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Kindly sponsored by

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Home to 28 of the industry’s leadinglicensable brands as well as over3,000 specialist employees,Gibraltar has drawn upon its stablepolitical and economic climate,harmonious cultural environment,and robust legal and regulatoryframework to remain one of theworld’s leading onshore gamingjurisdictions for the past 17 years.

By placing a continued emphasis uponaccepting only the most committed,most reputable and most consumerconscious operators and suppliers,Gibraltar now hosts a community ofeGaming concerns which todayrepresents almost 60 percent of theUK’s remote gambling presence inEurope, and which is defined by itssense of collective obligation, andcooperative approach to developingthe global sector.

On 3rd April 2014, a record 230delegates from the public, private,licensed and ancillary sectors boardedOcean Village’s newly opened SunbornGibraltar to embark upon a day’sdiscussion and debate concerning thepresent and future status of the sector.

The Hon. Albert Isola, the GibraltarGovernment’s Minister for FinancialServices and Gaming, kindly openedproceedings with an address whichreaffirmed Gibraltar’s commitment to aprivate/public sector partnership which

has resulted in its becoming thejurisdiction of choice for many of theindustry’s most trusted brands.Following the regulator’s update fromGibraltar’s Gaming Commissioner, PhillBrear, the morning’s session thencontinued with a technological focuswhich saw Gibtelecom’s Jansen Reyesexamine the jurisdiction’stelecommunications framework andContinent 8’s Nick Nally benchmarkGibraltar’s infrastructural offering. Atruly international delegation of DLAPiper representatives from London,Madrid, Milan, Munich and theNetherlands then introduced the firstpanel session of the day with adiscussion of the evolution of remotegambling across their respectivejurisdictions.

Opening the afternoon proceedingswas an expert panel of paymentsspecialists who together discussed thefascinating, albeit still contentious,potential of Bitcoins and theirapplication within the industry, undermoderator Archie Watt. Matt Gormanof Standard Bank then took over withan examination of Africa’s role inshaping the future of private andcommercial banking. A highlight of theday saw Peter Howitt of the GibraltarBetting and Gaming Association andPaul Leyland, who kindly offered torepresent the Association of BritishBookmakers as a last minute stand-in,embark upon a format new to the

Summit; a debate concerning the legaland regulatory issues facing thelandbased and online sectors.Concluding the day’s proceedings wasa resolute and erudite address on thedangers of the UK Point ofConsumption licensing and taxationregime from Sir Peter Caruana KCMGQC, after which a distinguished panel,moderated by Peter Montegriffo ofHassans, tackled the outlook forgaming in a discussion which rangedfrom technological developments andmarket consolidation, to social gamingand regulatory enforcement.

This report seeks to provide an insightinto the outcome and spirit of the day’sevents with a view to sustaining theimpetus generated by representativesof an industry undergoing aremarkable process of maturation.KPMG would like to take thisopportunity to once again thank theSummit’s sponsors, speakers andattendees for contributing to what wasthe most popular installment in theseries to date. We look forward toseeing you all next year.

KPMG employs a number of eGamingindustry specialists both in Gibraltarand globally and is committed tocutting through the complexity of thisconstantly evolving industry.

Introduction

A word fromthe SponsorA harmonious, robust andmulticultural environment, Gibraltarhas established itself as a pivotaleGaming hub which is home tosome of the most reputable globalbrands in eGaming and one of tenhosting centres in Continent 8’sglobal network.

The Continent 8 Gibraltar Data Centreis one of the most secure and wellequipped in the jurisdiction and isuniquely housed 500m deep within theRock of Gibraltar itself at the ex-UnitedKingdom Ministry of Defence facility.

This year’s Summit was characterisedby industry cooperation, resolve, and agrowing sense of maturity throughout.

Continent 8 is proud to have been herefrom the start. We hope you enjoy thereport and to see you again next yearat the KPMG eGaming SummitGibraltar, 2015.

Richard EbbuttContinent 8 Technologies

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A third generation member of thefamily-owned law firm Isolas, whichhas been doing business in Gibraltarsince 1892, the. Hon. Albert Isolawas admitted to the Bar in Englandand Gibraltar in 1985 and wasappointed as the GibraltarGovernment’s Minister for Financeand Gaming in July 2013. Sincethen, Mr Isola has overseen thecontinued expansion of Gibraltar’seGaming community to nowaccommodate over 3,000employees as well as 28 licensees,and has been instrumental insecuring the jurisdiction’s reputationas a global centre for eGaming.

“When I look around the room I seewhat our gaming community here inGibraltar is all about”, he enthused.“Every aspect we talk about when wediscuss online gaming is representedhere today, and I would like to thankyou all not just for your attendance, butfor your commitment to Gibraltar andto expanding its gaming community.”Mr Isola then expressed his desire tothank at the outset the GibraltarBetting and Gaming Association(GBGA), for its own work in sustainingGibraltar’s global reputation as a centrefor eGaming; “It really is a partnership,something that I am extremely keen tocontinue to develop and I would like tothank them for their continuedcommitment, particularly over thispast, difficult year.”

Where are we today?

“When you look back 20 years at thetelephone betting industry, and yousee where Gibraltar is today, with 28licensees and over 3,000 employeeswithin the sector, it is easy to see howfar we’ve come,” Mr Isola remindedthe Summit. “It is also interesting tonote that since December 2011 whenwe held the last general election, and Idon’t use that date for politicalreasons, the number of employeeswithin the sector has risen by athousand. We have more licenseesand people within the community thanever before, and I think it’s nocoincidence, therefore, that today’sSummit is the largest of its kind thatKPMG has ever hosted.”

Taxation and regulation

“But there are challenges, as well asopportunities,” Mr Isola continued withreference to the UK’s Point ofConsumption Tax and its regulatoryimplications. “Our government’s viewhas been that these changes arefundamentally flawed. Of course, werespect the right of the UKGovernment to set its own tax rates;every sovereign government has thatability. But we continue to makerepresentations at the highest levels tovoice our concerns that the manner inwhich that tax has been set will drivebusiness into the grey market. Webelieve that it not only puts consumerswhere the UK Government says it

doesn’t want them to be, but alsoundermines the reputable businessesthat are seeking to ply their trade in aregulated and orderly fashion, all whilstlosing revenue for the UK.”

Mr Isola explained that theGovernment of Gibraltar has hadnumerous exchanges with HMTreasury and HM Revenue andCustoms and had provided a numberof industry reports, one of whichKPMG was a key author, to explainthat the approach to taxation the UKhas taken is the wrong one. “Of theregulatory changes, we are equallyconcerned,” Mr Isola added. “InGibraltar, we seek to regulate in apractical and pragmatic manner, andwe require a presence here. But themanner in which the UK’s proposalsare to be implemented will, webelieve, drive businesses away fromthe country and from Europe. That’snot something that we hope for orwant, but it is certainly what weexpect to be the unintendedconsequence of the proposedchanges.”

What is our position for the future?

Mr Isola observed that it is no secretthat the GBGA has long beenconsidering the potential for a judicialreview of the Gambling (Licensing andAdvertising) Bill subject to it gainingroyal assent. He explained that theGovernment of Gibraltar will not takelegal action against the British

The Hon. Albert Isola Minister

Gibraltar Government

ConferenceOpening

The Hon Albert Isola

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Government, but that it would certainlyintervene if proceedings were tobegin, to ensure that the interests ofthe Gibraltar people and its businessesare represented and protected. “Wewould not initiate those actions,” MrIsola reiterated. “But were thoseactions to commence, we wouldcertainly seek to ensure that our stallis properly represented and laid out. Itis part of our duty not just to you, butto the rest of the community.”

What are the opportunities?

“This sector, as we all know, is onethat is very fast moving,” Mr Isolacontinued. “The speed and pace ofyour growth and the technologies youare running with is quite extraordinary.Obviously, there are opportunities inthe US, and many of you are in contactwith US based concerns to providethem with the expertise you enjoy andthey require. I also see the newregime in the UK as an opportunity forGibraltar. I believe that the regulatoryregime that will be introduced is so fardistantly removed from what we’redoing here, that we’ll become an even more attractive option.”

What is our recipe?

“Every person here knows full wellwhat the Gibraltar Government’srecipe for gaming has been for thepast 20 years, and I can tell you allnow, categorically, that it’s notchanging,” Mr Isola noted in closing.

“We will continue to screen operatorsto ensure that the ones we have here,like you, are of the best quality, and arecommitted and careful not just in theiroperations, but in caring for theirreputation to the same extent anddegree as we do. We believe thatwhen you say you’re in Gibraltar, youreally are in Gibraltar. Ourrequirements for a presence span arange of reasons, and I believe we gotthe formula right, first time, 20 yearsago. Regulation, pragmatic and real, isa difficult balance to strike, but as faras I’m concerned the best onlineregulator in the world is still ourGambling Commissioner, Phill Brear.”

Consumer Protection

“Finally, consumer protection,” MrIsola added. “In Gibraltar we don’t justpay lip-service to this term, weconsider it to be an integral part ofwhat gaming is all about. We believethat it is absolutely critical thateverything that can be done to protectthe consumer is done. All of thesecombine to give us, the GibraltarGovernment, our regulators, licenseesand non-licensees, the reputation thatwe deserve and will continue to workto protect.”

He continued: “Our culture ofcompliance is similarly important,because that’s how our reputation as ajurisdiction is judged. Interestingly, in2011 there were 17 tax and informationexchange agreements within the

European Union and the US. Sincethen, we’ve expanded that to 27 TIEAs:we have the multi-lateral conventionwhich gives us an OECD standard forsome 70 jurisdictions, we have FATCAwith the UK, and we are shortly toenter into FATCA with the US. Webelieve in the fight against tax evasion,we believe in the fight against moneylaundering, and we’re totallycommitted to it. I believe that it is ourresponsibility to you to ensure that wetake all the steps that we canreasonably take to protect ourreputation as a jurisdiction. Partnershipis how I see the way forward, and ourgovernment is entirely committed tothe gaming community. Our doors arealways open.”

“It really is a partnership,something that I amextremely keen to continueto develop and I would like tothank them for theircontinued commitment,particularly over this past,difficult year.”

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Phill Brear was appointed as Head ofGambling Regulation for Gibraltar inOctober 2007 following two years asDirector of Operations with the BritishGambling Commission. In July 2011,he was appointed as Gibraltar’sGambling Commissioner in additionto his existing responsibilities. Havingplayed a leading part in the roll-out ofthe UK Gambling Act and gainedexperience across the breadth of theBritish gambling industry, the switchto Gibraltar, ‘home to the world’sleading online gambling operators’,brought a new set of challenges, withGibraltar’s adoption of its newGambling Act. Since his appointmentPhill has steered through a series ofchanges to the regulatory regimewhilst working closely with operatorsand their representatives on a widerange of operational andorganisational issues. Phill is alsoresponsible for liaising with bodies aschallenging as US regulators and theEuropean Commission.

Mr Brear introduced his presentation asproviding an overview of developmentswithin his department over the past 12months, coupled with an examination ofthe impact of anti-money launderingmeasures, with particular reference tothe 4th European Anti-money LaunderingDirective.

“On the domestic front,” he advised, “Iam very pleased to say that interest inGibraltar licences continues apace,despite events elsewhere. In the last 12months, six new licences have beengranted to now include Lottoland, AdoboGames, WMS, Scientific Games,Realistic Games and Net Entertainmentin our portfolio. One existing licence wasalso reissued following a change ofownership. As with last year, virtuallyevery new licence was B2B (business tobusiness), but given that virtually everyB2C (business to customer) operator thatcan be here is already here, this is likelyto be the growth area for some time tocome.”

He continued: “All Gibraltar licenceholders continue to demonstrate a realcommitment to the jurisdiction. Asyou’ve heard from the Minister,

management and staff numbers nowexceed 3,000 individuals. The rumoursand scare stories surroundingredundancies and downsizing are nomore than that. Industry insiders knowthat every year the number of staffacross every industry and every operatorebbs and flows as companies changetheir support and management structureto meet the demands of an everchanging customer dynamic. We have,perhaps, become too used to the flowappearing to be constantly upwards, butlet’s not forget 2006 when UIGEA tookout a quarter of jobs in our industry, or2002 when another quarter were lost –ironically to a UK gambling tax change.These numbers were quickly recovered.”

Licensees and applications

Mr Brear went on to explain that thenumber of licensees in Gibraltar hasmore than doubled since 2008, andtrebled since 2005. Similarly,employment has also doubled in sixyears. He emphasised, “Whilst we mustnot underestimate the impact ofredundancy on the individual and family,we must not get over-heated over whathas so far been a very modestadjustment to changes incircumstances.”

“This time last year, I said I expectedthere to be more than 30 licensees bythis time this year,” Mr Brear remindedthe Summit, “and on 31st March 2014there were. By 1st April, however, twotakeovers were completed which tookthe overall number of licensees back to28. We still have a handful of applicationsunder development, so by this time nextyear I expect there will again be over 30licensees. We may soon run out of thequality B2B licence holders, however,just as we may soon run out of thequality B2Cs.”

Expressing thanks to his staff, he wenton: “All of our licensees create a varyingamount of work for us each year, andthat’s something that has more thandoubled over the last six years asregulation has become more formalised,the customer base has grown, and therange and complexity of businesspartners has escalated. We continue to

provide Gibraltar standards to all thosewe come in to contact with, and I’mpretty sure my licensing team ofLorraine, Caroline and Darren lookforward to the day when the industry isstable and predictable, but I fear that’sstill a long way off.”

Consumer protection and complaints

“This is an area in which, I believe, we inthe industry have excelled again thisyear,” Mr Brear affirmed. “I’ll not dwell onthe fact that whilst one jurisdiction hasseen repeated corporate failures bypretty thinly financed and managedlicensees, who simply would not havebeen given that opportunity under aproperly balanced licensing regime,another has seen another licenseesubject to intervention by their local lawenforcement agencies. Regrettably,these are the events which define publicand political opinion about the industry.These are the events that register in thetrade press, the wider press, are referredto by politicians, and become theunderpinning of legislation.”

“But when you read that, in one case,winning bets were not being paid inSeptember, the blog sites were lightingup in October, and the regulator wasmade aware in November, beforeaccepting assurances that the issue was‘technical and marketing’ and that thingswould hopefully get better by thefollowing February, you realise how muchtruth is in the saying ‘you make your ownbad luck’. The company went under, ofcourse. All the cases we’ve seen havestrong elements of foreseeability aboutthem. Not that they were predictable,but there were elements in the businessmodel, the licensing model, or theregulatory arrangements, that cried outthat they were not waving but drowning,whilst the regulator was busy doingother things. My fear is that, even whensuch crises can be firmly pinned on theregulator’s chest, no one does sobecause hanging the industry out to dryis so much easier.”

Security

Mr Brear continued in explaining thatduring 2014 his department had seen a

Phill BrearGambling Commissioner

Gibraltar GovernmentRegulator’s Update

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short run of reported ‘dodgy bets’ whichhad, at the time of his presentation, onlyrecently abated. Allegations surroundedissues of scores, scoring and outcomes.Some, he explained, had all the hallmarksof contrivances – new accounts,customers with no or a dubious trackrecord, high value or multiple moderatevalue bets with no clear provenance.Others, however, showed signs of beingwhat Mr Brear described as ‘tipster led’or ‘sleepy trader’ events, where savvycustomers with advanced technologywere getting ahead of the traders.“These cases are incredibly difficult tojudge,” he remarked, “given the almostinvisibility of some of the markets andevents that are now being offered, butwe will defend the rights of savvypunters to be paid, even if the traderloses his bonus, as vigorously as we willresist claims by those who seek todefraud operators.”

