Comments on Gambling Amendment Bill,

August 2007

(Based upon comments received from public hearings)

 

Detailed list of issues

Clause/ Provision

Comment

Received from

Response

Recommendation

 

Amendment Bill vis-ŗ-vis separate legislationto regulate Interactive Gambling.

 

Casino Association of South Africa

Interactive Gambling (IG) is already provided for in the Gambling Act No 7 of 2004. See definitions of interactive game and interactive provider. Section 11 also contemplates the provision of this activity in terms of the principal Act.

 

No sufficient motivation was provided for separate legislation. Regulatory principles of the current Act apply to all forms of gambling and these principles will also apply to IG. Further, IG will be regulated by the same regulatory body that is responsible for the overall regulation of all forms of gambling, and preferably in the same Act.†††

 

The national Lottery belongs to the state and is governed separately therefore the two canít be compared.

 

The UK also accommodates IG as part of the main gambling legislation

 

Leave as is

 

Technological development and issue of separate Bill

 

There are strong policy arguments that issues of technological advancement (technology package) should not be dealt with in the Bill but in subordinate legislation (regulations and technical standards).

 

Leave as is

 

Separate Money Bill in respect of taxation

 

It is a constitutional requirement. A provision that imposes taxes, levies, duties, etc makes the Bill a Money Bill (i.e section 77 Bill). Constitution requires a Money Bill to deal with nothing else but tax matters and it has to be introduced into Parliament by the Minister of Finance.

 

Leave as is

 

Insufficient research + consultation

 

 

The 2005 Interactive Report that forms the basis of the Bill clearly analyses the legislation of IG in other jurisdictions. Extensive consultations took place during the process of the research. Further there was wide consultation on the drafting of the policy where outcomes and recommendations of the research were conveyed to stakeholders. Provinces were afforded an opportunity to comment on the policy before it was submitted to National Gambling Policy Council. The draft Bill was published in the government gazette for public comments.

 

Leave as is

 

Consultations

 

CASA: Comprehensive comments were submitted by CASA and thoroughly considered by the dti drafting team. A meeting was also held with CASA. There were many issues of disagreement and CASA offered suggestions which mostly conflicted with the policy objectives and we could not agree with them. They offered to assist with clarifications and the dti agreed that should there be a need for same, further engagements will be held with them in that regard, possibly through another meeting.There were no issues that needed further clarification as CASA was lobbying for a business-orientedmodel.

 

FIC: Comprehensive comments were also submitted by FIC and thoroughly considered by the dti drafting team. A meeting was also held with FIC. When we met with FIC they indicated satisfaction with our clarification of the issues and as far as we were concerned there were no other outstanding issues with FIC.†† FIC also had meetings with the NGB in respect of these issues. Unfortunately the meetings occurred with different people from the FIC who did not convey the meeting outcomes to their colleagues.

 

Provinces:Comments were also submitted by three provinces on the Policy and Bill and thoroughly considered by the dti drafting team. A formal meeting with the provinces was delayed as we had to obtain a legal opinion on some issues that were raised by them, in order to ensure that the Bill does not fall foul of the Constitution. There was disagreement with the provinces on the main issue of licenses.

 

We are engaging with FIC on the issues.

 

Automatic license to land based casino operators +

Responsibility of providers

 

 

The process must be transparent, fair and open to allow new players in the industry. IG operators will be expected to contribute to the treatment of problem gambling by way of licensing conditions.There is no jurisdiction currently known that gives automatic licences. The argument that IG has negative impact on land based casinos has no substance. There is therefore no basis for the preferential treatment of Casinos in the awarding IG licenses.

 

Leave as is

 

Verification of offshore players +

 

 

 

 

The player registration process by the interactive provider, as an accountable institution, would have to comply with FIC requirements. Regulations for the verification of players to be drafted in consultation with FIC to ensure that they meet FIC requirements.

 

 

 

US prohibit IG so we will not be attracting US market

 

 

The objective of the Bill is not to make money or ensure expansion of IG businesses. However it should be noted that players from jurisdictions that permit IG will be allowed to play in SA.

 

 

 

Research into the financial viability and socio-economic impact not conducted

 

The market will determine the financial viability of IG business in SA.On the social impact, according to research, only 2% engage in IG compared to over 80% of gamblers in land based casino activity.There is no apparent threat to the land based casino from the interactive gambling.

