SECURITY DEPOSITS
Conclusion The innovative approach of combining a foundation for the safeguarding of player funds with a bond insurance product presents a promising solution to the challenges faced by operators in meeting the strict security deposit requirements set by the GGL. This method not only enhances the security of player funds, but also provides operators with a more cost-effective and efficient way to fulfill their regulatory obligations. By leveraging the proven concept of third-party funds foundations, coupled with the addition of insurance coverage, operators can achieve compliance with the GGL requirements while minimizing their financial burden and risk exposure. The combination of (Dutch) third-party funds foundations with insurance elements offers a reliable and secure mechanism to safeguard player funds. Furthermore, the forthcoming practical case study will provide concrete evidence of the effectiveness of this approach, demonstrating to the GGL how the combination of foundation and insurance can offer a viable alternative to traditional cash deposits. This case study will offer valuable insights into the operational feasibility and regulatory acceptance of this innovative method, paving the way for broader adoption within the German online gambling industry. The approach not only addresses the challenges posed by the current security deposit requirements but the way it has been designed, presented to and received by the GGL shows the potential for collaboration between industry stakeholders and the regulator to drive innovation and foster a more favorable regulatory environment for online gambling in Germany.
product. This combination allows operators to provide an additional layer of security to the German regulator, which should enable them to obtain their online license backed by a bond issued by an approved insurance company. This bond represents a promise to pay a specific amount of money in the future when called upon, effectively placing the insurer in the position of financial guarantor and fulfilling the EUR 5 million requirement set by the GGL. Using third-party funds to provide sufficient guarantees to players is an approach that is already tried and tested in the Netherlands, although without being combined with an insurance product. The Dutch regulator accepts the foundation to be sufficient security for the player funds and does not require security to cover any statutory fines. By combining the Dutch approach with the insurance provided by a bond, a secure and affordable solution has been created which allows all market players to meet the requirements of the GGL. As expected, when player funds are guaranteed by means of a third-party funds foundation, insurance companies found that their risks are substantially lowered, thereby opening up the possibility to provide insurance for less than one fifth of the costs of putting up a EUR 5 million guarantee. The GGL seems to recognize this as well, and an interesting case study will be moving forward to demonstrate to the regulator how this method will work in practice. A group of operators who already hold licenses (for which they have provided security in the form of a cash deposit) will submit a change to their financial security arrangements. This will trigger a formal response from the GGL will decide whether to approve or deny this new method of providing the security.
KARIN BEUMER Client director, EM Group Netherlands For information contact +31 6 5140 0498 karin.beumer@the-emgroup.com
funds. So the ‘stichting’ is merely a vehicle to own third party funds accounts with the objective to safeguard these.
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IMGL MAGAZINE | APRIL 2024
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