Gaming Law in Malta
GVZH’s contribution to Chambers & Partners 2022 edition.
Authored by Andrew J. Zammit, Jackie Mallia, Ilona Vella, James Bartolo, Jessica Camilleri
1.1 Current Outlook
The regulatory framework applicable to online and land-based gaming in Malta is consolidated under the Gaming Act (Chapter 583 of the Laws of Malta) and Subsidiary Legislation (SL) 583.01 to 583.12, adopted under that law. See 3.1 Key Legislation for an outline of these SLs.
The MGA issued several directives between 2018 and 2022, which are binding on licensees, providing additional guidance in relation to the interpretation and implementation of the laws and regulations, as follows.
- 2018 – the Start-Up Undertakings Directive, the Player Protection Directive, the Gaming Authorisations and Compliance Directive, the Directive on the Calculation of Compliance Contribution and the Alternative Dispute Resolution (ADR) Directive.
- 2019 – the National Lottery (Continuation of Concession and Licence Terms) Ruling, the Gaming Premises Directive, the De Minimis Games Directive, the Gaming Devices Ruling Directive, the Amusement Machines Directive, the Enhanced Automated Reporting Platform (Land-Based) Directive and the Directive on the Rules applicable to Amusement Machines and Low Risk Games.
- 2020 – the VAT Fiscal Receipt Lottery Directive, the Low Risk Games in Care and Nursing Homes Ruling and the Directive on the Key Function of the Prevention of Money Laundering and the Financing of Terrorism.
- 2021 – the Non-Profit Games during Political Events Ruling.
- 2022 – the National Lottery Ruling.
Additionally, the Malta Gaming Authority (MGA) has issued several guidance notes that provide guidelines on certain provisions, procedures, standards and methods, with the aim of improving proportionality, participation, openness, accountability, effectiveness and coherence.
1.2 Recent Changes
On 1 January 2019, the MGA initiated the first phase of its Sandbox Framework for the acceptance of virtual financial assets (VFA) and the usage of distributed ledger technology (DLT) within the gaming industry. The second phase was rolled out on 4 September 2019, accepting Innovative Technology Arrangements (ITAs), including DLT platforms and smart contracts. Despite being initially implemented until 31 December 2021, the Framework is now set to remain in force until 31 December 2022.
2. Jurisdictional Overview
Since the early 2000s, Malta has secured its position as a leading and well-regulated European remote gaming jurisdiction, and is estimated to host around 10% of the world’s online gaming companies by trading volume.
The Gaming Authorisations Regulations provide that operators in both the online and land-based sectors require a licence when providing or carrying out a gaming service, or when providing a critical gaming supply from Malta or to a person in Malta, or through a Maltese legal entity, unless exempt. A licence is required to provide or supply any of the following games, with the exception of skill games:
- casino, including live casino;
- virtual sports;
- lottery and secondary lottery;
- fixed odds betting;
- peer-to-peer games;
- lottery messenger services; and
- controlled skill games (fantasy sports).
Please see 12.3 Fantasy Sports for more information regarding that sector.
A licence is not required for games that the MGA classifies as low-risk games, which require a low-risk permit. Such permit is only issued for a single event, expires as soon as the event is concluded, is non-transferable unless the MGA’s prior approval is obtained, and is non-renewable. Examples of low-risk games include:
- non-profit games in which the stake does not exceed EUR5 per player and more than 90% of the net proceeds go to a good cause (charity, sports, education, etc);
- commercial communication games, which are organised to promote the sale of goods or services and that do not generate economic activity in their own right; and
- limited commercial communication games, which include a stake of not more than EUR2 and a prize of not more than EUR250.
With the adoption of the 2018 regulatory framework, online and land-based gaming activities are now regulated by the same legislation on a horizontal basis, except that applicants applying for a land-based gaming licence are required to seek and obtain an additional approval for the gaming devices they offer to consumers as well as the premises from which the licensed gaming devices are operated. Land-based betting, bingo, casino, lotteries and poker are thus also permissible and regulated in the same manner as online games. Please see 5.1 Premises Licensing for more information.
3. Legislative Framework
3.1 Key Legislation
The key legislation that applies to the gambling sector is as follows:
- the Gaming Act – Chapter 583 of the Laws of Malta;
- the Gaming Malta Fund Regulations;
- the Gaming Licence Fees Regulations;
- the Gaming Definitions Regulations;
- the Gaming Authorisations Regulations;
- the Gaming Compliance and Enforcement Regulations;
- the Gaming Premises Regulations;
- the Gaming Player Protection Regulations;
- the Gaming Commercial Communications Regulations;
- the Gaming Tax Regulations;
- the Social Causes Fund Regulations; and
- the Retention of Data (MGA) Regulations.
Other supporting legislation and directives that apply to the gambling sector are as follows:
- the Prevention of Money Laundering Act;
- the Prevention of Money Laundering and Funding of Terrorism Regulations;
- the Consumer Affairs Act;
- the Electronic Communications (Regulation) Act;
- the Data Protection Act;
- the Prevention of Corruption in Sport Act;
- the Requirements as to Advertisements, Methods of Advertising and Directions applicable to Gambling Advertisements;
- the Start-Up Undertakings Directive 2018;
- the Player Protection Directive 2018;
- the Gaming Authorisations and Compliance Directive 2018;
- the Directive on the Calculation of Compliance Contribution 2018;
- the Alternative Dispute Resolution (ADR) Directive 2018;
- the National Lottery (Continuation of Concession and Licence Terms) Ruling 2019;
- the Gaming Premises Directive 2019;
- the De Minimis Games Directive 2019;
- the Gaming Devices Ruling Directive 2019;
- the Amusement Machines Directive 2019;
- the Enhanced Automated Reporting Platform (Land-Based) Directive 2019;
- the Directive on the Rules Applicable to Amusement Machines and Low Risk Games 2019;
- the VAT Fiscal Receipt Lottery Directive 2020;
- the Low Risk Games in Care and Nursing Homes Ruling 2020;
- the Guidelines on GDPR Compliance; and
- the Directive on the Key Function of the Prevention of Money Laundering and the Financing of Terrorism 2020.
