Wayne Atkinson and Michael Lyner1
The definitions for most gambling concepts are set out in the Gambling (Alderney) Law, as amended (the 1999 Law). The 1999 Law provides that:
a Gambling is defined as all forms of betting, gaming and wagering, and any lotteries.
b Lawful gambling means any form of gambling made lawful under Section 6 of the 1999 Law.
c Gaming means the playing of a game of chance for winnings in money or money's worth, regardless of whether any person playing the game is at risk of losing any money or money's worth, but does not include the making of bets by way of pool betting.
d Game of chance includes a game of chance and skill combined, and a pretend game of chance or of chance and skill combined, but does not include any athletic game or sport.
e Pool betting is specifically defined as follows (and will fall within the definition of gambling):
bets made by a number of persons:
(a) on terms that the winnings of such of those persons as are winners shall be, or be a share of, or be determined by reference to, the stake money paid or agreed to be paid by those persons, whether the bets are made by means of a totalisator, or by filling up and returning coupons or other printed or written forms, or in any other way, or
(b) on terms that the winnings of such of those persons as are winners shall be, or shall include, an amount (not determined by reference to the stake money paid or agreed to be paid by those persons) which is divisible in any proportions among such of those persons as are winners, or
(c) on the basis that the winners or their winnings shall, to any extent, be at the discretion of the promoter or some other person.2
These definitions have the effect that, in Alderney, games of pure skill and competitive sports for prizes are excluded from the definition of gambling. However, sports betting, including fantasy sports, does fall within the Alderney regulatory regime.
The 1999 Law specifically excludes3 from its application contracts entered into by way of business, the making or performance of which involve dealing in any way with an investment (or making arrangements for another person to deal in any way with an investment, or offering or agreeing to do so). The definition of investment is necessarily wide and includes rights under an insurance contract, rights under a contract for differences, options and futures contracts.
ii Gambling policy
'Except as may be provided by the provisions of any Ordinance made under [the 1999 Law], all forms of gambling are unlawful.'4 The lawfulness of gambling in or from within Alderney is therefore provided for by a series of ordinances that legalise gambling only when conducted from within a set regulatory framework.
Gambling is an industry in Alderney and the Alderney Gambling Control Commission (AGCC) has been in operation since 2000 to regulate it by way of the granting of licences and the supervision of licensees. Alderney is considered one of the world's leading jurisdictions for the regulation of remote gambling and the island works hard internationally to encourage the development of the industry, while the AGCC set supervisory standards that are both appropriate to the industry and ensure the reputation of the island is protected.
iii State control and private enterprise
Beyond the regulatory requirements imposed on gambling under the 1999 Law there are no state controls on gambling and the Alderney regime does not favour the state over private enterprise.
Alderney law does exempt securities issued by the States of Alderney or the States of Guernsey, or by or under the authority of the UK government, by reason of any use or proposed use of chance to select particular securities for special benefits, if the terms of the issue provide that the amount subscribed is to be repayable in full in the case of all the securities.5
No limits apply to the number of licences available from the AGCC.
iv Territorial issues
Gambling is uniformly regulated across Alderney with no territorial distinctions made on the island. However, while Alderney forms part of the Bailiwick of Guernsey, it is a separate legal jurisdiction. Alderney laws in respect of gambling do not apply on Guernsey, Sark or Herm, all of which are subject to laws made by the States of Guernsey. The Bailiwick of Guernsey regulates a range of financial services businesses and, depending upon the manner in which remote gambling operators conduct their businesses, parts of this financial services regulation may apply either to the operators themselves or to their directors and service providers.
v Offshore gambling
The States of Alderney has a permissive attitude towards the provision of gambling services, and there is no general restriction in relation to foreign operators providing gambling products to Alderney citizens. The AGCC is very much a global citizen in this regard and has worked with a number of other gambling regulators to sign memoranda of understanding around the sharing of information relating to licensees including with the Nevada Gaming Control Board in January 2011; the Casino Regulatory Authority of Singapore in October 2012; and the British Gambling Commission in February 2013.
