Getting comfortable with affordability checks

Comments by David Clifton on gambling affordability checks are featured in an article by Scott Longley for iGaming Business entitled “Getting comfortable with affordability checks” (that you can download below).

We thought it might be helpful to expand in this website posting on David’s comments quoted in the article.

In the same way that 2019’s shift of focus from “responsible gambling” to “safer gambling” has placed a more burdensome onus on UK licensed operators to protect their customers, a combination of (a) repeated AML and customer interaction failings by operators and (b) an even greater emphasis by the Gambling Commission on the need for effective affordability checks during the COVID-19 crisis, means that the age-old mantra of ‘know your customer’ (“KYC”) is fast being superseded by ‘understand your customer’ (“UYC”).

As the ‘single-customer view’ initiative launched in February 2020 illustrates, the Commission is on the same learning curve as its licence-holders. We believe this to be one reason why it is not yet a mandatory LCCP requirement that B2C operators must conduct affordability checks on all customers.

However, that is getting ever closer. Since October 2019, UK licensed operators must take into account customer interaction guidance that has pushed them to use open source data to assess affordability for their British customer base in order to improve their risk assessments for such interactions and to better enable early interventions to help those experiencing, or at risk of, gambling-related harm.

The Commission’s additional interaction guidance, introduced without prior consultation on 12 May 2020, stated that its licensees should ensure they implement into their customer interaction framework affordability assessments for individuals picked up by potential gambling harm thresholds and triggers.

Its draft VIP customers guidance, published on 19 June 2020, is more explicit, stating “licensees are required to apply …. affordability checks …. to all customers”, adding that “licensees should be taking steps to ensure that all customers are gambling with money they can afford to lose (lawfully acquired disposable income) and without experiencing harm”.

Levels of understanding differ throughout the industry as a whole, but – in general terms – we think that operators have got the message on affordability and are trying hard to tackle what is a very challenging subject. That said, it looks set to become even more challenging when forthcoming LCCP changes bring into force the above-mentioned high-value customers guidance that will require operators to conduct an affordability check to establish that a potential VIP’s spending is not only affordable as part of their leisure spend but also sustainable.

We understand why some customer might have concerns over what gambling companies do with the data they are compiling. In our view, the Gambling Commission could do more to explain to consumers why operators are asking what may seem to some to be extremely intrusive questions about their personal finances. At the moment, the Commission’s “FAQ during lockdown” webpage poses a consumer’s question about the rules around affordability checks. The Commission’s response merely states:

We expect operators to have checks and controls in place to keep consumers safe and this includes stepping in when a consumer begins showing risks of gambling harm and checking that a consumer can afford their gambling activity.  Read more about what we expect from operators on affordability and protecting consumers.

The link takes the reader to the Commission’s 2019’s Enforcement Report chapter on “Affordability and customer protection”. As David is quoted as saying in the iGaming Business article, that’s hardly the most user-friendly or satisfactory explanation from a regulator that takes pride in placing the consumer at the heart of gambling regulation.

UPDATE: The House of Lords Select Committee’s “Gambling Harm – Time for Action” report (published on 2 July 2020) contains at paragraphs 311 to 326 considerable comment on the subject of affordability, culminating in its following recommendation that “the Gambling Commission must amend its Formal Guidance for Remote Gambling Operators to define the minimum steps which operators should take when considering customer affordability, and to make clear that it is for the operator to take those steps, and any necessary additional steps, which will enable them to identify customers who are betting more than they can afford”.