3.2 Definition of Gambling
The term “gambling” is not specifically defined in the Gaming Act. However, the activity of gambling falls within the operative term “gaming”, which is used in Maltese legislation and defined as “an activity consisting in participating in a game, offering a gaming service, or making a gaming supply”.
A “game” is defined as “a game of chance or a game of skill”. As a result, a “game of chance” means “an activity the outcome of which is determined by chance alone or predominantly by chance and includes but is not limited to activities the outcome of which is determined depending on the occurrence or outcome of one or more future events”. On the other hand, a “game of skill” means “an activity the outcome of which is determined by the use of skill alone or predominantly by the use of skill, but excludes a sport event, unless otherwise established by or under this Act”.
3.3 Definition of Land-Based Gambling
The general definition of “gaming” applies to all gambling/gaming, regardless of the channel of distribution adopted by the operator to reach its consumers. There is no distinction between online and land-based gaming, and thus the general definition covers both types of gaming. See 3.2 Definition of Gambling.
3.4 Definition of Online Gambling
See 3.3 Definition of Land-Based Gambling.
3.5 Key Offences
Criminal offences that fall under the Third Schedule of the Gaming Act include the provision of a service or supply without the necessary authorisation, aiding or abetting such provision, and failing to effect payments to the MGA. Other key offences arising under other applicable laws include money laundering offences and data protection offences, both of which are directly relevant for gaming operators.
Penalties also apply to lesser offences, such as the breach of, or non-compliance with, other areas of applicable legislation, including a breach of advertising regulations or compliance breaches.
3.6 Penalties for Unlawful Gambling
Any person found guilty of undertaking unlawful gaming activity as per the Third Schedule of the Gaming Act is liable to a fine of between EUR10,000 and EUR500,000, or to imprisonment for up to five years, or both. As an alternative to criminal court proceedings, the MGA may, by way of agreement with the offender and subject to the rectification of the breach, impose a penalty of EUR500,000 for each infringement, or a sum of EUR5,000 for each day of infringement or non-compliance, or any other administrative sanctions. Once such agreement is concluded, the offender’s criminal liability under the Gaming Act will be extinguished. The agreement will only be effective if it is accompanied by the payment of the sum due or the provision of sufficient security for its payment.
Any machine or other device, and any money used in the commission of the offence, will be seized and forfeited in favour of the MGA and may be appropriated in favour of the Malta Gaming Fund. In the case of a breach of any other regulatory instrument that is not outlined in the Third Schedule, the MGA may impose an administrative penalty of up to EUR25,000 for every breach or non-compliance, or an administrative penalty of up to EUR500 for each day on which such breach persists. The MGA may impose fines for non-compliance in the following three main scenarios:
- to ensure that the licensee rectifies any default;
- to deter future non-compliance and thus ensure that Maltese licensees uphold high standards of behaviour consistent with regulatory requirements; and
- for the purpose of ensuring that any financial gain that the licensee may have made through non-compliance is eliminated.
On 26 November 2019, the MGA published an explanatory note on “Guiding Principles for the Application of Enforcement Measures”, setting out the principles that should guide the MGA in its application of enforcement measures when a breach occurs. This explanatory note lays down the aims that the MGA should be guided by in deciding the appropriate form of enforcement action – ie, in determining whether it should offer regulatory settlement or proceed with the commencement of criminal proceedings. It also lays down principles for the quantification of penalties.
3.7 Recent or Forthcoming Legislative Changes
The Responsible Gaming Fund Regulations (SL 583.01) have been published but are not yet in force.
On 25 November 2021, the MGA issued an amendment to Article 41(2)(b) of the Gaming Authorisations and Compliance Directive, outlining how licensees must ensure that statutory financial statements are audited in accordance with International Standards on Auditing and prepared in accordance with International Financial Reporting Standards as adopted by the EU.
Two additional reports are also to be drawn up, one relating to gaming tax and gaming licence fees, and another including player and jackpot funds and players’ account balances. Such reports are to follow the International Standard on Related Services (ISRS 4400) requirements.
4. Licensing and Regulatory Framework
4.1 Regulatory Authority
The Gaming Act established the MGA as the main regulatory body responsible for the governance of all gaming activities (including land-based and remote gaming sectors) in Malta.
The MGA’s main functions include the issuance of licences, approvals, certificates and recognition notices, as well as the monitoring of the conduct of operators in the field. The MGA is also responsible for preventing, detecting and combating criminal activity in the gaming sector, and for ensuring that games are operated and advertised fairly and responsibly.
4.2 Regulatory Approach
The regulatory approach adopted by the MGA is risk-based and prescriptive. In August 2018, the Gaming Act and various subsidiary legislation came into force, broadening the regulatory scope and increasing the MGA’s oversight. It moved towards an objective-based regulatory approach, allowing for innovation and ensuring that the regulatory objectives are attained.