 

 

EU Litigation

 

Issue not relevant for SA.

 

 

 

Taxation

 

 

Currently the dti is consulting with National Treasury on the imposition of taxes in respect of IG. The dti will endeavour to provide for a level playing field in respect of IG vis-ŗ-vis the land-based casinos.In addition, consideration will be given to the concerns raised on reducing the extent of gambling and such taxation may be used to curb gambling activity.

 

It is still work in progress with National Treasury.

 

An enabling provision for the payment of tax by IG providers will be incorporated into the Bill.

 

 

Exclusion of Person to Person betting exchanges

 

Betfair

There is nothing in the Act that provides for Person to Person (P2P) betting exchanges. The investigation and policy processes in respect of P2P are still a long way from completion. The possible regulation of P2P has in any event, always been a separate process as it was not contemplated to be part of the IG process in terms of the Act. In terms of the Principal Act, P2P is not part of interactive games as it is not a gambling game as defined in section 4(1) of the Act.

 

The existing exclusion on the definition of interactive provider is proposed to be removed as Person to Person betting exchanges are currently excluded in terms of the principal Act.

 

P2P may be provided for in the Act once the research and policy process on its implication is completed.

 

Section 11

Age Verification

 

 

Section 11 (a) provides for the registration and verification of players. The Minister will issue regulations detailing the registration and verification process for all players.IG providers are also accountable institutions in terms of the FIC Act, and would consequently have to comply with FIC in respect of age verification etc. There is a two stage verification process which we believe is very tight.

 

Will, however, consider tighter provisions to place responsibility on the provider for identity verification.

 

On shore requirement to ensure monitoring and inspection of service providers for FICA purposes.

 

 

The Bill provides for servers to be located in the Republic.Records of financial transactions should be kept in SA therefore operators will have to provide SA physical address for domicilium purposes.FIC Act will apply to IG operators like any form of gambling.The companies will still need to comply with other requirements through licencing conditions.In terms of the Companies Act external companies have to lodge their articles of association and a form advising of business address in SA, with the Registrar of Companies. Refer to definition of external company in Companies Act.

 

Leave as is

 

Money Laundering

Financial Intelligence Centre

FICA requirements require verification of identity of account holder before transfer of money to nominated account. In addition, the registration process of a player addresses this matter.Winnings will be paid into the registered nominated accounts, which have already been subjected to FIC verification.

 

 

 

An accountable institution in terms of FICA

 

An accountable institution is currently defined as a company that operates with a licence issued by a PLA. A proposal that the wording should include the National Gambling Board be added to include IG operators who operate with a licence issued by the NGB.

 

An Amendment to the FIC Act will be effected.

Clause 1 (j)

Nominated account

 

The funds can only be moved to and from one account.Cannot transfer funds from that account to another account.All winnings will be paid back to the originating accounts.The Bill provides for the process of dealing with unclaimed winnings or credit.

 

 

 

Picking up suspicious players + Jurisdiction

 

 

The IG operators will be required to report unusual and suspicious transactions in terms of the Financial Intelligence Centre Act requirement which will be detailed in their Internal Rules

 

 

 

The dti to ensure agreement with FIC on prevention of money laundering.

 

The dti met with the FIC and agreed on key issues.

Agreement reached and issues raised will be taken on board in the Bill.

 

 

Licensing criteria can require providers to have guarantees

 

1. A performance guarantee will be required;

2. A reserve will be required to ensure demands of winnings are met at the required time;

3. Audit will look at the reserve to ensure compliance.For instance, Clause 9.

 

 

 

Over-indebtedness

 

COSATU

Setting of daily, weekly and monthly limits to gamble which is a requirement in terms of the Bill. The Bill prohibits the granting of credit by service providers for purpose of interactive gambling (Clause 13).

 

 

Long title

Provide for a statement pointing to intention of the Bill regarding control of Internet gambling.

 

Purpose section of the Bill already provides for the protection of minors/vulnerable persons and society from over-stimulation of gambling. Will provide in the Long Title of the Bill a statement providing for the curtailment of gambling as one of the main objectives of the Bill.

Amend the long title and Purpose section of the Bill by providing for the regulation and curtailment of interactive gambling in order to protect society against the over-stimulation of the demand for gambling; prevent money laundering etc.

 

Clause 15 (b)

Restriction on Advertising

 

 

The dti believes that there is a lot of merit to the proposal to prohibit the advertising of gambling. This issue will however be revisited in respect of the other forms of gambling that are currently regulated.

