UKGC Outlines Rating System for Determining Level of Consumer Fund Protection

The UK Gambling Commission (UKGC) released a document outlining the categories by which licensed gambling operators, whether for remote or non-remote gambling facilities, must assess themselves when indicating information about consumer fund “Level of Protection.”  The self-assessment must be conveyed clearly by UK-licensed operators to customers on or before December 31, 2014, by providing pertinent information and the related rating of the protection measures instituted.

That way, customers will have awareness of how money entrusted to UK-licensed gambling operators as fund balance in their gaming account, will be affected in the event that the operator becomes insolvent or bankrupt. Although the Commission requires operators not to co-mingle customer funds with business funds, the requirement does not pose as a guarantee that all the money entrusted to the operator could be recovered if the business goes into bankruptcy proceedings.

Knowing the level of protection afforded as far as the money in their gaming account is concerned can help customers decide on the amount to maintain or leave as account fund balance. For this purpose, the gambling operator will state if the Level of Protection is “Basic,” “Medium,” or “High,” which the UKGC explains as follows:

Basic – This denotes that customer funds have been segregated and placed in a bank account, investment accounts or other forms of financial credit separate from the business deposit. Still, the funds are regarded as assets of the business in case of insolvency.

Medium – This type of protection makes use of a “Quistclose Trust ” account or its equivalent, in which the arrangement involves the transfer of funds to another institution such as an insurance company. The latter will hold the money in trust without valuable consideration and will assume the obligation of distributing the amounts due to customers in the event of a company’s bankruptcy.

High – The customer funds are placed in an independent trust account usually under the management and custodianship of a trust company, for which the trust arrangement includes subjecting the account to verification and controls carried out by an independent trustee acting, in behalf of the customers for whom the funds are held in trust.

The UKGC provided further information on what are considered as customer funds entrusted to gambling operators, which include without any limitation:

• The cleared deposits placed by customers for use as betting money, to fund stakes or to be paid as entry fee for future gambling activities in the operator’s gambling establishment or online facility.
• Money won as prizes or rewards, which a customer elected to keep as part of his or her gaming account fund balance;
• Money that has already been resolved as loyalty reward or bonus earned by a customer, regardless if the gambling company is party to the gambling contract that gave rise to the rewards or bonus; including  money earned by a customer and no longer subject to the customary terms governing bonuses.

For purposes of clarification, the UKGC specifically states that the following are not considered as part of customer funds:

• Chips held in trust but not held in a specific account;
• Gambling machine tickets held by the customer for future cash outs;
• A betting slip that a customer intends to redeem later;
• Legitimate fees and charges drawn against a customer’s account in accordance with the gambling facility’s terms and conditions;
• Lottery fees paid as advance subscriptions but already applied as payment for lottery purchases and already form part of lottery corporation’s proceeds.