4.3 Recent or Forthcoming Changes
On 26 November 2021, the Authority launched the Personal Portfolioon the Licensee Relationship Management System (LRMS). This timeline will enable account holders to submit Change in Personal Detailsapplications (known as Personal Declaration Forms) separately from any application pertaining to the operator. In this update, LRMS has introduced the e-ID login, for both the Personal Portfolio and the traditional Company Portalview. Anyone holding a Maltese e-ID may opt to access the portal by using the e-ID login details.
On 3 March 2022, the Authority also issued a notice addressing the intensifying state of affairs between Russia and Ukraine, reminding licensees of their obligations to carry out sanctions screening both prior to the onset of a business relationship and on a risk-sensitive basis thereafter. To this effect, licensees are to adhere to their sanctions monitoring obligations under Article 17(6) of the National Interest (Enabling Powers) Act and guidance/directions issued by the Sanctions Monitoring Board.
On 16 March 2022, the Authority issued a regulatory notice announcing an update to its System Documentation Checklist, to be used by prospective licensees applying for authorisation. The revised checklist omits any requirements that were inefficient or obsolete, and focuses more on the following:
- the company structure;
- the business plan;
- the operating policies and procedures;
- the gaming and technical setup;
- KYC and AML procedures;
- responsible gaming; and
- sports integrity procedures.
In addition to this checklist, MGA also issued Source of Wealth and Statement of Affairs templates, which are to be submitted by all qualifying ultimate beneficiary owners and/or third parties investing funds into the licensee or prospective licensee.
4.4 Types of Licences
A gaming service is defined as the availability for participation by players as an economic activity, whether directly or indirectly, and whether alone or with others. The MGA may issue the following licences.
- A gaming services licence – a business-to-consumer (B2C) licence to offer or carry out a gaming service. A B2C licence may constitute any one or more of the following game types:
- Type 1 gaming services – games of chance played against the house, the outcome of which is determined by a random number generator, and which includes casino-type games;
- Type 2 gaming services – games of chance played against the house, the outcome of which is not generated randomly but is determined by the result of an event or competition extraneous to a game of chance, and whereby the operator manages its risk by managing the odds offered to the player;
- Type 3 gaming services – games of chance not played against the house and wherein the operator is not exposed to gaming risk, but generates revenue by taking a commission or other charge based on the stakes or the prize, and shall include player versus player games such as poker, bingo, a betting exchange and other commission-based games; and
- Type 4 gaming services – controlled skill games.
- A critical gaming supply licence – a business-to-business (B2B) licence to provide or carry out a critical gaming supply that is indispensable in determining the outcome of a game or games forming part of a gaming service, and/or is an indispensable component in the processing and/or management of essential regulatory data.
- A corporate group licence – B2B or B2C corporate group licences may be issued to a corporate group that includes more than one company within its structure, where such licensed corporate entities are at least 90% owned by the same ultimate beneficial owner of the licensed entity. This may be availed of where the entities concerned provide critical gaming supplies solely to other entities within the same group. In such instances, an additional B2B licence will not be required. However, if entities within the B2C corporate group licence provide critical gaming supplies in or from Malta to entities outside of the group, a separate B2B licence would be required. The entities that can be covered by the corporate group licence must be established in Malta or another EU/EEA jurisdiction.
In instances where a game may be categorised under one or more of the game types, the MGA has complete discretion to categorise the game under the specific type it believes closest reflects the nature thereof.
4.5 Availability of Licences
See 4.7 Application Requirements.
4.6 Duration of Licences
A standard licence term, whether original or renewed, is ten years, whilst a recognition notice is valid for one year. A recognition notice is a notice issued by the MGA whereby an authorisation issued by another member state of the EU or EEA, or a state that is deemed by the MGA to offer safeguards largely equivalent to those offered by Maltese law, is recognised as having the same effect as an authorisation issued by the MGA for the purpose of providing a gaming service or gaming supply in or from Malta. Licences that require government concessions, such as for the operation of land-based casinos and the island’s national lottery, would be granted for ten years or such shorter period for which the concession is valid.
Where a gaming service or a gaming supply is by its very nature temporary or consists of a singular event or a number of game instances linked to the same event, such service or supply shall be eligible to apply for a limited duration licence.
4.7 Application Requirements
Application requirements are similar in scope for remote and land-based operators. Prospective licensees must conform with all stages of the gaming licence application process as outlined in 4.8 Application Timing, in order to be eligible to apply for authorisation.
The MGA issued a Directive on Start-Up Undertakings under which any undertaking that qualifies as a start-up would not be required to pay a compliance contribution for the first year of operation. The qualifications to be deemed a start-up were amended as per Legal Notice 266 of 2019, wherein an undertaking must not have generated more than EUR10 million of revenue in the past 36 months. These amendments came into effect on 1 January 2020.
4.8 Application Timing
The timeframe for obtaining a new remote gaming licence from the MGA ranges between six and 12 months from the submission of a complete application. There are five application stages where the MGA will assess whether the applicant and its key function holders are fit and proper to conduct gaming business in accordance with Maltese laws and regulations, whether the applicant is correctly organised and prepared to undertake its proposed business strategy, and whether the applicant satisfies all key operational and statutory requirements. The MGA will also consider whether the applicant has correctly implemented its technical infrastructure in accordance with its approved business plan and systems documentation. The five application stages are as follows.
