Lotteries and Gaming Authority

Remote Gaming was introduced in Malta under the

Department of Public Lotto Act in 2000

Regulations for Offshore Betting Offices

Only betting was licensed

0.5% Gaming Tax Incentive

These regulations attracted more than 60 companies

between 2000 and 2004

DPL Act was replaced by the Lotteries and Other

Games Act in 2002

Offshore Betting was hit by the 0% betting tax in the UK

- 16 operators closed down their offices in Malta

The Regulations did not reflect the needs of a

changing market

Popularity of betting was being taken over by other

Were started in early 2003

Presented as draft to the Public by the end of Summer Authority held a Public Consultation Meeting on the New Regulations on the 8th _{of November}

– Feedback was clear and aggressive

– New Regulations were still not up to the market needs

– Authority understood it required a proper structure besides regulations

Until February 2004 the Authority employed one person and had three other hired from DPL

It operated from the DPL offices.

In February 2004 Authority acquired new office for it to house all its operations and

Recruited the Chief Executive and Legal Director

– To recruit the remaining staff

– To revise the Remote Gaming Regulations and publish them

– To market Malta as a reputable jurisdiction with a strong, dynamic regulation and a good understanding of the industry.

– Target 40 remote gaming operators by end f 2005 – To articulate all of the Gambling Legislation

Today the Authority has a staff compliment of 26 people New staff has a background in different areas of gaming. Operating from our new offices in ta’ Xbiex

Five officers are directly involved in Remote Gaming and 8 others support them in the following functions:

– Application Processing – Involvement Verification – Regulatory Supervision – Financial & Accounting – Information Management – Inspection

Corporate Service Inspectorate

Legal and Enforcement

The Board

Dr. Joseph Zammit Maempel Chairman

Chief Executive Officer

Mario Galea Director Dr Anthony Axisa Accounts Marvic Battistino Chief Inspector Bernard Storace Remote Gaming Sandra Gatt Kenneth Bonello Casinos Philipe Warzee Lotteries Stephen Vella

Deputy Chief Inspector

Bernard Zarb

Remote Gaming Insp.

Melody Morgan-Busher Inspectors (9) Human Resources Rita Calleja Administrators Mariella Maurin Frances Blenheim Anthony Borg Personal Check Philip Agius Denitza Dimitrova Information Analysis Unit Kristy Spiteri

Remote Gaming Regulations came into force on the 20th _{of April} 2004

Established under the main Act as Other Games by Means of Distance Communication

This means that:

– the gaming principles are the same as those of the principal act that requires parliament intervention to change,

– the regulations were under the control of the Authority and can be changed by way of a simple legal notice

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Technology Neutral –

– Apply to all types of technologies:

• Internet, Mobile, Telephone, Fax and Game Devices

Game Neutral –

– Apply to all types of games:

• Betting, P2P, Online Casino, Community Games, Leagues, etc.

Future Proof (as much as practicable)

Shift from regulating the games to regulating the means of carrying out gaming

Establishes a safe environment for players Giving operators a competitive edge

Qualifying criteria for Applicants:

– A Limited Liability company registered in Malta; – Applicants shall be fit and proper;

– Must demonstrate a business and technical ability to carry out the operation;

– Must demonstrate that the operation is covered by sufficient reserves or securities to ensure player winnings and deposit returns.

• The regulation does not call for a bank guarantee unless the Authority foresee that players’ money is at risk

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Establish the License Criteria and licensing Procedure Requirement of a responsible official

Defines the Remote Gaming System Model Certification

Player Safety

Prevention of Money Laundering Classifies the Types of Games

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Supervises all the operations

Is responsible for all functions of the operation (Game Risk and IT Security Risk Management) unless vested in other persons

registered with the Authority

Ensures that the licensee complies with all applicable laws Must be:

• A director of the company

• Resident in Malta (i.e. files the tax return here)

Position may be outsourced as long as all responsibilities are fulfilled

A system of internal controls, administrative and accounting procedures for the conduct of a remote gaming office

Technically this includes all the subcomponents of the system where the player is in the “secure area”, login module included The control system must be located in Malta