“On that front,” he added, “there hasbeen a blip this year of unexplained bugsor interferences in some types of slotgames. There’s no doubt that astechnology becomes ever moresophisticated and commonplace, thosethat seek to undermine game securityare trying to do so, and in some casesthey are succeeding. To date, they havebeen careless and left small but clumsyfootprints that have allowed the event tobe unpicked, but this is an uneven battle,as many thousands of them try to pickoff the few dozen of you. So let it not bea Gibraltar operator holding the parcelwhen the hackers get bored of breachingNATO and UN systems and turn theirheads and hands to your games. Thatthreat is out there and getting strongerand stronger, and your defence systemsmust not stand still.”

The European Union

Mr Brear observed that there had beenlittle progress within the EU over the past12 months. Though the EuropeanCommission had made developmentssurrounding those that may be exposedto infringement proceedings, the ActionPlan project continues to move at whathe described as ‘glacial place’. The UKhad denied Gibraltar a place at themeetings, leaving the emerging advisory

papers looking ‘hollow and inadequatelyinformed’. “To the cynic, the ExpertGroup leading the Action Plan was adevice for moving as little as possible asshort a distance as possible, and it’sbeginning to look as if they’ll have theirway. Gibraltar is continuing to makerepresentations,” he confirmed. “But aswe are locked out of the debate, exceptfor seeing the minutes, it looks like theoutput of two years’ work will be a seriesof recommendations ranging from theanodyne to the misunderstood.”

The 4th European Money LaunderingDirective

“Much has already been said about thisdocument because it explicitly includes,as a designated non-financial businesswhich must adopt risk based protections,remote gambling in its entirety – that iscasino activities and betting. TheEuropean Parliament has recently giventhe draft quite a rough passage, applyingmore heat than light to its contents. Myreading of it and the Parliament’s earlyobservations is that the new directiveoffers to simplify some of the currentlyoverly elaborate language and doublelayering in the 3rd Directive. Thepoliticians, I believe, will struggle to openits jaws too wide because of the mainlygeneral applications of its provisions.What is sauce for the gambling goose issauce for the financial services gander,and though the financial servicesindustry’s reputation may be at an alltime low, the European Commission isn’tgoing to choke off that source ofeconomic activity through the AMLD.Some states may try to use the newdirective to attack the remote gamblingsector,” he continued, “but they couldhave done that anyway with the 3rdDirective.”

Local focus

Moving on to local developments, MrBrear alerted the floor to the recentgovernment launch of a series ofindustry and public sector workinggroups to examine the jurisdiction’sreadiness for the 4th Directive. Heexplained that this governmentprogramme will work slightly ahead ofthe Directive, and should mean that

Gibraltar is both well positioned and wellinformed ahead of its results. Mr Brearadded that it was with great pleasurethat he could confirm the industry hadbeen invited to join the relevant workinggroup.

The Gambling (Licensing andAdvertising) Bill

Turning to the UK licensing and taxproposals, he posed the question: “Howmuch more wrong could John Penrose[former Minister for Gambling at theDepartment of Culture Media and Sport2010-2012] have been when he informedthe UK Parliament in 2011 that he had abill of four ‘short and simple clauses’which he hoped to tag on to somebodyelse’s primary legislation and coat-tail thebill through the system?” Mr Brearremarked. “It is no surprise that therewere no takers and that this eventuallybecame a stand-alone bill. I would love tohave been a fly on the wall when theyfound out that royal assent had beendelayed. But what swings one way may,of course, suddenly swing back. Wehave, since March 2010 when thiscunning plan was first revealed, gentlyand diplomatically informed the UKdecision makers that this bill is wrong,wrong and wrong again. It is bad forconsumers, it is bad for the UK industryand it is bad for the UK Exchequer. It mayalso be good or bad for Gibraltar, but asthings look it’s going to be neutral.”

He continued: “The bill substantiallyweakens UK consumer protection bymultiplying the supply chain with a rangeof weak suppliers. Some existing UKcompanies will go to the wall, some willbe taken over, or become shadows oftheir current selves. UK companies willmake and report lower profits to theExchequer. Some will no longer be UKcompanies and report nothing at all.”Turning to events which preceded thebill, he stated: “It is very welldocumented that the only remotelytroublesome remote gambling policyissue that the DCMS and the GamblingCommission were faced with in 2008and 2009, when the ink wasn’t even dryon the Gambling Act, was the challengeand suspension of the defective whitelisting process. There were no regulatory

Phill BrearGambling Commissioner

Gibraltar Government

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problems with Gibraltar or Malta, or evenLatvia, Lithuania or Bulgaria, whorecently have been thrown into the potto add colour to officials’ ramblings andrumblings. All the significant UKgambling regulatory issues in the lastfive years have come from the WhiteList, if not from the UK itself. This is notsour grapes, just look at where theseevents came from and why they cameabout.”

Mr Brear explained that the Departmentof Culture, Media and Sport and theGambling Commission had prepared“almost coherent” white listing criteria in2006: “I say ‘almost’ because it wasclear to me that someone was trying toadd ambiguity and wriggle-room to thedocument”, he added. “The criteriawere, however, misapplied, ” heexplained, “for no ‘brass-plate’jurisdiction can meet key parts of thecriteria.”

Mr Brear then referred to sections of thewhite listing criteria document, whichstate that: ‘It is vital that the [UK]Secretary of State may be assured thatthe jurisdiction has the capacity, technicaland regulatory ability, and politicalimpetus necessary to enforce itsregulation.’ and ‘[the white listjurisdiction] must have the facilities andresources in place to ensure complianceand enforcement with those values ofthe regulatory regime in operation.’ Andhe compared this to powers given to theGambling Commission ‘enabling it toensure compliance, and to investigateand prosecute offences, includingpowers to investigate and accesslicensed and unlicensed premises usedin conjunction with gambling (such as agambling operator’s head office) andpowers to access key gamblingequipment.’

He pointed out that if the Secretary ofState believed “the GamblingCommission needed powers to accesslicensed and unlicensed premises andkey equipment used in conjunction withgambling, then I’m pretty sure the whitelisted regulators needed very similarpower as well. Without them, theycannot relate to the company, let aloneseek to exercise the necessary controls.Let’s not forget; regulators’ powers stopat the border. The typical white listoperator is located hundreds, if notthousands, of miles away from thelicensing jurisdiction, often speaking a

different language, not subject to EUcontrols, usually with no local regulator atall, and demonstrably able to pull thewool over their regulator’s eyes and thedraw-bridge up.”

“That,” he said, “is the problem theGambling Commission knew they had tofix back in 2008/09. That they produced,in a joint study between 2009/10, aconfection of problems that became theconsultation document in 2010 doesgreat disservice to the UK. If theproblems and deficiencies set outlaboriously in the 2010 documentexisted, why had they not been raisedwith us? 60-80% of the UK remotegambling market is in Gibraltar. Why hadthey not been raised with the white listregulators, whose arrangements theymust monitor and be advised if anysignificant changes are made?”

“It remains the case that the GamblingLicence objectives of keeping crime outof gambling, ensuring gambling is atransparent affair, and protecting theyoung and vulnerable have been letdown a disproportionate number oftimes by white list licensees, but nothere. If it’s not broke, you shouldn’t try tofix it.”

Market share

Moving towards a conclusion, Mr Brearreferenced a recently published analysisconducted by Gambling Data, an advisorto the Gambling Commission, on the sizeof principal operators’ UK market share,“although you have to take their workwith a pinch of salt; their authors are nottraditionally supporters of Gibraltar andthey have misplaced one Alderneylicensee as being UK licensed,” headded. He reported that their findingssuggest that up to 90 percent of UKbingo is licensed in Gibraltar, as is up to70 percent of casino, over 60 per cent ofbetting, but only 25 percent of poker.“Now given that betting has got 3 millionactive and not so active punters, pokerhas 20,000 players, with bingo towards600,000 players, and casino more thanthat; if somebody is online gambling inthe UK, they are 7 to 10 times more likelyto be gambling with a Gibraltar operatorthan anybody else. The point of all this isthat in EU law, and in very simple terms,the UK has to have a legitimate reason tochange its legislation to make it moredifficult and expensive for a licensed andregulated industry to operate there. I

don’t believe it did, or it does.”“Moreover, EU law requires that the fixit puts in place for the problem it hasdefined must be proportionate and it hasto work. The UK must now know that inmonths to come applicants for licenceswill creep up out of the woodwork.Companies and individuals that haveavoided the mainstream and even not somainstream licensing process, who havebought licensing in places where the baris low, will apply under Section 69 of theUK act for a licence to target UKcustomers. Section 69 and 70 containmany fine words, but the upshot ofthose sections is that you fill the form,you pay the fee, and the GamblingCommission has to give you a licenceunless it can show that you are notcompetent, not fit and proper, or cannotafford to be an operator, as set out in theStatement of Licensing Principles.”

“The government that introduced theGambling Act used the phrase: ‘in theUK, gambling licensing will stopbecoming a privilege and start becominga right.’ Now, forgive me for namingnames, but Canbet, Bodugi, and GloBetwere all operating under UK licences sixmonths ago. They were all giving offdistress signals, and all went under notpaying customer balances. All, I wouldargue, had structural flaws that theGambling Commission should have beenalive to, but it wasn’t. It licensed them,then looked the other way at its otherbusiness. So, losing one may beunlucky, losing two appears careless,losing three in six months really doesbeg some questions about the process.I hope I don’t live to regret these words,but could I stand here if I lost one, two orthree licensees not paying customerbalances?”

“In terms of the UK proposals, we arenow in year two of a five year cycle, butwe will have no idea how years three,four and five will play out until year two iscompleted. With royal assent delayed,and the legal challenge looking morelikely than not, we are very much in thethick of it, and it looks to be that way fora very long time.”

Mr Brear concluded by thanking theaudience for their attention.

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An energetic and enthusiasticspeaker, Mr Reyes began hisinteractive presentation byexplaining that Gibraltar’s offeringto Gibraltarian e-businesses isunderpinned by customer choice ina number of service providers,including two for internationaltransport (Gibtelecom andSapphire), three for internetprovision (Gibtelecom, Sapphire andContinent 8 Technologies), and fourfor data centre services (Gibtelecom,Sapphire, Continent 8 and Cube).“Indeed,” he enthused, “I canconfidently say that you are nolonger bound to the incumbent.”

Finding the right balance

Starting with what he described as the“most difficult service to get right inGibraltar”, Mr Reyes then quicklymoved on to the ‘notoriously hard’topic of international transport. Heexplained that the reasons for itsnotoriety can be ascribed to the typical‘two-dimensional’ model used withinthe service provider industry - cost vs.

engineering complexity - which hasnow been supplanted by a thirddimension; international politics.“Unfortunately,” he observed, “whenyou add that third axis the modelbecomes extremely sensitive. Whenyou pull on that third dimension itskews absolutely everything, making itvery hard to find the right balance.”

“But we did find that right balance,and we did so when Gibtelecominvested in a 15,000km cable, whichspans three continents and features 13landing stations, one of which lands inGibraltar. This not only gives ushundreds of gigabytes worth ofcapacity in and out of Gibraltar, but italso gives us 35 milliseconds of roundtrip time from Gibraltar to London andback, and roughly 130 milliseconds toMumbai and back. For the moretechnically inclined amongst you,when you take the sum of those twoparts you quickly come to therealisation that that is the shortestpossible route from London to Mumbai– it’s fabulous stuff. Supplement thatwith the fact that we have a number of

other partner cables landing in theconsortium’s landing stations and itmeans that we are one serviceprovider hop away from six out of theseven continents.”

Returning to Europe, Mr Reyes notifiedthe Summit of Gibtelecom’s recentfinalization of a pan-European, self-optimising and self-healing transportnetwork spanning from Gibraltar toLondon via Madrid, Marseilles,Monaco and Paris, thus completingwhat he described as “a resilient androbust mesh”. “Now, because we ownthe technology and the infrastructureat each of these points of presence,”he continued, “not only does it meanthat we can offer break-in and break-out telecommunications services, butwe also have a platform for speedyinternet access.” Mr Reyes explainedthat Gibraltar has been developing itsinternet peering footprint over the pastdecade such that its service providersnow pair with some of the largest inSpain, France, the Netherlands, andevery single provider with a UK ISP.This, he explained, means that

Gibraltar - a globalcommunications hubJansen Reyes Associate Director, TechnologyDevelopment - Gibtelecom

Jansen started his career in communications as a graduate engineer working forNortel Networks and later setting up his own consultancy business in the UK. Onreturning to Gibraltar in April 2005, Jansen joined Gibtelecom as an Assistant TeamLeader in the Internet Department, progressing his way to Next Generation NetworkManager in 2011. In 2013, as part of the Company’s succession planning programme,Jansen was promoted to Associate Director, Technology Development and in May2014 was appointed Director of Technology.

Jansen is the only Gibraltarian to hold a Cisco CCIE accreditation, one of the mostprestigious networking qualifications in the industry which he attained in 2009. In2002 he was awarded a First Class Honours Degree in Computer Systems andNetworks and Distributed Systems from the University of Plymouth and in 2011 anMA in Enterprise Management from the University of Durham.

customers throughout Europe are justone service provider ‘hop’ away from aGibraltar based service, which createsan augmented customer experience.

Data Centres

“Over the last decade, Gibraltar hasseen the build of over 2,000m2 ofrack-power cooling facilities, or datacentre space,” Mr Reyes observed.“From Gibtelecom’s 700m2 hostingfacility, rated tier 3, which is located 50metres above sea level, to Continent8’s absolutely unique, ex-NATO facilityembedded 500 metres into the rock,to Sapphire’s aptly located facility inthe hub of the e-commerce district, Ican truly say that we have the capacityto support any services we may needtoday, or in the near future.Unfortunately for all of us here,however, great bandwidth, fantasticfacilities and hosting are not the be alland end all, because according tosome extensive research carried outby industry analysts, the combinedsector of eGaming commerce is thenumber one target for cybervandalism, which manifests itselfpredominantly in a DDoS, ordistributed denial of service, attack.”

He explained that a DDoS attack is, insimple terms, one which is carried outby multiple computers with the aim ofoverwhelming the computingresources of an operator to the pointof network saturation with vast

amounts of data. Such volumetricattacks are often conducted as ameans of exacting revenge, ofextorting an operator or, albeit rarely,as a form of ideological ‘hacktivism’. In2010, Gibraltar was the host target ofthe largest DDoS attack knownanywhere in the world at that time,although it was successfully mitigatedby specialist technologies within tenminutes. Since then, attacks havegrown to a maximum, in 2011, of105.11Gbps, which is equivalent tomore than the inbound bandwidth tothe whole of Gibraltar. The jurisdictionwas also the host of one of the world’smost prolonged DDoS attacks, whichlasted for 9 months and was alsosuccessfully mitigated by Gibtelecom’sdedicated technologies.

Mitigating and ‘scrubbing’

Moving on to cyber-security, Mr Reyesexplained that the most commonmeans of mitigating a DDoS attack isknown as ‘scrubbing’, a method bywhich ‘scrubbing farms’ attract bothmalicious and legitimate data packets,and filter out those which are used aspart of an attack. He noted thatGibtelecom currently enjoys 14‘scrubbing farm’ clusters, which aresituated throughout the Americas, Asiaand Europe, including one in Gibraltar,Madrid, Marseilles, Paris, London andBude in Cornwall. “And the reason forthis is that we need to be as close tothe source of the attack as possible so

that we don’t bring down half theinternet when we initiate a response,”he added. As an aside, Mr Reyes alsonoted that respondents, or those whoattempt to negotiate withcybercriminals, are the most likelytargets of future attacks: “This is notadvice, but from our experience thesecriminals will simply ask for double,triple, quadruple the original ransom,and they will not stop.”

How real is this threat?

“Regrettably for all of us, I am notexaggerating the scale of this threat,”Mr Reyes reiterated to the Summit inclosing. “In just the last 24 hours therehave been 180Gbps of cumulativeDDoS attacks around the world, two ofwhich are in Gibraltar and are beingsuccessfully mitigated. But theproblem is, these attacks arebecoming too easy. You don’t need tobe an expert, it can be cloud based,you can go and buy it at a rate of just$5 for 5Gbps. Realistically, therefore,you could bring the whole of Gibraltardown for just $100; it would crawlwithout the proper systems andtechnologies in place from your choiceof data service providers.”

