Betting Sites Face VIP Scheme Crackdown
UK betting and gambling firms are facing mounting pressure over ‘VIP schemes’, in which customers have allegedly been allowed to wager without adequate checks. Critics of the VIP schemes say that customers have been able to bet with stolen money and lose large amounts of money without being monitored.
What Are VIP Schemes?
VIP schemes are run by most betting websites, as a way of rewarding bettors who lose large sums of money on a regular basis. They can consist of cash, free wagers or tickets to events. Betting firm staff are financially incentivized to handle VIP accounts. VIP customers are not managed according to usual compliance procedures. VIP schemes are an integral tool for online gambling companies, as a means of holding on to customers, preventing them from swapping over to rival sites.
Gambling firms use algorithms to decide which customers should be awarded VIP accounts. By using systems to track gambling patterns, companies can quantify which customers will benefit the company the most by being part of the scheme. The UKGC argues that these algorithms fail to spot customers who are problem gamblers, despite tracking their gambling patterns.
In response to a freedom of information request from The Guardian newspaper, the Gambling Commission has said that it is considering implementing solutions to combat the widespread use of VIP schemes. These could include deposit limits or a total ban.
According to the UKGC, around 50,000 UK gamblers are part of VIP schemes. It estimates that around 10% of these gamblers have a gambling problem. This means that they are unable to control their betting habits and continue to gamble when they can no longer afford to do so. As such, operators are effectively using VIP programs to facilitate problem gamblers. The UKGC report states that gamblers who are part of VIP schemes are more likely to suffer from problem gambling.
“Operators must improve their interaction with VIPs and we have challenged the industry to make faster progress to improve how they manage their customers. We have also taken robust action against operators who fail to protect consumers and we will be even tougher if behavior does not change”
Statistics for one operator show that 83% of its deposits came from the 2% of its customers in its VIP scheme. Another operator received 58% of its deposits from just 5% of customers who were part of a VIP scheme. The UKGC examined data from nine of the UK’s most popular betting firms to compile these statistics.
Will There Be a Ban?
If the UKGC does crack down on VIP schemes, it is likely to have a detrimental effect on British gambling firms. Inside sources claim that moves against VIP schemes are ‘imminent’. There are a number of potential options that the UKGC could follow. Investigating how staff is incentivized to award VIP schemes will be key, as will be implementing an industry-wide code of conduct on VIP schemes. The most drastic option is to ban VIP schemes outright.
The Conservative Party pledged to conduct a review of the 2005 Gambling Act in its most recent manifesto. Now that the party has won the election, the UK’s gambling industry will have to wait and see whether they hold true to their pledge “to make the UK the safest place in the world to be online”.
“This report shows how completely reliant the industry is on people with gambling problems and that they are profiteering from them. As the Gambling Commission has itself suggested these practices should be banned to protect problem gamblers and stop the transfer of money from vulnerable addicted gamblers directly into the pockets of the online gambling industry”– Carolyn Harris, Labour MP
This is not the first time that concerns have been raised over the substantial use of VIP schemes by gambling firms. Seven out of ten penalties issued to gambling firms over regulations breaches cite VIP schemes as part of wider failings in combatting problem gambling. Last year Ladbrokes paid out £1 million to compensate the victims of a problem gambler who had bet using stolen money. The payout came with an agreement to keep the scandal quiet from the industry regulator. Betfair has also been slated for assisting the holder of a VIP account in hiding his gambling from his spouse.
“Our industry recognizes the need to change practices in this area and we will soon publish the terms of a review for a new industry code of conduct. We intend to consult widely on the shape of this new code, to ensure we are always putting the welfare of our customers first.”– Brigid Simmonds, Chair, Betting and Gaming Council