This is in the context of remote gambling only. Any foreign operator who wants to provide land-based gambling would need to apply and obtain the relevant licences locally.
II Legal and Regulatory Framework
i Legislation and jurisprudence
Alderney is the northernmost of the inhabited Channel Islands and politically it is part of the Bailiwick of Guernsey, a British Crown dependency. As stated above, Alderney is a separate legal jurisdiction.
The States of Alderney is the legislature of the island, although Alderney sends two representatives to the States of Guernsey as well. While Alderney enjoys full autonomy in law (except in matters of foreign affairs and defence, like the other Channel Islands and the Isle of Man), under the provisions of a formal agreement entered into between the governments of Alderney and Guernsey, certain matters have been delegated to Guernsey. These transferred services include policing, customs and excise, airport operations, health, education, social services, childcare and adoption. Immigration is the responsibility of the UK (UK law applies), with day-to-day operations carried out by the Guernsey Border Agency. In addition to the transferred services, both the UK and Guernsey may legislate on other matters with the consent of the States of Alderney.
Gambling legislation was first put forward in Alderney in 1975 in the form of the Gambling (Alderney) Law 1975. The 1999 Law is now the primary legislation regulating gambling within Alderney.
The significance of remote gambling to the island's wider economy and its global status in the field unsurprisingly have led to a deep pool of subsidiary legislation in this regard, with no fewer than 64 separate pieces of subsidiary legislation relating to gambling on the statute book. Of these, the Alderney eGambling Ordinance 2009 (the 2009 Ordinance) and the Alderney eGambling Regulations 2009 (the 2009 Regulations) are the most significant pieces of legislation for remote gambling operators.
ii The regulator
The AGCC was established in 2000 under the 1999 Law.6 The AGCC is the regulatory authority tasked with the responsibility of ensuring and maintaining the integrity of the online gambling industry in Alderney.
The AGCC's stated primary objective is to protect and enhance the reputation of Alderney as a first-tier regulatory jurisdiction by seeking to ensure that:
a all electronic gambling is conducted honestly and fairly, and in compliance with good governance;
b the funding, management and operation of electronic gambling remains free from criminal influence; and
c electronic gambling is regulated and monitored so as to protect the interests of the young and the vulnerable, and without compromising this primary objective, to work with other agencies in the development of eGambling activities regulated by the AGCC.
The duties of the AGCC are to keep under review the extent and character of gambling on the island of Alderney and, in particular:
a to grant such licences to an applicant as may be necessary for the purpose of providing and operating any form of gambling;
b to supervise and control, including by way of inspection and the imposition of conditions, the conduct and operation of any form of gambling so licensed;
c to investigate the character and financial status of any person applying for, or holding, a licence or otherwise concerned with the provision, operation or management of any form of gambling;
d to ensure that all fees, royalties and other monies payable to the States by a person providing or operating any form of gambling are duly paid and accounted for; and
e to perform such other functions as are assigned to the AGCC by the 1999 Law or by Ordinances made under it.7
The AGCC's responsibilities are therefore effectively related to the licensing of new applicants as well as the supervision of existing licensees and gambling more generally.
The licensing process involves the review of all applicants to determine their fitness and propriety as well as a review of a licensee's gambling equipment and systems, internal controls and operating procedures.
Licences and certificates are not subject to time-based renewal but granted indefinitely and the number of licences the AGCC is able to grant is not subject to any kind of cap.
iii Remote and land-based gambling
Both remote and land-based gambling are permitted in Alderney. Notwithstanding this, the island's small population size and worldwide stature in the field of remote gambling has meant that the focus of almost all regulation is remote gambling.
iv Land-based gambling
Alderney does have specific and separate legislation in respect of land-based gambling.8 Owing to the island's small population, land-based bookmaking has, however, been negligible to non-existent over the past decade.
v Remote gambling
The legal operation of online gambling in Alderney was the creation of a number of ordinances dating back to 2001 that allowed for applications to be made to the AGCC for the issuance of remote licences.9
Following the 2001 regulation by Alderney of online gambling, commonly referred to by the AGCC as 'eGambling', Alderney became one of the first non-European Economic Area jurisdictions to be white-listed by the UK. This allowed Alderney licensees (and those of other white-listed jurisdictions) to advertise and offer gambling services in the UK without obtaining a Gambling Commission operating licence, until the white-list regime was ended by the Gambling (Licensing and Advertising) Act 2014.