The RNG is part of the control system

The applicant is required to submit a written document outlining the control system functionality and specifications for the

approval by the Authority and update it if there are changes A licensee is granted after control system has been issued a compliance certificate

A system by means of which remote gaming is conducted, and shall include all its associated components, its operating systems and application software

Technically this includes all the subcomponents of the system which provide the games, including gaming devices where applicable

Gaming system must be also be certified for compliance

Requires further approval if critical components of the system are subsequently changed

GAMING DEVICE

GAMING SYSTEM _{CONTROL SYSTEM}

GAME APPLICATION

USER FRONT-END WEB-BASED, JAVA, FLASH

OPERATING SYSTEM

PC, iDTV, Mobile, VLT, Xbox, PlayStation

Player Accounts

Communications Channel Internet, SMS, TV Broadcast, GPRS, 3G ….

Game

History TransactionsHistory

PAYMENT GATEWAY

Gaming Platform HOMEPAGE

WEBSITE EVENTSODDS GAMES

Must be Located in Malta

CLASS 4 Licensee CLASS 4 Licensee

Who can carry out Certification

When certification is to be carried out Requirements for certification:

– Server protocols, communication protocols and other specifications which are part of the gaming system architecture;

– Gaming Risk Management Procedures

– IT security Risk Management Procedures and internal controls of the system; – Modules that affect processes, rules and parameters of the game if the

source-code is changed;

– Detailed description of the setup and functionality of the application architecture and system architecture

Class 1: For operators who partake in unlimited risk on games depending on repetitive occurrences

Class 2: For operators who manage their risk on a singular event

– Fixed Odds betting, pool betting and spread betting

Class 3: For operators who promotion or abetting gaming from

Malta

– Operators who are receiving only a commission fall under this class

Class 4: Hosting and managing other remote gaming operators,

other then themselves

Since April 2004 the LGA has received 53 applications Granted 45 and 8 still pending

Currently the industry employs 230 people

5 Class 4: 6 Class 3: 24 Class 2: 4 Class 1 on Class 4: 5 Class 1:

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6% Casino Games_14% Lotteries6% Bingo

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Positioning Malta as the European Hub of IGaming

Published in collaboration with local service providers and licensed

operators

40 000 copies distributed with iGaming Business Magazine, EIG and ICE 2005

Currently working on the 2005 issue which will include a directory of services and platform operators

Authority has issued an approval to three entities to carry out certification

Hired its internal Remote Gaming Inspector

In February 2005 published its own Compliance Audit Guidelines:

– Based on the ISO/IEC 17799 Standard and the FATF 40 Recommendations

– Centred around the regulatory requirements of the Remote Gaming Regulations

– Covers Gaming Risk Management Procedures and IT Security Risk Management Procedures

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Kite marks for every Class and Software Platform

Seal of Approval

A point of differentiation for licensees operating from Malta

In future to serve as a link to the Certificate website of the Authority.

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Our weakest point in the remote gaming industry has

been Internet Bandwidth when compared to other

jurisdictions:

– Quality – unstable latency times and low guaranteed uptime – Quantity – Until 2003 Malta had only 155Mbits

– Reliability – Until 2004 there was one international Carrier – Vulnerable – open to DDOS attacks

M A E M IA M I vodafone CABLE & WIRELESS TELECOM ITALIA TELECOM ITALIA PALERMO MILANO INTERNET EXCHANGE

LONDON INTERNET EXCHANGE

Average Latency Times From Malta

– To London Internet Exchange: 52ms – To Frankfurt Internet Exchange: 38ms

BEGLIAN INTERNET EXCHANGE

)

Currently is the largest carrier for Internet Bandwidth

Cable capacity is 16STM1 (2.15Gbps) with current

usage at 600Mbits

New agreement with Telecom Italia has improved peer

to peer latency times and guaranteed uptimes

In February 2005 installed DDOS equipment in Palermo

Has a backup microwave link with Sicily

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Started operating in September 2004

Connected to two carriers – Cable & Wireless and

Belgacom

Cable capacity is 16STM1 (2.15Gbps) with current

usage at 155Mbits

Is positioned to sell bandwidth at B2B level

Controls traffic flow upstream to mitigate DDOS but is

currently looking at installing other solutions that

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