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Workshop Online Poker at the EU Parliament: Does Europe need uniform safety standards? – Experts attest providers effective control mechanisms against fraud attempts

March 13, 2013 News & Reports

By Ansgar Lange

Brussels, in March 2013. This has never happened before: For the first time, representatives of the European Commission, the European Parliament, national regulators as well as scientists and industry experts met for a workshop on the regulation of the online poker market. Jürgen Creutzmann, member of the European Parliament for the FDP, had extended the invitation to the meeting under the headline “Online Poker – Need for European Safety Standards?” “In spite of the growing popularity of the world-wide poker market – Germany is considered to be the second largest market in the world, behind the United States – national legislators have up to now put the focus exclusively on the sports betting sector, failing to acknowledge market realities and gaming habits as well as the technical possibilities of the World Wide Web, which cannot be dealt with through national regulations”, explained Mr Creutzmann, shadow rapporteur of the EU Parliament for the pending report on online gaming (Fox Report). The specific regulatory requirements for the online poker market have up to now, if at all, only been discussed superficially and without any factual basis. This applies in particular to the money laundering risks allegedly associated with online poker.

eco boss Rotert: National bans are ineffective

Professor Michael Rotert, chairman of the board of the eco – Association of the German Internet Industry http://www.eco.de and spokesman for the European Internet Service Provider Association (EuroISPA), underlined in his statement the necessity of a supra-national regulation of online gaming. “Ensuring a maximum of safety is only possible through the cooperation of all market participants – regulators, payment providers, internet industry and customers – and can in particular not be achieved in the online area by imposing national bans”, is Rotert’s conviction. He is of the opinion that the possibilities of influence of the various regulators usually end at the borders, that national bans cannot be successful in the global web and that furthermore, a gaming monopoly as such cannot provide effective protection for the players. He also thinks that regulations which block certain online offers do not make much sense, quoting Italy as an example, where a regulation was introduced which is as strict as it is ineffective, as bans are being bypassed. His suggestion therefore is that European standards should be developed in cooperation with the industry, in the form of a “multi-stakeholder model”. Often, “best practices” already exist which ensure a maximum of safety and are far more effective than state-imposed measures which are prescribed by the regulating authority without sufficient knowledge of detail. Mr Rotert also recommended looking at the Danish model of regulating the market.

One of the world’s leading experts on issues relating to the shadow economy, Professor Friedrich Georg Schneider of Johannes-Kepler-Universität Linz http://www.econ.jku.at/schneider, had a closer look at the argument of the money laundering risks frequently put forward by the opponents of online poker. His conclusion: Money laundering via online poker is not worthwhile. According to his analyses, illegal gambling plays a minor role in global money laundering activities, running at only approximately 0.5 per cent. In view of a study of the consultancy firm Goldmedia on the German gaming market, he explained that, even if all online poker activities were used exclusively for money laundering purposes, the total volume of “laundered money” would be comparably small in comparison to other fields of the economy and therefore relatively unattractive for criminals. He added that money laundering via online poker is associated with large outlay and high transaction costs. Detlev Henze, CEO of TÜV Trust IT GmbH (TÜV Austria Group) http://www.it-tuv.com, also criticised the unsupported arguments in relation to money laundering risks in online poker as a “perceived threat scenario”. This is why the TÜV has commissioned a study which is to examine the actual relevance of money laundering activities in the area of online poker. Furthermore, the TÜV, on the basis of initial examination results, has started to compile a checklist for the assessment of the risk matrix of online gaming offers. The providers’ in-house safety measures can be monitored and assessed on the basis of this method. “Regulators and customers will then be able to judge the quality of the poker provider’s in-house safety measures”, Mr Henze said.

In-house safety measures work

Sven Stiel, Director Northern Europe for the market leader Rational Group (brand: PokerStars) which is monitored at the moment by eight licensing authorities in the EU alone, reported that the providers themselves have a vital interest in safe and fraud-free offers, as the customers’ trust in the integrity of the gaming offers is an indispensable requirement for customer loyalty. In view of gaming practice, he also explained that the money laundering risks are hardly relevant in online poker. “Online poker is usually played with relatively small sums which have no relevance with regard to money laundering. High stakes are only placed by so-called “high rollers”, professional players with large stakes who usually are personally known.” As the business model furthermore works with non-cash payment transactions, funds paid in have in most cases already been part of the banking circuit, and have been made subject to the financial institutions’ money-laundering examinations before they are paid in to PokerStars. Upon a critical question by Mr Creutzmann, Mr Stiel also commented on “anonymous means of payment”. He said that such means of payment, for instance prepaid cards, irrespective of their limited possibilities of use – the new German money laundering act completely prohibits deposits for online gaming via anonymous means of payment -, are only of minor relevance, as players can only charge such products with relatively small sums (usually a maximum of 100 to 150 Euro). Furthermore, players always have to log in via their customer account in order to play, so that they can be identified. All transactions and the gaming behaviour, including the stakes, are furthermore recorded on back-up servers, so that they are verifiable and are associated with high detection risks for potential fraudsters.

