Tough rules for online gambling

By Leon Engelbrecht, ITWeb senior writer

Johannesburg, 19 Oct 2007

The National Gambling Amendment Bill will place tight restrictions on vendors of Internet and cellphone gambling, the Department of Trade and Industry (DTI) has told the upper chamber of Parliament.

The department has briefed the economic and foreign affairs select committee of the National Council of Provinces (NCOP) on the Bill that has already passed the National Assembly, or lower house. Once the NCOP approves the Bill, it will go to president Thabo Mbeki for his signature.

The focus of the Bill is "regulating interactive gambling", defined as all forms of remote gambling taking place via the Internet, or other related forms of telecommunication.

DTI director for legislative drafting Brian Muthwa told MPs interactive gambling in SA is "currently unregulated and is generally plagued by crime, criminal elements, little or no protection of players, uncontrolled exposure of children and other vulnerable persons to gambling and a host of other negative factors".

Muthwa says the Bill will aim to protect society against the over-stimulation of demand for gambling, protect minors and other vulnerable persons; provide for the registration of players and the licensing of vendors; ensure compliance with Financial Intelligence Centre Act (FICA); and prevent gambling to be associated with crime, money laundering, or financing of terrorist and related activities.

Fair treatment

The Bill requires that all interactive gamblers register with a licensed vendor and establish a player account. "The Bill will make any gambling activity provided by an unlicensed provider unlawful and will prohibit South African players from engaging in interactive gambling activities with unlicensed providers," Muthwa says.

The Bill also contains provisions to ensure registered players are treated fairly by vendors, "hence there will be strict probity of interactive providers".

The draft law further creates a mechanism for the resolution of disputes between players and vendors, and a system to pay winnings and prizes to players.

Strict FICA-compliant verification procedures will include attaining a statement from players that they are 18, or older, and that the jurisdiction in which they reside does not prohibit interactive gambling.

In addition, the player must nominate an account, held with an authorised financial institution and this account will be the only account within which transfer of monies will be carried out. The vendor or bank will not be allowed to extend credit to players.

Multiple licences required

The Bill makes advertising and promotion of interactive gambling unlawful. "It will also be unlawful for offshore operators to advertise interactive gambling in the republic. Any person who provides advertising facilities to such off-shore operators will be committing an offence," Muthwa said.

Other than an operating licence, the Bill also requires licences for employees and premises, for the testing and certification of software, interactive equipment, manufacturers, suppliers and maintenance providers.

Employees who require licences include key staff, management, directors and shareholders. The Bill further provides for the minister of trade and industry to prescribe procedural requirements for licensing by the National Gambling Board (NGB), in order to ensure compliance with certain technical specifications and standards for equipment, software and premises.

The Bill makes provision for the minister to prescribe interactive gambling software and hardware procedures to maintain the integrity of interactive gambling activities, registered player data and game data.

"The [NGB] will be required to supervise and enforce compliance by licensees with FICA requirements. It will be expected of the board to conduct inspections in respect of interactive gambling Web sites and premises where equipment and software is located. It is a requirement of the Bill that the server be located in SA," says Muthwa. "The board may revoke or suspend licences for non-compliance with licence conditions or any applicable law..."

Vendor obligations

Players surfing to gambling Web sites abroad can also expect trouble. The Bill prohibits South Africans from engaging in interactive gambling activities provided by providers not registered in the republic.

To protect minors and other vulnerable persons from being harmed and exploited, the Bill places an obligation on vendors to ensure that players are 18 or older, and also provides for the minister to prescribe mechanisms and procedures to ensure unregistered players and children cannot access interactive gambling facilities.

"The interactive provider will be required though licensing conditions and regulations to ensure that there is an electronic system for the monitoring and reporting of registered players. Players will be required to set limits on accounts. The principle of know your customer will apply and providers will be required to audit playing patterns and behaviour," Muthwa says.

The Parliamentary Monitoring Group reports the main issue raised by members was how gambling affected poor communities. Some felt that gambling added to the moral breakdown in society. They also felt that some people could easily gamble away their earnings.

However, the department said interactive gambling did not affect poor communities, as they did not have access to Internet facilities.