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Enforcement measures in EU gambling

Online gambling in EU

The success of a national gambling policy also depends on a Member States’ ability to effectively enforce its national rules. For this purpose Member States can use preventive and responsive enforcement measures.

Preventive enforcement measures

Preventive enforcement means aim at reducing the contact of citizens with the unregulated gambling offer and ensuring compliance with national gambling rules and common principles.

Inform players about the available legal offer

Today many players are not aware of or ignore if and where a gambling service is authorised. In order to enforce national gambling rules players need to be enabled to make a distinction between authorised and unauthorised gambling services offered online. Member States should therefore explore means encouraging users to play on websites of authorised operators as opposed to websites of unauthorised operators providing services without a licence.

While many Member States have information campaigns to inform consumers about the risks of gambling the Commission has little information about campaigns held to inform consumers about the availability of an authorised offer and the specific risks of using unauthorised gambling services provided without a licence.

One way of informing players about the reliability of a gambling service offered online is the use of trustmarks, issued by gambling regulators to authorised operators. They exist in several jurisdictions and players are thus better able to identify if a gambling site is licensed and by which jurisdiction. Nonetheless, the question remains as to effective such trustmarks are in channelling players to regulated websites, in particular without complementary promotional campaigns enabling player recognition. In the Commission’s workshop on enforcement views differed on the impact that trustmarks have on consumers in choosing an operator over another.

The Commission will explore, together with Member States, best practices for consumer information and education.

Understand citizens’ choice/behaviour

Many EU citizens purchase online gambling services for entertainment purposes. Many of these users, either because of a lack of national supply of such services or because they seek to maximise their return on stakes, search across competing online gambling services across borders. It was highlighted in many responses to the Green Paper, from Member States and stakeholders alike, that in order to channel these requests into the authorised national market a Member State will have to provide an attractive authorised offer.

Responsible Business Conduct

Naturally, industry inherently has an important role to play in the enforcement of national gambling rules. The nature of the internet allows consumers to access gambling services cross-border. Very often Member States require a national licence for the offering of gambling services to a citizen. In order to ensure the effectiveness of national gambling regimes operators need to respect these regimes and refrain from offering their services to consumers if not authorised to do so.

At the same time industry can and has launched its own initiatives to ensure the attainment of policy objectives. The European Committee for Standardisation (CEN) workshop agreement on responsible remote gambling measures for example was initiated by the gambling operators. The CEN workshop agreement developed a set of control measures designed to ensure the adequate protection of customers and the responsible behaviour of gambling operators, software suppliers and associated service providers.

Appropriate reporting obligations and supervision of licensees

A thorough post-licensing process is imperative to ensure full compliance of authorised operators with the respective national regulatory regime. In order to have a full understanding of the market and of the regulated entities that are operating it is crucial to collect information from all relevant sources not only from the regulated operators. Establishing the information requirements, collecting and processing the information are key challenges for regulators.

In an online and technology-based sector the monitoring of gambling transactions between the player and the operator and access to the operators’ server are considered essential for proper supervision of authorised gambling operations. In some Member States monitoring of gambling transactions is conducted in real time. Access to the server is important to perform the monitoring of gambling transactions and of the operator’s compliance with the licensing requirements. In order to have access to an operator’s server it does not seem necessary to have the server located in the Member State where a game is offered. From the authorities present in the Commission’s workshop on efficient national enforcement measures and administrative cooperation only few regulators consider the location of the server in the recipient Member State as essential while the majority of regulators do not see a need for such requirement from a technological standpoint. Instead, access to servers at a distance, central control units and real time control through technical supervisory tools (allowing, for example, for “know your customer” (KYC) checks by operators, central list of excluded players and storage of players’ balances) were considered far more efficient and appropriate, provided that the information is processed and analysed adequately. Ensuring the accuracy of data is considered more important than physical access to it. Software and hardware certification can play an important role in this respect. Duplication of IT infrastructure furthermore increases the complexity of a system without necessarily facilitating access to information.

However, while technology is an important enforcement tool many regulators have highlighted that it should not be overestimated. They consider direct contact with operators to be at least equally important.

Together with Member States the Commission will discuss the necessary means for the supervision of authorised gambling operators and explore methods and technologies for remote supervision. The Commission could promote best practices for this important regulatory task.

Administrative cooperation

Enhancing administrative cooperation amongst public authorities, including enforcement bodies, and with the gambling operators and other relevant stakeholders will further improve the quality of enforcement.