Jansen Reyes

9

Mr Nally introduced his presentationas providing a global jurisdictionalcomparison, using Gibraltar as abase standard against which tobenchmark the staple offerings ofproviders in power,telecommunications, and hostingbundles. He explained thatContinent 8 now runs 10 differentdata centres around the world, firstin Montreal in the late 1990s andnow in such jurisdictions as London,Paris, Dublin, Isle of Man, Gibraltar,Guernsey, Malta, Singapore and,following a recent transactionalservice waiver, New Jersey.

Power

“What I call these ‘staples of ourindustry’ - power andtelecommunications - are effectivelythe basis upon which we form andcharge for the services we provide toour client base in different locations,”Mr Nally began. He explained that hispresentation would compare Gibraltarto five other jurisdictions composed ofstandard gaming jurisdictions, such asthe Isle of Man and Alderney, and ‘tier1’ locations such as Dublin andLondon. Rather than provide specificfigures, however, for comparativepurposes Mr Nally elected to useGibraltar as a base value of 1, with theremaining jurisdictions providing arelative evaluation.

The numbers are based upon totaloverall charges, they are not ratescharged by the electrical utilitycompanies and they incorporateconcepts such as PUE, or power usageeffectiveness,” Mr Nally observed.“This measures how efficient yourdata centre is. In an ideal scenario,you’re trying to get down to onebecause we’re measuring the totalamount of power in the data centreover the total amount used for yourhosting operation; service, storage anddata communication equipment. Ifyour PUE is 2, for example, that meanshalf of your energy is going to yourclient’s IT infrastructure, and the rest isgoing to your infrastructure i.e. cooling,BMS, overheads, etc.”

Mr Nally referenced studies conductedby the Uptime Institute to explain thatin 2007 the average data centre PUEwas 2.5, which is highly inefficient. In2011, that number had gone down to1.89, lowering to 1.65 by 2013: “whichshows that our technologies arebecoming more efficient with everypassing year,” he added. “Althoughthere is one caveat to those numbersin that 6% of respondents claimed thattheir PUE was less than one, which isstatistically impossible.”

Power Charge Ratios

Mr Nally then drew the attention of theSummit to a bar chart depicting powercharge ratios in selected jurisdictions.Again, furnishing Gibraltar with a baserate of 1, the Isle of Man came in a0.68, Alderney at 0.78, Malta at 1.41,Dublin at 0.56, and London at 0.71.“The point to make here is I’m notsurprised by Malta and Gibraltarbecause they’re typically hotterlocations, so it takes more energy tocool those data centres,” Mr Nallynoted. “In the case of the Isle of Man,Dublin and Gibraltar, we own all of ourfacilities so we can invest in andimprove our own infrastructureinternally, which does affect thosenumbers. In Gibraltar, for example, wehave invested millions to treble thecapacity of the data centre from a750kw to a 2.2 megawatt facility. Inthe typically cooler climates such asthe Isle of Man, Dublin and London,we use advanced technologies such asadiabatic wheels to take advantage ofthe cooler air.”

Telecoms

Again taking Gibraltar as a base value,Mr Nally explained that telecomscharges comparisons are calculatedusing a base value of a 10Mbps supply.“I should state at this point, thatContinent 8 takes connectivity from anumber of different carriers so that we

10

Nick Nally Chief Development Officer

Continent 8 Technologies

Nick Nally has 25 years’ experience in many sectors ofthe IT & telecommunication industry, encompassingsenior management, consultancy, sales, carrierrelations, engineering, and business development.Nick has been with Continent 8 for 7 years now andlooks after business development and strategy as itrelates to the rollout of offerings to service theeGaming market. Previously, Nick was an advisor andconsultant to the Department of Communicationswithin the Irish Government.

Nick Nally

have a redundant and resilient supply,”Mr Nally added. “This enables us toguarantee our services on acontinuous basis, but these dualnetworks obviously increase the cost.We also rely heavily on carriers likeGibtelecom so carrier infrastructure isvery important to us.”

Again drawing the attention of thesummit to a bar chart, and usingGibraltar’s offering as a base value, Mr Nally provided a jurisdictionalcomparison which showed the Isle ofMan’s offering at 0.07, Alderney’s at0.13, Malta’s at 0.16, Dublin’s at 0.03and London at 0.02. “These are thecosts that we receive and deliver toour customers,” Mr Nally observed.“Really they show that telecoms iswhere the biggest potential to improveGibraltar’s offering to e-business lies.As with all jurisdictions, telecoms willhave a dramatic impact on futureofferings in all sectors.”

Bundled offerings

To provide an example of a bundledoffering, Mr Nally explained that atypical customer may approachContinent 8 and put its two basicofferings – power and bandwidth – intoa bundled offering of 1 rack, 5kW ofpower, and 10 Mbps of bandwidth. Atthis point no other services, such asDDoS protection or cloud storage, areincluded. Taking Gibraltar as a base

value, Mr Nally then demonstrated thatMalta’s offering came in at 0.27, withthe Isle of Man, Alderney, Dublin andLondon scoring 0.15, 0.22, 0.10 and0.12, respectively. “This againdemonstrates that there is greatpotential for Gibraltar to furtherimprove upon its bundled offering,” headded.

Observations

Moving on to continuity of supply, MrNally then alluded to the importance ofreliability in the provision of power tobusinesses. “Our customers don’t feelthe loss of incidents such as poweroutages, but we do rely heavily uponincumbent suppliers to allow us tomaintain a standard of service,” heexplained. Concerning the provision oftelecoms services, Mr Nallycommended the quality of Gibraltar’sinfrastructure in allowing Continent 8to operate without a single set-backsince its establishment in Gibraltar in2012. DDoS, or distributed denial ofservice attacks, however, remain asignificant problem for incumbentoperators. Mr Nally explained thatContinent 8 owns and operates itsown protective services for theeGaming sector, and emphasised theneed for greater vigilance to guardagainst malicious activities.

To close, Mr Nally touched briefly uponthe topic of availability of skills andembracing technological change,noting that this was an aspect of theindustry that will always represent achallenge for the industry’s regulators.Mr Nally then paraphrased a commentmade by Richard Scheutz,Commissioner of the CaliforniaGaming Control Board, who statedthat he’d rather have fewer lawyersand more engineers working within hiscommission. “That statement is verypertinent,” Mr Nally added; “you needto have the expertise in place to keepabreast of technological changes, andthat is something that many regulatorsstruggle with.”

“Finally, intervention,” Mr Nallyconcluded. “Thirteen years ago, Irelandwas faced with a massive problem.Microsoft had approached the IrishGovernment and stated that they hadto leave the jurisdiction because thetelecoms infrastructure was so poor,and because it was so expensive. The Irish Government immediatelyinvested in the infrastructure and soldit back into the marketplace. I was theconsultant for the government at thetime and spent a number of yearsputting everything in place. That is achoice, and I know that Gibraltar istaking steps to improve its offering, no doubt to further its reputation as aglobal leader well into the future.”

“Gibraltar is takingsteps to improve itsoffering, no doubt tofurther its reputationas a global leaderwell into the future.”

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“Going back to the majorjurisdictions we discussed 12months ago; I think it’s fair to saythat Germany was a mass ofconfusion,” Mr Ketteley began. “Asfar as the UK was concerned, wewere simply waiting to see whatwas going to happen. In Spain therewas discussion about whether ornot slots and exchanges were goingto arrive, and whether the licensingwindow was going to open again.Italy had then fairly recently openedup for slots, which was quite a majormove for the market and likely tohave a major impact on thejurisdiction, and in Holland therewere some movements from thegovernment to allow operators tocontinue trading in the marketpending the emergence of aregulatory regime. Now, 12 monthson, things have fundamentallychanged. But to repeat a questionposed to each of our panelists lastyear; what is the societal perceptionof online gambling in yourrespective jurisdictions?”

Niels Boef - “I think it’s fair to say thatin the Netherlands online gambling isstill heavily debated. The legalization ofthe online market is scheduled to takeeffect on January 1, 2015, but it is notabsolutely certain that this timeframeis feasible. Legislative proposals arestill underway and there has been a lotof debate in the press recently aboutopening the online market, which hasmostly been fed by the land-based,state casino, lottery and land-basedslot operators. This then extends to theregulatory environment and the taxangle. So I would say that this marketis still heavily debated, especially in thefinancial press and that means that thepoliticians are still reluctant to engagewith the issue, but it is in motion,that’s for sure.”

Patrick Schwarzbart - “In Germany wehave seen some progress in the last12 months because we have at least,in part, a regulated market. Last year,there were already licences in placewith respect to Schleswig Holstein, astate which we must remember todistinguish from the rest of theGerman market. Over the last 12months we’ve found that severaloperators licensed in SchleswigHolstein have taken up their regulatedoperations. We haven’t seen anychanges to regulation, but theInterstate Treaty on Gambling providesthat a remote offering is possible if solicensed and we have seen that thelottery operators in each of the sixteenfederal states have embraced thisopportunity. They have ticketpurchasing websites in place and theyare also strongly advertising. Horserace betting operators are alreadyregulated and provide their offeringsremotely. With respect to sportsbetting, however, the mess is gettingbigger every day; we still don’t haveany licensing in place, and noregulation to support it.”

Guilio Coraggio - “From Italy’s pointof view, the biggest change has beenthe launch of slots, which hasincreased the scale of the casinomarket. We also have the liberalizationof sports betting, which was veryrestricted under the old regime. Therewill be some new games and eventslaunched over coming months, as wellas a new betting exchange. We alsoexpect new bingo regulations to sooncome into force. The goal of theregulator in this respect is to decreasethe scale of the black market, which atthe moment is very much the mainissue. This is to be achieved throughmeasures such as a move by theItalian regulator against gamesuppliers, which will decrease the size

of the casino black market and work tothe advantage of the regulatedmarket.”

Ash Averill - “For the UK, there aretwo main areas of concern. The first isan increase in focus on the gamingmachines, so mainly the B2 machinesor fixed odd betting terminals (FOBTs).These have high stakes and pay-outlimits and have already undergone areview, albeit to remain at the samelevels. The problem surrounding this isaccessibility. Bookmakers are currentlyallowed four B2 machines in each oftheir high-street shops, and there hasbeen a suggestion that these areamounting to most of the income forthese operators. As a result, therehave been suggestions that this hasled to a proliferation of betting shopson the high street, which is a land-based topic but, as tends to be thecase, remote gambling is being tarredwith the same brush.”

“The other issue surroundsadvertising, which is certainly growingaround sporting events. There hasbeen a six-fold increase inadvertisements between 2007 and2012, and I think there’s a worry thatthis will increase even more when thenew regime is put in place.”

Albert Agustinoy - “It may seemobvious, but from a Spanish industrystand-point one year has gone by andthe market is now more mature. Imentioned last year that onlinegambling is perceived as anentertainment industry and this hasbeen reinforced in the mind of theSpanish consumer. Advertising is nowwide-spread and the introduction ofproducts on new devices andplatforms has consolidated the market.From a regulatory standpoint, I wouldsay it’s quite an exciting time. At the

Panel Session 1 The Evolution of RemoteGambling Across Europe Moderated by:

Stephen Ketteley - DLA Piper, London

Panellists

Albert Agustinoy – DLA Piper, Madrid

Guilio Coraggio – DLA Piper, Milan

Patrick Schwarzbart – DLA Piper, Munich

Ash Averill – DLA Piper, London

Niels Boef – DLA Piper, Netherlandst

moment, we expect that slots maysoon be regulated. This will besupported by the introduction of newproducts such as exchanges as well asother important developments thisyear. There is a paradox in the Spanishindustry in that it is still, broadlyspeaking, half the size of Italy. Fromthe point of the regulator it isimportant, therefore, to ensure thatthis potential for market growth isfulfilled.”

From the perspective of thoseworking in the more maturemarkets, what lessons can theregulators learn from theirrelationships with your clients?What do your regulators do well,and what could they do better?

Guilio Coraggio - Mr Coraggiocommended the Italian regulator for anopen-mindedness and businessoriented approach, which has savedthe online gaming market from thosemore old fashioned regulators. Heexplained that the lesson for the Italianregulators was the realisation that itmust do the best for the market byproposing practical guidelines andtaking a proactive approach to theirimplementation. “Unfortunately,” heexplained, “discussion between theregulators can sometimes go very fast,and sometimes very slow. The lessonis to simply do the best for the market,which will have the knock-on effect ofattracting new business and enableoperators to do the best for theirplayers. Players are going to gambleanyway, whether on the black orregulated market, and we’ve come tolearn that the best results cannot beachieved by restricting gambling.”

Albert Agustinoy - “I think theSpanish regulator also follows abusiness oriented model, althoughsome here may disagree,” MrAgustinoy remarked. “Given theframework they are working within,they are moving to create the most

competitive offering they can fordomestic operators. Another positiveattribute is that the Spanish regulatorstend to hear the industry and learnfrom the experience accrued by thoseoperators that have been in the marketfor years. The Spanish authorities knowprivate industry has a clearer picture ofthe market and are always happy tohear their input.”

Guilio Coraggio - “I think it’s alsoworth mentioning that the Europeanregulators do talk to one another,which means that an improvement inone jurisdiction often means animprovement in another,” Mr Coraggioadded. “This sort of collaboration mayeventually lead to somethingresembling common standardsbetween jurisdictions, which iscertainly lacking at the moment.”

Do you get the impression that thereis any kind of movement towardsharmonized or common standardswithin the European market?

Guilio Coraggio - “In terms of sharedliquidity, I think Italy and Spain need tounderstand how their technicalstandards are going to interface beforewe can make a decision. Everyonewas waiting for France to do the same,but unfortunately the FrenchParliament decided to consider itfurther. Italy was waiting for Spainwhile it was thinking of opening a dotcom environment, which is somethingthat Italy wouldn’t accept, so we needto find a common agreement. Inrelation to common technicalstandards, the position I got from theItalian regulator is that they were goingto use common UK standards as abenchmark.”Albert Agustinoy - “From the Spanishside it’s no secret that the GeneralDirector is in favour of shared liquidity.The approach that he is defending isthat it is up to the operators to ensurethat once international liquidity hasbeen executed, they will always

13

“Players are going togamble anyway,whether on the

black or regulatedmarket, and we’vecome to learn thatthe best results

cannot be achievedby restrictinggambling.”

remain bound to the technical andregulatory requirements in Spain. This makes the situation more difficult.From a philosophical standpoint,therefore, I think the regulators inSpain, Italy, Denmark and so on are inagreement. The problem lies in puttingthe details down on paper. I would notbe too optimistic in the short term, butcertainly in the medium.”

There are a number of regulations indifferent Member States thatcontinue to flout European legalprinciples, and we know theCommission wrote to a number ofthem in November. Patrick, couldyou remind us of Germany’ssituation with regards to theinfringement process?

Patrick Schwarzbart - Mr Schwarzbartexplained that an infringementproceeding has been ongoing inGermany since 2008, which is one ofthe focuses of the EuropeanCommission and is still beingassessed. He explained that, to hisknowledge, there are currently twopending cases with the EuropeanCourt of Justice. The first relates to thepotential incoherency of a dualregulatory regime in SchleswigHolstein; one liberal and the other, theInterstate Gambling Treaty, morerestrictive. The second deals withtransparency issues surrounding thesports betting licensing process and,as Mr Schwarzbart noted, is unlikely tobe resolved until 2015, during whichtime operators will continue pose legalchallenges.”

What should potential licensees lookto do in the interim? Is it going toprejudice the process of acquiring alicence in a Member State?Specifically, where are people now,in the Dutch and German markets, ifthey continue to trade?

Niels Boef - Mr Boef first wished tofocus on a single issue on the

regulatory side concerning a severeDutch litigation case surrounding thegambling tax, which is currentlypending and, he explained, is currentlyovershadowing a series of proposalsunder government consideration.Incumbent land-based operators areclaiming that the current tax regime isnot compatible with EU law. In thecurrent proposals, online operators areoffered a 20 per cent tax rate, whileland-based casino operators incur 29per cent rate. This differentiatedregime is putting a lot of pressure onthe current system and, he explained,is slowing down the legislativeprocess.