The legislation was overhauled by the States of Alderney in 2009 and the 2009 Ordinance is now the most significant piece of legislation for the purposes of remote gambling, and is intended to be as future-proofed as possible in a technology-driven industry. The 2009 Ordinance provides the current framework for the legal provision of remote gambling from within Alderney. eGambling is defined in the 2009 Ordinance as where the gambling transaction with an eGambling licensee or Category 1 or Category 2 associate certificate holder is effected remotely by a customer by means of a telecommunication device.
Licences available are:
a the Category 1 or business-to-consumer (B2C) licence, for an operator that has the direct contractual relationship with the customer (using either its own platform or someone else's); and
b the Category 2 or business-to-business (B2B) licence, for an operator that manages the platform and any games approved to run on that platform without the direct customer relationship.
Alderney has positioned itself as a global leader in the regulation of remote gambling, particularly in the B2B space. Its licensees hold a significant proportion of the global market.
vi Ancillary matters
An eGambling licensee or a Category 1 or Category 2 associate certificate holder may exercise its eGambling licence or its Category 1 or Category 2 associate certificate only if: every person that performs functions identified by the licensee or certificate holder in its approved internal control system as those of a key individual holds a current key individual certificate; or if every person designated as a key individual by the AGCC in accordance with regulations made under Paragraph 19 of the 2009 Ordinance holds a current key individual certificate.10
A person who is a key individual and who does not, without reasonable excuse, hold a key individual certificate is guilty of an offence and is liable, on conviction, to a fine not exceeding £25,000.
vii Financial payment mechanisms
Developments aided by new and innovative technologies being utilised by remote gambling operators could provide the next challenge for the existing legislation. A leading mobile-first iGaming platform provider and turnkey operator, licensed by the AGCC, now issues cryptocurrency in partnership with a social casino operator, their branded cryptocurrency being available as a payment method on the casino operator's platform. Whether amendments to the current regulatory regime will be implemented in response to these new and innovative technologies remains to be seen.
III The Licensing Process
i Application and renewal
As outlined in Section II.v, above, there are two types of licence available in Alderney, distinguished on the basis of the two distinct functions of eGambling with licences covering the player relationship, and the provision of games and betting activities: Category 1 or B2C licence; and Category 2 or B2B licence.
A single entity may choose to hold either or both licences. The application process is identical irrespective of whether an application is made for one or both types of licence.
In addition to the licences above the following certificates may be required in Alderney:
a a Category 1 associate certificate for B2C activities, the equivalent of a Category 1 eGambling licence, for operators based outside of Alderney, a new category of licence, introduced in January 2018;
b a Category 2 associate certificate (formerly known as a foreign gambling associate certificate) for B2B activities, for foreign-based operators equivalent to a Category 2 eGambling licensee but based outside Alderney;
c a core services provider associate certificate for third parties providing gambling software to a licensee or Category 1 or Category 2 associate certificate holder; and
d a hosting certificate for the physical accommodation of gambling equipment, which must meet the AGCC's technical standards.
The Alderney licence application process can be considered to have three constituent parts: suitability, fair games and adequate process.
The first stage of the application process requires applicants to submit a completed application form with supporting documents as well as key individual certificate applications in respect of all key individuals who do not already hold a key individual certificate. A 'key individual' is an associate, someone who occupies or acts in a managerial position, someone who carries out managerial functions, or someone who exercises significant influence over the operations of the applicant. A deposit of £10,000 must be paid in respect of the AGCC's expenses in investigating and processing the application.
