MD-E-2007-0203
Briefing Paper – Remote Gambling Disaster Recovery (DR)
Background
On 1 March 2005, the States debated P62/04, Modernisation of the Island’s Gambling Legislation. As a consequence of that debate, the States agreed, in principle, that legislation be brought forward for approval by the States to allow, inter alia, on-line gambling. This draft Regulation, developed in conjunction with the Shadow Gambling Commission, ensures the highest possible regulatory standards. This is the first legislative step towards realising the States decision of 2005.
The Shadow Gambling Commission plays an essential role in the process of modernising the Gambling Law and producing a legislative framework that is sufficiently responsive to business needs, while addressing the key principles of protecting the vulnerable and the Island’s reputation. The function of the Shadow Gambling Commission is advisory and the Commissioners will have no formal powers until the Commission is formally established by Law.
The Shadow Gambling Commission chairman’s background:
Graham White OBE served the Gaming Board for Great Britain and latterly the UK Gambling Commission from 1983 to the end of 2005 and held the post of Chief Inspector since 1996. In this capacity Mr. White advised HM Government and Gaming Board Officials on all matters relating to gaming legislation, inspection and enforcement. Mr. White was chairman of the Technical Committee of the Gaming Regulators European Forum and chaired various sub groups of International Association of Gaming Regulators including intelligence, probity and compliance committees. Mr. White is a board member of the Gordon House Association, a specialist provider of residential treatment for addicted gamblers.
The Effect of these Regulations
The primary objective of these regulations is to allow remote gambling operators to place their disaster recovery in Jersey, while maintaining the Island’s invaluable reputation as a well regulated jurisdiction. In the event of a verified disaster, a licensed operator would have the ability to invoke those facilities, and continue their internet gambling operations for an initial period of three months, which can, if necessary, be extended a further two times.
‘Disaster’ is defined in the Regulations, and is regarded as a major disruption that legitimately renders the gambling site inoperable. The Regulation creates an offence if the disaster has been caused deliberately by the operator. It would not be possible for an operator to ‘invoke’ it’s DR provision if, for example, it was facing investigation in another jurisdiction or simply wanted to move its operations for its own purposes. It is the responsibility of hosting providers and remote operators to inform the Minister of any DR invocation.
Applications for licences are restricted to Jersey registered companies. This is to ensure that the licensee has a legal presence in Jersey, but also enables review of the suitability of shareholders, beneficiaries, associates and key individuals associated with a potential licensee. This provides a valuable additional level of scrutiny and helps to inform Gambling Control’s wider investigations.
Benefits of the Regulation
It should be noted that our neighbours have suffered no reputational damage, or had any major financial institution decline to use or leave the jurisdiction as a result of the introduction of online gambling.
From an economic perspective, internet gambling has brought clear benefit to a number of jurisdictions, particularly the Isle of Man and Alderney, with no adverse effect upon their international reputation or commercial attractiveness.
The development of electronic gambling services has proven to be of great significance to Guernsey, which hosts the majority of the Alderney licensees, bringing gross added value of several million pounds[1]. It has also had the effect of increasing the amount of bandwidth for Guernsey and, as a direct consequence, lowering the overall cost of data delivery. This in turn allows significant infrastructure investment[2]. This is a clear economic benefit that Jersey should seek to achieve and it will benefit both business and consumers.
International Summit
At the International Summit on Remote Gambling, Jersey along with other governments agreed that in enacting legislation or regulations in relation to remote gambling the principal and over-riding priorities should be:
- That remote gambling should be conducted responsibly and with safeguards necessary to protect children and vulnerable people;
- That remote gambling should be regulated in accordance with generally accepted international standards to prevent fraud, money laundering and other crime, and should not be permitted to be a source of crime;
- That, where offered, remote gambling should be verifiably fair to the consumer.
These Regulations set out to attract operators who seek a comprehensive and tightly controlled regulatory regime. Applicants are anticipated to be, for the most part, established, major gambling operators with brands they wish to protect. They are also the types of company most likely to conduct their business in a way that is consistent with the standing of Jersey as a highly reputable financial services centre.
Financial/Manpower Implications
These draft Regulations will be at neutral cost to the States in that they are to be met by the prescribed fees. While the work will be undertaken by staff of Economic Development in consultation with the Shadow Gambling Commission, it is anticipated that this responsibility will be passed to the Commission once it is legally established by the States. It will then be for the Commission to ascertain and take responsibility for the costs involved in regulating this sector.
Powers to the Minister
The legislation gives the Minister the ability to delegate necessary powers to Gambling Control to:
- Conduct necessary wide ranging investigations,
- To obtain such information necessary to conduct its investigations,
- To gain access to licensed premises and to ensure compliance by monitoring, and
- Investigate the software, systems and business processes of its licensees.
Summary
These regulations, if passed by the States, will allow hosting providers to obtain a licence and offer DR services to overseas gambling operators.
Gambling operators will be able to apply for a DR gambling licence and if granted, place and invoke for a maximum of 9 months, their business continuity provision in the Island.
All applications will be subject to satisfactory probity having been undertaken and overseas operators will be expected to adhere to the conditions of their overseas licence. In the event that the Minister believes that it is in the Island’s best interests, he may attach further conditions to the local DR Licence as he sees fit.
Online gambling has flourished in Alderney, the Isle of Man and Gibraltar. Jersey’s credibility as an international finance centre would make it a very attractive alternative to competitors such as Gibraltar or Alderney. Guernsey has benefited from a significant increase in bandwidth consumption. Economies of scale have thus granted Guernsey lower telecoms costs, and allowed significant infrastructure investment. Jersey has not enjoyed these benefits. Traditionally, online gambling has been resisted because of the ‘risk of reputational damage’. Guernsey’s experience serves as a useful case study – there has been no reputational damage, nor has any major financial institution declined to use the jurisdiction on the grounds of online gambling.
[1] Alderney Gambling Control Commission 2006 Published Accounts.
[2] Telecom infrastructure investment. News released 26th September – “Newtel Solutions has appointed Doug Wright as the new Head of E-Commerce Development. He will be responsible for the new multi-million pound data centre”.
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