- A fit and proper exercise is conducted on the applicant by assessing all information related to persons involved in financing and management, and on the business viability of the operation.
- Business planning – an in-depth financial analysis of the applicant’s business plan is conducted by the MGA.
- Operational and statutory requirements – the applicant is examined on the instruments required to conduct the business, including incorporation documents, the games, the rules, terms, conditions, policies and technical documentation of the gaming and control system. Applicants must also meet the established minimum issued and paid-up share capital requirements.
- System review – the MGA informs the applicant of the outcome of the application. If the application is successful, the applicant will be invited to implement the operation on to a technical environment, in preparation to go live. A 60-day time limit is allowed for this technical roll-out. Once the process of certification is completed successfully, the MGA will issue a ten-year licence.
- Compliance review – after going live, a licensee must undergo compliance audits of its operations, which must be completed by an approved service provider within 90 days from the MGA’s notice.
4.9 Application Fees
Licence application fees vary according to the licence/authorisation being applied for. A one-time, non-refundable administrative fee of EUR5,000 is payable to the MGA upon the submission of any application for a B2C or a B2B licence, for the renewal of such a licence or for a recognition notice. A breakdown of all fess can be found in the Gaming Licence Fees Regulations.
4.10 Ongoing Annual Fees
Any person in possession of a gaming services licence issued by the MGA must pay a licence fee of EUR25,000 for Type 1, 2 and 3 licences, and EUR10,000 for Type 4 licences.
5. Land-Based Gambling
5.1 Premises Licensing
Gaming premises must be licensed, and any person renting out or allowing another person to use the premises as a gaming premises must ensure that the lessee is in possession of a valid approval or licence. The Gaming Premises Regulations, which were published in July 2018, are applicable in this regard. The Gaming Premises Directive, which was published by the MGA and came into force on 1 February 2019, delineates further requirements to which gaming premises must adhere. The MGA has carried out several amendments to the 2019 Gaming Premises Directive to guarantee the proper functioning of the regulatory mechanisms applicable to gaming premises and controlled gaming premises. The amendments relate to different aspects of the Directive, including the provisions pertaining to the conversion of regular players into junket players, the identification of employees, the count procedure and the “No Objection Procedure” relating to the approval of controlled gaming premises.
There is no limit on the total number of gaming premises for the Maltese islands. However, gaming premises are subject to several criteria obliging them to be located at a pre-set minimum distance away from schools, places of worship and other gambling premises. There are also restrictions regulating the number of gaming devices within the licensed gaming premises to one gaming device per two square metres, and a maximum of ten gaming devices in any gaming premises. A valid permit is required to sell tickets for the national lottery; an application for this permit is to be made to the MGA by the proposed seller. There are currently approximately 240 “Maltco Lottery” points of sale across the Maltese islands.
5.2 Recent or Forthcoming Changes
A new policy paper was published on 28 May 2021, relating to the amending of the return to player minimum percentage (RTP). This proposed change was based upon the MGA’s consideration of eliminating the differences between the requirements applicable to land-based gaming premises operators and remote gaming operators, to aid in establishing uniformity between both sectors. For this to be achieved, the amendment deals with the lowering of the existing minimum RTP percentage from 92% to 85%.
The MGA will also be publishing changes to the Player Protection Directive (Directive 2 of 2018) in light of committing to the protection of consumers, particularly minors and vulnerable individuals.
6. Online Gambling
6.1 B2C Licences
See 4.4 Types of Licences.
6.2 B2B Licences (Suppliers, Software, Etc)
See 4.4 Types of Licences.
The use of affiliates is currently unregulated. In accordance with Directive 3 of 2018 (the Gaming Authorisations and Compliance Directive), outsourcing service providers such as affiliates shall be deemed to be acting for, and on behalf of, the licensee. In such cases, the licensee is responsible for the affiliate’s actions insofar as the activities concerned are covered by the licence issued by the MGA.
Notably, the MGA holds that when the service of the outsourcing service provider is constrained only to marketing and advertising activities, the regulatory framework that shall be adhered to is that of advertising. In light of this, the liability lies on the licensee to comply with such laws. However, this may differ when the outsourcing service provider conducts other activities that are related to the gaming service. In fact, where the outsourcing service provider processes payments and handles player registration, the service provider shall itself be deemed to require a B2C licence, unless such services are only being completed on behalf of the licensee, in which case they shall be considered to be enclosed within the authorisation of the licensee. In the latter case, the service provider would require approval of the service as a material supply.
See 6.5 Recent or Forthcoming Changes regarding the revisions made to the Implementing Procedures Part II, in terms of affiliates.
6.4 White Labels
There are currently no measures regulating requirements that apply to the use of white-label providers, which are commonly deemed to be intermediaries. In accordance with Directive 3 of 2018, outsourcing service providers such as white-label providers are deemed to be acting for, and on behalf of, the licensee. In such cases, the licensee is responsible for the actions of the white-label providers insofar as the activities concerned are covered by a licence issued by the MGA in favour of that white-label service provider.
6.5 Recent or Forthcoming Changes
In April 2020, the MGA conducted a survey of its licensed operators, to analyse the impact of the COVID-19 pandemic on the gaming sector. This survey revealed that the B2C sector was affected the most, especially the operators handling Type 2 games. Due to this, considerations arose with respect to plans in investing in this sector, including the postponement of such plans.
For other regulatory changes expected in the online gaming sector, please see 5.2 Recent or Forthcoming Changes.
