Joe Cuschieri recently took over as head of the Lotteries and Gaming Authority and is taking nothing for granted. He spoke to Vanessa Macdonald about ‘futureproofing’ the sector.

What is happening with the infringement cases against various member states which are aimed at creating a level playing field?

There are a lot of things going on at Commission level. One of the pieces of legislation which would affect us is the Anti-Money Laundering Directive which introduces the possibility of a member state imposing a national authorisation to prevent money laundering and to protect its citizens from the ills of remote gambling. This means a remote gaming company operating with a Maltese licence would be required to obtain a licence to operate in each of the other member states...

It would then have to pay gaming taxes in each jurisdiction, which would eat away our revenues. And without it, they would be blocked from access to the citizens of that member state.

Our primary argument as a Maltese jurisdiction is that the EU is a single market and hence anyone who has a licence from Malta has the right to use it across the whole of the EU. We, of course, agree that there should be very strong, anti-money-laundering initiatives and mechanisms but we disagree that having separate licences for each jurisdiction would reduce the threat.

We are a small jurisdiction fighting against big member states trying to defend state monopolies. Are we going to win this?

We are doing our best. Nothing can be guaranteed. There are 28 member states, each of which is making its case. There is a whole process and it will need to be discussed at Coreper and at Council of Ministers level. But if it goes through as proposed, it would put our industry at risk. And the impact on Malta would be proportionally greater as no other country has 11 per cent of its GDP coming from gaming. We have a lot more to lose.

There is a political commitment to make our case across member states and also at bilateral level with my counterparts in other jurisdictions.

But that is just one part of it. What we need to do is start diversifying globally. In Asia, there are millions of people coming out of poverty and consuming more.

If Maltese licencees are recognised in Asian jurisdictions, it would open up opportunities for them as well as for Asian online gaming operators who could come and set up shop in Malta. There are also considerable changes occurring in Latin America and in the US where some states are opening up to internet business.

Apart from that, we need to widen the scope of gaming. There is a big untapped market for digital games of skill that you play online with other players or against the computer, and social media apps like board games. It is a multibillion dollar industry... 80 per cent of gaming is not gambling but social and skill games.

Apart from the licensing fees, tax and jobs created, the servicing industries would also benefit, such as office spare owners, international bandwidth, co-location, etc as well as restaurants. That is the beauty of the industry: its multiplier effect.

I have started the legislative process to license these gaming services and although they will take a few months to get through Cabinet and Parliament, once enacted, they would minimise the negative impact on Malta if things at the EU level do not go the way we want.

What is happening in the UK? Is it going ahead with its proposed tax on online gaming?

According to recent media reports, it will go ahead. In the third quarter of next year, they will also issue their own new remote gaming regulations – and a new tax regime. Obviously it then becomes a competing jurisdiction.

The reality is that in 2004, when Malta launched its first remote gaming regulations, we were unique. We saw the opportunity and we grabbed it.

But the likes of Gibraltar, Alderney, Isle of Man followed and now the bigger member states are doing the same.

To compete, we have to be seen as a jurisdiction of repute, with the right mechanisms for anti-money-laundering, player protection (which is very important in this industry as this gives a lot of credibility to the jurisdiction itself, as well as to the companies that come to Malta), an efficient regulator and a regulatory framework which is technology-neutral and flexible and provides all the right safeguards for operators and players.

The remote gaming regulations are 10 years old and although we have been successful, I think we need to think about what we have been doing so far and future- proof for the next 10 years.

There is a lot of updating that needs to be done to face up to the realities of today. Whereas five years ago you had to have your servers here, nowadays there are cloud-based solutions which are not provided for in our legislation. Neither are game apps on a smartphone.

Operators are also asking whether it would be possible to have a single licence for multiple platforms, such as land-based casinos who want to have online apps. As it is, you need to apply for separate licences and go through a due diligence process for each.

If I have one of the big players who we know well, who has been here for years, who is very compliant and serious, who is going to launch a new game or a new class... Why should I take them through the whole process as I would if they were new and I don’t know them? There has to be some sort of flexibility there...

What about player protection? Everleaf went bankrupt last year and the LGA was highly criticised for not having any player protection.

We involved the police who are issuing an international arrest warrant for the owners, so the company funds could not be released yet. The licence was suspended many months ago when we discovered what was going on. We immediately informed the police and there is a judicial process that has to be followed. We as an authority cannot just take the money... At some stage the players will be paid.

From where will the money come to reimburse them?

We need to know what each and every player is owed, as you are talking about hundreds and thousands of people. We also have to see what assets the company had and the decision will then have to be taken about the balance.

There is a player protection fund which has €3.5 million in it from unclaimed winnings (which have to be returned to the authority after a certain amount of time). The money in that fund will also be used for educational programmes to promote responsible gaming.

