Gambling Review... How Will Affordability Checks Affect the Gambling Industry and the Sport of Horse Racing... By Neil Channing
Last week I described in detail the checks that are already being done by betting operators in the UK. I only wish the man on Twitter who keeps repeatedly telling me that these checks are already in place could have found the time to read it. Basically, the Know Your Customer (KYC), ID checks are accepted by most people as reasonable and not hugely intrusive, although I do worry a little about my passport and copies of utility bills leading to identity fraud as it is so unclear which staff at the company have access to this information, how long it will be kept for and how it is stored. I think all firms could tighten their procedures around these issues and I wish the firm I sent my details to around nine months ago would at least acknowledge receipt.
The Anti-Money Laundering (AML) checks are trickier as these do involve sending details of your financial circumstances such as a P60, Company Accounts and Bank Statements. Obviously, the operators can't explain clearly what it is that made them have to perform AML checks as they can't make life easy for the criminals, but many punters suspect these checks are being used for commercial reasons, to identify professional gamblers and potential winning customers. A little more clarity and a tightening of procedures could help here.
As I said last week the operators are attempting to head off draconian regulations being included in the new Gambling Act by trying to prove they can regulate themselves and bringing in Affordability Checks where they see evidence of potential problem gambling. To an extent they have shot themselves in the head to avoid being hung and one major operator has gone from 23,000 VIP customers to around 1,000 because they have asked all VIPs to go through stringent checking procedures. The problem with this approach is that all firms have created their own trigger points and limits and they all ask for slightly different information to be sent in, (some ask for six months bank statements, some a year, some ludicrously will ask that anyone who has transferred you money to send in their bank statements). On receipt of the information some will decide that a customer earning £100,000 a year will be allowed to deposit £1000 a month while others think £2500 is acceptable. As far as I know none will factor in past winnings, arguing that you could easily have lost them, unless they are currently in your bank. Professional gamblers with a proven track record will find that only income from earnings, rent, shares, interest, and pensions will count. It's generally only earnings and not capital which will be factored in and moral decisions are being made by operators who are suggesting that inherited money cannot be used, the punter who has a massive win on a huge accumulator can't suddenly start increasing his stakes even if he is now in a world where he buys racehorses and flies first class. Details of money held by other betting companies are also not allowed. It seems that all operators are not prepared to accept that gamblers have periods where they win a lot and others where they lose a lot and that gambling involves a lot of short term variance. You can be a massive winner over your lifetime but after a few months of losing you could be classed a potential PG. Also by judging things purely on deposits you are not looking at the way people gamble. A punter who bets ten odds-on shots a week is unlikely to be a huge loser and could easily be a winner due to something called the favourite/longshot bias. A customer who plays only eight-fold accumulators is very unlikely to be a winning customer over time but they are likely to deposit a tiny amount and to bet much smaller stakes than the odds-on punter. It seems to me that these changes are being made with no consideration to how gamblers generally operate and how the industry works.
Always when politicians of all parties are changing our laws, they really like to talk about making sure decisions are "evidence-based". Chris Philp, the minister responsible for writing the White Paper, spoke in parliament last week and assured The House that he would be doing nothing to damage horse racing as a sport and that he was definitely going to be looking at impact-assessments. While that is welcome, we do have some evidence here...we can see that one of the largest operators in the world have brought in affordability checks on their VIP customers and now 94% of those customers have gone. We can't say for sure whether those punters have disappeared because they failed to pass all the checks or if they simply didn't wish to engage in the process, but we can start to see the possible affect these changes will bring in. That number of 94% is in line with a survey that Racing TV did of its members and from over 2,000 respondents they found 95% said they would not be willing to share bank details in order for bookmakers to judge their affordability level. The polling company YouGov were commissioned by the Betting and Gaming Council to ask members of the public for their opinion on affordability and from 1683 members of the public 51% said they were not in favour of bet limits being introduced by politicians while 27% were in favour.
You could argue that random members of the public who maybe don't bet are more likely to support regulation, while subscribers to Racing TV, who almost certainly do bet, and would be the ones having to spend time sending in this personal and sensitive information, are much more likely to be against regulation. You could easily argue that for the VIPs the paperwork required might be more complex and involve multiple bank statements, share certificates, company accounts and details of inheritance while for the average punter, who is betting a lot smaller, it might just be a bank statement and a P60, so more will respond.
One company estimated that if the affordability checks came in at £100 a month, as has been proposed by the think tank the Social Market Foundation, then that would affect 37% of their customers. They estimated that bringing in checks at this low level would halve their turnover overnight, If the checks came in at £2000 a month their estimate was that turnover would fall by closer to 35%.
The UK horse racing industry receives £350m a year from the UK betting industry and the UK gambling industry as a whole is worth around £4bn to the UK economy. There are around 120,000 jobs connected to both the gambling industry and horse racing but if you look at the numbers just for betting and the care of horses those numbers are 46,000 and 6,500. Around six million people attend horse race meetings every year in the UK and many more watch on TV.
Clearly if the turnover on betting was to fall by the lower estimates of 30% then the knock-on effect to horse racing would be huge with funding to the sport being crippled, prize money falling and potentially racecourses closing, yards shutting down and huge job losses. Racing income comes from media rights, sponsorship, attendance at the track and corporate boxes and all would massively suffer. There are also lots of ancillary businesses mostly media companies, who depend on a thriving racing industry to survive.
Back in December Chris Philp said he hoped that use of technology and data held by companies such as credit reference agencies could make affordability checks smoother but he acknowledged how damaging they could be and seemed to dismiss the £100 level, but there was an implication that checks would come in at higher levels, that firms would be strongly encouraged to use all of their other methods to spot potential PGs and that the GC would be given more powers to make sure the operators do just that.
It is very definitely still all to play for, the White Paper is not yet written and even when it is we have months of scrutiny and amendment before it becomes law so there is still plenty of time to contact your MP and let them know your thoughts.
Do make the effort to send off a letter to your MP on the imposition of affordability checks. I've written one for you here