 

Amend clause 15 to provide for no advertising of IG.

 

 

Illegal advertising in South Africa by foreign jurisdictions

 

We recommend closing this loophole in the Act to prevent illegal operators from promoting gambling in South Africa.

Amend section 15 to exclude illegal activities that are carried out by operators from other countries or jurisdictions

 

 

Capacity of the Board to supervise compliance

 

Western Cape Racing and Gambling Board

The Board has no specific capacity but this can be created within a reasonable/specified time. PLAs have themselves experienced staff turnover but could still deliver and build capacity. Currently inspectors exist and can be trained and used for the required skills. Capacity on IG regulation is a new phenomenon and will require some kind of training even if PLAs take over all responsibilities. Also, given the borderless nature of IG, it is critical that IG be in the auspices of a national entity.

 

 

 

Giving too much power to the Minister to prescribe certain matters

 

 

The Minister does make regulations in isolation. There is a comprehensive consultative process involving the National Gambling Policy Council which is represented by all the provinces and the public consultation period is lengthy; +45 days for public comment. The fast pace of technological development which might affect for instance the manner of identity verification requires flexibility in terms of amendments and is properly placed in regulations rather than the main Act. The dti will, in collaboration with the State Law Advisors, look into all the identified clauses providing for the powers of the Minister.

 

Amendments being considered.

 

Licenses + capacity

 

 

 

Given the borderless nature of IG, it is critical that IG be in the auspices of a national entity.

 

 

 

Ministerial power with respect to setting of license conditions

 

 

Minister will prescribe minimum criteria or a framework of subject matter for the setting of such conditions by the Board.

 

 

 

Other technical issues

PLAs

Will be attended to in collaboration with the State Law Advisors.

 

Amendments being considered.

 

Delegation Section 31 (2)

 

This is a constitutional requirement of cooperative governance.In certain instances probities done by provinces may be relied upon instead of repeating processes. This is not a new principle as it is already contained in the principal Act with regards to the PLAs. This is also an empowering provision that is standard in most laws dealing with matters of a concurrent nature.

 

 

 

Oversight on NGB

 

The NGB carries out its functions under the direction of the Council

 

 

 

Technical standards

 

Minister sets generic /criteria / procedure not necessarily technical requirement. Technical standards are set by the SABS technical standards committee.

 

 

 

Moral issue within society and should be treated like theft

JASA

Gambling is not generally recognised as a moral concern across the board such as theft. No society views theft as a positive moral issue. The two canít be compared.

 

 

 

Bill leaves out crucial aspects such as fees and licence requirements to the discretion of the Minister

Gauteng Gambling Board

This will be provided in the regulations. Ministerial powers in this regard will be reconsidered together with other technical issues

 

 

Definition of gambling device is limited with respect to determination of results

 

It is a broad issue that does not necessarily relate to IG. To be discussed and finalised between the NGB and the PLAs first.

 

Leave as is

 

Definition of manufacturer, supplier, should provide for licensing of software

 

The Act provides for licensing of gambling devices. IG software/equipment is considered to be a gambling device. Therefore no need to provide for a separate licensing regime for IG software/equipment.

 

 

Section 3. Application

Regulation should extend to unlicensed gambling activities

 

Proposal considered inadvisable and dangerous. Unlawful gambling falls within the general offences clauses.

 

 

 

There should be an independent research body

Civil Society for South Africa Advisory Council: Dudley Baylis

 

The NGB has the function to conduct the research as provided for by the Act. It is in any case accountable to Parliament.

 

 

Insufficient research done

 

Covered above.

 

 

 

Cellphone usage

 

There are stringent registration requirements, in addition to access to internet and nominated account requirements in order to play. This will ensure prevention of exposure to minors.

 

 

 

Those licensed should contribute to outreach programmes

Jewish Board of Deputies

Providers will contribute to responsible gambling programmes in the same way as land-based Casinos.Will have to contribute to social responsibility as part of BID commitments. Responsibility of regulator to ensure compliance with licence conditions.

 

 

 

The enforcement should be strict

 

IT compliance and security are examples to ensure protection from hackers and viruses. Technical compliance audit and financial audits will all be part of compliance monitoring.

 

 

 

Regulations on IG to be brought to the Committee for consideration.

 

Agreed.