6.6 Technical Measures
There are currently no technical measures, such as IP blocking, in place to protect consumers from unlicensed operators.
7. Responsible Gambling (RG), Also Known as Safer Gambling (SG)
7.1 RG Requirements
Maltese gaming legislation and regulations provide for a number of responsible gaming requirements, aimed at protecting minors and vulnerable persons from unscrupulous operators. The Responsible Gaming Foundation was set up in Malta in 2014, and has launched several projects and initiatives in this regard, including a National Gambling Helpline (1777) in 2015. Furthermore, in addition to Directive 2 of 2018 (the Player Protection Directive), the MGA imposes requirements ranging from strict advertising and marketing regimes to the possibility of self-exclusion.
In May 2020, the MGA published a consultation paper to gather feedback on the “Suspicious Betting Reporting Requirements and Other Sports Integrity Matters”, aimed at safeguarding the integrity of sports and sports betting. A guidance paper was subsequently issued in this regard, advising all MGA licensees on matters relating to sports betting integrity.
7.2 Recent or Forthcoming Changes
On 30 September 2022, the Authority issued a closed consultation with operators regarding its proposed amendments to the Player Protection Directive (Directive 2 of 2018), addressing:
- operators’ obligations in terms of responsible gaming policies and procedures;
- the introduction of five markers of harm that must be considered by licensees when determining effective measures and processes to detect and address problem gambling; and
- provisions relating to real-money reinforcement and staff training.
The consultation period was initially set to run until 14 October 2022 but was later extended until 24 October 2022.
7.3 Gambling Management Tools
Gambling management tools adopted by the MGA are focused principally on:
- obligations placed on operators to assist players with determining whether or not they are problem gamblers;
- making leaflets or other material regarding organisations that assist problem gamblers readily available to players; and
- ensuring that there are procedures in place to enable players to exclude themselves from playing for a definite or indefinite period of time.
In March 2019, the MGA issued a preliminary market consultation document to request information pertaining to the possibility of implementing a unified self-exclusion system to be applied to the regulated gaming industry in Malta, across gambling operators, regardless of the channel.
8. Anti-money Laundering (AML)
8.1 AML Legislation
The Prevention of Money Laundering and Funding of Terrorism Regulations oblige online gaming operators to conduct high levels of CDD, with the risk of steep penalties for non-compliance.
The MGA has issued a new directive dealing with the Key Function of the Prevention of Money Laundering and the Financing of Terrorism. Directive 3 of 2020, which came into force on 20 July 2020, obliges B2C licensees to have at least one of the key function holders vested with the key function of the prevention of money laundering and the financing of terrorism. This key function holder must also be an FIAU-registered MLRO in accordance with the procedures laid down in the directive.
The FIAU is the Maltese government agency responsible for the combating of money laundering and financing of terrorism. It has published two sets of implementing procedures in terms of the PMLFTR, applicable to land-based casinos and the remote gaming sector. These implementing procedures focus on specific areas of the PMLTFR and their application at an industry-specific level, in order to highlight those aspects of money laundering prevention that are of most relevance to the industry, and to ensure they are understood and interpreted consistently by all Maltese licensees or other licensed operators based in Malta.
See 6.5 Recent or Forthcoming Changes on the salient revisions made to the Implementing Procedures Part II, which came into effect on 2 July 2020.
8.2 Recent or Forthcoming Changes
In June 2022, the MGA, together with the participation of the FIAU, hosted a conference titled “The MLRO in the Gaming Sector”, which covered the following topics:
- an overview of the legislative instrument that governs the key AML and MLRO functions from a gaming perspective;
- the MGA regulatory process on the key AML/CFT function, including the MLRO interview held within the Authority for prospective applicants; and
- common issues faced by gaming companies when submitting suspicious transaction reports.
8.3 AML Requirements
As an EU member state, Malta has implemented all EU directives regulating the prevention of money laundering. Malta is part of MONEYVAL (the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism), which was established in September 1997 by the Committee of Ministers of the Council of Europe to conduct self, and mutual, assessment of the anti-money laundering measures implemented. The principal sources of Maltese law on money laundering are two statutory instruments: the Prevention of Money Laundering Act (Chapter 373 of the Laws of Malta) augmenting other provisions found in the Criminal Code (Chapter 9 of the Laws of Malta) and the PMLFTR (SL 373.01).
The EU’s Fourth Anti-Money Laundering Directive (4AMLD) classifies gambling operators as “subject persons”, which means they are required to comply with stringent reporting and procedural obligations. The 4AMLD was transposed into Maltese law, and gaming operators became subject to risk-based AML obligations as of 1 August 2018.
The 4AMLD takes the form of a minimum harmonisation directive and sets out minimum standards that must be met by transposing national legislation, while affording member states the option to exceed this standard and vary in the implementation thereof. Whilst the 4AMLD lays down an obligation for B2C operators to apply CDD measures for single transactions amounting to EUR2,000 or more, Malta applies this threshold on the basis of a rolling period of 180 days.
Further to the transposition of the 4AMLD, an Anti-Money Laundering Unit was set up within the MGA, with the purpose of conducting AML/CFT supervisory assessments of licensed operators through inspections carried out both on-site and off-site. Reports of findings are subsequently forwarded to the FIAU.
Any operator found guilty of the offence of money laundering could be exposed, on conviction, to a fine not exceeding EUR2.5 million, and its officers could be exposed to imprisonment for a period not exceeding 18 years, or to both a fine and imprisonment. The court may, inter alia, also order the forfeiture to the government of the proceeds or of property with a value that corresponds to the value of such proceeds, whether such proceeds have been received by the person found guilty or by the company.