In answer to Mr Ketteley’s originalquestion, Mr Boef explained that theDutch industry had recently seensome M&A activity where the partyacquired fell within the scheme ofprivatization policy. “So what I seeright now is that the foreign players arecircling around it and waiting to seewhat is going to happen,” he added.“We will have to see, but I don’tenvisage regulatory change being toofar off.”

Generally, people continue to takecasino and poker out of Germany.Some are betting on paying the tax.What is the situation there?“It’s a very complex situation,particularly because we haveSchleswig Holstein in the mix,” MrSchwarzbart observed. “First of all,many operators that are licensed inSchleswig Holstein take the view thatthey are entitled to operate throughoutthe rest of Germany, but we have yetto see to what extent they will becontested by the other federal states.On the other hand, it is important tounderstand that until we have thatlicensing regime in place we still havea de-facto state monopoly on sportsbetting in place in Germany. Withrespect to this state monopoly, theEuropean Court of Justice has ruledthat this is incoherent and therefore

14

“I think it’s also worthmentioning that theEuropean regulatorsdo talk to one another,which means that animprovement in onejurisdiction oftenmeans animprovement inanother”

15

not valid and operators can take thesame viewpoint. Insofar asenforcement is concerned, that is adifferent issue. We don’t have oneregulator which is enforcing lawsagainst unlicensed operators; we havesixteen states each with their ownenforcement competence. There is noreal coordination in their approach, butthat will change one a single regime isin place.”

As everyone prepares for the newlicensing regime in the UK, one of thequestions we’re asked the mostconcerns a particular line in a provisionaimed at applicants with a businessplan. This involves sharing with theGambling Commission your rationalefor doing business in jurisdictionswhere you don’t have a licence. Whatview does your regulator take withrelation to doing business in otherparts of the world?

Ash Averill - Mr Averill explained thatthe requirement for a company torationalize its desire to do business inother jurisdictions could be describedas very ‘Nevada style’ in itsimplications of extraterritorial probity,but reminded the floor that this onlyapplies to jurisdictions from which anoperator takes more than 3 percent ofits total revenue. Moreover, for smalleroperators with a total revenue of lessthan £5million, that threshold islowered to 10 percent. He explainedthat the Gambling Commissionrequires a company to provide arationale to justify the legality of takingbusiness from a jurisdiction in whichthat company is not licensed. In

addition, the Gambling Commissionrequires similar justification concerningany jurisdictions that are activelytargeted by a company, irrespective ofthe 3 percent or 10 percent of totalrevenue threshold. He explained thatthe Gambling Commission wants tounderstand the processes andprocedures put in place to engage withan outside jurisdiction, and how thatengagement takes places i.e. througha dedicated domain name or the useof a local language. “This is stillmoving, but we understand that theGambling Commission does not intendto issue a blacklist of jurisdictions fromwhich business is banned. However,we don’t understand what they aregoing to do with this information,whether it will be used to prevent acompany from gaining a licence, orwhether that company will be requiredto stop doing business in thosejurisdictions in order to acquire andmaintain a licence in the UK.”

Albert Agustinoy - “I think that theregulator should be banned pursuantto the powers of regulation it is taskedto fulfill and enforce. In the Spanishlicensing system there was a similarrequirement, but this was more forstatistical purposes. Overall, I amsurprised that this is the case.”

Giulio Coraggo - “In Italy, no directoror ultimate shareholder is allowed tohave a pending or active criminalproceeding in Italy, or criminal sanctionworldwide. This extends beyond anindividual’s role within the company toany personal liability. What FrancescoRodano, Head of Remote Gaming in

Italy is doing is talking to regulatorsworldwide, say in New Jersey orNevada, and notifying them of anylicensees that are acting illegally inItaly. This is creating a lot of issues.For instance, major game suppliers inItaly will stop offering games to non-Italian operators that offer games toItalian players, so we have a doubleroute: game suppliers offer the samegames to unlicensed and licensedItalian operators, but the payout forunlicensed is, of course, much higherso players gravitate to unlicensedplatforms. Developments areanticipated, however, and since theItalian casino black market is known tobe the same size as the regulatedmarket, we could soon see theregulated casino market double in size.”

“Developments are anticipated, however,and since the Italian casino black marketis known to be the same size as theregulated market, we could soon see theregulated casino market double in size.”

16

17

Archie joined KPMG Isle of Manfrom KPMG London, where he wasrecruited as an IT Advisory Directorin the Information, Communicationand Entertainment practice, with aparticular focus on online gamingclients. Archie worked on thebwin/PartyGaming merger and hehas also worked on a number ofacquisitions in the gaming sectorand the public listings of 888,Playtech and PartyGaming, amongstothers. Archie is a regularcontributor to sector publications.He co-authored the report OnlineGambling: A Gamble or a Sure Bet,and was recently consulted for theRemote Gambling Associationreport on the impact of theforthcoming changes to tax andregulation of the remote gamingindustry.

“I think we can all agree,” Mr Wattopened, “given the amount ofcoverage they have gained over thepast few months, thatcryptocurrencies have evolved fromsomething that would seemcompletely anathema to regulatedeGaming markets, to a form ofcurrency that is perhaps now enteringthe mainstream. It’s one of the keypoints I would like to discuss with ourpanel, which today represents a largeportion of the payments processingworld. But before we begin, for the

benefit of the Summit, could I ask foran overview of what Bitcoin is, andwhat it means to the paymentsprocessing world?

Eric Benz - “I’ve been working withinthe digital currencies sector for thepast couple of years now and over thatperiod I’ve seen something that initiallyattracted only a very small followinggrow to become very much larger thanlife,” Mr Benz enthused. “We realisedthat we really needed to do somethingfor the industry. We started anassociation that would spearheadengagements with HM Revenue andCustoms, the Financial ConductAuthority, and other financialinstitutions and groups to provide theright guidance and understanding -whether from a banking or complianceperspective - as to how companiesthat use cryptocurrencies need tooperate and do business within theregulated financial system. In manyways, it’s very similar to the eGamingenvironment a decade ago. It’ssomething that needs attention andI’m glad that we’re here.”

Paul Davis - Having briefly consultedthe floor as to delegates’ priorunderstanding of Bitcoin and itsmechanisms, Mr Davis first opted toprovide an overview of the technology:“A Bitcoin is a piece of machine code,”he explained. “It can be passed

between electronic devices over theinternet between two individuals andas long as those two individualsbelieve that it represents value, andthey both have a way to do somethingelse with it, then it operates exactlylike a currency. We use the term ‘fiatcurrency’ to describe money issued bycentral banks, and ‘cryptocurrency’ isemerging as the most popular term forthese privately issued alternatives.”

Mr Davis continued: “Bitcoin and itscousins are very scary forgovernments, banks and, to be honest,even for payment processors. This isbecause widespread acceptance of adigital currency that can be transactedat no charge from person to personhas the potential to put us all out ofbusiness. Consequently there’s amassive political lobby against Bitcoin.Governments and banks who caninfluence the press in many parts ofthe world are content to encourage thepublication of negative stories. Butevery single concept that is ralliedagainst the crypto-currency cause -that it can be used for drug dealing,transacted across borders withoutbanking fees, and can be laundered -can be applied to cash.”

“Because of this fear and lack ofunderstanding surroundingcryptocurrencies we are now in aspace which is very similar to that of

Panel SessionBitcoins & Beyond - payments,conventional & alternativeModerated by:

Archie Watt, Director, KPMG Gibraltar

Panellists:

Paul Davis - CEO, Counting House

Stephen Quinn - Ukash

Ian Benson - Maclay, Murray & Spens

Eric Benz - UK Digital Currency Association

18

debit cards in the mid-1970s; everyonethought it was insecure, that it couldbe hacked, and that it would never takeoff. I doubt anyone here today doesn’thave a debit card in their pocket. Thereis a young, aggressive, powerful groupof people that is developing, thinkingof new applications and making ithappen, and an older generation that’stut-tut-tutting and saying it’ll neverwork. Bitcoin has been around longenough to have faced its challenges. It isn’t now going to go away. Thequestion for the eGaming communityis how best to use it, not how to stopit from happening, because ittranscends borders, it opens marketsand it represents a powerful toolwhich, in my opinion, could beemployed by forward lookingcompanies.”

Ian Benson - Mr Benson agreed withMr Davis in terms of Bitcoin’s potentialas a new entrant with tremendouspossibilities for global markets.“What’s different, as Paul pointed out,is that it avoids international clearingsystems,” he added. “That means youcan send currency, irrevocably, as goodas cash, for the cost of sending anemail. Of course, when an individualcomes to trade or convert thatcryptocurrency they would beartransaction costs, but the avoidance ofclearing systems and charge backs area key selling feature. There are a lot of

issues; it’s new, the regulators areshying away from bringing Bitcoinservices within the fold of financialservices regulations, and there’s a lotthat needs to be resolved for thatmarket to emerge, fully, as analternative means of payment.”

When we talk about anonymity,what are the subsequent anti-moneylaundering issues surroundingBitcoin?

Eric Benz - “I think the statementshould be made at this point that therereally is no anonymity to Bitcoin.There’s privacy, but every single aspectof Bitcoin is visible. If you could seeevery single transaction using Visa orMasterCard, for example, that wouldbe a great thing. The reason for this isthe ‘block chain’. The block chain is anopen ledger which shows every singletransaction of a Bitcoin in real time asit functions within the eco-system.You’re able to see every movementwithin the Bitcoin system in real time,so we can track and see everything;nothing is anonymous.”

“The privacy aspect comes in becausepeople are acting as their own bank.They have control of their own fundswithout operating on a fractionalreserve type basis. From an AMLperspective, sure, there are ways thatpeople could find to launder money,

but Bitcoin is really not the best way todo it.”

Because of the complete visibility oftransactions, does that mean thatBitcoins should be incapable ofbeing stolen?

Eric Benz - Mr Benz explained thatthere are two sides to Bitcoin, or whathe termed ‘big B’, and ‘little B’. “LittleB concerns the price and its volatility,everything you may read about. Butthe big B is what I like to focus on,” heobserved. “This concerns the protocoland the software, the areas where thereal investment and innovation is goingright now. Honestly, I don’t know ifBitcoin will be around in its currentform in a year’s time, but I do know forcertain that the software will be, andit’s growing. You’ll see a lot of differentsystems being put into play and therewill be innovations within the blockchain and security to protect againsthacking, or exchanges going down. Inall actuality, this system has only beenin place for five years, and it has onlybeen gaining attention for two, sothere’s a lot of potential for growth.”

“I think the statementshould be made atthis point that therereally is no anonymityto Bitcoin. There’sprivacy, but everysingle aspect ofBitcoin is visible.”

19

Ian Benson - “I think the issue comessharply into focus when you have afraud,” Mr Benson added. “That’salways the thing that uncovers anyweaknesses in a regulatory or legalsystem. I mean no disrespect, but ifthe regulators are behind the curvethen the judges are always going to beeven further behind the curve.”

“In a fraud situation, accepting that thetransaction is in a block chain model,you should be able to identify the‘route of title’, or predecessors of title.If you then go on to try and trace thosefunds through a Bitcoin trader,however, you may encounter someproblems because that trader, whetherit likes it or not, is not authorised. Thisis because at the moment, apart fromperhaps in Germany, no one isregulating the Bitcoin traders. Thismeans you’ll have a problem trying tofind that money and trying to secure asatisfactory court order to find thatmoney. So without those systems inplace and, to be fair to the Bitcointrader, without the protection of AMLregulation for client confidentiality, youmay encounter issues.”

Paul Davis - “I think that lawyers likemyself could wallow in fear for a verylong time about the potential problemswith Bitcoin, and we could charge ourclients quite a lot of money for thatconcern. But the truth is that thedigital currency economy, like anyother field where there is an activityand a danger to the public – whetherit’s food or car production, aviation,banking or insurance – there are goingto be good and bad operators. The bigadvantage of digital currency is that itfunctions in most ways like a currency,and there is already an establishedframework of best practices which weall know and understand. All a Bitcoinexchange or vending operation has todo to protect itself is to follow thosecodes, even if it doesn’t have to. Thebest thing governments could do is totake those codes for banking and

exchange and apply them to digitalcurrency as soon as possible.”

“The other advantage they have is thatBitcoin exchanges and operators reallywant to be regulated because theywant the credibility and the safety, notonly for marketing their product butalso to be able to get banking facilitiesin the fiat world. There’s a free flow ofvalue between digital currencies andbanking currencies. The problem is thatbig committees of people my agesitting offline in rooms writing thingsdown on paper can’t keep up with it –it’s terrifying for us.”

Eric Benz - “There’s no riskwhatsoever to an operator that takesBitcoin deposits, or deposits of anyother cryptocurrency. You’re paid inUSD, Euros or any other traditionalcurrency instantaneously and with norisk. I’d also like to point out that thefees are minimal. You’re looking at a 0to 1% fee for accepting Bitcoinpayments from some of the merchantprocessors now, whereas traditionallythe average is 5 to 9%, I believe. It’s afascinating way for businesses to passon those benefits to their players. Thisis especially true for micro-transactions.”

Paul Davis - Mr Davis agreed, statinghis belief that there are two quitedifferent routes in which digitalcurrencies could have an effect withinthe gaming market. “The first is whenplaying at tables, or against theoperator where the currency in and outis digital,” he explained. “There is a riskto the operator in that the rake won’tbe worth what is was when theBitcoin was taken on the table and theoperator gets round to selling it, butit’s a minimal and worthwhile risk. Thesecond, more risky, proposition is toallow people to deposit Bitcoin butthen credit them, say, USDs to playpoker or bet on a horse. Therein lies apiece of emerging business, which iscurrently very attractive to the digital

world, which allows the operator totake a Bitcoin deposit, instantly sellthat and give that value. In that world,the operator would have to cover itsrisk by selling off.”

“But most credible gaming companieshave deep pockets these days, andyou’re very quickly going to see anemerging trend where big operatorsare quite happy to hold a portion oftheir wealth in Bitcoins,” he continued.“There are many operators takingBitcoin deposits today and you’ll seeperhaps one or two companies a weekjoining those operators for theremainder of this year. They cannot beblind to the fact that all those countrieswhere it’s hard to take money from –Brazil, Argentine, Singapore, et al. –are suddenly opened up by Bitcoin. InBrazil there are already two banksparticipating in the Bitcoin economywhich will send digital funds anywherein the world for a very low transactioncost. I know everyone in this room isthinking about it, and if you’re notyou’re about to miss a big boat.”What about price volatility; is thissomething we should be concernedabout?

Eric Benz - Mr Benz explained that,from the perspective of the UK DigitalCurrency Association, price volatilitydistracts quite significantly from whatit is trying to achieve for variousmarkets. “This is not a big communityat the moment,” he reminded theSummit, “but the software and whatthe community is trying to achieve isgoing to be massive. At the momentthis is a thin market, with low tradingvolumes and, as a result, massivevolatility.”

“The big advantage of digital currency isthat it functions in most ways like acurrency, and there is already anestablished framework of best practiceswhich we all know and understand.”

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21

Hypothetically, then; I’m an innocentparty involved in payment made byBitcoins. I’m involved in atransaction, possibly several stagesremoved, which has to do withmoney laundering. How do I stand?Is this situation made morecomplicated than it would be withtraditional currency?

Ian Benson - “It is a problem, largelybecause Bitcoin traders have not yetbeen regulated,” Mr Benson explained.“Certainly in the UK, the consistentattitude from the Prudential RegulationAuthority and the Financial ConductAuthority has been that Bitcoins arenot money, there is no issuer ofBitcoins, and therefore anybodyoperating Bitcoin trading is notinvolved in a payment service and iscertainly not taking deposits. Thatmeans that the Bitcoin trader is notable to respond to a court order for theproduction of documents in the sameway it would if it was a financialinstitution and was protected in the UKby anti-money laundering regulationsand under the Proceeds of Crime Act.This is something that the law is goingto have to grapple with. It is moredifficult, but not, I suspect,insurmountable.”

