Taking the hot seat: Malta Gaming Authority CEO talks new roles, new regulations and new challenges

In any business environment there are people who drive innovation and come to embody the organisations they work for. They also contribute to the future direction of their companies in ways which cannot always be measured. So when these individuals leave their respective organisations, the onus switches to recruiting individuals who can become as integral to these companies as their predecessors.

When Joseph Cuschieri, CEO of the Malta Gaming Authority (MGA), chose to take up the same position at the Malta Financial Services Authority after five years of steering the MGA to becoming one of the leading lights in global gambling regulation, it faced an uphill task in recruiting his successor. This challenge was complicated even further by the presence of new legislation working its way through the Maltese parliament that would change the role, scope and powers of the MGA.

Cuschieri would leave big shoes to fill. Yet rather than recruit someone with little experience in the way the MGA works, as well as the structure of the new legislation and how to drive it forward, the decision was taken to promote from within by elevating Heathcliff Farrugia to the top job. The appointment was not a shot in the dark for the MGA; he came with impressive credentials, having served as COO before being appointed to the role of CRO in 2016.

Reflecting on his appointment as CEO, Farrugia says: “It was an honour for me to be offered the opportunity to serve as the chief executive of the MGA. One which carries huge responsibilities, and which requires passion and dedication. I’ve been at the Authority for over four years, and I believe both the COO and the CRO roles have contributed significantly to my experience, and also my perspective, although in a different way.”

At the time of writing, Farrugia has been in the role for just over two months, but he is already concentrating on maintaining the progress made during Cuschieri’s tenure. “The biggest challenge will be to keep the pace of the momentum which the Authority picked up over the past years, and to ensure we keep delivering within the context of public policy objectives, political realities and technological advancements.”

One of Farrugia’s principal duties will be to maintain Malta’s status as the current king of the island gambling hubs and sustaining the significant economic contribution that gambling makes to the Maltese economy. Despite its size, the Mediterranean island is home to over 287 separate egaming businesses, rising by 11% on previous figures, all of which contribute over 12% – or €1.1bn – to Malta’s GDP. There are over 625 remote gaming licences currently in operation and the sector directly generated more than 5,861 full-time jobs in 2017.

Taxation revenues received from egaming companies topped €26.5m, almost 45% of the total tax revenue received by the MGA last year. But Malta’s financial success is not the be all and end all for Farrugia. “The industry is experiencing growth across Europe, with Malta remaining an attractive proposition,” he says. “However, from the MGA’s perspective, the measure of success is not the size of the sector, but our effectiveness at ensuring that consumers are protected and that the sector is kept free from crime, without jeopardising innovation and technological development.”

Rewriting the regulatory rulebook

Scheduled to take effect on 1 August, the Malta Gaming Act is something of a legislatory masterstroke for the Maltese government in that it replaces a bag of pre-existing regulations with one set of rules, while also giving the MGA the regulatory teeth it needs to combat the sorts of problems that are likely to occur in its immediate future.

Addressing the potential of the new act, Farrugia says: “It does not merely increase the MGA’s regulatory powers, it rethinks the fundamentals of gaming regulation. A prime example would be the convergence of the licensing and regulatory framework for land-based and online gaming, as well as the introduction of the risk-based approach towards regulation.

“The new framework completely revisits areas such as consumer protection, advertising and responsible gaming, but also the licensing structure itself, reducing duplicate checks currently existing within the framework, and shifting towards increased checks in higher risk areas such as AML/CFT compliance.” The Act replaces Malta’s current multi-licence framework with a two-licence system – a B2C and B2B licence covering different types of activities across multiple distribution channels.

It widens the MGA’s powers under the compliance and enforcement functions to better achieve regulatory objectives, in line with developments on AML and funding of terrorism obligations. Finally, the Act strengthens the MGA’s existing player protection framework by formalising the mediatory role of the MGA’s Player Support Unit, segregating player funds and moving towards a unified self-exclusion database across both remote and land-based delivery channels.

A better mousetrap?

Simplification, with the aim of streamlining regulatory processes, should free up the MGA to greater focus on those areas that cause the most issues. Over the next 12 months, according to Farrugia, these will “primarily be on the implementation of the new licensing and regulatory framework, and in maximising the potential of the new law for the benefit of the MGA, consumers, and the industry in general, and the development of applicable technical standards to complement the new law”.

He continues: “From a supervisory perspective, our focus will be to ensure licensees implement their new obligations, especially those relating to AML/CFT and responsible gaming.” Many international gaming companies use Malta-based servers to operate services across the EU – making the role of the MGA in overseeing the industry important not just locally but across Europe. Nevertheless, what lessons can regulatory counterparts in Europe learn from Malta? For Farrugia, the most vital lesson is “to never rest on one’s laurels and make change a constant process”.

