Operators and Consumers

An interview with the head of administration of the Georgian Gambling Association, George Mamulaishvili. By

When was the association set up and what are amongst its key guiding principles?

The Georgian Gambling Association was established in 2018, in order to improve the gaming business industry and raise awareness with people in the government. The association protects the legitimate business interests of the member companies. It communicates with state bodies, non-entrepreneurial legal entities and international organizations. It examines international best practices in the field of gaming regulation. It prepares proposals regarding legislative changes and it presents conclusions on initiated draft laws as intended.

Lyudmyla Kyrychenko

What was your work experience prior to your role of head of administration at the Georgian Gambling Association?

I have been in the field of gambling since 2011. I was the financial director of one of the leading companies, which now belongs to Entain. Over the years, I have participated in the development of many legislative initiatives. I have been:

• Head of the Georgian Gambling Association.

• Executive board member of the Georgian Gambling Association.

• A financier and expert in the gambling business in terms of legislation, taxation and management.

• A consultant for management and analysis of online and offline casinos.

• For more than 12 years, I have held a senior position in one of the leading international online casino companies in Georgia.

• I am a financial and analytical consultant for a network of gambling houses, bookmakers, and slot clubs in Georgia.

• Since 2011, I have participated in all developments and changes in the legislative initiatives introduced into the legislation of the Georgian gambling industry.

• I advise international gambling companies entering the Georgian market.

• I have authored various publications on the review and analysis of neighboring gambling markets.

What is the situation with anti-money laundering and Know Your Customer in Georgia?

Since 2019, with the great involvement of the association, the situation in terms of AML and KYC has changed radically. With the participation of the association, there were changes in the legislation, which contributed to the development and implementation of modern AML and KYC systems. It can be said that today in Georgia there are the most modern systems in terms of AML. These effectively protect customers and help to detect illegal operations. I can say that all phishing operations in online games have been minimized. This in itself had a positive effect on the business environment. However, both online and offline operators are obliged to follow all rules that prevent unscrupulous users from gambling with illegal funds.

It's no secret that regulators strictly require operators to adhere to the principles of responsible gaming and to minimize money-laundering risks. On the one hand, this is correct, because with the development of technology, various types of threats are increasing every day, such as phishing and other fraudulent manipulations to gain illegal access to personal information and funds of users. This is a short list of the realities that operators and consumers may face.

It is known to the public that many users ignore the basic rules for storing personal information, which in turn makes it easier for fraudsters to gain illegal access to data. But this does not provide a reason for the operator to neglect his duties and completely shift the responsibility to the user.

In addition, the risks of money laundering give reason for gambling operators to implement standard KYC checks and AML procedures, and strictly adhere to them for each player. This burden is becoming increasingly heavy for business operators as regulators continue to tighten procedures.

In today's gambling industry, there are huge fines imposed on those who violate the rules set by the regulatory bodies. This results in operators having to pay more to comply with regulatory requirements and avoid fines. However, by establishing the right relationship between the regulator and the operators, these risks and costs can be minimized.

In addition, we should not forget about the various problems that operators may face when obtaining information, including getting the correct information about their customers to the operator. Incorrectly received information and data can become a big problem for operators. In Georgia, this problem was solved by giving operators access to a single database registry of the population, where the operator can verify the user's identification data and the validity of this data. The latter was indeed a big step forward in improving the gaming sector's business environment.

Ultimately, operators should design their work plan in such a way that the regulator has less opportunity to deceive the operator and write him a fine. It is also important for the operator to ensure full automation of registration, identification-verification and dataverification processes. The above procedures are required to comply with AML and KYC regulations. The human factor and error should be excluded as much as possible. Further, auditing of this data is also important.

The role of the regulator in the said process is no less. He should be willing to cooperate with the operator, not be focused on penalizing him. Cooperation between the regulator and the business always brings more positive results. For example, in Georgia the business closely cooperates with the regulator and the Georgian Gambling Association acts as an intermediary in communication.

Georgia approached this issue as follows:

First of all, both the state and the operators wanted to improve the business environment. Secondly, it required the close cooperation of operators, state agencies and law-enforcement agencies. Third, there were significant changes in the legislation. Amendments were made to the Law on Customer Verification & Identification. In particular, as a result of the close cooperation of business and the state, which worked on the changes of the mentioned legislative initiative, it was possible to unify the adopted legislative acts.

Fourth, amendments were made to the law regarding the promotion of prevention of money laundering and financing of terrorism. Although this law existed before, with the involvement of the operators and the association, the legislation was improved and refined. Fifth was willingness of operators to cooperate closely with law-enforcement bodies and financial-monitoring services. This naturally allows operators to be more transparent. Finally, there was cooperation by financial institutions and operators in order to introduce new technologies in the payment system.

With these changes and the close cooperation of the state, regulators and businesses, Georgia received a complex opportunity to control cash transactions, and be the final recipient of cash transactions. This once again confirms the opinion that the state should support the development of local operators. It is natural that illegal operators will not obey any rules. Regulators are powerless against them because illegal operators do not fall under their jurisdiction. The most effective method of combating illegal operators is the development of the local market.

Also, the main principle is the complete transparency of the operators and the desire to inform their customers. Because an informed user is more protected from various manipulations. The right communication and awareness allow operators to work more closely with their customers in the future.