Responsive enforcement measures

Responsive enforcement measures should provide the appropriate tools to cater for those cases where gambling operators or other relevant service providers do not comply with national rules. Member States are in need of means for the execution of administrative decisions prohibiting the provision of unauthorised gambling services in cases where an operator fails to implement a decision prohibiting the offer. Technical enforcement means available have certain benefits but also a number of significant shortcomings. As responsive enforcement measures directly impact not only on the rights of the player but also of the service providers they require a proper legal basis in national law.

Blocking access to websites

Blocking access to websites is used in a number of Member States in order to enforce national gambling rules. This is the case at least in Belgium, Estonia, France and Italy. Other Member States have provisions for blocking access to websites in their national gambling laws but are currently not applying them, such as Denmark. While in principle two main methods are available for blocking access to websites, Domain Name System (DNS) filtering and Internet Protocol (IP) blocking, most Member States applying blocking methods seem to use DNS filtering:

In order to access a website, rather than having to write the full IP address (which is actually the ‘location’ where the content really is on the worldwide network), it is possible to use a domain name. A domain name is an alias to an IP address, and an IP address can have an unlimited amount of aliases. A domain name looks like http://europa.eu. To ensure that these aliases work, a matching table associates a precise domain name to a specific IP address; they are provided by the DNS Servers.

An example:

  1. The Internet user opens a web browser and types “europa.eu”;
    2. The browser asks the DNS servers which IP address is associated with “europa.eu”;
    3. The DNS server checks its matching table and, if a match is found, it answers by giving the associated IP address ‘123.345.567.789’;
    4. The browser contacts the given IP address and tries to access its content.

DNS blocking occurs at Step 3. Instead of answering the real IP address which is associated to the given alias, the DNS Server answers with another IP address which is, in most of the cases, owned by a governmental service such as the police or, in the case of gambling, the gambling authority.

National procedures

Procedures for the rules for blocking access to websites offering unauthorised gambling services differ between Member States. Gambling authorities are either authorised to order internet service providers (ISPs) directly to block access to websites identified by the regulator or they first have to seek a court order:

In the first case, the gambling authority is authorised to issue a list of websites providing unauthorised gaming services. The list, which is regularly updated, is communicated to ISPs, which have to deny access to listed websites, normally by redirecting players to a regulator’s website informing them that they were trying to access a website offering an unauthorised gambling service. The gambling authority can also be empowered to impose fines on ISPs for any breach of their blocking obligations.

In the latter case, a court, upon an application by the gambling authority, may order a provider of information society services to restrict access to websites through which online gambling services are provided without authorisation. Before applying for a Court decision the gambling authority will have to request the gambling operator to cease its activities in the Member State and the operator has to fail to abide by this decision. Member States associate a number of benefits with blocking access to websites. It is considered as a communication tool, providing information to consumers in terms of what are authorised and unauthorised offers under national law. Citizens are thus made aware of the existence of authorised and unauthorised gambling services offered online. For those who do not wish to use unauthorised operators or first time gamblers blocking can serve as an effective deterrent. Authorised operators and consumers consider state control as beneficial.

However, blocking access to websites does not work as an isolated enforcement tool and can be easily circumvented. Moreover, depending on the technology used, website blocking can impact on legitimate businesses. The efficiency of the blocking method furthermore depends on the validity of the list of blocked websites. Keeping the list up-to-date requires significant resources while internet addresses can be changed instantly. Lastly, ISPs are faced with the implementation of the provisions for blocking access to websites, not only implying costs and tying-up of resources but also creating potential liability issues.

EU framework

The E-Commerce Directive provides for exemptions from liability for information society service providers when they host or transmit illegal content that has been provided by a third party. Information society service providers can under certain conditions benefit from these exemptions when they provide one of the so-called intermediary services set out in Articles 12 to 14 of the Directive. Moreover, Article 15 of the Directive prohibits Member States from imposing on providers of these services a general obligation to monitor content that they transmit or host. The Directive provides for a technologically neutral framework and the liability regime strikes a balance between the several interests at stake, in particular between the development of intermediary services, the societal interest that illegal information is taken down quickly, and the protection of fundamental rights.

Article 14 of the E-Commerce Directive contains the basis for procedures for notifying and acting on online illegal content. It provides that hosting providers, in order to benefit from a liability exemption, should act expeditiously to remove (take down) or to disable access to (block) illegal activity or information of which they have obtained actual knowledge.