For instance, the MGA has drawn praise for its attitude to the legalisation of that great industry hot potato: cryptocurrencies. In December, companies from Malta were invited to register their interests in future cryptocurrency projects, which was followed up with a full consultation paper in March. In its consultation, the MGA champions a prudent approach to this process, but legislation is still under consideration by the Maltese parliament.

Yet it hasn’t been all plain sailing for the MGA, which has repeatedly been the target of many stinging media attacks over the rumoured links between some egaming businesses on the island and organised crime syndicates in Italy. The MGA has had to publish several press releases defending itself from these accusations, reiterating the close cooperation that it has with the Italian authorities. But as the head of the regulator, how do you respond to such attacks?

Farrugia offers this insight: “Whilst it is acknowledged that the infiltration of criminal elements, particularly deriving from Italy, within Malta-based businesses is a manifestly real risk, the Authority has always taken immediate enforcement action to prevent the situation from persisting, and to retain all information relevant for prosecution or to protect vulnerable parties. Furthermore, the MGA has actively pursued domestic and international cooperation to prevent and prosecute the same.

“Past incidents have helped the MGA identify gaps, deficiencies, and areas of heightened risk in the regulatory framework, and the MGA has been able to review and strengthen its processes and means, including by changing internal procedures, systems, organisational structure, human resources and training, as necessary in fulfilment of one of the MGA’s primary objectives of preventing the infiltration of criminal elements within gambling business.”

Keeping players and operators happy

One of the other main roles of a gaming regulator, aside from its main regulatory and legal obligations, is to maintain a balance between gaming industry interests with protecting the welfare of the players. The MGA has not held back in this regard, seeking to better understand its licensees by launching a unique online licensee management system, which enables companies to apply for remote gaming licences, submit player liability, gaming tax reports and a variety of regulatory forms online.

Billed as a one-stop-shop for licensing, it has an emphasis on making the process as easy to use as possible. A year on from the launch of the system, Farrugia says: “The system was very well received, and licensees responded very positively. The launch had very minimal teething problems, and we can surely say that after a year from its launch, its benefits are visible to everyone.”

At the same time as it champions its relationship with its licensees, the MGA has also worked extensively in that other big area of industry concern, responsible gambling. It recently announced a bold plan to extend its unified self-exclusion system project for land-based operators even further, proposing a unified system for its remote gaming licensees, under which a player can exclude themselves from all of Malta’s licensed remote gaming operators with one click.

Furthermore, being perceived to be socially responsible when dealing with players has become an essential element of the gambling industry over the last 12-24 months, and as the industry has moved to embrace this new trend, so have the regulators. The initiatives to build a unified self-exclusion system in Malta for land-based gaming operations, and latterly the drive to extend this to remote gambling operators, are a symptom of this trend. But for Farrugia, it is about more than that: “The MGA believes in giving consumers the opportunity and the correct tools to moderate and control their gambling activity, and provide them with means to resort to support services.”

The MGA already maintains a national self-exclusion register which is connected across all of its land-based licensees, while remote gaming licensees are required to maintain operator-specific self-exclusions systems. However, these systems are not interlinked, and this is what the MGA seeks to achieve with this ambitious project: extending the protection afforded to consumers who make use of land-based operations to online gaming, and to players making use of MGA-licensed business wherever they may be located.

Farrugia adds: “The project for a cross-operator and cross-channel self-exclusion register will bridge the current lacuna that once a player excludes himself from playing on a particular operator, he or she could move to a different operator, or still enter gambling premises without being stopped.”

The Brexit question

One big concern is Britain’s forthcoming exit from the European Union, a decision which has all sorts of ramifications for the gaming industry. With its high concentration of gaming businesses serving customers throughout the EU, Brexit carries with it both the potential to damage the island’s gaming industry but also, inversely, the potential to carry it to the top of the egaming tree.

But what does the new man at the top think of the effect that Brexit will have on the island’s economy? “It is still premature to comment on Brexit and its effects, since there is still uncertainty,” he says. “That said, we are aware that companies are assessing various options in a potential post-Brexit scenario, and Malta, in view of its strong gaming ecosystem and robust regulatory framework, is being considered as an option.”

Companies throughout the sector await the Brexit deal with bated breath; it is a question of who will make the first move. Recent reports claimed that one of the biggest gambling firms in the world, bet365, was actively seeking to move from its Gibraltar headquarters to set up shop in Malta. However, Farrugia refuses to be drawn on this speculation, saying: “The MGA is not in a position to comment on the plans of operators.”

Difficult as going into a new job can be, the path that Farrugia has taken gives him a unique perspective on most aspects of what the MGA does and where everything fits in. And given the lack of earth-shattering regulatory events hitting the Maltese gaming industry, we can surmise that he has passed his initial probation period. However, some of the biggest tests may yet still lie in wait for Farrugia and the MGA over the coming years.