Topics covered in this issue:

Upcoming: July 1, 2021 – Germany’s new Gambling Treaty Goes into Effect

Last January, Germany’s 16 Federal states agreed to create a new federal gambling regime. The 4th Interstate Gambling Treaty, or the GlüStV, has been ratified and comes into effect July 1 of this year. Since last October, German regulators implemented a transition period which has given operators a chance to effectively implement new rules and requirements set out in the new treaty as a path to offer legal sports betting, slots / “casino,” and poker games while allowing operators to prepare their license applications without the risk of heavy fines. 

What changes and how is KYC implemented? 
The new treaty, while aiming to significantly enhance player protection mechanisms, has received criticism. Operators, trade associations, lawyers, and even regulators have cited strict requirements may prevent some operators from entering the German market and could even enlarge the black market.

Regulatory Requirements are as Follow:

Identity Verification and Accounts

• Operators are required to verify their customers’ identity (perform an age verification check)
• Collect required data to verify, ensure, and maintain individual accounts belong to the player for account / payment purposes.

Advertising

• A complete ban on broadcast marketing between the hours of 6am / 06:00 and 9pm / 21:00
• No cross advertising for operators with multiple platforms
• Advertising cannot be geared towards minors or presented as a solution for financial issues

Slot Machines

• Virtual slot machine spins are required to have five second intervals between spins with a cap of €1 per spin
• Jackpot restrictions apply
• Games must last at least 5 seconds

Casino Games

• Online casino games are defined as virtual simulations of casino games with the possibility of participation in games such as roulette or blackjack.
  • Note: The new law does not regulate licenses for online casino games.
• Licenses for online casino games will be subject to separate laws from individual federal states (subject to new specifications for a license to operate an offline casino).
• The new treaty stipulates that the new Gambling Authority may not issue more online casino licenses than licenses available for land-based casinos.

Sports Betting

• Betting and live betting will be allowed on the outcome of the game as well as events that occur during the match. Details are to be determined
• Operators in Germany will need to have a base in Germany
• Expect to employ German speakers to communicate with players
• Online sports betting licenses granted before July 1, 2021, will remain effective until December 31, 2022

Technical Specifications

• A database between players and operators will operate in near-real-time
• Online specifications / systems must be in place with algorithms to prove measures geared toward preventing player addiction and system shall have backing with scientific evaluation
• No parallel playing

Financial Obligations

• New tax regime of 5.3% for online gambling
• A security deposit based on the company’s monthly turnover (i.e., smaller operators will pay a minimum of €5 million and larger companies are expected to pay up to €50 million)
• Deposit limits on customers (preventing deposits of more than €1,000 a month across all casinos owned by the operator)

For the first time, uniform regulations and licensing requirements will fall under one Gambling Authority, which will be seated in Sachsen-Anhalt as of 2023. Licensing requirements will continue to be those, that have come out of the Regional Council of Darmstadt Hessen operating officially until 2022 for sports betting, with additional technical criteria for slots and poker.

This puts the next 1 to 1/2 years into an experimental period with an eye on enforcement, turnover, player protection from gambling-related addiction, restricting minors to access games, reducing the number of black-market offerings, and compliance. Ultimately, one important aspect is the player, whose user experience can easily dictate where and which games they wish to play.

Operators have been preparing for the new licensing requirements and would expect to see a return on their investments in meeting these strict enforcements with a level playing field for license holders over a black market. 

Swiss Regulator -FINMA Allows Chip Reading for Remote Identification

The Swiss Financial Market Supervisory Authority, FINMA, has adopted new requirements for remote Know Your Customer (KYC) onboarding when entering into business relationships digitally. The enhanced security measures that accompany the amended Circular now allow for an automated identification solution that can read data embedded in the chip off of a biometric passport or biometric ID. Moving forward, as of June 1, remote solutions require an automated solution with NFC capability or other security mechanisms such as a bank transfer, and or a video identification to be in place.

Spanish Regulator Allows for Automated Identification Solution in Conjunction with a Qualified Electronic Signature

This May, the Spanish Supervisory Authority published new amendments to their regulations on remote identification and trust services. The Spanish Authority now recognizes the validity of both attended and unattended videoID as acceptable digital identification processes for trust services. The memorandum has taken into account innovations in technology updated by the National Cryptological Center (Centro Criptológico Nacional-CNN) and would requires a trust service provider (TSP) to be certified according to Spain’s ENECSTI Certification Body.Alternatively, standards that are adopted at European and international level and in particular by the European Telecommunications Standards Institute (ETSI), will be considered as well if applicable.

Revisions to Establish Contractual Relationships in Electronic Media – Turkey

Turkey’s Regulation on Remote Identification Methods, which allows a bank to establish contractual relationships with its customers in electronic form, has been updated and was published this April 14th. The Official Gazette has now entered into force, allowing for a video identification to be used in conjunction with electronic bank agreements between the bank and its customers. Banks must ensure that customers entering into remote banking agreements electronically meet specific regulatory requirements (e.g., via video identification and use of an encryption key generated for the customer’s contact). The recent announcement is welcome news for Turkish banking customers since the new regulations offer greater flexibility for banking customers and enhances customer / bank relationships. Banks and financial institutions continue to bear the responsibility of ensuring secure and trustworthy KYC identification methods to onboard new and existing customers that use remote methods.

Crypto Assets to be Registered with Central Bank of Ireland

As of April 23, 2021, the Irish Central Bank mandates that all virtual asset service providers (VASP) are subject to AML regulation and must register through the Central Bank by July 23, 2021.

The scope of VASPs follow the AMLD 5 provisions. Virtual asset providers include persons or firms that exchange between virtual assets and fiat currencies or one or more forms of virtual assets, transfer or hold virtual assets on behalf of another person, custodian wallet providers, or any participation in financial services related to issuing or selling virtual assets.

• VASPS are subject to the same AML requirements of financial service providers, including:
• An AML business risk assessment;
• Carrying out customer due diligence (CDD) on their customers
• Carrying out ongoing monitoring of customers and their transactions
• Filing suspicious transaction reports (STRs)
• Implementing and maintaining appropriate AML / CFT policies and procedures
• Retaining records as required
• Providing AML training to staff

During the recent Citi Bank Digital Money Symposium, panelists of the ‘Institutional Infrastructure for Crypto’ panelists explored some of the obstacles crypto firms face as they strive to set a footprint within the institutional finance ecosystem. Experts highlighted the growing relevance of KYC compliance and its effectiveness. The larger players are satisfying their due diligence requirements.