of the Mark Summerfield gambling revenue it’s a very small figure, it shows how powerful the lobby is,” he said, commenting that he Head of Gaming thought the UK would probably introduce a system where KPMG Europe people who were offshore would take bets in the UK but there would be another form of licence in the UK.

Tex Rees Fair Gaming Advocate eCOGRA Limited

Warwick Bartlett Founder and Partner GBGC

43 44 Do you think that Europe will adopt the principle of white listing, e.g extending the EEA or that the UK will merge far more to the Where do you see the importance of self-regulation fitting in European model? with technological development in the future?

Mark Summerfield said that the EU would keep a close Claire Milne said that it was unclear exactly what the driver Tex Rees said there was definitely a big role for self- Tex Rees explained that bodies such as the EGBA and the eye on revenues of France and Italy and try to replicate that was behind future regulation. “We are being told from a regulation because it was important for the industry to lead. RGA were lobbying the European Parliament and other model across Europe. regulatory perspective that it’s about player protection. If She said that with so many innovations and new products jurisdictions around the world to aim “for some consistency that is the case then we absolutely welcome that,” she coming out it was vital “that we quickly get some kind of at the very least.” She said some progress was being made Warwick Bartlett commented that there was a long history said. She doubted whether that was actually the case, best practice requirements in place, to demonstrate to in the form of a CEN workshop agreement which is the first of gambling in the UK and the British customer had a clear however, and it was simply a matter of waiting and seeing. policy makers that the industry is willing to be regulated. step towards consistent player protection measures across understanding of odds and value. They wouldn’t accept “Sometimes legislation does lag – so the industry needs to Europe. being overcharged and, if they were, would resort to betting Is EU access the be all and end all to the Isle of Man’s lead through self-regulation.” She said if the industry sets illegally. future in gambling? Warwick Bartlett observed that the best protection for the the bar, the rest will follow. customer was competition. “But Governments don’t see it Roger Raatgever commented that over time there would Claire Milne said it was important to note that the GSC and She also highlighted the issue of regulation across Europe that way. They want lots and lots of regulation.” be one set of regulations, a common standard similar to the the cross governmental Steering Committee had worked where it was fragmenting. She gave the example of bwin, mobile industry. hard over the last 18 months discussing bilateral an EBGA member, which had separate licences in France, cooperation with various different jurisdictions. But whilst it Warwick Bartlett said there was a common standard for Italy, Gibraltar and potentially acquiring licences in Denmark, was important that the Island continued to talk to European drugs but they were all illegal! “The thing about illegal Greece and other jurisdictions as they open. “It means they jurisdictions there were other jurisdictions to focus on as gambling is that there’s no victim,” he said. “It is a are subjecting themselves to a very large number of onsite well, outside the EU. victimless crime with a willing buyer and a willing seller. audits in a single year. They’ve got auditors in their office Everyone’s happy. It could take place anywhere. I could Bill Mummery thought the pressure on operators in the almost every day,” she said. This is simply not practical. make a book here.” Isle of Man would not be based so much on the loss of eCOGRA is looking for ways to streamline the testing revenue if they didn’t have access to those mainland process by working with jurisdictions as an approved test Bill Mummery cited the example of administrators in Hong territories, but because they would be heavily criticised for house. The ideal situation would be to combine the reviews Kong who had spent 40 fruitless years attempting to take a not being seen to have diversified sufficiently away from into one onsite visit that would cover all the regulations. whole raft of illegal activities, including gambling, away from their core markets. That’s where the pressure would come. “So I believe that self-regulation still has a very big part the Triads. They then came up with the idea of criminalising to play.” Hong Kong citizens for going online and betting offshore whilst at the same time offering them a monopoly Tote product. “The net effect is that they have just handed back gambling in Hong Kong to the Triads.”

The issue of regulation not keeping pace with technology

Claire Milne said it was true that regulation had not kept in Roger Raatgever said from a technology company line with technology. “But it’s not just eGaming, it’s most perspective, initially technology drove the industry and then technology businesses,” she said, explaining that she had marketing drove the industry. Now the industry was seeing been involved with technology companies for 15 years and “regulatory pressures being a major force driving the everyone said the same thing – that the law did not keep up industry. Raatgever said that it could mean prices coming with what they were doing. She said that in 2006 legislation down and a requirement to be more innovative, something was enacted that allowed the Government more flexibility which Microgaming thrives on. with the Online Gaming Regulation Act by using secondary “As a software company, we’ve already come out with peer legislation under the Act. This was a major move forward. to peer gaming. We are coming up with three or four new The GSC was aiming to have new primary legislation both products in the next three to six months that will blow for the online and land based industries existing regulations right now,” he said. Technology is on Island. heading in directions that hadn’t previously been thought of, That would result in one consolidated piece of legislation for instance, where do you play if you are on a ship or which would provide a framework for the industry with the plane? Raatgever said Microgaming would soon be use of secondary legislation to flesh out the details – this launching technology in planes and boats. Although the Isle would allow more flexibility. “The hope is that new of Man had lost licensees on peer to peer gaming in the legislation would be out for consultation at some point in past, he applauded the Government for moving towards 2011 and at that stage I think it is for the industry to secondary legislation and welcomed the opportunity for participate as much as possible and to tell us their views in dialogue. order for the GSC to work towards an appropriate framework.”