EU initiative

The E-Commerce Directive provides the basis for Member States’ rules on blocking access to websites of unauthorised gambling operators. As announced in the Communication on the “Completing the Digital Single Market – A coherent framework for building trust in the Digital Single market for E-commerce and online services” (COM (2011) 942 final), the Commission services are preparing an initiative on procedures for notifying and acting on illegal online content. The cross-border nature of the Internet, the lack of development of regulatory codes at European level and conflicting jurisprudence within and across Member States justify an analysis of the need for EU action. The initiative will have a horizontal scope in the sense that it will cover all types of online services (not only gambling but also entertainment, adult, health, etc.).

Blocking payments between players and operators

A number of Member States, such as Belgium, Denmark, France, and Germany, are introducing or have introduced provisions in their national gambling laws on the blocking of payments between players and gambling operators not authorised to offer their services in the Member State. Different payment means are offered and used in gambling transactions. The methods for blocking payments between the player and the gambling operator and their efficiency depend on the payment means used:

  • Payment blocking for card payments is based on the Merchant Category Code (MCC) used by the merchant, i.e. gambling operator. All card transactions are tagged with a specific four-digit identifier, the MCC. This number is based on ISO standards and is applied globally by issuing and acquiring member banks. The purpose of the MCC is to identify the goods or services the merchant provides or to classify the nature of the merchant’s business. MCC 7995 is the universal identifier for gaming and gambling merchants and is linked to all transactions from these merchants. It covers all transactions (face to face and online) from merchants that provide betting, lottery tickets, casino gambling chips, off-track betting and wagers at racetracks.
  • The prohibition of processing payments is undertaken via the blocking of payment orders where cards are using MCC 7995. Payment for authorised gambling services in a Member State is approved using of the respective country code in combination with MCC 7995. Payment service providers covered by the regulations therefore must implement routines to differentiate between requests for the authorization of payments for authorised and for unauthorised gambling services, on the basis of the combination of the MCC and the respective country code, before the approval or denial of a transaction.
  • Payment blocking for bank transfers is based on the account number used by the gambling operator. It covers transactions both originating from (payments crediting players’ accounts) and going to (repatriation of profits by players) unauthorised gambling operators. The implementation requires the gambling authority to identify bank accounts used by unauthorised operators and submit respective bank account numbers to the banks. Banks then have to block these accounts; they cannot be used for payment transfers related to gambling activities to and from the Member State.
  • For e-wallets, the implementation of the prohibition of processing payments to unauthorised gambling operators seems to depend on the active involvement and internal controls of the e-money issuer. The issuer uses a single worldwide system for senders and receivers of payments. Both, sender and receiver are customers of the issuer and information is available about each party involved. All gambling operators are identified as such in the system, and a payment is considered to be for gambling if it goes to a gambling operator. Based on the verified and recorded information to indicate a customer’s nationality the issuer can block payments for gambling services according to the customer’s nationality. The issuer can also check the payer’s IP address at the time of payment as an additional precaution.

For other payment means, such as pre-paid cards, little information has been provided in response to the public consultation on how the prohibition of processing payments is undertaken.

Some gambling regulators consider financial blocking a more efficient instrument than ISP blocking. The European Parliament calls on the Commission to examine the possibility of proposing a legally binding instruments obliging banks, credit card issuers and other payment system participants in the EU to block, on the basis of national black lists, transactions between their clients and gambling providers that are not licensed in their jurisdiction, without hindering legitimate transactions. However, being a relatively new enforcement tool the debate about the use and efficiency of payment blocking system suffers from a lack of experience and data.

Within Europe Norway is the only country having significant experience with the implementation and enforcement of payment blocking rules. In a recent evaluation of the law the Norwegian authorities concluded that access to gambling without a Norwegian license has become somewhat complicated, but the effect of the ban on payment transfers has been less effective than intended when the provisions were introduced (“A ban for Norwegian companies to provide payment services to gambling services on the Internet will significant help to reduce the availability of such gaming” (Proposition. No. 80 2007-2008, p. 19).).