Illegal arrangements between players to the detriment of a third party – so-called collusion – and the use of poker bots – computers which take part in a game instead of a human player – are countered by PokerStars with the help of elaborate mechanisms: For instance, newly registered players can initially only play for small stakes. They can only be increased after sufficient gaming experience has been gained. Payments are furthermore only made after the player has taken part in games, and after a comprehensive identification of the player and verification of the account for payment. “Due to the complete traceability of the transactions and gaming processes, we achieve a significant deterrent potential”, Mr Stiel said. For instance, the gaming behaviour of each player is analysed automatically. A disproportionate winning and losing ratio, a significant difference between the stakes and the sums requested for payment, substantial increases in the stakes in comparison to past stakes, or fast “cash-out” – pay-out requests – of winnings will automatically trigger a warning signal, the “Red Flag”, a manual examination by trained staff and, if necessary, a notification to the supervisory authority. Mr Stiel also made it clear that other participants also act as a corrective factor, “as they keep a very close eye on their competitors’ gaming behaviour in order to protect their own chances of winning.” In contrast to those invoking a threat scenario without any reliable data, Mr Stiel can prove the success of the defence mechanisms: More than 90 per cent of all illegal gambling arrangements are detected by the system and/or the staff before they are reported by other players, and more than 98 per cent of all poker bots are detected by these safety measures before they are reported by other players.

FDP parliamentarian Creutzmann: Monopolies must be put to the test

For the EU parliamentarian Jürgen Creutzmann http://www.juergen-creutzmann.de and also for Harrie Temmink, deputy head of the unit Online and Postal Service of the Directorate General Internal Market and Services of the EU Commission, a uniform legal framework with uniform safety standards is indispensable for the gaming offers in Europe. Creutzmann is of the opinion that this is necessary “in order to avoid unnecessary double examinations of gaming providers who apply for licences in various EU Member States.” He said that up to now, the EU Commission’s action plan has not included any specific legislative initiatives for the area of online gaming. Furthermore, he believes that the Commission should resume the infringement proceedings against Member States, and pursue the numerous complaints against national regulatory systems. In particular, state gaming monopolies should be scrutinised carefully with regard to their compliance with the fundamental freedoms under Union law. Both Creutzmann and Birgitte Sand, chairwomen of the Danish gaming supervisory authority, who also attended the workshop, demanded improved cooperation between the national regulators in the European Union and beyond the EU borders. He said that for the desired channelling of customers into a regulated market, a reasonable regulation, and thus the ability to licence gaming offers, is furthermore required. The regulation of gaming offers with regard to money laundering should take place on the basis of a “risk-based approach” which already has been made the foundation of the suggested 4th Anti-Money Laundering Directive. In this context, he stressed the non-cash payment transactions in online gaming, which make such transactions traceable.

For the EU Commission, Harrie Temmink asserted that the Commission will address the pending infringement proceedings and complaints, and will deal with them “step by step”. Furthermore, he said that the Commission has already submitted suggestions which go beyond the action plan on online gaming: For instance, the Brussels Parliament has been provided with recommendations by the EU Commission on cyber safety and data safety. However, the Parliament has reservations with regard to a suggestion by the Commission on online gaming, as the regulation of this area is in principle a duty of the Member States, due to the principle of subsidiarity.

At the moment, a model which is anything but trend-setting and originates from the concept of subsidiarity can be inspected in Germany, where, even though in the meantime all federal states have reunited under the roof of a uniform inter-state treaty on gambling, two different systems continue to exist – after Schleswig-Holstein under the previous CDU/FDP coalition government had passed the most modern gaming act in Europe, on the basis of which numerous providers of sports bets and online poker are doing business in the north German state. This should also show the importance of uniform and Europe-wide regulations for the online poker sector.

In conclusion, the workshop has shown how safe online poker offers can be, and on what high level of safety they ought to be standardised throughout Europe. In any event, bans in this area constitute an inappropriate “anti-regulation”. Against this background, in particular the German Glücksspielkolleg (gaming council) should immediately dismiss the ban on online poker, and should choose the modern regulations from Schleswig-Holstein as its standard.

Source: Freie Welt, published on 12 March 2013 (http://www.freiewelt.net/blog-5127/braucht-europa-einheitliche-sicherheitsstandards%3F.html – German)

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