Moving onto the Point ofConsumption Tax; it appears that theGambling Commission is trying tomove into regulation through theapplication of restrictions oncompanies that operators use toprocess payments on their behalf.Does the panel have any insight intowhat the restrictions might mean inpractise? Are they workable? Andare they in compliance with EU ruleson the free-flow of transactions?

Stephen Quinn - Mr Quinn explainedthat, to his knowledge, Ukash has notbeen contacted by the GamblingCommission in this regard. He alsonoted that Visa, MasterCard andPayPal had an arrangement for

processing on behalf of regulatedbusinesses. “Personally, I don’tunderstand how that can work,” headded. “Ultimately, the GamblingCommission is not the FCA, which iswho we are regulated by. Ultimately itis they who decide whether we’re fitto process transactions. Indeed,picking up on something that wasmentioned earlier today; without theproper enforcement, as a paymentsprocessor we risk being pushed intothe grey.”

Paul Davis - Before passing comment,Mr Davis alerted the floor that he alsoacts as a consultant to the GamblingCommission on payment processing.“In my view,” he explained, “they arehopelessly misinformed about the flowof funds into British gaming and Britishlicensed gaming companies. In arecent round of discussions the ideawas floated that there would be aprovision in the new legislation that aUK licensee would only be allowed totake payments that were handled by apayment processor that had aEuropean PSD [Payment ServicesDirective] licence. This would meanthat a company that takes betpayments from India on EnglishCricket, say, would have to go througha European licensed company, which isnot particularly likely to happen.Similarly, large poker companies wouldnot be able to take payments fromRussian players because there are noRussian payments providers who areregulated in Europe.”

“Despite this,” he continued, “theyhave proceeded with the idea, which,in my view, is a massive overreach. Ifail to see how the GC can tellcompanies how they should act inother countries. The announcementthat the Gambling Commission hadreached an arrangement with Visa andMasterCard to only process horse-betting transactions from licenseescontributing to the British HorseRacing Levy, whether they are onshore

“Certainly in the UK,the consistent

attitude from thePrudential Regulation

Authority and theFinancial ConductAuthority has beenthat Bitcoins are notmoney, there is noissuer of Bitcoins.”

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or offshore, is absolutely laughable.Not only can they not police it, but Visaand MasterCard cannot know what thebetting product is that they’retransacting funds for. Take the exampleof a person in Kenya, using a Kenyandebit card, who deposits money intoan account with 888 (a Gibraltarlicensee), then decides to place somewinnings on a horse race in England:how on earth is anybody in that chaingoing to know that a bet was placedon an English horse race? It’sabsolutely ludicrous.”

Ian Benson - “It’s an odd suggestion,”Mr Benson agreed, “because thewhole payments agenda is to makethe experience better for theconsumer. In the UK we’ve just had anannouncement that the PaymentCouncil is to be replaced by thePayment Systems Regulator and theagenda has been given by the FCA toincrease competition within the sector.Additionally, the FCA are perhapsmoving more towards an e-moneymodel rather than a payment servicesregulatory model, so from the PSD tothe Electronic Money Directive. Assuch it seems extraordinary, given theagenda to make payments better forthe customer and introduce morecompetition to the payments market,to introduce these measures.”

“I should, however, add that thePayments Council has just managed tosecure an agreement with the banksto make payments possible throughmobile phones using the phonenumber, rather than the accountdetails. This is clearly a positive stepforwards and something that may wellbe of interest to a few people heretoday.”

With the pending imposition of thePoCT, all operators are looking atways to reduce costs. Do paymentsproviders have any solutions tooffer?

Paul Davis - “All well run businessesstrive to reduce costs across theiroperations,” said Mr Davis. “Paymentprocessing costs are not a big piece ofthe equation in the gaming world; ourrates tend to be low and quitecompetitive. I’m sure, however, thatanything that impacts on an operator’sbottom line will provide the incentiveto revisit their outgoings and try torenegotiate down. Ultimately, it’s themark of a well run operation that theynegotiate well for the services theybuy. However, Bitcoin provides a wayto keep costs down because it’s free.”

Eric Benz - “What the internet did forcommunication, Bitcoin is doing formoney,” Mr Benz agreed. “Everythinghas become open and peer-to-peer andcosts are constantly being drivendown. This means that those inpayments and gaming are going tohave to learn to adapt or disrupt yourown processes in order to co-exist, orrisk becoming extinct.”

Where are alternative paymentproviders going?

Stephen Quinn - Mr Quinn echoed MrDavis’ sentiments, adding that thedifference from the perspective ofUkash was that between cost andvalue. “Contrary to what many maythink, there’s isn’t often very much wecan do in terms of cost,” he explained,“so we focus on adding value. If anoperator feels pain, we feel pain. Whatwe try to do is find out how we canhelp operators with the costs thatimpact them, such as acquisition orfraud, or we try to use our expertise totake them into new markets usingnew technologies. That’s really where Isee our businesses going over thenext few years.”

Question from the floor: where doesBitcoin come from? Who inventedit? Where is its value derived?

Ian Benz - Mr Benz explained that aBitcoin is a piece of 64-digitalgorithmic code that gives a specificvalue. “The easiest way to explain it isto picture a virtual gold field. You havevirtual miners who are awarded ablock. When it first came out, thisblock would consist of 50 Bitcoins thatwere released every ten minutes, butthe more miners there are and themore activity in the eco-system, theharder this is and the smaller theblocks become. They were created bySatoshi Nakamoto, which could be aname or acronym, there will only everbe 21 million released up until 2140,they are open source, are notcontrolled or owned by any one personor corporation, and they will be aroundfor a very long time. Of course, at themoment there are volatility andliquidity issues, but this is due toproblems with press and regulation. Ifthere were any real problems, thenBitcoin would already havedisappeared.”

Paul Davis - “It’s about belief,” MrDavis said in closing. “As long as thecommunity believes there is value in aBitcoin it will have value. If you findthat hard to imagine, think for amoment about diamonds. You can goto any town or village in the world andfind dozens of jewelry stores withdiamonds in the window, yet peoplepay hundreds and thousands for them.The only thing that distinguishes adiamond from any stone on the groundis that there are only so many of themand that work has been done on themto create value. Bitcoin is thediamond of the currency world.”

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“Standard Bank has been around forjust over 150 years,” Mr Gormanbegan, “and personally, during thattime, I don’t think banking changedthat much. Until the credit crisis,banking was running as you wouldexpect it to; making money andinvesting funds. Then the creditcrisis arrived and the worldchanged. Today it’s quite humblingto work in a bank”, Mr Gormanadded. “We caused a lot of painaround the world, and this has ledus to change.”

“So we’ve started using differenttechnologies within our banking tomake a difference,” he continued.“Standard Bank is Africa’s largest bankwith a presence in 20 countries andsupported by nearly 50,000 staff. Wealso have offices in the offshorelocations of Jersey, Isle of Man andMauritius and we have a footprint inGibraltar to support the eGaming andcorporate banking market. We focuson serving clients with connections toAfrica.

Mr Gorman went on to explain that themost common mistake made is tohomogenize African cultures andnations, before qualifying hisstatement by observing that 50% ofthe Kenyan population is under 18,while the Nigerian economy is thisyear expected to outgrow that ofSouth Africa for the first time. “Thereare over 170 million people in Nigeria,25 million of whom live in Lagosalone,” he enthused. “And thatrepresents a huge opportunity.”

Africa’s Banking Experience

“One thing we can say about Africa asa whole, however, that is that it hasundergone a series of experienceswhich are vastly different to those ofourselves,” Mr Gorman continued. Heexplained that the route to change andgrowth has been completely removedfrom that of the western world,drawing upon technological advancessuch as landline telephones, VHS andwalkmans to emphasise that Africahas been a process of leapfroggingtechnologies to arrive today at thosesuch as mobile and smartphone. MrGorman then drew upon the examplesof Blockbuster, Kodak and TheEncyclopedia Britannica to emphasisethe imperative for companies to adaptto change, stating “Just becauseyou’re the first to market, or have beenaround for over one hundred years, itdoesn’t mean that you’re going tostand and make a difference.”

“The same goes for banks – they haveto fundamentally change in order tosurvive, from their culture to theirDNA.” Mr Gorman offered the exampleof M-PESA, a digital wallet that allowsthe transfer of payments betweenmobile phones. M-PESA was launchedin Kenya in 2008, already enjoys over 6million customers, allows customersto save and borrow money, andoperates without a banking licence.“Technology reduces friction,” heemphasised. “Smartphone penetrationin South Africa will reach 25% thisyear, which makes getting it right,making it easy, and making it always

Matt Gorman Head of Change, Personal &Business Banking International -Standard Bank

Digital Banking - Africa leapfrogging thedeveloped world

“Standard Bank isAfrica’s largest bankwith a presence in 20

countries andsupported by nearly50,000 staff. We alsohave offices in the

offshore locations ofJersey, Isle of Man

and Mauritius and wehave a footprint inGibraltar to supportthe eGaming andcorporate banking

market.”

Matt Gorman joined Standard Bank in January 2013,having previously worked as Head of Operations forthe Royal Bank of Scotland for two years and, mostrecently, as Head of Operations, Channel Islands forBarclays from February 2011.

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available, three critical steps for today’sbanking providers. Take the Squareapp, a device which plugs into yourSmartphone and enables chip and pinpayment via mobile. Within 3 years itgained 2.5 million customers. It’stransformational, not just in its impacton local businesses but also thedeveloped areas themselves. AtStandard Bank, we expect 80% of ourcustomers to own a Smartphonewithin five years or less.”

Pop-up banking

Mr Gorman then drew the attention ofthe floor to a slide entitled ‘The branchof the Future’, which depicted a pop-upStandard Bank branch in a townshipnamed Alexandra in Johannesburg,South Africa. “There are over 4 millionpeople living in this township, somewithout running water or electricity,and we offer banking at the accesssites to their local suppliers,” heexplained. “From a tent, we used aSmartphone to take a picture of theirKYC documentation, we gave thatperson a bank card, and their accountwas open, up and running within 8minutes. We have 86 Standard Bankaccess points dotted around the townthat people can use to access andmanage their finances.”

Mr Gorman then drew the attention ofthe Summit to a video whichdemonstrated Standard Bank’srecently released mobile bankingapplication and which was describedas allowing the user to see everythingthat’s happening in their financialworld. Users are presented with awholly customisable dashboard whichcontrols a number of applications.Users are able to conduct traditionaltransactions, transact using a

telephone number rather than bankaccount and sort code, create cashvouchers and withdraw cash fromnearby terminals, purchase SMScredits, purchase electricity credits,monitor insurance policies, tradestocks and shares, and analyse marketindices, all in real time.

Bringing data and customer thinkingtogether

“This is a remarkable product,” MrGorman added. “A client can sign upfrom a tent and be set up with this appwithin minutes. The product hasalready been launched and we hope tobe able to offer it to our offshore andbusiness markets within a year. Goingback to our earlier point, however, onething we are concerned about is theuse of the data and information we’vegained from our client base. I think wehave a lot to learn from the eGamingcommunity. That may mean going intopartnership or another form of workingrelationship, but either way it’s clear tous that if we don’t do something tounderstand what our clients need toremove that friction, we’re going tohave a problem.”

By way of example, Mr Gorman thendescribed an app-supportedadvertisement type, which is locationaware and provides both the customerand the bank with real-timeinformation on the customer’sshopping patterns and budget. Duringthe purchase of a car, for example, theapp could allow the user to request apre-approved loan, forecast theirfinancing obligations, requestalternative purchase options andcontact their relationship manager atStandard Bank directly.

“This could equally be applied withineGaming sites,” Mr Gorman added inclosing, “or it could be applied to anypurchase within that client’s financialwindow. If you then extend thatwindow, you could be looking atengaging social media and other onlinebehavioural patterns, you could evenallow the customer to control accountsheld with other banks. Ultimately, it’sthe client’s choice, not the bank’schoice. As such, my final point is,although Standard Bank aims tobecome the best digital bank bychoice, the word bank may notnecessarily apply. It could be anycompany that becomes the bestaccording to customer preference,and if we don’t watch out, it could beAfrica that leads the way.”

Matt Gorman

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Peter Howitt - Gibraltar Betting andGaming Association (GBGA)

Peter has worked for 15 years in the e-commerce and financial servicessectors as a lawyer and corporateadvisor in England & Gibraltar. He isdual-qualified in England & Gibraltar.He is currently the CEO of theGibraltar gaming industry association(www.gbga.gi), the Secretary of theGibraltar E-money Association(www.gema.gi) and the founder ofRamparts - a European law firm inGibraltar (www.ramparts.eu). Peteralso has experience in establishing anonline social network for artists.

Paul Leyland - Regulus Partners

Paul Leyland is a founding partner ofRegulus Partners, a strategicconsultancy focused on the gamblingand related sectors. Prior to this hewas Corporate Development Directorat William Hill, from April 2012 toOctober 2013. Paul started in the Cityand was an Equity Analyst focused onthe gambling sector for over a decade.He worked for a number of InvestmentBanks including Investec and CollinsStewart Cannacord.

The Association of BritishBookmakers

Upon introducing the debate’sparticipants, Mr Kelly first noted achange to the original Summitprogramme. Regrettably, Dirk Vennix of

the Association of British Bookmakerswas unable to attend, and wasreplaced by Paul Leyland of RegulusPartners. KPMG would like to offertheir sincere thanks to Mr Leyland forstanding in at remarkably short notice,and kindly pass on Mr Vennix’sapologies.

Mr Kelly then invited both Mr Leylandand Mr Howitt to introducethemselves and their respectiveorganisations. Mr Leyland began, andintroduced the Association of BritishBookmakers (ABB) as the leadingtrade association for high streetbookmakers in the UK. He explainedthat the ABB represents the operatorsof around 7,000 betting shops in theUK, including multi-channel operatorssuch as Gala Coral, Ladbrokes, PaddyPower, Stan James and William Hill,adding that it is also increasinglyrepresenting the online or remoteindustry by its association, if not by itsmandate. The ABB also represents theinterests 65 small family-ownedbusinesses with around 400 high-street shops, which gives a totalrepresentation of around 80 percent ofthe landbased market in Britain.

Mr Leyland then identified threecommon challenges that thelandbased operators share with theironline counterparts. Competition, taxand levy he described as a toughcommonality that is only likely toincrease with the emergence andsubsequent convergence of regulation

Landbased and Online:The Debate

Russell joined KPMG in 1993 and has also worked forKPMG in the Isle of Man, London and Jersey. Russell’saudit experience encompasses banking, wealthmanagement, mutual funds, shipping, real estate ande-gaming. Russell’s transaction services experienceincludes acting for clients with respect to acquisitions,disposals and flotations, in particular Russell hasadvised on flotations on LSE, AIM, Luxembourg andNew York Stock Exchanges. Russell also providesInternal audit and SAS 70 services.

Moderated by Russell Kelly – Director, Audit & Advisory, KPMG

“From the GBGA’sperspective, it

appears they are justnot listening to ourconcerns about therisk of competitionwith the unlicensed,

unregulated anduntaxed online

sector.”

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within the gambling industry.Concerning responsible gambling, MrLeyland observed that the ABB islaunching a new Code for PlayerProtection and that the two sectors areworking together to share bestpractice on advertising and selfexclusion, adding that ‘the sooner theindustry follows in a similar vein, theless likely it is that the politicians willintervene and do it for you.” Finally, onthe 4th European Anti-MoneyLaundering Directive, Mr Leylandnoted evidence that both sectors arelow risk, a message which must bepromoted coherently and effectively,and emphasised the importance ofimplementing a risk based approachthat is effective at fighting crime.

