Gambling Review: Prepare now for changes to Personal Management Licences

Companies holding Gambling Commission Operating Licences should be reviewing their management structure and identifying which additional postholders will be required to hold Personal Management Licences under the proposals that were the subject of a consultation in the summer of 2023. Given the need to provide details of training undertaken and the need to arrange for overseas police reports/DBS checks licensees should not leave it until the publication of the Commission’s response before starting the application process.

Here, Andrew Cotton from Irwin Mitchell's Regulatory & Compliance team, re-publishes the article he wrote in August 2023 which sets out the background to the proposed changes and the detail of those additional post holders that will now need a Personal Management Licence.

Section 80 of the Gambling Act 2005 requires the Gambling Commission to set licence conditions to ensure that within each licensee at least one person occupies a ‘specified management office’ and holds a personal licence authorising them to perform the functions of that office.

Licence condition 1.2.1. requires that licensees must ensure that each individual that occupies one of the management offices specified in the condition holds a Personal Management Licence (PML) authorising the performance of the functions of that office. 

The Commission has launched a consultation on changes to this licence condition which would both clarify and extend the roles captured by the requirement to hold a PML. As a consequence practically all corporate licence holders are likely to require additional PML holders. 

Background

The Commission justifies the proposal given the number of cases where there are repeated failings by the same licence holder: “We are concerned that, historically, a high number of our enforcement cases involve repeated failures by the same licensee, resulting in an escalation of our action. 

In cases over the last five years, eleven licensees have been subject to enforcement action multiple times. The majority of these cases relate to similar, repeated failings linked to anti-money laundering and social responsibility. By increasing the personal accountability of individuals within a licensee, we seek to reduce this risk.”

The proposed reform was first raised in an open letter from the Chairman of the Gambling Commission to The Times in May 2022:

“Our enforcement has led to operators paying out more than £130 million in the past five years, but this clearly is not a sufficient deterrent. Consequently, operators can expect to see cumulative sanction packages with not only increased financial penalties but also a suite of sanctions aimed at changing behaviour, including fines being based on a percentage of customer takings, short or long-term suspensions and attaching significant conditions to licences.

“We will expect full board oversight and personal accountability through increased personal management gambling licences at strategic and operational levels. And we will not tolerate an attitude of lowest possible compliance being sufficient. We expect our licence-holders to genuinely commit and learn from failings. Licences will be withdrawn where standards are not met, meaning that individuals could not hold senior positions in the industry. Licence-holders should aim for the highest standards”.

Proposed changes

The proposed changes will require more individuals within a corporate licensee to hold a PML and be authorised to carry out the functions of their “specified office” before the new licence condition takes effect. The application process includes an assessment of the suitability, competence and integrity of the applicant before the Commission will grant the PML, which then authorises the individual to carry out their role.

The Commission sees the proposals as a way of driving personal accountability and responsibility, and a means of making sure it has adequate regulatory reach over individuals when failures are found. The revisions are intended to both clarify and extend the responsibilities currently captured within the definition of ‘specified management offices’.

The Commission appear to concede that the existing licence condition may not provide sufficient clarity on the management responsibilities that should be licensed. “The definitions within the Act are broad and could apply to a wide range of management responsibilities within a licensee. We propose amendments to our licence condition to clarify which management offices require a PML.”

The Commission is proposing amendments to make clear that the CEO of a licensee must hold a PML as the person with responsibility for the overall management and strategy of the licensee’s business. There may well be cases where a Chief Operating Officer holds the PML for this function. The revised licence condition proposes that for each specified office “at least one person occupies the office“. Advice should be taken on whether more than one person needs to hold a PML for this and the other specified offices.

It also proposes that the person with responsibility for chairing the Board of an organisation, (where the licensee has such a body), should require a PML in order to ensure that those responsible for scrutiny, strategy and leadership at the most senior level within the organisation hold a personal licence.

Additionally, it proposes to explicitly capture those responsible for anti-money laundering and measures to counter terrorist financing, including money laundering reporting officers (MLRO) and nominated officers (NO) as ones where the individual must hold a PML. 

It is of the view that these roles should already be captured under the definition of ‘management office’, because the person is taking or sharing responsibility for “facilitating or ensuring compliance with terms or conditions of the operating licence” under section 80(5) of the Gambling Act 2005. The Commission seeks to clarify this statutory requirement in the revised licence condition by requiring that the person responsible for the licensee’s anti-money laundering and counter-terrorist financing function must hold a PML.

“The current position where those responsible for anti-money laundering and counter terrorist financing are not explicitly required to hold a PML means that it is possible for persons holding those positions to not meet our expected standards of suitability, competency and integrity. If one of those individuals failed to comply with statutory regulation, the LCCP or our guidance, we would therefore have limited options available to take regulatory action against them. This also means those individuals could move around within the industry, with the risk of poor practice moving with them to another licensee.”

Lastly, the Commission identifies that there will circumstances where directors of a parent company should hold a PML and this will be assessed on a case by case basis.

This is the proposed revised condition 1.2.1 with the new text being underlined:

1. Subject to 6 and 7 below, licensees must ensure that:
2. each individual who occupies one of the management offices specified in 2 below in respect of the licensee or in connection with the licensed activities holds a personal licence authorising the performance of the functions of that office (hereafter ‘a personal management licence’); and
3. for each office specified at paragraph 2, at least one person occupies at least one of those offices that office
4. The specified management offices are those offices (whether or not held by a director in the case of a licensee which is a company, a partner in the case of a licensee which is a partnership or an officer of the association in the case of a licensee which is an unincorporated association) the occupier of which is by virtue of the terms of their appointment responsible for:
5. the overall management and direction of the licensee’s business or affairs (this is likely to be the Chief Executive Officer, Managing Director or equivalent) 
6. chairing the Board (where the licensee has such a body) 
7. the licensee’s finance function as head of that function
8. the licensee’s gambling regulatory compliance function as head of that function
9. the licensee’s marketing function as head of that function
10. the licensee’s information technology function as head of that function in so far as it relates to gambling-related information technology and software
11. oversight of the day-to-day management of the licensed activities at an identified number of premises licensed under Part 8 of the Act or across an identified geographical area
12. in the case of casino and bingo licences only, oversight of the day-to-day management of a single set of premises licensed under Part 8 of the Act, and
13. the licensee’s anti-money laundering and counter-terrorist financing function as head of that function is likely to include the following: 
14. for holders of casino licences, the person responsible for compliance with the relevant regulations (and appointed in accordance with those regulations); and the person responsible for submission of reports of known or suspected money laundering or terrorist financing activity under the relevant legislation (and appointed in accordance with the relevant regulations); 
15. for holders of licences other than casino licences, where an individual has been appointed to submit reports of known or suspected money laundering or terrorist financing activity under the relevant legislation, that individual. 
16. The person responsible for the licensee’s gambling regulatory compliance function as head of that function shall not, except with the Commission’s express approval, occupy any other specified management office.”

Conclusion

Licensees will need to start planning for these changes now as they will almost certainly be adopted in the Commission’s response to the consultation, which will probably be published early in 2024. Licensees then have three months to implement the required changes before the new condition takes effect. As part of the process for approval of PML applications submitted by MLRO’s the Commission will seek details of qualifications held and all relevant experience. For those companies relying on the small scale operator exemption, they will need advice on whether additional personal licensing is required. If more than three individuals fill the qualifying positions, then this will trigger the transitional requirements in paragraph 7 of the licence condition. 

What to do next? 

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To learn more about the consultations listed here and the latest regulatory requirements for your business, please contact Andrew Cotton