The advantages most frequently attributed to payment blocking rules are the observation that the transfer of payments to unauthorised gambling operators becomes more difficult for players and the prohibition is considered to have an effect on spontaneous, first time gamblers. The prohibition provides the information to the player that an available online gambling site is not necessarily licensed or supervised by the national authority. However, a number of shortcomings of payment blocking systems are raised in the debate. A payment blocking mechanism may result in blocking licit commercial transactions, in particular if based on the operators MCC. At the same time the effectiveness seems to be limited as in those countries applying payment blocking the majority of players continues to use the services of unauthorised gambling operators, using their credit or debit cards. Payment blocking systems can also be circumvented, for example by using third-party solutions or by changing payment details frequently. If a payment blocking system covers only certain means of payments it might urge players to resort to less controlled and regulated means of payment, not covered by existing enforcement measures. The implementation of payment blocking systems entails substantial costs for the payment service provider and other financial institutions.

EU framework

The main objective of the EU policy on payment services is the establishment of a Single European Payment Area, in which citizens and businesses can make cross-border payments as easily, safely and efficiently as they can within their own countries and subject to identical charges. The Directive on Payment Services (PSD) (Directive 2007/64/EC of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market amending Directives 97/7/EC, 2002/65/EC, 2005/60/EC and 2006/48/EC and repealing Directive 97/5/EC.) provides the legal foundation for the creation of an EU-wide single market for payments. In Article 55 II to IV the PSD provides rules on the blocking of payment instruments referring inter alia to the suspicion of unauthorised or fraudulent use of the payment instrument. However, it is unclear how existing rules on the blocking of payments for unauthorised gambling services would fit within the PSD provisions.

EU initiative

Considering the general lack of data and experience with payment blocking methods it is not the time to consider an EU policy initiative. The Commission will assess the possibilities and limits of payment blocking in more detail before taking a final decision. It will discuss the issue with Member States and stakeholders concerned. The upcoming review of the PSD might also offer an opportunity to look into the issue.

Other enforcement means

White- and Blacklisting

In most Member States gambling regulators provide a list of licenced operators (white list). These lists can provide useful information on the one hand to players, informing them that a gambling operator is authorised to offer services in the Member State and supervised by the competent authorities, and on the other hand to regulatory authorities in other Member States, verifying that an operator is regulated in another EU jurisdiction.

In a few instances Member States provide lists of operators not authorised to offer gambling services in the Member State. The European Parliament stresses in this respect that more action should be taken by Member States to prevent illegal gambling providers from offering their services online, for example by blacklisting illegal gambling providers. While black lists in principle can also inform consumers and regulators about the absence of an authorisation and thus the absence of supervision in a Member State it is almost impossible to keep these lists up-to-date, considering the huge number of gambling operators active on the internet.

In both cases players need to be aware of the existence and accessibility of the list.

Domestic Domain Name

A number of Member States require that licence holders offer their gambling services on a website with the country code top-level domain of the respective Member State, for example website.fr for France or website.es for Spain. Players should thus be enabled to identify quickly if the gambling service offered on a website is authorised in a Member State.

Advertising bans

National gambling laws commonly prohibit the advertising of online gambling services not authorised in the respective Member State. Member States consider such a prohibition as an indispensable part of their enforcement policy. Advertising bans for unauthorised gambling services are generally compatible with EU law. In Sjöberg & Gerdin the Court found that Article 56 TFEU does not preclude legislation of a Member State which prohibits the advertising to residents of that State of gambling not authorised in the Member State, under the condition that the general regulatory framework for gambling services in the Member State is in compliance with EU law. In HIT and HIT Larix it held that Article 56 TFEU does not preclude legislation of a Member State which permits the advertising in that State of casino’s located in another Member State only where the legal provisions for the protection of gamblers adopted in that other Member state provide guarantees that are in essence equivalent to those of the corresponding legal provisions in force in the first Member State. Member States however find it difficult to enforce the restrictions on advertising, in particular against advertising on the internet. Regulators experience the same technical and legal challenges as with blocking access to the unauthorised gambling service itself. Links and banners directing players to unauthorised gambling websites are easily changed and difficult to control and hosting websites often receive a percentage of the profit for each player directed to the website.

Administrative and criminal sanctions

In the workshop on efficient national enforcement measures and administrative cooperation some regulators suggested that regulatory authorities need to have full enforcement rights against unauthorised offers, including appropriate administrative and criminal sanctions. Without such powers close and robust working arrangements with law enforcement authorities are required. A number of participants advocated that a sanction regime should also cover related services, such as ISP, financial services and media services.

EU initiative

The efficiency of enforcement tools is crucial for the successful implementation of a national gambling policy. Commission services, together with Member States and stakeholders concerned, will discuss the issue of efficient enforcement measures and seek to develop best practices.

© European Union

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