See 8.1 AML Legislation.
9.1 Regulatory/Supervisory Agency
See 4.1 Regulatory Authority.
9.2 Definition of Advertising
Advertising is defined as text, images, sound or any other medium transmitting information that is designed to promote, directly or indirectly, the goods, services, image or brand of a person pursuing a licensable gaming activity. For the avoidance of doubt, this also includes product placement and any emerging advertising techniques.
9.3 Key Legal, Regulatory and Licensing Provisions
The key provisions can be found in:
- the Gaming Commercial Communications Regulations, 2018;
- Legal Notice 247 of 2018; and
- SL 350.25, entitled “Requirements as to Advertising, Methods of Advertising and Directions applicable to Gambling Advertisements”.
The MGA issued the Commercial Communications Guidelines as part of its mission to prioritise player protection and responsible gaming. These legal instruments lay down the basis for acceptable advertising practices in respect of gaming services. The MGA also set up a Commercial Communications Committee, the role of which is to review commercial communications issued by gaming operators in Malta and assess any possible breaches.
9.4 Restrictions on Advertising
The prohibitions and restrictions on advertising generally provide that advertisements must not portray, condone or encourage behaviour that is criminal or socially irresponsible or that could lead to financial, social or emotional harm, or directly or indirectly encourage antisocial or violent behaviour.
The above-mentioned regulations and guidelines also prohibit the portrayal of gaming as socially attractive, or suggestive of enhancing personal or professional qualities, or a way of gaining control, superiority, recognition or admiration. The portrayal of gaming in the context of toughness/resilience, or as being indispensable or taking priority in life is also illegal. Furthermore, advertisements must not suggest that solitary gaming is preferable to social gaming, nor that skill can influence the outcome of a game that is purely a game of chance, and cannot provide false information about the chances of winning nor exploit cultural beliefs or traditions about gaming or luck. Operators cannot make reference to instantly available consumer credit services or other ways of providing credit to players.
Advertisements must clearly display the name of the relevant gaming company responsible for that advertisement, and a reference must be made in the advertisement to the fact that the company holds a valid licence issued by the MGA or another licensing authority duly recognised in Malta. Advertisements made via social media account portals held by the gaming company itself or third parties are subject to the same restrictions.
Gaming advertisements cannot be issued or distributed in any public places or on any means of public transport in Malta, unless displayed within authorised gaming premises or locations frequented mainly by tourists, such as airports.
The regulations also provide that responsible gaming messages are to be prominently displayed within all advertisements, and that advertisements must not:
- be directed towards minors or vulnerable persons;
- encourage these persons to play a game;
- feature minors or appeal to these persons in any way;
- exploit the susceptibilities, aspirations, credibility, inexperience or lack of knowledge of these persons; or
- present gaming as a sign of maturity or move to adulthood.
If the MGA determines that a particular advertisement is in breach of legislation, it may order its modification, retraction or termination. The MGA may also take any administrative action it deems necessary, including the issuance of sanctions. Furthermore, where the MGA deems it necessary, it may also instruct the licensee to suspend the advertisement until it reaches a final decision.
The Court of Magistrates, in its criminal jurisdiction, is competent to take cognisance of any offences committed in this respect and proceedings against an entity may only commence once the entity has been sanctioned by the MGA. The prescriptive period in relation to actions in breach of advertising regulations is six years.
Advertising Recommendations by the MGA in Light of the COVID-19 Pandemic
Regarding the COVID-19 pandemic, the MGA has taken into consideration all relevant developments and is constantly proposing adequate and proportionate measures, also bearing in mind the distress the pandemic has caused among players and operators. The MGA has reiterated the fact that operators are bound by their obligations pursuant to the Commercial Communications Regulations to ensure that all commercial communications are socially responsible, especially given the current situation. Any direct or indirect reference to COVID-19, or any related circumstance, would be considered to amount to a breach of this regulation.
9.6 Recent or Forthcoming Changes
There have been no updates in the past year.
10. Acquisitions and Changes of Control
10.1 Disclosure Requirements
Article 37(2) of the Gaming Authorisations and Compliance Directive (Directive 3 of 2018) requires operators licensed by the MGA to notify the Authority of any change in direct or indirect qualifying shareholding within the licensee, no later than three working days after it occurs. All the documentation required by the MGA as part of the notification process for the approval of the new qualifying shareholder must be submitted to the Authority within 30 days of the change in shareholding taking effect. Changes in shareholdings in a licensee representing less than 10% of the operator’s issued share capital, either directly or indirectly, will not require the Authority’s approval.
If the MGA takes the view that the change in direct or indirect shareholding has the effect of prejudicing the fitness and propriety of the licensee, or otherwise hinders its suitability for a licence, it may order the licensee to reverse the transaction, reverting to the status quo ante within a timeframe established by the MGA.
10.2 Change of Corporate Control Triggers
Gaming licences are only transferable within the same group of companies. However, in the case of a change of corporate control, the continuance of the licence will be subject to the MGA’s vetting and approval of the new owners, and of any incoming directors and/or key function holders.
10.3 Passive Investor Requirements
Passive investors are caught by the general change of control rules outlined in 10.1 Disclosure Requirements.
