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: Matthias Spitz is a partner at a fi and of the IMGL. He can be reached by email: Jessica Maier, LL.M. is a gaming atto n it a fi She can be reached by email: European Gaming Lawyer | Spring Issue | 2017 | 9