Another important factor is the cooperation of local operators and government agencies, such as the Financial Monitoring Service and law-enforcement agencies. Knowing your customers can be of great benefit. Even take into account the fact that it is very difficult to distinguish between the spending of the proceeds of crime and their subsequent laundering.

Georgia is clearly a country that is growing in appeal for tourists. How do you see the landbased casino industry in Georgia assisting with the promotion of the country as a tourist destination in the years ahead?

In 2005, when the legislation of gambling and profitable games was developed for the first time, it was followed by the development of various industries, including the tourism sector. Free zones were created, thanks to which regional municipalities developed. I can say that today the budgets of eight large municipalities are filled with gambling fees. New gaming facilities were opened, which contributed to the creation of new jobs.

Since 2017, many companies have been interested in Georgia. Many large foreign companies have entered the Georgian market and opened facilities. It is no secret to anyone that the gambling sector contributes well to the development of the tourism sector. Infrastructure is being created; new hotels are being built. A non-criminal and healthy business environment makes Georgia attractive for both tourists and investors. Since 2005, Georgia has been moving towards the mentioned success with rapid steps and this aspiration has brought results.

What is the GGA view on safer gambling?

Gambling plays an important role in the development of the country's tourism infrastructure. It also makes a large contribution to the state budget, which contributes to the economic development of the country. Those countries that have chosen to ban or restrict gambling have backfired – many illegal companies have entered the local market. This has a negative impact on the country’s social background and budget.

One of the best ways to combat illegal gambling companies today is to promote a local operator. Gambling should be regulated within the framework of legislation but it should be taken into account that excessive restrictions or prohibitions will, on the contrary, harm local operators and encourage the emergence of illegal online or offline operators in the liberated market. Illegal games create a big problem for the population of any country because unlicensed and illegal operators are not subject to any rules, and the user is completely unprotected.

In addition, it is necessary to exclude the involvement of vulnerable groups in gambling. Involvement of minors is a big problem. For example, Georgia was able to solve this problem by introducing the right legislation. However, against the the background of the restrictions of 2022, this problem became active. Today, many foreign illegal sites are interested in the market of Georgia and their target is precisely the category of the population that is prohibited from gambling with legal operators.

What are the key safer-gambling practices in place in Georgia at land-based casinos?

Land-based casinos, unlike online casinos, always have to spend more energy and human resources to monitor their customers, and protect their rights. It is necessary to find highly qualified personnel to always analyze the behavior of each user. We can do it online through support software. The situation at the landbased casino is a little different. Systematic training of service personnel is needed so that they can easily detect customer behavior. More control needs to be introduced for each user.

How are safer gambling practices observed by online operators in Georgia?

Nowadays, online operators have very well-developed principles of safe gaming. AML and KYC rules are written. All operators work closely with government agencies to eliminate illegal involvement. Legislation passed in 2019 facilitated the introduction of such a system. In fact, all operators know who is behind any transaction. Thanks to the above-mentioned legislation – in the development of which, of course, the GGA made a big contribution – phishing operations have been reduced to a minimum, which is also important in protecting the interests of users. The implemented CRM system allows operators not only to keep track of financial transactions but also to protect the customer from excessive gambling.

Although the problem of gaming addiction is relevant. No operator strives to have gaming addicts in its customer base. Detecting the proceeds of crime is actually much more difficult than we imagine. This is the area that the sector should focus on today. In general, in the gambling industry, through sophisticated systems it is possible to recognize through the behavior of the user what his action serves. Qualified personnel also play an important role in this process. We should not forget the fact that the final investigation of the case ultimately depends on the law-enforcement agencies.

What is the current situation regarding investment from foreign partners into the Georgian gambling sector, in comparison to the amounts of money being invested abroad from Georgia?

Today, the largest companies in the industry are interested in the Georgian market. Such giants of gambling as Flutter, Entain and Betsson have invested a lot in the Georgian market, which makes the Georgian market attractive for other investors as well. Game-supply companies also operate in the market. Following legislative changes in 2020, when tax incentives were imposed on technology companies, many game-supply companies relocated their offices to Georgia and many Asian companies opened streaming studios. This helped to create new jobs.

Casino Life understands the Georgian government is looking into further restrictions that could mean one million people will be banned from gambling. That change is already in effect from March 2022 and it can be said that it was one of the biggest mistakes in terms of the legislation of the gambling industry of Georgia. This restriction has led to the migration of restriction users to foreign, illegal or unlicensed online platforms. Foreign illegal operators became interested in the Georgian market. An uncontrollable situation has arisen. The user who plays on such type of sites is completely vulnerable, due to the lack of international principles of registration and verification.

How is 2023 shaping up for the Georgian Gambling Association and do you plan to attend ICE London?

The Georgian Gambling Association plays an important role in improving the environment of the industry and providing correct information to the population. I believe that, as in 2022, the association will be able to engage in many important issues for the industry in 2023. The association works on the analysis of the current situation and makes correct forecasts, and assesses the criticality of the situation and current issues. As for ICE London, it is one of the biggest events in the gambling industry, and we certainly plan to attend this event to learn the best examples and practices from specialists from leading countries.