The MGA can adopt the following enforcement measures:
- an order directing the authorised person to do something, or to refrain from doing something, or to otherwise correct their conduct and/or operations;
- a warning, directing the authorised person to do, or refrain from doing, something in the future;
- adding, removing or amending conditions attached to the authorisation held by the relevant authorised person;
- in the case of a breach that does not constitute an offence under the Gaming Act, imposing an administrative penalty in terms of Article 25(3) of the Gaming Act;
- in the case of a breach that does constitute an offence under the Gaming Act, filing a report to the Executive Police for the commencement of criminal proceedings; and
- suspending or cancelling a licence.
Please see 11.3 Financial Penalties with regard to financial penalties.
Pursuant to Article 7(1) of the Gaming Compliance and Enforcement Regulations (SL 583.06), the MGA has the right to commence a formal investigation when it suspects that there is a breach of any applicable regulatory instrument or if it believes that such authorised person is no longer fit to hold such authorisation. In this case, a notice of suspension or cancellation will be served on the authorised person.
11.3 Financial Penalties
Financial penalties are enforced as certain, liquid and due money claims against the licensee through Maltese procedural law. These generally consist of the filing of a claim by way of special summary proceedings in the Maltese courts, and the issuance of the relevant precautionary warrants against the assets of the licensee to secure the sum due pending the outcome of the judgment. Once a favourable judgment is obtained by the MGA, an executive warrant is issued against the licensee to recover the sum due, together with any relevant interest and eligible legal costs.
11.4 Personal Sanctions
Administrative penalties are imposed by the Authority in the following circumstances:
- when the breach undermines regulatory objectives;
- when the licensee’s behaviour includes aggravating circumstances; and/or
- when the licensee’s recent compliance track record is not satisfactory.
For breaches stipulated in the Third Schedule of the Gaming Act (criminal offences), licensees are liable to fines ranging between EUR10,000 and EUR500,000, or to imprisonment for up to five years. If the operator is a recidivist, the administrative penalty imposed shall range from EUR20,000 to EUR1 million, and imprisonment from six months to six years.
For breaches that do not fall under the Third Schedule of the Gaming Act, the Authority may impose an administrative penalty of up to EUR25,000 for every breach or non-compliance, and/or up to EUR500 for each day the breach persists.
When enforcing administrative penalties, the Authority takes into consideration the nature of the breach, any mitigating or aggravating circumstances, and the previous disciplinary and/or supervisory record of the licensee.
In addition to administrative penalties, the MGA also issues the following enforcement measures to authorised persons:
- warnings – issued when breaches do not directly undermine regulatory objectives set out by law, and the licensee’s behaviour includes one or more mitigating circumstances;
- suspension of authorisation – where there are issues that undermine the licensee’s ability to conduct its operations in compliance with the applicable legislation but that may be remedied with appropriate action, which the licensee commits to undertake; and
- cancellation of authorisation – the licensee’s operation is affected by systemic issues that cannot be remedied in a satisfactory manner to be able to recommence operations.
12. Recent Trends
12.1 Social Gaming
In September 2018, the MGA signed an international declaration expressing concern regarding the risks posed by the blurring of clear lines of demarcation between gambling, gaming and other forms of digital entertainment, such as video games. The MGA was joined by the gambling regulators of 15 other European and US states and territories. In doing so, the regulators of these territories committed themselves to working together to analyse the characteristics of video games and social gaming more thoroughly, and called for a more constructive dialogue with the responsible representatives of the video games and social gaming industries.
In May 2019, Malta launched its “Vision for Video Game Development and Esports”, and efforts are under way to attract international esports tournaments to Malta. A memorandum of understanding (MOU) was signed between the Electronic Sports League (ESL) and the government of Malta through the Gaming Malta Foundation, which serves as a notice of intent for both parties to develop a multi-year programme designed to develop areas such as the organisation of local and international events.
12.3 Fantasy Sports
In August 2018, the MGA defined fantasy sports as a controlled skill game requiring a licence in terms of the Gaming Authorisations Regulations (SL 583.05), and as a contest offered by means of a distance communication, wherein players commit a consideration of monetary value, whether in the form of a stake, a periodic subscription or the purchase of in-game items, which provides an advantage to the player, to compete against other players for the possibility to win a prize of money or money’s worth.
The outcome of a fantasy sports contest shall be determined by the accumulation of statistical results of the performance of a number of individuals competing in actual sporting events. The winning outcome must be determined predominantly through the skill or knowledge of the player, the burden of proof for which lies with the applicant.
12.4 Skill Gaming
A “game of skill”, or “skill game”, is defined as an activity in which the outcome is determined by the use of skill alone or predominantly by the use of skill, but excludes a sports event, unless otherwise established by Maltese law. The MGA has the sole discretion to determine whether an activity is classified as a game of chance, a game of chance and skill or otherwise, and specific rulings may be obtained from the MGA upon submission of a request outlining the proposed game in detail. In determining this, the MGA considers factors such as the presence of random draws and their effect on the outcome, whether the game is played for money or prizes with a monetary value, and whether participation in a game involves any form of commitment having a monetary value.
Skill games do not generally require a licence, unless they involve a stake to enable participation or offer the possibility of winning a prize of money or money’s worth, in which case they would constitute a “controlled skill game” and require a licence.
The burden of proving that an activity is a skill game (and therefore not licensable) rests on the party operating or promoting such activity, which will be considered by the Authority in accordance with the Sixth Schedule of the Gaming Authorisations Regulations. To date, the MGA has only issued one ruling whereby “fantasy sports” was pronounced to be a controlled skill game. It is possible to obtain a ruling from the MGA in relation to a proposed game, based on the specific operational model.