The Gibraltar Betting and GamingAssociation

Mr Howitt took over in introducing theGibraltar Betting and GamingAssociation as the single voice of theGibraltar online gambling industry,representing most of Gibraltar’s 28licensees. He explained that Gibraltaris within the European Union SingleMarket and that the GBGA is anaffiliate member of the EuropeanBetting and Gaming Association(EGBA). GBGA members are rigorouslyregulated by the Gibraltar GamblingCommission, are leading e-commercesuppliers of online gambling servicesand provide approximately 60 percentof all UK online gambling transactions.

Mr Howitt continued in explaining thatover the last 12 months the GBGA hadbeen in close conversation with the UKconcerning competition, tax and levy.Particular focus had been placed onthe extent to which competition to theregulated online sector increasinglycomes from the unregulated onlinesector rather than the landbased,which the GBGA does not consider tobe a substitutable service. “When wespoke to HM Treasury and mentionedthat online needs bespokeconsideration,” he added, “the initialview we got back was that it would bedifficult to implement different ratesfor landbased and online, which is whyI was interested to hear earlier aboutthe legal challenge that was taking

place in the Netherlands. We knowthat in Belgium the Commissionapproved a differential rate on publicpolicy grounds, so we were surprisedthat the UK was finding it difficult totake a different approach. Thankfully, inthis year’s Budget we saw that the UKwasn’t quite adhering to that principalwhen they reduced the tax forlandbased Bingo to a rate belowonline!”

“From the GBGA’s perspective, itappears they are just not listening toour concerns about the risk ofcompetition with the unlicensed,unregulated and untaxed online sector.I also don’t think their taxationobjectives are coherent with concernsabout consumer protection. Thejustification for having reduced taxationfor land-based, as opposed to onlinefor example, shows that they are notreally consumer protection driven atall.”

“I think that has certainly been trueduring the first phase of remotegambling,” Mr Leyland agreed. “But Ido think that is starting to change.Mobile and tablet gambling isundergoing what we euphemisticallycall ‘channel shift’. It is a significantlymore simple transaction medium, it isdemographically more similar and,certainly around large sporting events,we are starting to see volumesincreasing on mobile but less so in alandbased environment. So I thinkthere is a greater degree of directcompetition with landbased and Isuspect that will be exacerbated byincreasing levels of country specificregulation where you end up creatingmore homogenous markets, ratherthan a bunch of disparate landbasedoperators with a dot com umbrellaover the top.”

He continued: “A combination ofregulation, technology and a change incustomer behaviour is going to makethem more competitive and I don’tthink anyone from the ABB willdisagree that the government won’ttake an entirely political view on tax.We saw that very clearly in theBudget. Not only did Bingo duty godown, but duty on category B2

machines, or FOBTs, went up. There’sno specific customer protection issuearound tax, but I would say that wherelandbased operators have a significantadvantage in many jurisdictions is thatthe tax, and particularly theemployment, footprint is considerablyhigher than online. It will be so still fora number of years.”

“Also, if landbased operators are cleverthey can be very entrenched. Myobservation would be that thebookmakers in the UK forgot howentrenched they were a few years ago.They got on with operating theirbusinesses, forgot to talk togovernment and the regulators and, asa result, lost battle after battle. That’ssomething very important for theremote operators to understand:government in a regulatedenvironment is your biggest, mostpowerful and potentially mostdangerous stakeholder, and unless youtreat them in that way you’re going toget caught out, and caught out verypainfully.”

Mr Kelly - You touched very quicklythere on FOBTs, which is a key areafor debate in the UK at the momentand one upon which governmentpolicy is bound to have an impact.What are your thoughts there withregards to possible futureregulation?

“I think this is a really, really usefulobject lesson in what not to do,”warned Mr Leyland. “Broadlyspeaking; if you have your ear to theground, you talk to your regulator veryoften and you understand what themood is, you make sure that you dojust a little bit more than that in termsof protecting people so that theregulator is happy and it doesn’t get onthe front page of the newspapers. It’srelatively simple to do. If, however, yousay ‘there is no problem’ regardless ofwhether there’s a problem or not andthe regulator feels it needs tointervene, you then increase the risk ofit becoming a political as well as aregulatory issue. That’s exactly whathas happened with FOBTs.”

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“The addition to that is that there is anawful lot of data out there, but theextent to which that data has beenpresented in a clear and transparentway that persuades the layman thatthere is no problem is open toquestion. That again is a huge problemfor the sector. It’s no good just sayingwe’ve got the data, we understandeverything’s ok. If you can’t put thatpoint across in a very clear way thatmakes people feel less concernedthen, when they get off the fence,they get off the fence with a view toregulating you. Regulators are alwaysgoing to be a little bit behind the curbin terms of understanding how theindustry behaves, but politicians areeven worse. When you get yourself into the political arena, only bad thingswill happen.”

“So, from a political standpoint, I thinkLabour made it very clear what theywanted to do. I think the Lib Dems arebroadly in support of that, and in aLynton Crosby Conservative Party 2015campaign consultatnt, known as theMaster of the Dark Arts] style, I thinkwhat the Tories probably need to do isensure that the debate moves on awayfrom the Labour debate, look like theyown it, and try to put it to bed beforethe election. That means doingsomething pretty aggressive so that itgets off the papers and the Tories looklike they’re being tough on somethingthat it’s popular to be tough on.”

Russell Kelly - Concerning responsiblegambling; despite the fact that theonline industry does a huge amount toprotect consumers, this is often moredifficult to see from a public side thanfor landbased. What is your view aboutthe online space and how that wouldbe affected?

Peter Howitt: “To tie in to the politicalpoint, you’re right, just dealing with theFOBT issue and the landbased isclearly easier for the politicians and thepublic. It’s easier to see the prevalence

of machines, or their use, in shops.But it would be shortsighted to thinkthat once they’ve finished withlandbased they won’t turn that focus toonline. The industry here in Gibraltardoes do a lot, but I actually think thatthis is an area in which we need to domore. The industry needs to take thelead and not wait. If you wait forpeople who know very little aboutwhat you do to get involved and tellyou what to do, that would be very badfor your business. They’re likely to haveyou implement measures that mayhave an effect upon those with agambling problem, but may equallyaffect those without, which is the vastmajority. This is one of my key areas tofocus on with the GBGA over the next12 months. I want to make sure we’reable to show and communicate ourobligations and show that we’re takingthem seriously, rather than just waitfor the politicians to take the lead anddecide what’s best. It is difficult online,but the fact that something is difficultis not a reason not to do it, it simplymeans that you need to be careful inwhat you do.”

“I think Peter is absolutely right”, MrLeyland agreed, “and I would add thatthe most damaging thing that thegambling industry does to itself is talkdown other operators, products andjurisdictions and say ‘I’m alright butthey’re terrible’. There will, forexample, be an awful lot of landbasedoperators based in the UK who arevery smug and very crowing about allthe problems the bookmakers face atthe moment, but it’s very dangerousand very shortsighted. You will be next.That’s how it works.”

“So I think one of the very importantthings that needs to be done is everyoperator and trade association oughtto work out what the key messagesare, make them as similar as possible,and keep getting those messages outthere. We need to make it absolutelyclear that this is a safe, trusted, and

well regulated industry because at themoment that message is absolutelynot getting across.

“Tying in to the UK’s proposedchanges, one of the things I expect tohappen is that the online operators,particularly those with a UK focus, willhave to coordinate much more closely,”Mr Howitt added. “If we’re right andwe think the evidence is there, they’regoing to be competing much morewith those outside of the regulatorysphere. So it might actually becomeeasier to reach agreement on a lotmore, and the consequence might bethat we realise we actually share a lotmore common ground. That way, thepoliticians will realise that we’re thepeople they want to interact with, thatwe’re not the enemy. At the moment,the sense that I have is that, in the UK,regulated online and landbased –all ofit – is open for attack, possibly becausethey haven’t had a large unregulatedsupply, which is going to change.”

Russell Kelly - Do you think that afuture approach to the UK will bedriven by some of the large,integrated operators that have anestate who will try to converge theagendas of online and offline, or doyou think it will be two veryseparate lobbies hopefully workingin the same direction?

“I think we’re likely to see differentstakeholders making different points,but with an element of commonality,”Mr Howitt explained. “On responsiblegambling, for example, we’ve seenthat an industry group has now beenformed by the ABB members and theRGA, so we’re seeing some coherenceacross channels and sectors as theyrealise that all of the operators areexperiencing similar problems when itcomes to making sure that they takemeasures and communicate thosemeasures to the wider public.”

“From the GBGA’sperspective, it appears theyare just not listening to ourconcerns about the risk ofcompetition with theunlicensed, unregulated anduntaxed online sector.”

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“Where you’ve got quite invasiveregulation I think that will start todivide operators not so much byremote or landbased but by what theirrisk exposure is to that regulation,”added Mr Leyland. “Just to give anexample; there’s the GamblingCommission’s 3 percent rule whichsays that they want to understandwhether or not every single bit ofbusiness you do over £5 million or 3percent of gross income is going to belegal, and at the moment we’ll seehow they get on with that. But let’ssay you take a Coral, a Ladbrokes, aPaddy Power, these operators wouldbe quite relaxed about that, in fact Ithink they would be quite pleased. Butthere’s a whole bunch of otheroperators who I think would benervous. That would not only divideopinion, but would also start to dividebehaviour.”

Russell Kelly - Moving on to the 4thEuropean Anti-Money LaunderingDirective; that must present verydifferent challenges for the onlineand landbased industries. What sortof impact do you think it will haveon each?

Peter Howitt - “As we’ve mentioned inprevious discussions, in the UK,Gibraltar and other jurisdictions, onlinehas been covered in existing legislationin one way or another. The 4thDirective does have some very goodfeatures. It starts with principles andobjectives and, in particular, asksjurisdictions and stakeholders toundertake risk-based assessments andmake sure they their policies andapproach to money laundering areevidence based. That will have abenefit for the online industry because,in our view, there’s very little evidenceto suggest that online gambling is avery useful tool for money laundering.This is not to say that it doesn’thappen, but we believe that theelectronic nature, the fact that itstransactions are all logged through

authorised financial institutions, makesonline an extremely unlikely placethrough which to launder money.”

“There are some negatives however,particularly surrounding structuralissues in the sense that the directiveappears to not take any account of thedigital economy. A lot of what is goingon in Europe at the moment is focusedon the reduction of compliance costsand the legal complexities forelectronic businesses, and thisdirective appears not to take intoaccount the issues of firms thatconduct business across borders.There are things that could be done tofix that quite easily, as they’re doing inthe current data protection regulationwith a one-stop-shop style approach.That’s not going to happen for thisdirective if it goes through as drafted,however. I think operators need to beaware that the AML laws that apply totheir supplies across Europe mightinclude some surprises. Onejurisdiction may have adopted a placeof supply model, and another a placeof establishment. One jurisdiction mayhave gold plated, or added, to theirinterpretation of the directive andother may simply have differentadopted a different assessment ofrisk.”

“Quite frankly, moreover, it’s going tobe difficult for an operator to persuadea national court that they shouldoverrule their jurisdiction’s assessmentof money laundering risk. I think thatchanges the game if some of theMember States, as I suspect they will,seek to use the stronger directive,with stronger enforcement powerswith specific reference to onlinegambling to find a way to reducegambling supplies. So I do have someconcerns. It’s going to be a hugeamount of work for people, and at theend of it operators may not be able todo business in some states”.

Paul Leyland - “I think the challengesfor land based might be considerablysimpler but certainly no lessproblematic, and I should reiterate thatthis is my view and might not be thatof the ABB. To my mind, the industry isvery good at batting averages aboutand every operator in the room knowsthat those averages are verymisleading, that the industry’s relianceupon higher spending customers ispronounced. The case of GrahamCalvert vs. William Hill was a greatexample. It was thrown out, but itdoes highlight, as an extreme, thehuge sums of money that can changehands between relatively few people.The fact that the average bet size iscompletely irrelevant in that context;there is absolutely a need to applyAML regulations. There was, ofcourse, a debate about the limit, but ifany operator is suggesting that there isabsolutely no need for AML, thatwould be not only risible, butcounterproductive.”

Russell Kelly - How do you think theywill police AML in the landbasedenvironment? Are you going to have toproduce ID, and what assurance is thatgoing to give the bookmaker thatthose cash funds are not the proceedsof crime?

Paul Leyland - “I think there are twopoints to this argument. Number oneis that the betting industry, as opposedto the casino industry, is not used todoing it. Number two concerns theproblem that you’re actually solving. Ingeneral terms there is almost certainlya problem and almost certainly a needfor regulatory intervention. That debateshould focus on proactively solving theproblem, rather than act as a forum forbookmakers to protest theirinnocence.”

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The dangers of the UK Pointof Consumption Licensingand Taxation RegimeSir Peter Richard Caruana, KCMG QC is a former Chief Minister of Gibraltar(1996-2011) in which capacity he also held the portfolio of Minister forGambling, was an architect of Gibraltar’s pioneering legislative andregulatory regimes and oversaw Gibraltar’s growth into one of the world’spremier and best regulated online gaming jurisdictions. He has nowreturned to legal practice and acts as a consultant to the Gibraltar Bettingand Gaming Association.

Sir Peter Caruana KCMG QC

Despite acting as a representative andconsultant for a number of privatefirms and public regulatory bodies invarious roles, Sir Peter addressed theKPMG eGaming Summit in anindividual capacity, and as one privatelyconcerned with the impact of the UK’sPoint of Consumption Tax model onboth the UK and Gibraltar’s eGamingeconomy.

“This is an important moment for thisindustry in general, and for Gibraltar inparticular,” Sir Peter began. “Let mesay at the outset that I am optimistic,and in no sense pessimistic, aboutGibraltar’s ability and indeed prospectsof remaining a jurisdiction of choiceand excellence for your industry. It isreflective of the fact that Gibraltar is animportant player in this industry,particularly the part that faces the UK,that all stakeholders have taken partover the last 18 months or so in theattempt to ensure that what the UKdoes in relation to its announcementto alter the basis of its licensing andtaxation system was sensible.Sensible, not just in relation to theinterests of the industry, but sensiblein their impact upon those who thesemeasures are purported to be in theinterests of: the consumer, andsensible also in relation to the UKTreasury that was obviously after moremoney.”

“Part of our objective had been to tryto prevent the United Kingdom fromcommitting the same mistakes thatother European countries hadcommitted and try to ensure that theUK would learn those lessons,” SirPeter continued. “There has beensome quite intense dialogue with theDepartment of Culture, Media andSport (DCMS) and with HM Treasury toachieve that. Usually whengovernments are lobbied by sectorialinterest groups, there is an intrinsicconflict of interest between whatindustry doesn’t want, and what thegovernment wants. Here, we thought,was an opportunity, rare indeed, whereit was possible with a little bit ofintelligence, application of industryexpertise and sensitivity to thegovernment’s objectives, to actuallyline up all the stakeholders’ ducks in arow – the British consumer, the Britishindustry, the Gibraltar industry, and theUK Treasury.”

“We could see a clear win, win, winscenario; a win for the sector, theconsumer and HM Treasury’s tax yield.In the event, we have not enjoyed agreat degree of success for any.Indeed on licensing we have enjoyednone, and on tax it looks as if it may benone, but it looks like we may stillsucceed in the latter areas. We thinkthat a great opportunity for a win, win,win scenario has been spurned. Theopportunity has been wasted and,therefore, if we were driven and

motivated as a collection of Gibraltarstakeholders to engage with the UKGovernment by concerns about certainoutcomes, it is axiomatic that if wehave failed then we now face the verydangers that we were seeking toprevent in the first place.”

Licensing

Sir Peter continued in explaining thatthe UK Gambling (Licensing andAdvertising) Bill, which was expectedto receive royal assent in May 2014,establishes a quite unprecedentedsystem. Effectively, in his opinion, theBill allows operators with little or nomarket penetration or nexus to the UKto obtain a UK licence. Indeed, the Billprovides that operators must obtain alicence if their facilities are used in theUK. This obligation extends to everyoperator on the planet that offersfacilities into the UK on penalty ofcommitting a criminal offence.