We are being tested and if we don’t deal with it properly, the message out there will be that Malta cannot put its money where its mouth is... My commitment is that cases like this have to be settled. This is my pledge.

I will make it a point to ensure that whoever was bitten will be repaid. But they need to have patience.

Everleaf was in trouble in the US and had had its licence withdrawn there long before we reacted. Why did it take us so long?

It is a very good question. Yes, I think we should have taken much quicker action. I have passed on the message internally very clearly and, in fact, I want to increase my powers as well... When we start receiving multiple complaints about a particular operator, it should immediately raise the red flag.

At that point, you need to investigate quickly, take a decision, get assurances from the operator and, if not satisfied, take action. I think in this particular case, the LGA was slow to react and that is something that I want to avoid. I don’t want it to happen on my watch.

The LGA also covers street gaming like bars, gaming parlours and casinos...

A review of this sector is needed. The latter are pretty well regulated; casinos are the least of my worries.

I am more worried about what happens with the machines in village bars. There are so many different permutations of machines with an element of both skill and chance. It is not the way it was 30 years ago when all we had was flipper machines!

So we are reviewing the market to create a licensing and tax regime to classify all the available machines and where they can be used.

At the moment, the way things stand is fuelling a lot of underground activity. Let us have simple and well-structured regulations as they do in the UK and Ireland and bring tax into the economy. I want to have a situation where it pays to be regulated.

Recently the LGA found illegal gaming machines and you could not confiscate them – you had to bring in the police.

We cannot seize. We can inspect – access premises and check the machines – but then we have to call in the police. To be honest with you, I am looking into this.

I would like a Guardia di Finanza type of model where I can also seize machines. But that is something that we will look into in the ‘street market’ review...

At the end of the day, I want the LGA to be more agile so it can react quickly and have the necessary resources to enforce.

A Maltese casino was using Facebook, which was seen as advertising and therefore ran foul of the law. What is the situation?

How can I in this day and age tell an operator not to use social media or to have a portal?

How can I ask Dragonara Casino to shut down its website and Facebook page? This is another case where the laws have not been updated.

There are also anomalies on the advertising front because this sector cannot be treated like any other business because responsible gaming is a very important element. For example, casinos can only advertise in certain places like airports, airline magazine, etc.

But does that make sense when you have Maltco – albeit just a lottery – advertising? Can’t people also spend all their money on betting with Maltco? There are some anomalies which have to be addressed.

So I am working on a new code of conduct for advertising for gaming parlours and casinos for example.

What is happening with regards to responsible gaming?

Protecting people from gambling is not about enforcement – although you have to have it and it has to be agile and efficient. The educational element, though, is what I really believe in.

A Responsible Gaming Foundation is going to be running educational campaigns. We will be working with NGOs and helping people with addictions through Sedqa and Caritas. We will be supporting them both financially and with the relevant programmes.

We also want outreach programmes at schools on the ills that irresponsible gaming can bring. Hopefully by mid-next year, this foundation will be up and running. It will have its own board of trustees, so it will be a separate entity from LGA. It will be partly financed through unclaimed prizes. Maltco also pay €50,000 a year towards this foundation.

Another problem seems to be the lack of data about problems relating to gaming. Do we know how many are addicted?

One of the things I want to do here is to have a proper research and policy unit doing analysis. I would call it decision support, because to take decisions of quality you need to have the right information.

We understand why companies come here, but what is going to keep them here?

Incentives like tax can be easily copied by other jurisdictions – as we are already seeing. The LGA can be the differentiator because operators want a regulator who understands the industry, who is very proactive, responds quickly, is agile, efficient and trustworthy. Obviously they like living in Malta, expats in particular.

But we also need to be efficient within the public administration. These people deal with other public entities and the way the authorities and government departments respond to business has to be quicker as this is what the industry wants. They don’t want to wait months to get a reply.

Which are the three worst bottlenecks?

The main complaint is bureaucracy: getting all the authorisations and permits

Another comment is skills. Only 30 per cent of the employees within the remote gaming industry are Maltese. I think if we are going to invest in this sector, we need to put into the pipeline more people who are qualified in IT, in web development, marketing and communications.

They sometimes complain about us too. I think we have a challenge to improve our responsiveness. They want us to be more proactive and responsive.

How do you see the next 10 years?

This industry has the potential to grow double-digit year-on-year if we make all the changes in legislation and start licensing for new forms of gaming like social gaming and digital games of skill...

The process has started already. In fact, in February I am attending ICE, the biggest expo for the gaming industry and I plan to go there and start promoting a new package for Malta. That is what I am pledging to do.

I am excited about this role because I joined at the end of a decade and now I have to build up for the next 10 years.

Looking back, learning, appreciating what has been achieved, but then, looking ahead, future-proofing the industry...

Fact file – eGaming industry

• 420 licences
• 7,000 employees
• 11% of GDP