12.5 Blockchain or Cryptocurrency
Sandbox Regulatory Framework
The MGA launched a guidance note on the use of innovative technology arrangements (ITAs) and the acceptance of virtual financial assets (VFAs) and virtual tokens through the implementation of a sandbox environment with effect from 1 January 2019. The regulatory requirements envisaged therein are subject to change from time to time, as may be rendered necessary by technological and regulatory developments. The sandbox environment was set out with two phases.
- The first phase established the possibility for authorised persons to be allowed to accept VFAs as a means of payment. This was launched in October 2018 and became effective on 1 January 2019.
- The second phase was introduced in September 2019, wherein the MGA accepts applications for the use of ITAs including distributed ledger technology (DLT) platforms and smart contracts. ITAs shall be required to be audited by auditors registered with the Malta Digital Innovation Authority (MDIA) in terms of the Innovative Technology Arrangements and Services (ITAS) Act (Chapter 592 of the Laws of Malta) and shall only be accepted by the MGA if the audit report consists of a positive opinion and the MGA is satisfied that the regulatory requirements shall be adhered to by the authorised person.
In June 2020, the MGA also made some amendments to the Sandbox Regulatory Framework, wherein authorised persons and/or prospective authorised persons and/or outsourcing service providers that are carrying out a licensable activity in terms of the Virtual Financial Assets Act predominantly require a licence from the MFSA, in order to be able to participate in the Sandbox Framework.
in addition, the requirements relating to the verification of control that a player exercises over their wallet have been brought in line with applicable AML/CFT obligations, and the requirements applicable to the audit of innovative technology arrangements by auditors registered with the MDIA have been clarified.
The MGA emphasised that the participation in the Sandbox Regulatory Framework is conditional on the applicant. One must hold the relevant licence issued by the MGA, without prejudice to any other regulatory requirements stemming from other applicable legislation, including the Virtual Financial Assets Act and the regulations. The MGA has extended the duration of the Sandbox Regulatory Framework until 31 December 2021, which extension may be given for a specified period, in whole or in part.
There has been little take-up of this framework by operators. Earlier in 2021, the MGA published the amendments, following the guidance note mentioned above, which mostly consist of the following:
- extension of the Sandbox Regulatory Framework to 31 December 2022;
- changes to the documentation that needs to be submitted by applicants further to the approval to participate in the sandbox framework;
- changes to the criteria pertaining to VFAs;
- guidance relating to the applicability of the Sandbox Regulatory Framework; and
- clarification relating to additional safeguards that may be imposed by the MGA in order to grant an approval to participate in the sandbox framework.
13.1 Tax Rate by Sector
Any gaming service subject to the requirement of a licence, carried out from Malta or to any person in Malta, is subject to a gaming tax calculated at the rate of 5% on the gross gaming revenue (GGR) generated from said gaming services during the relevant tax period. This tax is levied on the gaming revenue, as defined in the Gaming Tax Regulations, 2018, Legal Notice 248 of 2018, generated by operators from end customers located in Malta.
There is also a gaming levy imposed on gaming devices, calculated on the aggregate gaming revenue generated during the relevant tax period. The rates of this gaming levy depend on the type of gaming service offered. The gaming levy imposed in relation to gaming devices deployed within gaming premises in the provision of Type 1 and/or Type 2 gaming services is 30%, while that imposed on gaming devices deployed within gaming premises in the provision of Type 3 and/or Type 4 gaming services is 12.5%. The levy on gaming devices deployed within controlled gaming premises in the provision of Type 1, Type 2, Type 3 and/or Type 4 gaming services is 15%.
Operators are obliged to pay a compliance contribution to the MGA, as well as other applicable licence fees; this contribution is determined by the gaming revenue generated by the licensee under its MGA licence and in accordance with the Gaming Licence Fees Regulation based on the type of gaming service or critical gaming supply offered. Player winnings are generally exempt from taxation in Malta, provided that the gaming activities are not undertaken with such frequency by the player as to be deemed to constitute a trade, business, profession or vocation.
Maltese resident and domiciled companies are subject to tax on their worldwide income, minus permitted deductions, at the standard corporate tax rate of 35%. However, based on Malta’s full-imputation system, upon the receipt of a dividend, shareholders of a Maltese company may claim a refund of all, or part, of the tax paid in Malta at the level of the company, depending on the type and source of the income from which such dividend was paid. Specific tax advice should be obtained in each case.
Value Added Tax (VAT)
VAT is applied at the standard rate of 18% on every taxable supply of goods, services or importation, with lower rates applicable to certain sectors.
Two sets of guidelines have been published by the Maltese government in relation to the previous gambling VAT exemption. These guidelines became effective on 1 January 2018 and provide a specific list of exemptions applicable to particular gaming activities. Therefore, in contrast to the previous regime (where a blanket exemption was applicable to all gaming activities), VAT will apply under the current framework, unless the particular gaming activity is specifically exempt.
14. Anticipated Reform
14.1 Anticipated Reform
The Sandbox Framework issued by the Authority in 2019, for the acceptance of Virtual Financial Assets and the use of Distributed Ledger Technology within the Gaming Industry, is anticipated to conclude on 31 December 2022. Following this trial period of reviewing applications and issuing gaming licences accepting cryptocurrencies, the Authority may affect certain tweaks to its current framework, better facilitating the largely growing industry.