“Those of you who are UK lawyers,and those of you that have hadrecourse to the UK judicial systembefore will know that, almost uniquely,the UK has a legal system of publicadministrative law and judicial reviewwhich is considerably more intrusive ofadministrative and executive discretionthan most other legal systems aroundthe world. The idea that in a situationwhere people commit offences unlessthey have a UK licence - and that thatoffence is committed as easily as

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“We could see a clear win,win, win scenario; a win forthe sector, the consumer andHM Treasury’s tax yield.”

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having equipment anywhere in theworld that they know, or should know,is being used by just one person in theUnited Kingdom – the UK courts aregoing to allow the GamblingCommission to exercise the degree ofadministrative discretion as would ajurisdiction that is being selective intheir licensing process, is naïve in theextreme.”

Sir Peter continued: “I believe that, onthe basis of the way in which thisstatute has been drafted, theGambling Commission is going to beinundated with licence applicationsand is going to be hard put to restrictthe numbers and nature of thecompanies that are allowed into theUnited Kingdom in a way that is goingto bear scrutiny in court. So there is adanger of a multitude of UK licences,and the UK Gambling Commission willsimply not be able to effectively andreliably regulate those operatorsspread around the world. In goodtimes it doesn’t have the resources,let alone in stringent, austere timeswhich show no signs of abating.”

The alternatives

Sir Peter explained that Gibraltar hadsuggested an alternative modeldesigned to protect the UK, itsconsumers and its industry from theconsequences of these provisions,and had proposed a system ofmodified passporting that would haveallowed the UK regulator to have reliedon and used local regulators in the(approved) home jurisdictions ofoverseas companies as an extensionof the UK regulatory reach. Throughregulatory memoranda ofunderstanding, the GamblingCommission would have been able toeffectively regulate companiesestablished in jurisdictions which wereapproved by virtue of the UK’s ownregulation and statutory systems. “Yetwe failed, at the highest level, topersuade the DCMS to adopt them.

This was in the face of doggedopposition from the GamblingCommission who saw it as afrustration of their desire to achievethe powers and functions that they feltwere necessary, but that those of usin Gibraltar and elsewhere wherethere was a store of experience knewwould operate to precisely theopposite of the intended effect toenhance protections to the UKconsumer.”

“How will the Gambling Commissionobtain information?, Sir Peter asked.“How will the Gambling Commissionobtain the capacity and ability tomonitor compliance? How will itenforce sanctions?

All of these are unanswered from anorganisation that has alreadydemonstrated how difficult it can be toregulate distant operators that it hasalready licensed in to the UK. How,too, will the Gambling Commissionprotect the UK consumer and police orprevent the black market operatorswhich have suddenly been handed theincentive to target the UK market?”

“This is all to take place at hugereputational risk not just to the UnitedKingdom but to reputable regulatedentities in the UK because, effectively,the government has set up “brassplate Britain” when it comes to onlinegaming. Companies will be ableoperate under a licence, tax free as faras Britain is concerned, anywhere elsein the world. Companies established inwhatever remote corner of the planetyou might wish to imagine that mayhave no UK business and indeed nointention of having UK facing businesswill nevertheless be able to apply forand obtain a UK licence which willprovide them with the imprimatur - thebadge of honour – which the rest ofthe world, rightly or wrongly, mayinterpret as a badge of reliability,quality, and of respectability.”

“How will theGamblingCommission obtainthe capacity andability to monitorcompliance? Howwill it enforcesanctions?”

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“This is all to takeplace at hugereputational risk notjust to the UnitedKingdom but toreputable regulatedentities in the UKbecause, effectively,the government hasset up “brass plateBritain” when itcomes to onlinegaming. Companieswill be able operateunder a licence, taxfree as far as Britainis concerned,anywhere else in theworld.”

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Compliance and AML

Sir Peter posed the question of how,therefore, the UK will continue tocomply with its international anti-money laundering obligations, an areain which the British Government itselfcurrently leads. He posited that theimplications are of huge reputationalrisk, and indeed danger, to the UK andthose companies already establishedin the UK, all for no discernible netgain. “So despite the absence ofevidence for the need for this changein regime - in the context of the waythe existing one is working, for whichno evidence has been provided that itis exposing the UK consumer toparticular levels of risk, certainly nomore than they will now be exposed tounder the new regime,” he added;“this will saddle compliant, licensedoperators with additional andunnecessary licensing and compliancecosts.”

“These companies are, therefore,faced with a choice. In an industrywhere there is already a low marginthey will either have to absorb thecosts themselves, or they will have topass it all, or in part, to the consumer,becoming in the processuncompetitive in the global virtualmarket with which we are concerned.When that happens, overseas,unregulated operators that hithertohave had no incentive to target the UKmarket will do so because this Billrisks providing those consumers withthe reasons they have never beforehad to migrate, to do business, to play,to bet, with those unregulatedoperators.

“This is an industry with a customerbase that is savvy, extraordinarilymobile, and extraordinarily price

sensitive, and this Bill saddles the UK’sreputable core of suppliers to pricingpressures that will make their productsless competitive than it is almost tooobvious to need saying. So a GamblingCommission that arguably lacksresources to regulate what it currentlydoes in terms of online operators ishardly going to be well placed toenhance that level of consumerprotection which is currently deliveredto UK consumers by the vast majorityof UK facing gaming operators todaylocated in reputable, well regulatedjurisdictions in which the UK hasconfidence,” Sir Peter added.

European Legal Implications

“There is, to boot, a body of eminentlegal opinion that considers that thisAct is unlawful under European law.Why? Because it places unsuitable anddisproportionate burdens on Europeanoperators whilst increasing consumerrisk.” Rhetorically, Sir Peter asked thequestion of ‘why should the UK not befree to do what other Europeancountries have been doing andcontinue to do?’. The answer, hesubmitted, is that the UK is restrictinga hitherto open market as opposed to,in part, liberating their closed markets.He explained that Article 56 of theTreaty established in the EuropeanUnion, which regulates restrictions onthe freedom to provide services,makes it clear that the only justificationfor placing restrictions on the provisionof services to consumers in the UK isif there is a legitimate aim. “And thatby itself is not enough,” he remarked;“the aim has got to be legitimate, andthe means to achieve it have got to beproportionate. Those that subscribe tothat view believe that the UK’smeasures do neither. There is noevidence for it and there are

alternative, less burdensome proposalsavailable which will enhance the wholelegitimate aim, but which have beendeclined. Indeed, it is difficult to findan expert in this profession that doesnot believe that this Act will degrade,rather than enhance, consumerprotection.”

“I won’t take your time by remindingyou about the global nature of thisindustry, about the effect of turnoverand consumer migration, except to saythis; governments often don’tsufficiently recognise that, effectively,the government is a shareholder inevery single business in their country.There are times, therefore, when theinterests of the other shareholders inthe business are actually aligned withthose of the government, which as taxcollector, probably has a bigger stakeas quasi-shareholder than any otherreal shareholder. Anything thatjeopardizes the volumes, revenue andsustainability of the client base of theoperators who are the tax base of theUK revenue undermines, in similarmeasure, the sustainability and thelevel of the yield for the treasury.”

Sir Peter continued in explaining thatwhen a conversation to this effect wasengaged with the UK Government byUK stakeholders, their proposalsincluded measures that would improvethe sustainability of the country’s taxbase and reduce the effective rate ofthe tax to the UK’s operators.Deductions included, for example, top-line areas that were currently deemedto be income, but which in reality arenot, such as free bets and bonuses:“reasonable acquisition and retentioncosts”.

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Sir Peter referenced the critical effect,not least for the operators, but for theUK tax base of the loss of clientelethrough price competitiveness,drawing upon what he described asthe “frightening figures” associatedwith business currently done throughthe affiliate markets. “These arepeople whose willingness to sendtraffic to UK licensed and taxpayingcompanies, as opposed to theirunregulated counterparts who havenot been saddled with additional costs,will depend entirely on whether theaffiliates’ income is prejudiced or not,”he explained. “So the companies willhave to pay not just a tax on thebusiness the affiliates send their way,but also pay the affiliate its share ofthe revenue on a gross profits basis;effectively, therefore, succumbing totwo losses. The price of not doing so isthe risk that the affiliate sends thebusiness elsewhere, the operatorloses the revenue, and the BritishTreasury loses its tax base. You see,the ducks were in a row all the time.”

Jurisdictional comparison

In drawing towards a conclusion, SirPeter explained that, ultimately, muchwill turn on the topic of enforcement.A summary of his arguments foundthat a lot was premised on the viewthat it is not possible to effectivelyprevent consumers from migrating tocompetitors and it is not possible toprevent unregulated operators fromtargeting the UK market. “But thatview is not used simply for self-servingpurposes”, he argued.

“You all know of the statistics that areout there in the public domain thatdemonstrate it. In Norway, more thanhalf of online players have found a wayto circumvent the payment blocking

measures that were introduced therein 2010. In Italy, despite websiteblocking, official sources close to theregulator estimate that up to 50percent has gone to and remains withunregulated operators. In France, thesituation is not much better; up to 70percent of sports betting is in thehands of unregulated operators. TheUS demonstrated that legislation andprohibition is simply insufficient toguarantee the integrity of a nationalgaming market, unless you are willingto take extraordinary measures –which do not come easily or naturallyto countries such as the UK – tophysically and technologically enforceagainst the things that they want toprevent from happening. But in thosecountries that have tried it, and I don’tsee the UK with any ideologicalpropensity to go down this road, theyhave almost always demonstrated thatit doesn’t work: the consumer willalways find a way around suchmeasures.”

Conclusion

“There are dangers, lots of dangers forboth licensing and taxation”, Sir Peterstated in closing. “The Point ofConsumption system is dangerous forthe operators, and it is dangerous forthe consumer in the UK. There are alsodangers for the UK Treasury, which Ithink has been motivated by theirdrawing a figure of around £270 millionin the air that they would rather notcollect than have to explain toparliament why they are changing it.They will be lucky to collect that figureand they will be lucky to collect itsustainably unless ways can be foundto protect the compliant, licensedsector operators from loss ofbusiness, loss of margin, loss ofprofitability, and loss of turnover in

favour of unregulated, unlicensedoperators offering their products at amuch lower cost base.”

“In so far as Gibraltar is concerned, Ithink concerns about the impact ofthese measures tends to beoverstated. I think there will be aperiod of readjustment; someestablished operators in Gibraltar maychoose to make alternativearrangements and others may wish toreconfigure their operations, but hereis an industry that is still growing inGibraltar, and is growing impressivelyin spite of all these months ofuncertainty. In my view, it will continueto do so. The industry in Gibraltar isrobust and established enough, andsufficiently engrained into the ethos ofour companies, community andeconomy, that the Government willremain sensitive to its needs.Whatever the temporary disruptiveeffects of the introduction of this newsystem in the United Kingdom, thecombination of that, I am certain,means that Gibraltar will remain alocation of choice and one in which wecan expect growth to continue.”

Sir Peter Caruana KCMG QC

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Before putting questions to the finalpanel of the day, Mr Montegriffo firstexpressed his desire to set the scenevery briefly by highlighting five mainthemes that are impacting on thesector at present. Firstly, he noted thepolitical environment in which thesector operates. “Clearly the politicalenvironment in the United Kingdom isextremely difficult, even hostile,” heremarked. “We need to ask ourselvesif there’s more we can do to correctthat. The political tide in Europe,however, is probably, at best,indifferent. Those of us who harboredexpectations that we might have hadsome relief from Europe probably gaveup that expectation long ago, althoughwe will always remain hopeful thatperhaps some deeper engagementmight still be possible in the future.”

“The second theme,” Mr Montegrifforemarked, “concerns the huge dividebetween the regulated andunregulated sectors. Operators aregrappling with this reality more todaythan ever before. Developments notjust in Europe but also in the UnitedStates mean operators are going tohave to decide how to positionthemselves and decide what riskappetite they will have in a worldwhere the challenges of dealing withboth markets will, I believe, becomedifficult to handle.”

“Thirdly, as a result of many factors,margins are being squeezed further.We will discuss what this means formarket consolidation, what the newdynamics for the new market are, andwhat these will mean for the outcome

over the next few years. Then comesthe role of technology, not just indelivering the product to thecustomers, but also in paymentprocessing systems and indeed theway that businesses run. We are wellaware of the significance of mobile,we are well aware that delivery of theproduct has changed dramatically. Sohave we moved away from thetraditional methods of delivery, or arewe moving into an area where thedelivery systems are going to be multi-faceted or diversified than they werethree or four years ago?”

“Finally, because we’re in Gibraltar butalso because we’re in a business thatoperates internationally; what is thefuture of ‘hub’ jurisdictions given theinexorable move towards regulatedmarkets in a domestic context, puttingto one side the prospect ofconvergence at European and even USlevel. What is the value proposition ofjurisdictions like Gibraltar? What moredo we need to do to remain relevantand, indeed, be of value to operators?So with that introduction, a verysimple question; what are the topthree priorities for the development ofyour business over the next few years?

Michael Carlton - “I think, firstly, it’simportant to focus on the multipledistribution channels that are availableto us. We’re focusing specifically onmobile of course, but it’s important tomake the complete range of deliverychannels available so that thecustomer can use them at the times,and in the ways and manner that bestsuits them. Secondly, looking at the

pressures that we have to bear at themoment, we need to consider ways tobroaden and increase our revenues tocounter the new costs of operating.Third is maximising the efficiency ofour cost base to ensure that we cangenerate profit as effectively aspossible.”

Martin Weigold - “Firstly, I agree thata critical part of the success of mostcompanies now is to continue toevolve your products as we transitionto mobile. The other two prioritiesinclude preparing for the transitiontowards internationally regulatedmarkets, which are coming whetherwe like it or not. We’ve beenexperiencing this first hand, with 56percent of our revenue coming fromnationally regulated markets. Thattransition is very painful, so whateveryou can do to set up your businessesto enable that to happen moreeffectively i.e. ensuring an open andadaptable platform to comply with allthese regulations, is going to be agood thing. Also, that means you haveto choose your battles more carefully;you can’t be a winner in every marketyou operate in. When we see thesemarkets opening up there will be newplayers that emerge, so you have tofocus on those markets where you canbe a top three player. My third priorityconcerns the agility of the business.Consumers are becoming increasinglydemanding so the ability to reactswiftly to consumer demand is veryimportant.”

Panel Session 3The Outlook for Gaming

Moderated by:

Peter Montegriffo, Hassans

Panelists:

Archie Watt - Director, KPMG Gibraltar

Juergen Reutter - Operations Director, William Hill Online

Martin Weigold - Chief Financial Officer, bwin.party digital entertainment plc

Michael Carlton - Chief Executive, BetVictor

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Juergen Reutter - “Just to add to that,we believe there is a great opportunityawaiting for the sector in the generaltechnological developments that areahead of us. If we look at the UK, 4Gand free WiFi coverage is increasing,Smartphone and Tablet penetration isbooming representing underlyingdrivers that we must embrace. Theindustry is at the forefront of mobiletechnology and this must remain thecase with emerging technologies if weare to continue to drive our business tothe next level. This ties in with my finalpriority which is to have product andservice innovation as an integral part ofthe organization.”

Archie Watt - “I echo what has beensaid on technology; harnessing andmaking the most of it is a key priority.Secondly, I think businesses need toplace more focus on keepingcustomers and enhancing theirexperience. Acquiring customers isexpensive, but keeping them for longermust be a more cost effective option.Thirdly, and to pick up on an earlierdiscussion; if companies can getahead of the curve in terms of whatthe regulators want for playerprotection and problem gambling, theycan be seen as good corporatecitizens. Being a good corporate citizenis going to be beneficial to the futureof the industry.”

Just to focus upon the point ofbroadening the revenue stream; arewe talking about the retention ofand extraction of more value fromexisting customers? Is it simply acase of being better at delivering theproduct they will buy? Are wetalking about expanding client basedemographics, or diversificationinto areas such as social gaming?