After receiving an application, the AGCC will typically seek a meeting with the applicant to talk through the business plan and intended remote gambling operations as well as the staff and corporate entities involved in the application.
Successful completion of the first stage will result in a licence being issued on payment of the applicable licence fee, and the licensee will proceed to the second stage of the process.
Stage 2 requires the AGCC to assess licensees as being adequate with regard to their internal control system, gambling equipment and capitalisation. The application process is suggested by the AGCC to have a time frame of six months, though this is necessarily influenced by the timelines in which applicants supply required information.
Licensees are required to submit regular financial and operational reports, which include information relating to player activity, suspicious transactions and significant player deposits or losses in addition to their broader anti-money laundering reporting obligations.
Licensees are subject to an annual audit requirement in respect of their financial accounts.
ii Sanctions for non-compliance
Contravention of any provision of the 1999 Law (or any ordinance made under it) is an offence.11 Additionally the 1999 Law creates specific offences of cheating by fraud or unlawful device or practice in any gambling transaction12 – the penalties for which include imprisonment for up to five years – and inciting young persons (i.e., those under 18) to gamble.13
Penalties for offences that are not specified (i.e., that do not relate to a specific offence) are as follows:
a in the case of a first offence, a fine not exceeding £25,000 or imprisonment for a term not exceeding six months, or both; and
b in the case of a second or subsequent offence under the same provision, a fine not exceeding £50,000 or imprisonment for a term not exceeding two years, or both.
In addition to the criminal offences contained in the 1999 Law, the 2009 Ordinance sets out a number of offences specifically in relation to remote gambling. Sanctions applicable to these offences include requiring rectification of a specific issue by the relevant licensee or certificate holder, issuing a formal caution, fines and suspension, or revocation of a licence (or suspension or withdrawal of a certificate).14
The most well-known use of the AGCC's sanction powers remains the suspension and subsequent revocation of the licences held by a number of companies trading as Full Tilt Poker following investigations by the AGCC. In that case, the AGCC found its investigation showed a shortfall of funds in the group caused by third-party theft and by covert seizure of funds by US authorities, both of which it stated had been concealed from the AGCC.
Alderney, as part of the Bailiwick of Guernsey, is subject to the anti-money laundering regime established by the States of Guernsey under the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law 1999 and ancillary legislation.
Owing to Guernsey's status as a leading international finance centre, it is highly focused on compliance with international standards (as represented by the Financial Action Task Force and Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism) in respect of the application of sanctions, prevention of terrorist financing and prevention of money laundering. The Guernsey legislation and guidance in this regard is regularly updated to reflect international best practice.
The 2009 Regulations make clear the standards licensees are expected to meet in respect of these issues and impose a modified form of the customer due diligence and transaction reporting requirements that financial services businesses in the Bailiwick are expected to meet.15
Licensees are required to appoint a money-laundering reporting officer to report suspicious activity. Failure to report, where appropriate, may result in criminal prosecution. Licensees are assessed in respect of their processes in this area as part of the licensing process and on an ongoing basis.
For taxation purposes, Alderney is part of the Guernsey taxation regime and treated as part of Guernsey. There is no corporate tax, VAT or other tax or duty applicable to gambling licensees in Alderney. The corporate tax regime for Guernsey and Alderney companies has been approved by the EU. Under this regime ('zero-10') companies with non-resident shareholders are not liable for any corporate tax, so the effective rate for a foreign-owned company is zero per cent.
In order to benefit from the zero per cent corporate tax regime, licensees must demonstrate that (1) they are resident in, and managed and controlled from, the Bailiwick; and (2) the main permanent establishment that generates all or the majority of their group profits is in the Bailiwick.
Guernsey income tax for individuals is set at 20 per cent with a maximum charge of £220,000 per year on Guernsey-sourced income and a maximum charge of £110,000 on non-Guernsey income. 91 days or more in Guernsey will establish residency and 182 days or more will establish sole or principal residency. Social security is set at 6.6 per cent for employees and is capped at annual earnings of £142,896.