45 46 Mark Summerfield was asked to explain his thoughts on consolidation, that buyers appeared to be few and far between and the likelihood of three super consolidated players emerging in the future. Mark Summerfield said Warwick Bartlett had shown a characteristics, economic theory, or competitor behaviour, slide earlier indicating the combined revenues of six leading everything pointed towards consolidation. Whether it was The Isle of Man had had success in attracting some very large gaming companies which were all growing nicely. But their three or five companies it didn’t matter. profits were “roughly zero.” That would tell you it was a operators in the gaming sector but had also seen a large number market that was ripe for consolidation, he said. He said however you looked at it, whether in terms of industry of start ups. How could the Island attract more value from different sized operators? Does the industry represent value at a P/E of 7 given the industry Bill Mummery said there was definitely “a middle ground Island.” He said one of the reasons Microgaming came to risk? Was that a realistic P/E ratio? where we are currently under represented.” But he said it the Isle of Man was because of the professional services, was important to ensure protection of all of start ups. but now “we are starved of professional services.” If more He said that there were businesses that had started up of these companies came to the Island “then large gaming Roger Raatgever pointed out that Betfair had sold at much Warwick Bartlett surmised where an investor should put elsewhere “where the climate in that jurisdiction is not companies would start to look at the Isle of Man. When higher than that. Seven might be the average but that his money in the current market. He suggested it would be fulfilling its role.” As a result, he thought we may well see a companies need good lawyers and good CSPs they may would change, Raatgever said. As markets began to the software companies like Microgaming (if it was listed), situation where people would transit from their first choice end up coming to the Isle of Man because they are regularly regulate you would see margins and revenues coming Playtech and Netentertainment because these were to the Isle of Man. “I think we are better placed to win doing business with them. Raatgever said it was unrealistic down, but values would increase because “their businesses that “don’t have the same legacy or regulatory some of those operators,” he said, citing Malta as a to move the big players because of the huge costs involved sustainability and quality are going to be strong”. issues and they can talk to anybody and deal with anybody jurisdiction that “in my view is not able to deliver a quality and there are already major operators here like Pokerstars. Raatgever said it was inevitable that the industry would see because they are not actually accepting the bets.” product for its license holders.” “The opportunities are for the peripherals.” the P/E moving up to 13 or 14. Warwick Bartlett thought it was important to encourage Claire Milne said it was not just about the license start ups because although the risk of failure with most of operators. There was a large cluster around the operators them was high, using Betfair as an example, there was a already and more of that type of business should be What was the panel’s view on bringing the banks to the table and business that had started with one million pounds and ten attracted here. That was why exclusion regulations were years later was floated for £1.4bn. “You’ve got to back put into place so that it didn’t deter that type of company. people and we don’t want to make it too difficult for them,” could more be done with understanding the banking position? Roger Raatgever said that there are more patent lawyers in he said. “I know the application process is easy but I think, Microgaming than developers! for a start up, you’ve got to lower the entrance fee and Tex Rees said she would like to see the banks getting fundamental for this sector.”There are significant risks but make it as easy as possible. But he stressed that the Isle of John Spellman said this was a perfect place to finish, with together and “helping us protect players.” The same issue also significant opportunities, pointing to the recent Man should be viewed as a whole package. “It’s not just the emphasis being placed on service providers and CSPs. applies to the tobacco, alcohol and pharmaceutical MasterCard acquisition of DataCash. “The banks need to about VAT and some betting tax. You need to get people And he told delegates: “It is now up to you to develop the industries. “Kids are going online with cards we can’t understand this sector. If they don’t understand it, they are over here and sell them the Island; that the schools are business on the Isle of Man.” identify. I believe the banks could do a lot more in coding going to get left behind. They need to start making better than in the UK; that the hospital service works well. Russell Kelly then closed the Summit saying it had been their cards to help us protect the underage.” decisions now.” Because once they see what the island is like, I think they’ll thought provoking and very informative. He was very proud take to it.” Claire Milne said from the regulator’s perspective it was Warwick Bartlett said the only real risk was the US. that KPMG had staged the event and thanked all the important to have banking on the Isle of Man “because that Claire Milne said it was a difficult balance from the GSC Roger Raatgever said the banks should make the decision sponsors, speakers and delegates for making the day such is part of our regulatory jigsaw.” She said if the regulatory perspective. For companies to be licensed, they had to and stand by it. It was possible for the banks to identify a success. authority had an issue , they would “go to the banks and demonstrate they had robust business plans and forecasts those customers that were a risk and those that weren’t. say ‘can we talk it through with you’ and that had worked in that were realistic. But there weren’t any set requirements the past. That gives us a lot of comfort.” She referred to Bill Mummery said it was frustrating for the industry because “that’s something we’ve decided isn’t new legislation mentioned earlier in the Summit by GSC because a lot had been achieved with the banks in appropriate.” She said that the Island would love to attract Director Steve Brennan the intention of which was that overcoming their sector concerns. “But to then walk away, more of the large operators from other jurisdictions “but player funds held in IOM banks would be in effect ring in my view, is not reasonable.” He stressed that it was US realistically moving them once they are established in a fenced, so if the operator went into liquidation, the funds domestic regulation that was the root cause of the issues particular jurisdiction is very difficult.” could be repatriated. “But that only works if we have the with the banks. There needed to be more balance than the Roger Raatgever said there was “a significant amount of banking on island. banks were currently showing. inertia to move a large operator.” He thought the real Roger Raatgever said he didn’t want banks “to love us, but opportunities for expansion lay with the peripherals, such as to understand us.” Raatgever implored the banks to get to CSPs, and marketing companies. “There are so many understand the eGaming business because as the industry professional services that these gaming companies are heads towards regulated markets, banking is “absolutely going to need. That’s the gap, that’s the opportunity for the

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