Michael Carlton - “I think it’s acombination of all of those. As Archiewas saying, the cost of acquiringcustomers is increasing day-by-day, soonce you’ve got those customers it isvital to try to extract the maximumvalue out of them and for the longestperiod of time. This entails keeping thecustomers happy, keeping themplaying, and it entails player protectionas well. If the customer is content and

happy, and everything is working as itshould, then they will naturally staylonger. It’s in everyone’s best interestto do that.”

Juergen Reutter - “For us, again, itgoes back to technology. Everycustomer in the UK, for example, hastwo to three accounts running at anyone time, so retention is key. If youlook at mobile we now have 1.5 millionapp downloads in the UK. This enablesus to communicate with ourcustomers via ‘push notification’; anotification which arrives directly fromthe app on to the user’s home screen.You cannot get closer to yourcustomer unless you shake hands. Thiscan not be a one size fits allnotification, it has to be tailored andpersonalized to drive added value toeach single customer. In order to dothat you have to be able to completethe bridge between your front-endpresentation technology and the datasystems in your backend. This is one ofthe key challenges for the future:Leveraging on user data for a tailoredpersonalized offering presented in real-time to your customers.

One of the bigger challenges islearning how to deal with the newregulated markets in Europe andelsewhere. What effects will thathave upon the issue of marketconsolidation, and the issue of whosurvives and who does not?

Martin Weigold - “I think there will, tosome extent, be a polarisation. Therewill be some M&A or consolidation inboth the unregulated and regulatedsectors, and there will be somecompanies that will happily operate inthe unregulated markets – as weknow, it is very profitable to be there.Equally, I think the larger companieswill focus on the regulated markets inthe future and so it is inevitable thatthere will be some degree ofconsolidation.”

“Taking the UK as an example, I don’tthink there will be a rush towardsconsolidation. When the market opensthere will be a large discrepancybetween what the vendor expects theimpact to be on their target business’

operations, compared to what thepotential buyer thinks. So I think therewill have to be a period of 12 to 18months, during which the buyer willwait to see what the true impact is.This will result in some of the mediumsized companies being absorbed,while some of the smaller companies,quite frankly, will struggle to survive.”

Archie, are you seeing some ofthose stresses in the market?

Archie Watt - “The M&A market isquite buoyant at the moment, withsome of the smaller entities activelylooking to be acquired. These areentities which have a particular USP,something that they’ve developed andbrought to market up to a point, andwhich are now looking to exit. That hasalways been the case, however, andthe UK’s new regime is not changingthat. I agree with Martin: just as inFrance and Spain companies arelooking for a voluntary exit from theUK market. As for consolidation, we’vebeen hearing a lot of promises for avery long time.”

Juergen Reutter - “I agree withMartin: I think the pressure on the tier2 and tier 3 players in the regulatedmarkets will only increase. To take theUK again, it’s a big tax hit that has tobe absorbed into the bottom line. Addto that the cost of acquiring a licencein order to remain compliant in thosejurisdictions, and the cost of facing theincumbent operators, and you can seethat it won’t be an easy environmentfor smaller businesses. As a result, Ithink we will see an increased marketshare for the tier 1 players.”

I think we’re all agreed that wehaven’t done a very good jobhistorically of defending andpromoting the industry, or inpresenting the safeguards inherentin our technology to dispel theprejudices that exist. What more doyou think we should be doing?

Michael Carlton - “I think we ought tofocus on what we’re good at. Thismeans delivering a product that iswhat the customer wants, it meansworking very closely with regulators in

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the market, and it means working withthe governments where necessary. It’sabout enhancing the reputation of theindividual companies and the industry,and making sure it attracts the bestpeople to deliver the best service tocreate the right level of perception andconfidence in the industry. I think ahub such as Gibraltar, which does pickup on a number of those points withits support from the government,regulator, operators and individuals,can only add to the whole quality ofthe industry.”

Martin Weigold –- “I certainly agreewith Michael, and I would add that onearea in which the industry candefinitely improve is lobbying and howit interacts with various interestgroups. I think there should be morecompetition on commercial andtechnological merit, and perhaps fewerattempts to exclude certain types ofoperators by alleging that, say, oneform of gaming from one type ofoperator is worse than another. It’s badfor all of the industry. I have to say,however, that I’ve been very pleasedwith the level of cooperation theindustry has shown in getting togetheron the Point of Consumption tax and Ihope to see similar levels ofcooperation in other areas in future.”

Archie Watt - “I absolutely agree;speaking with a single voice has to begood for the industry. The UKGovernment seems to be driven by thefront page of The Daily Mail so whatthe industry needs to be doing isprojecting that single voice onto itsfront cover. It needs to show that is ittaking positive action in the areaswhere The Daily Mail has had concernsin the past. That must be the right wayto go forward.”

Moving on to hub jurisdictions likeGibraltar; what do you think are themajor issues we need to tackle inthe medium term to remain ajurisdiction of choice for majorinternational players?

Michael Carlton - “I think it’s ourability to adapt: Gibraltar was terrific 15years ago when it realised gamingwould be a tremendous opportunityand it has enjoyed great success. Now,with the challenges that face us, we

must maintain that flexibility andadaptability to embrace change andsustain the positive environment thatwe work in, despite the fact that it willnot look like it does today. It willchange, and we need to drive thatchange. This includes the way we asoperators, the government, and thesupplier industry operates.”

Martin Weigold - “I think Gibraltar hasindeed shown itself to be veryadaptive, and whilst recent nationalregulatory developments in otherjurisdictions have made the principlesof a hub jurisdiction less relevant,there are still many reasons to chooseto be based here. We still enjoycorporation tax and VAT advantages, arobust licensing regime, and anestablished pool of industry expertise.Of course, there is still room forimprovement. Ultimately all ourbusinesses are about our staff, so wehave to focus on attracting morepeople to our jurisdiction and keepingthem here. Things like the border issueare relevant to our business to theextent that it affects our staff and theirdesire to live here.”

Juergen Reutter - “We have around450 people who we are able to recruitand retain because they are veryhappy here. We are looking for veryspecific skills in people, many ofwhom are working at the forefront ofnew and emerging technologies, anddriving our product development.There are many reasons for us to becommitted to Gibraltar, but the bordersituation remains a topic of discussionfor the many who have to cross itdaily.”

Archie Watt - “I agree in that I thinkthere are still many benefits to be hadby operating in Gibraltar. I travelthrough many similar jurisdictions –Alderney, Malta, the Isle of Man, andthe brass-plate operations in the UK -and I would split them into twocategories; the brass plates ofAlderney and the UK, and the oneswhere there are real operations takingplace, such as Malta, Gibraltar and theIsle of Man. The issues we all have arestaff related, but we have tounderstand that the ‘generation Y’people we recruit have entirelydifferent approaches to work

compared to my generation – theparents of the generation Ys. Theywant a different lifestyle, have adifferent outlook on life, want to dodifferent things during the day andduring the weekend. If a jurisdictionwants attract staff then they need toensure that this generation is cateredfor. This means resolving such issuesas the Gibraltar border and makingsure that the leisure activities areavailable. That’s the sort of stuff thatreally attracts people, and if you can’tattract staff your business cannotcontinue in the long-term.”

Do you see social gaming cominginto the sector in the medium term?Even if it doesn’t, do you see it as aviable means of broadening yourrevenues?

Martin Weigold - “I don’t think thatparticular business needs to becomeregulated in order to become ofinterest to operators. It is a very goodopportunity and you only have to lookat some recent acquisitions in thespace - Caesar’s with Slottomania andBingo Blitz, IGT with Doubledown – tosee that there is the potential for a lotof growth. At bwin.party, our approachhas been a little different. We’veactually bought a development teambased in the Ukraine, which isbeginning to roll out some of the firstsocial gaming slots. This is very mucha ‘hit’ driven business, however, andthe jury is still out on the level ofconversion between social and realmoney gaming.”

“Overall, I do think social gaming is anopportunity for operators. Personally, Idon’t think it ever will be the case thatthere is a large overlap between socialgaming and real money gaming, butthe numbers are so high that you don’tneed such a large cross-over for it tobecome a meaningful business. It isalso important to remember that wecan learn a lot from social. Without thereal money aspect, the quality of thegaming experience needs to beenhanced, so what we’re trying to dois take some of those social featuresand build them into our real moneyproducts.”

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“In terms of regulation, I think socialgaming will inevitably attract theinterests of the regulators at somepoint as the lines between social andreal money gaming are becomingincreasingly blurred.”

Moving on to effective enforcement;is there more that we, theregulators, or the governments cando to impede the grey/black marketor to discourage players fromentering it at some point in the nearfuture?

Juergen Reutter - “I think we as anindustry all aim to operate in aregulated market, in strong partnershipwith the regulators and in a healthyeco-system. Enforcement is key for us.It is expected, in the end, of regulatedoperators and there are technicalmeasures that can be taken byregulators to help the process ofenforcement. In the short-term, theissue is one of resource; theexpectation from licensed, responsibleoperators is that there should be someprotection afforded to those operatingwithin the regulated environment.”

Martin Weigold - “To the extent thatwe are able to deal with it, I would saywe need to deal with it ‘at source’ andget the regulation right in the firstplace. The UK is regulated at themoment, with almost no black market,whereas the French market hasbetween 60 to 70 percent of it in theblack market. Why is that? It’s becausethe French regime is uncommercialand the market is substantiallydistorted by the product restrictionsand high tax rates that are placed on it.For me, educating those that aredrafting the legislation at the outset isimportant. We need to make themunderstand that the facts we provideare true, are not aimed to distort, andare for mutual benefit. Of course, aswe’ve heard from Sir Peter CaruanaQC in an earlier presentationconcerning the UK, you can bring thehorse to water, but you can’t alwaysmake it drink. As far as enforcement isconcerned, I think that it is as muchabout political appetite as it is abouttechnical ability.”

How do you see alternative paymentmethods gaining traction within theindustry over the next few years?

Michael Carlton - “I think you have tobe flexible and keep an open mind. Theconsumer is quite quick to embracenew technologies and concepts andvirtual currency is one of them. I’m notsure to what extent it’s going topenetrate into the market, however;even with the vast amount of e-walletsolutions that are available and thenumber of customers that use them,they are still eclipsed by credit anddebit card. Yes, customers will useBitcoin, say, and propensities for usewill vary from market to market, but Ithink it will form another part of themany payment solutions available tothem.”

Where do you see the industry intwo to three years’ time? Are we inthe throes of a transformation?

Juergen Reutter - “Again, I would liketo answer from a technological point ofview. Eight to ten years ago, when wewere developing for the PC, operatorsonly had to worry about compatibilitywith two to three major webbrowsers. Four or five years ago, withthe emergence of smartphone, ourdevelopers were faced with a coupleof hundred devices with which toensure compatibility. Today, mostoperators have become flexibleenough to accommodate both, butwhat we’re also seeing is multi-devicedriven behaviours in our customers. Auser may start their journey during theday on their smartphone and move onto a PC at lunchtime, while theevenings are increasingly being takenover by tablets. Looking two or threeyears ahead, we’ll see wearabletechnologies – iWatches and GoogleGlass – coming to the market. So thereare added complexities for theoperators and their developers to workwith and adapt in order to offer aseamless gaming and entertainmentexperience across different platforms.Those are the major challenges, butthey are also the major opportunitiesfor the sector.”

Martin Weigold - “I agree withJuergen entirely, I think the market willstill be growing on the back of newtechnology, but I also think thatgaming in general has become moresocially accepted – that’s one of thebenefits of national regulation and thefreedom to advertise. This is good forthe industry. Having said that; therewill be a few bumps during theprocess of transition whererestrictions are placed on the market.Casino and bingo as a product groupare markets that will be adverselyaffected by national regulation. Certaincountries, as with the Spanish slotoffering, will look to restrict them insome way. Concerning poker, I thinkproduct growth is pretty tired inEurope - the potential there lies withthe US as and when it opens up -while prospects for sports bettingremain positive across the board. Asiashows little sign of regulatorydevelopment and I expect the marketwill remain somewhat in the grey area,despite its being a potentially verylucrative market for operators willing toaccept players from that jurisdiction.”

Michael Carlton - “It’s a very excitingtime. The markets are growing, thepropensity to gamble is increasing andthe availability of the product isincreasing. There are new marketsbecoming available to transactbusiness in and I’ve never seen anindustry in which the people are soagile, resourceful, and resilient. Ofcourse, we are going to see somechanges in tax and regulation, but itwill accept those, it will findresolutions, and it will be stronger andbetter for it.”

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Mr Kelly concluded the day’s eventswith a closing address whichremarked upon the rapid growth ofthe KPMG eGaming SummitGibraltar series in just the four yearssince it first began. “Thank youeverybody for coming along todayto our fourth eGaming Summit herein Gibraltar. It is tremendous to seethe level of support we enjoy for allof the Summits we run here and inthe Isle of Man and I’m sure you’llall be pleased to know that for thefirst time now the Gibraltar Summithas grown in size beyond its Manxcounterpart,” he enthused.

“Key to this success has been thetireless enthusiasm of our eGamingteam both here in Gibraltar and inpockets of influence across the globe.We all play our part in helping thisindustry to progress, perhaps nonemore so than our resident expertArchie Watt. It is for this reason amongmany, and with great pleasure, that Iwould like to take this opportunity toannounce Archie’s appointment toDirector of KPMG Gibraltar and to offermy congratulations on behalf ofeveryone here at KPMG.”

Mr Watt then took over from Mr Kellyin thanking the KPMG team and thosewho attended the day’s events: “I’msure the success of the KPMGeGaming Summit series reflects uponthe quality of speakers who were kindenough to join us and offer theirexpertise, and upon the attitudes ofthe eGaming community here in

Gibraltar,” he remarked. “It has beenevident throughout the day that thereis a growing acknowledgement of theimperative for the remote gamingcommunity beyond Gibraltar to adopt acollective stance in extolling thevirtues of the industry, rather thancompeting on common ground.”

“This is an industry that, of its ownvolition, remains at the forefront ofonline consumer protection,international legislation and regulation,anti-money laundering and complianceprocedures, technologicaladvancements and, not least, thecustomer entertainment experience.What remains is to come together totackle that final and most elusive ofobstacles; public and politicalperception.” “As many of our speakers have alreadyreiterated today, it is up to the industryto ensure that those in a position tohave a significant effect on eGaming,its laws and regulation, contribution tothe economy and, of course,customers, are made aware of thegreat care it takes and the progress ithas made in little over the decade anda half since its inception. It is hugelygratifying, with the passing of eachKPMG Summit, to take an active roleto this end and to see the growingconsensus that this is an industry thatcan meet any challenge and still onlygo from strength to strength.”

Mr Watt then took the opportunity tothank the day’s sponsors – Continent 8Technologies, Gibtelecom, CountingHouse, Standard Bank, Sphonic,Hassans, Word Trade Center Gibraltar,Call Credit, Sunborn Gibraltar, DLAPiper and the Isle of Man Post Officefor their generosity and supportthroughout the process beforeexpressing his gratitude to thespeakers and panelists who helpedmake this year’s eGaming Summit inGibraltar KPMG’s most successful todate. “Finally,” he added, “I would liketo say a big thank you to my team atKPMG, particularly Katie Richardson,as well as the team at AshgroveMarketing for putting all of thistogether. Thank you and we lookforward to seeing you all again nextyear.”

Closing WordsArchie Watt Director

KPMG Gibraltar

Russell Kelly Director, Audit & Advisory

KPMG Isle of Man

Archie Watt Russell Kelly

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“This is an industry that, ofits own volition, remains atthe forefront of onlineconsumer protection,international legislation andregulation, anti-moneylaundering and complianceprocedures, technologicaladvancements and, notleast, the customerentertainment experience.”

Archie Watt

Russell Kelly

KPMG LimitedTel +350 200 48600www.kpmg.gi

© 2014 KPMG Limited, a Gibraltar limited company and a member firm of the KPMGnetwork of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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