'Light touch' financial vulnerability checks: invasion of privacy or necessary?

by David Thomas Last updated: 28 Nov 2024

Following its Summer 2023 Consultation, the Gambling Commission (UKGC) announced the introduction of “light-touch financial vulnerability checks”. Described as “frictionless” by the UKGC, this 2-stage implementation raises concerns over the potential (and likely) impacts it will have.

We look at the legislation and the implications:

Increased regulation
Concerns
Frictionless?
Financial vulnerability checks implementation
Ethical considerations
Discrimination
Impact of checks
Invasion of privacy
'Flags'
Further reading

Increased regulation

Part of the government’s Gambling Act review white paper, the new 'financial risk checks' translates to 'increased regulation'. On 30 August 2024, the UKGC introduced the ‘check threshold' at £500 on deposit, but this will change to just £150 on 28 February 2025 – a fairly modest threshold in anyone's eyes. This means discretionary 'light touch' checks on anyone depositing £150 or more a month.

Concerns

It is feared that the increased regulation of affordability checks, maximum betting limits, or similar measures could drive many players to unlicensed sites. From here, they could be at risk of financial exploitation, compromised data security, and lack of responsible gambling protections – to name just a few possible concerns, This is especially alarming when we consider the rise of unlicensed casinos and their enticing “better odds and bonuses” attracting more and more players. It's a trend we have already seen in Europe.

Frictionless?

Coming back to the UKGC’s emphasis on “frictionless” when describing the checks, this seems to be a proactive approach to downplay concerns regarding possible operational disruptions. But, it may actually indicate the Commission is actually anticipating some friction when implementing these checks – even though impact is supposed to be 'minimal'.

In trying to reassure both customers and operators, it seems friction is inevitable when the checks are rolled out, especially in terms of logistical complexities, costs, and time. It's just a question, really, of how much friction?

2-stage implementation of financial vulnerability checks

Stage 1 is currently taking place (30 August 2024 to 27 February 2025). At present, checks are applied at a higher threshold of £500 net deposits per 30-day rolling period. The UKGC hopes that this initial phase will allow operators to introduce the checking process gradually, therefore reducing the number of checks required.

Stage 2 begins on 28 February 2025 when the threshold lowers to £150 net deposits. Casinos will thus be expected to conduct more regular checks on a player’s financial vulnerability.

'Risk flags'

This begs the question – what constitutes a ‘risk flag?” Does this apply to every individual? After all, each player is unique in terms of income, outgoings and gambling history. A one-size-fits-all assessment model is unlikely to capture the nuances of everyone’s personal financial circumstances or gambling behaviours.

Infringing player privacy is bound to raise concerns. Yes, financial vulnerability assessments are intended to protect players, but excessive or even indiscriminate checks may well be viewed as intrusive and lead to mistrust between players and casinos.

Phased implementation

According to the UKGC, the £500 introductory threshold’s initial 6-month period is “beneficial for consumers as it will help smooth implementation". It also allows casinos time to “introduce the process into their overall customer interaction approach".

This phased implementation will undoubtedly affect costs, time, and logistics in several ways. Firstly, the setup and ongoing operations will require significant investment, particularly for operators needing to outsource processes to third-party vendors.

Then there is the issue of time. Whilst the phased rollout is intended to help operators adjust gradually, February’s lower threshold will significantly increase the number of checks. More checks means greater processing times, as well as staff training.

Operators will have to ensure effective data management and partner with external providers to ensure everything goes smoothly. This will take time and raise costs further, possibly disrupting overall operations for some time.

Ethical considerations in the limelight

The UKGC has been using a player’s postcode as criteria to “support risk assessment by giving an indication of possible average salaries or the likelihood of deprivation". Arbitrary measures such as this are unlikely to inspire confidence in the process.

The problem with checks such as this is potentially (or likely) misleading assumptions made about the person being checked. And surely ‘assumptions’ are not enough basis to accurately assess someone’s personal financial standing.

How can a postcode account for an individual’s unique circumstances? Even affluent postcodes will contain those who are financially vulnerable, whilst lower income areas have many financially stable residents.

