Governance in iGaming: Managing Risk For A Stronger Sector
Malta’s grey listing has undoubtedly had a negative impact on Malta’s reputation as the jurisdiction for iGaming. Having said that, Malta still offers a mature iGaming ecosystem with strong knowledge and expertise within the sector available on the Island. “This is why we have to keep working at ensuring good corporate governance is implemented across the iGaming industry to mitigate risk and ensure an ethical and socially responsible environment is fostered amongst iGaming companies” says ANDREW NAUDI from Getgovernanz.
1. NOUV is being very vocal about governance. In what specific ways can the iGaming sector apply governance principles more effectively?
Indeed, NOUV set up its Getgovernanz initiative to promote good governance, transparency, accountability, and rule of law as the necessary fundamental values to shape a better economy and a fairer society. When it comes to iGaming, as with most other sectors, good corporate governance ensures that companies have the appropriate policies and practices in place to establish long-term shareholder value. Shareholders have all the right to ask questions around the governance of an organisation, especially when performance is taking a downturn, but not only. Good corporate governance principles give shareholders the right to ask questions to re-affirm that the board and management are doing their best to increase shareholder value and that the board is accountable to them and working in an ethical and socially responsible manner
2. Every iGaming and financial services company needs to have an own in-house MLRO. What are your thoughts around this?
It is a regulatory requirement on licensed entities and ‘subject persons’ as described in the FIAU regulations and guidelines. The role of the MLRO is to ensure AMLCFT policies are in place and implemented as per implementing procedures published by the FIAU for the various industries. It is therefore essential for companies to engage qualified and knowledgeable MLROs, and that the MLRO is empowered to exercise his/her duties in an objective and independent manner.
3. What, in your opinion, have been the most important effects of Malta’s grey listing on the local iGaming sector?
The grey listing has undoubtedly had a negative impact on Malta’s reputation as the jurisdiction to be in for iGaming. This reputational issue compounded with the fact that as a nation we are now possibly stepping up our game in regulatory and compliance matters has rendered doing business in Malta not as attractive as it possibly used to be in the past.
We have seen from existing and potential clients of ours, that there is scepticism as to whether Malta should still be considered as a jurisdiction where to establish oneself. However, Malta still offers a mature iGaming ecosystem, and undoubtedly the knowledge and expertise within the sector is still very strong.
4. One of the major aftermaths of the grey listing has been how banks and financial institutions outside the country view Malta with repercussions on cashflows in and out of the country. How has this impacted the iGaming industry in practical terms? What have been the quantifiable losses till now and the foreseeable ones if Malta does not exit the list within a year?
The grey listing of Malta as a jurisdiction has triggered a re-assessment of the risk posed by Malta-based entities amongst several stakeholders, such as international banks, and therefore, MGA licensees may be faced with additional queries and requests for information from international partners.
It appears that the MGA, as confirmed by the MGA CEO, has picked up on this immediately, and is prioritising outreach to the most relevant stakeholders in order to explain , that the shortcomings identified in Malta’s regard do not relate to the gaming sector.
Perhaps the most meaningful initiative is the Action Plan put together by the Ministry of Finance to set the ball rolling to implement change at MBR and FIAU level to satisfy the FATF’s recommendations. This action plan primarily affects unregulated businesses – over 48,000 companies currently registered with the MBR. From an MGA perspective, the Authority had already embarked on a process to improve its onboarding and ongoing monitoring processes.
5. You advocate for proper board composition and governance at board level. In what ways would this apply when we particularly focus on the igaming sector?
iGaming companies are no different from any other organisation, meaning that proper board composition that ensures an ethical and social behaviour is adopted throughout the organisation will go a long way to ultimately produce shareholder value. Boards should ensure that the good corporate governance principals of transparency, responsiveness, efficiency, and accountability are adhered to.
While good governance can be associated to governments and public institutions, corporate governance is very much one and the same thing. iGaming Companies have their own ecosystem of internal and external stakeholders, just like a government has, and companies also have social and environmental responsibilities to society in general.
Hence while government and institutions, such as regulatory agencies and authorities, professional bodies such as the chamber, accountants’ body, and others, set the governance frameworks through the enactment of laws, regulatory and licensing regimes, companies operating within those frameworks must adhere to the same governance principles as described earlier.
6. What foreign model of governance should Malta’s gaming sector emulate in your opinion and why?
There is not one single model that stands out over others, however there are various frameworks such as the International Finance Corporation’s (part of world bank) corporate governance methodology which are well worth a serious look. This approach evaluates and improves the corporate governance of a company (including the governance attributes of key environmental and social policies and procedures) to identify, reduce, and manage risk. Its use helps companies confirm their commitment to demonstrate leadership and promote effective environmental, social, and corporate governance.
7. How easy/difficult is it to apply the principles of good governance in cases where a company is governed by different jurisdictions?
Issues like transparency, accountability, participation, and responsiveness, apply to private organisations as they do for public institutions. Good corporate governance helps companies operate more efficiently, mitigate risk, and safeguard against mismanagement. It therefore makes companies more accountable and transparent to investors and gives them the tools to respond to stakeholder concerns. And this applies to any organisation. The principals of good governance remain the same in which ever jurisdiction one operates.