Malta’s MGA’s supervision of operators, modernising the gaming framework,

Malta’s Gaming Act hasexisted since 1998, however, in July 2017 the Malta Gaming Authority (MGA)introduced a white paper which proposed major changes in the regulatoryframework of the Gaming Act. The aim of the newly proposed act is to repeal anyexisting legislation regulating gaming and gather them all together in a singlepiece of legislation which is to be called the Gaming Act. According to the MGA, the aim of the new Gaming Act isto streamline the MGA’s supervision of operators, modernising the gamingframework, simplifying regulatory burdens and adopting a risk-based approachwhich is intended to give the MGA a greater level of prescription wherenecessary1.                Apartfrom repealing the old legislative framework related to gaming, the while paperaddresses increased technology convergence between online and land basedgaming, and it promotes technological, channel and game neutrality which wouldallow innovation and industry developments. The paper also seeks to adopt arisk-based approach to render licensing and monitoring processes moreeffectively and efficiently. Accordingto the proposal, the gambling licensing system will be overhauled andreintroduced to have only two types of licenses, one license covering all B2Coperations and the other would be a separate B2B supplier licence. Due to this, gaming companies and operators would notneed to apply for a number of licences to offer different types of games, or anumber of licences under the same class to offer content from differentproviders as this might be done by applying for one single license. Oncepassed, the latest proposals would also extend the licensing period from fiveto ten years and revise licensing fees.

          The introduction of the twolicence system would also be accompanied by amendments to the taxation system,including the introduction of a point of consumption tax in order to reduce theburden on certain operators that are currently subject to double taxation onoffshore business. This usually takes place due to the company being taxed fromthe country it is based in (case being Malta), and the country the consumer isbased in, which would result in the operator paying a double tax. B2B entitieswould be exempt from paying tax under the new Gaming Act.Due to this, the MGA suggested that companies should pay 5%of the gaming revenue which derives from an end customer located in Malta as agaming tax, unless the operators are otherwise instructed. This means that if aforeign consumer is using the land-based games while in Malta, the companywould be taxed as if the consumer was Maltese.

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On the other hand, if theconsumer were a foreigner, gambling online from another country, the taxpayable would depend on the jurisdiction of the country the individual isplaying from. This change, if brought about by the amendments, would affectgaming companies based in Malta positively because the gaming tax thatoriginally had to be paid under two jurisdictions would only be due to thecountry where the consumer is located. The license duration has also been increased from five to tenyears, unless certain games fall under a government concession and might have ashorter license period as a result.

This increase in the licenses term can actas a guarantee for companies in order to ensure their business’ stability inthe local economy, reducing the risk that the license may not be extended afterthe fifth year. The MGA would also be enabled to provide limited durationlicences, with the condition that they cannot be issued more than four times inany one calendar year, which would be ideal for use in cases of a disasterrecovery scenario. This also goes to prove that the MGA’s powers of complianceand enforcement will actually be extended.

The key functions within operators will also becomelicensable and persons responsible for the overall management and provisions ofgaming services, marketing, finance, compliance and IT would all require apersonal licence. By virtue of such personal licence, the MGA will be able to intervenedirectly and hold each of these persons accountable in respect of theirindividual area of responsibility. This would rid companies from the burden ofresponsibility they currently have over the persons responsible for suchsectors, and might also enhance the employees to do their job more diligentlyin order to avoid being held responsible for errors.The requirement to obtain a licence to operate an amusementmachine shall be also be removed under the proposed framework, however,amusement machines are still required to be registered with the MGA against anominal fee. In cases of land-based gaming companies seeking to grow, thismight encourage a more prominent increase in the amount of machines to bepurchased.

 Included in the white paper was listed another power thatwill be granted to the MGA once the act comes into use2, andthis is its extended monitoring and enforcement authority. Through thecompliance review process that has been formally introduced, the MGA’sregulatory thinking department have to be more transparent to the licensees.Licensees ought to be informed about any doubts which may be brought up andshall be given a reasonable time to submit their views on the MGA’s concernsand suggest ways how it may be resolved.Following such review, the MGA may take one or moreenforcement measures in relation to the licensee in case where a breach of lawis confirmed. The gaming authority may also revoke, vary or add conditions tothe licence held by licensees, both for enforcement and/or non-punitivemeasures.

The authority is also going to be given the possibility to nominatean administrator who will cater for certain exceptional circumstances whichwarrant such intervention by an independent third-party.Another power which will fall in the hands of the authorityis that they would be able to prepare and present a new procedure listingnon-compliant operators. This would put compliant operators at an advantagebecause if the list would be available to the public, both consumers and othergaming companies would know whom to trust and/or work with. In such a scenario,operators would be allowed to make submissions to the MGA clarifying andaddressing the lack of compliance the authority claimed they had in order to beremoved from the list. The ground for cancellation and suspension have also beenexpanded, which acts as a guarantee that operators will act more diligently inorder not to have their licences repealed. Another new system that has beenmentioned in the white paper is that the authority would start making use ofthe ‘mystery shopper’ concept, in which a lay person is sent/used by theauthority in order to make sure that the entity is adhering to the regulatoryframework. This could be done by sending a physical person to a casino withregards to land-based operators, or hiring users to make use of an operator’sgaming company whilst pretending to be a normal user. The Regulations will alsoprovide for cases when the licensee wants to voluntarily suspend its licence, however,this is subject to conditions connected to the Authority’s satisfaction.

  According to the MGA’s legal and international chief officer,Edwina Licari, the proposed changes are likely to be brought into effect duringthe first quarter of 2018. It is most definitely that this change inlegislation related to gaming is going to affect Malta positively as it wouldencourage more operators to base their gaming related businesses on the island,and it increases protection of the ones already operating. Through the newlyproposed changes, the MGA hopes to strengthen and secure “the status of Maltaas an international hub of gaming excellence”.1Benjamin Reedman’s article on the significant changes introduced by the MaltaWhite Paper on reforms to the gaming legal framework taken from the GamblingCompliance Website, written on the 21st November 2017.2According to Edwina Licari, chief officer legal andinternational affairs at the MGA, the act is presumed to start applying to ourlaws sometime during 2018.