Discrimination

The argument is that this form of criteria introduces discrimination or bias, as certain demographics will come under scrutiny simply because of where they live. However, the UKGC has acknowledged that the use of postcodes, as well as job titles, can lead to misleading assumptions regarding someone’s finances. Going forward, publicly available financial data, such as bankruptcies and Debt Relief Orders (DROs) will also be used to assess a customer’s financial vulnerability.

This approach has the potential to overlook individual circumstances, failing to account for factors such as temporary hardships. Again, players may feel unfairly treated and look to unregulated gambling sites to continue their activities.

Impact of checks

The UKGC has reiterated that the checks will not affect a customer’s credit score. According to the Consultation Response, “If the check is conducted via a third-party provider, the fact of the check may be visible to a customer when they check their own credit score.”

Such vigorous checks with no credit score implications? Okay, we will take the UKGC’s word for it, but we will see in time whether these “light touches” are indeed as “light” as they promise. The fact that there is an onus on customers to ensure the checks are correct and accurate may mean many could face confusion or frustration, especially if there are issues.

The aftermath (or 'fall-out' perhaps?) as a result of these checks remains to be seen, but UKGC CEO, Andrew Rhodes has previously tried to settle some nerves. Rhodes clarifies that the proposed checks aim to focus on higher spending customers. He says that only 3% of accounts will be assessed while labelling many industry fears as “myths” because most customers won’t experience any major impact – unless of course any substantial financial risks are found.

Invasion of privacy

Tension remains, however. Although protecting the vulnerable is of course a positive step, it is deeply concerning how a government body can implement checks on how individuals spend their money. We have to ask, is it any of their business? Private spending should remain that – private. No government body is scrutinising how much a person spends on cigarettes, clothes, or going to sporting events.

If measures were introduced to control how much food people buy, or measure how much is wasted there would be a public outcry. Private spending, as long as it does not harm anyone, should remain beyond government review or censure.

Spending fluctuations and spending reviews

Fluctuations in a customer’s discretionary spending should also be considered. It would be difficult (maybe impossible) for casinos and operators to monitor such spending. Some avenues could include dynamic monitoring systems to track a customer’s spending behaviour in real-time. This could theoretically detect sudden changes in deposit and withdrawal activity allowing for intervention, but yet again, this comes at an extra cost. And is, arguably, getting into the realms of the seriously intrusive.

Annual reviews on a customer’s financial vulnerability could be implemented based on up-to-date data, but this doesn’t account for fluctuations in personal spending. Without a virtually forensic analysis of customer financial activity, casinos and operators will be unable to keep up.

Such vulnerability measures, while arguably well-intentioned, are at grave risk of overstepping it when it comes to privacy. There is a fine balance between a person’s right to privacy and how they spend their money with consumer protection; something the UKGC needs to consider very carefully.

Flags; well-intentioned or overly stringent?

The UKGC reiterates it “does not consider that all flags connected with this check should result in one type of action”. So, how many actions will there be? This is where it gets complex, once again, as the Commission needs to create a system that can execute various responses based on different levels of risk.

For instance, low level flags would not require any immediate action, so simply logging the flag may be enough. From here, a record can be made for future reference if any flags arise again. However, this can lead to an incomplete understanding of the customer’s risk profile.

Confusing? Too involved?

The number of actions taken is unclear. From a mere warning to full account restrictions, each risk level could lead to a different type of action, or even a combination of actions.

The UKGC states that there are 5 types of financial indicators, including bankruptcy and county court judgments (CCJ). As a customer can have one or more of these flags at once, they may show different levels of financial risk, resulting in confusion as to what actions should be taken. More light needs to be shed on how these actions can be assessed and administered.

The UKGC’s light touch financial vulnerability checks make sense in theory. Protecting the vulnerable is an important priority within the gambling industry, and the promotion of responsible gambling is critical. But, ethical questions linger, and putting these checks into practice raises concerns about accountability.

Well-intentioned the checks may be, but many customers will become frustrated with the stringent restrictions. If they feel unfairly treated, expect the growing rise in people seeking unregulated gambling sites where such checks are not enforced to continue.