VI Advertising and Marketing
Advertising and marketing are regulated under the 2009 Regulations, which simply state that advertising carried out by, or conducted on behalf of, a Category 1 eGambling licensee:
a must be truthful;
b must not be distasteful;
c must not promote gambling by, with or through persons under the age of 18 years, and this factor must be taken into account when determining media selection and placement of the advertising;
d must not encourage people to engage in excessive participation in eGambling that would be socially irresponsible or could result in harm to them or others;
e must not imply or convey any message that a person's status, general abilities or social success can be attributable to gambling;
f must not challenge or dare people to participate in eGambling;
g must not, having regard to the expected returns to customers through eGambling, promote or suggest any unrealistic expectation of winning;
h must not bring into disrepute:
- the island of Alderney;
- the Commission; or
- in any broader context, the Bailiwick of Guernsey; and
i must comply with any requirements relating to the content or nature of advertising imposed in the jurisdiction covering the target market for that advertising.16
Similar requirements extend to advertising by temporary eGambling licensees, Category 2 eGambling licensees, Category 1 associate certificate holders and Category 2 associate certificate holders respectively.17
VII The Year in Review
This year there were no significant developments beyond the passing of minor subsidiary legislation, which had no great impact on the overall legislative regime. Alderney continued to welcome new licensees in 2018, and also saw a number of merger and acquisition transactions involving remote gambling operators. These trends have continued in early 2019.
It is expected that Alderney will continue to grow as a remote gambling jurisdiction looking to access newly opening markets and continuing to build its relationships with other gambling regulators. New licence applications are still being processed, notwithstanding international political upheaval, and Alderney continues to market itself as a remote gambling jurisdiction to a range of different global marketplaces.
At the time of writing, Brexit continues to loom large on the horizon with no clear resolution. It is difficult to say with any certainty what the impact of Brexit may be on the e-gaming and gambling industry in Alderney. With general speculation predicting that the economy of the UK will be negatively impacted by Brexit, this could have a knock-on effect on the industry in Alderney, with less spending by the British public on online gambling and gaming.
Economic substance has come to the forefront in recent months. With legislation recently dealing with substance implemented in Guernsey, it remains to be seen how the focus on substance will impact operators in Alderney on a practical level.
The coming into effect of the General Data Protection Regulation and local legislation (the Data Protection (Bailiwick of Guernsey) Law 2017 (the 2017 Law)) means that those processing or controlling personal data (such as Category 1 licensees) are required to comply with European data protection standards. Data subject rights such as portability, subject access requests and the right of erasure will be applicable to many, if not all, licensees when processing personal data and the legal basis for and minimisation of data usage under the 2017 Law should be considered by all licensees.
Anti-money laundering and customer protection remain important, with an Alderney licenced online gambling operator being subject to a significant fine imposed by the UK Gambling Commission (UKGC) due to failures in complying with the UKGC's rules regarding money laundering prevention and customer protection.
1 Wayne Atkinson is a group partner and Michael Lyner is an associate at Collas Crill.
2 Section 20, the 1999 Law.
3 Section 19(3), the 1999 Law.
4 Section 5, the 1999 Law.
5 Section 19(1), the 1999 Law.
6 Section 1, the 1999 Law.
7 Section 2, the 1999 Law.
8 The Gambling (Betting) (Alderney) Ordinance 1997 and Gambling (Bookmakers) (Alderney) Ordinance 2002.
9 The Gambling (Interactive Gaming) (Alderney) Ordinance 2001.
10 Paragraph 19(1), the 2009 Ordinance.
11 Section 13, the 1999 Law.
12 Section 11, the 1999 Law.
13 Section 12, the 1999 Law.
14 Section 12, the 2009 Ordinance.
15 Schedule 16, the 2009 Regulations.
16 Regulation 4(c), the 2009 Regulations.
17 Regulations 8(1)(c), 6(c) and 60(b), the 2009 Regulations.