European Gaming Lawyer magazine EGL_Spring2017_opt | Page 9
exempt providers of certain gambling services
from national provisions when transposing
the 4AMLD – “following an appropriate risk
assessment”. Such a risk assessment would
also have to take into account specific risks
arising from a certain gambling sector or
market and not only the product-related
ML risks. It, therefore, does not come
as a surprise that the Federal Assembly
(Bundesrat, i.e. the representation of the
German states at federal level) has demanded
that the exemptions with regard to gaming
halls and horse-race betting be reversed.
Then again, the privilege for retail lottery
sales is unlikely to be touched. It might even
have been been caused by the states seeing
as their gambling policies aim at preserving
the state monopoly on lottery operations and
treating it in a patronising manner.
KYC and provisional player accounts
From the perspective of the online gambling
industry, KYC requirements will be a key
challenge under the new laws. The German
AML law follows the concept of an ID card-
based identification and verification, where,
in terms of a provisional identification, at
least a copy of an ID card would have to
be submitted by the player prior to him/
her being allowed to participate in online
gambling activities on a provisional basis.
Pursuant to the draft AML Act, the operator,
however, is obliged to “promptly conduct a
full verification” after the provisional player
account is opened. Obviously, this concept
of KYC has not been happily received by
the online gambling industry (sec. 16(8)
draft AML Act). Yet, following substantial
lobbying efforts of the German Sports Betting
Association (Deutscher Sportwettenverband –
DSWV), the wording in the version approved
by the Federal Government was amended.
Online gambling operators, as a second
option, may also choose to conduct KYC
“in accordance with the requirements for
identification and authentication under
gambling regulations”. Interestingly, the
German regulation of gambling, including
the Interstate Treaty on Gambling (the
‘Interstate Treaty’) as the overarching law,
do not stipulate any particulars in relation to
KYC. Essentially, it is only required to “ensure
the exclusion of minors and barred players
through identification and authentication”
(sec. 4(5) no. 1 Interstate Treaty). In April
last year, the Gambling Committee (i.e. the
interstate body representing the leading
state regulators) published a paper setting
out “Key Aspects of Internet Requirements”
to fill in the gaps. According to this paper,
identification and authentication will have to
meet the following requirements in order to
comply with gambling law:
1) A multi-level video identification
process and online gambling on a
provisional basis up to 150 EUR, where
the player account has to be activated
within 30 days; or
2) Verification based on databases
featuring data from face-to-face
checks with sufficient match ratio and
provisional gambling up to 150 EUR;
again, the player account would have to
be activated within 30 days, and login
credentials would
have to be submitted using secure email
services or a 1-Cent-bank transfer; or
3) Identification using electronic ID
card functions.
Albeit not really convenient for
online gambling operations, the above
requirements arguably may be feasible.
Payment restrictions, however, could turn
out to be a higher threat to the business
going forward. Whilst it was obvious that
the Federal Government would exclude
cash vouchers (the use of any anonymous
payment method is already prohibited
under the current law with regard to
online gambling), the fact that the federal
states expressed the view that credit
cards might not qualify as permissible
means of payment through the statement
submitted by the Federal Assembly must
be considered a threat to the business. The
underlying idea appears to be that credit
cards essentially are a kind of anonymous
payment method, since it is contended
that the customer cannot be automatically
matched with the credit card holder.
Obviously, this does not take into account
that many EU-licensed operators will
have complementary measures ensuring
a “closed loop policy” is in place.
It is clear that for the remaining months
of the legislative procedure, the industry,
through its lobby groups (i.e. the DSWV
and the German Online Casino Association
– DOCV), will make considerable efforts
to ensure that such a restriction will not
expressly be included in the final law
Further internal security measures
As indicated above, the draft AML Act that
was approved by the Federal Government
now extends general AML requirements also
to retail sports betting operations. Having
to implement individual security measures,
such as a risk analysis for each franchisee
and appointing an AML officer for each
betting shop or betting agent (while ensuring
sufficient protection under employment law
from dismissal as demanded by the law)
as well as storing KYC data for at least 5
years, would certainly amount to an undue
compliance burden for the retail betting
sector. Interestingly, the Federal Assembly
seems to have acknowledged this promlem
and is proposing to treat franchisees as part
of the sports betting operator’s distribution
network. Accordingly, responsibilities for
AML obligations could be shared between
the franchiser (i.e. the operator) and the
franchisee (i.e. betting shop owners or agents).
It remains to be seen whether this amendment
will be implemented in the final law.
It is expected that the gambling regulators
of each state will also be responsible for
supervising gambling operations with regard
to AML compliance. Rumours suggest
that they have understood what powerful
enforcement tool AML regulation can
be – also bearing in mind their failure in
implementing and enforcing Interstate
Treaty regulations. Hence, the gambling
industry is well advised to prepare and,
where necessary, mitigate risks arising from
new AML requirements in relation to the
German market.
Joerg Hofmann is the Head
of the Gaming Law practice
at
a fi and
President of the IMGL.
He can be reached by email:
[email protected]
Matthias Spitz is a partner at
a fi and
of the IMGL. He can be reached by
email: [email protected]
Jessica Maier, LL.M. is a gaming
atto n
it
a fi
She can be reached by email:
[email protected]
European Gaming Lawyer | Spring Issue | 2017 | 9