Financial Blocking: Will data retention have to be extended?
By Peter Langenbach
Experts think that payment blocking in the context of online gambling will not be able to be implemented
Potsdam, October 2014. Whilst the Conference of the Minister Presidents of the German Federal States will meet this week to discuss, among other issues, the Inter-State Treaty on Gambling and its implementation in Germany, a series of gambling providers are facing massive repression by the Federal States. The States intend to ban gambling offers on the internet, if necessary by blocking payment transactions – an instrument which, it is remarkable to note, has been advocated by the representatives of the state-run lottery associations, such as Michel Burkert, who plays a leading role in the Deutsche Lotto- und Totoblock, is the manager of Saarland-Sporttoto GmbH, and who wants to prevent transfers of funds to other countries. In plain language: Banks, credit card companies, payment providers are intended to interrupt the monetary flows between players and online gambling providers, even if they are licensed in the EU. This is the widespread theory.
Eco President Rotert: Data privacy activists are called upon to act
It is obvious that the State chancelleries have not considered comprehensively the practical implementation of the so-called Financial Blocking, explains Michael Rotert, an influential internet pioneer. The professor for informatics at the Karlsruhe University and President of the Eco Association of the German Internet Economy http://www.eco.de explains upon a corresponding inquiry that not least the realities of the European market stand against plans such as this: “I am not dependent on German banks, and only here will the authorities be able to impose conditions. Even in the European environment this will be futile, as the provider may be licensed there. For reasons of incompatibility with the European situation, there should not be Financial Blocking as a German national solo move.” Does this mean that all Europeans have to implement Financial Blocking instruments? Too much stands against it, Rotert knows: “First of all, you would need all connection data, as only then will it be possible to determine who accessed which site and when. For this purpose, the internet service providers would have to reintroduce data retention, in an even tighter form, because the exact web site address would also have to be stored.” Rotert says that service providers acting as the henchmen of the German gambling monopoly who furthermore would have to retain data as a precautionary measure is something he “cannot by any stretch of the imagination foresee. It would be necessary to first introduce by law the retention of data, and also to extend the areas of application. This is exactly what the Federal Constitutional Court (BVerfG) restricted in its relevant decision.” Even the EU Directive, which in the meantime has become illegal, would not justify such usage.
Ultimately, Rotert is of the opinion that data privacy activists are called upon to take action: “The data from the internet which are necessary for Financial Blocking must not be stored by the providers, and the consolidation with scoring data should not be permitted either. Aside from the fact that internet addresses always identify a device, but never a human being, several data sources would have to be consolidated here. Also, data relating to contents and location would have to be stored, because the relevant offers may in part be an illegal offer from a provider who otherwise is licensed.”
This means that even the national German legislative regime makes Financial Blocking practically impossible: How can a bank distinguish between licensed and unlicensed gambling providers? This is problematic as, for instance, Schleswig-Holstein granted almost 50 licenses for a variety of providers, based on the legal regime applicable there, whilst the Inter-State Treaty on gambling merely provides for 20 licenses nationwide. Apart from increased legal uncertainty – what else does Financial Blocking bring?
Kubicki: Threatening Financial Blocking is an act of desperation of the Federal States
In view of this situation, the critics of the Inter-State Treaty on Gambling see their position confirmed: Wolfgang Kubicki, head of the FDP parliamentary party in the Schleswig-Holstein parliament, for instance, told the Norddeutsche Rundfunk (NDR) that he thinks that the threat by the Federal States to swing the cudgel of prohibition is “an act of desperation, because the bans are entirely ineffective beyond our national borders, and the threat of criminal-law consequences is actually ridiculous.” According to the NDR, the FDP politician, who was among the fathers of the modern Kiel gambling act, forecasts: “This is not the first time for the Federal States to try to enforce prohibition orders. Up to now, they have failed completely in all respects. And this will again be the case this time.” This impression is confirmed when looking at Norway, where even the responsible Norwegian gambling supervisory authority admitted that the measure called Payment Blocking had failed. “This payment ban has had less impact than expected. It’s not been a success”, Rune Timberlid, Senior Advisor for the Norwegian Gaming Board, said according to GamblingCompliance.
The State government of Baden-Wuerttemberg confirms practical problems associated with Financial Blocking
But this is not all: The banks also are clearly dismissive and question the legal certainty and practicability when it comes to examining millions of monetary transfers with significant organisational effort. In September, the newspaper Süddeutsche Zeitung (SZ) http://www.sueddeutsche.de already reported that the bank organisations “have not been contacted up to now”, as the federal association of banks, the Bundesverband der Volks- und Raiffeisenbanken, states. And, anyway: This course of action would have to be “legally safe and practicable”, the association comments. The bank organisations informed the federal states as early as in May 2011 that bank transfers into the account of a gambling provider “are not always inevitably” betting stakes, but could also have other reasons. The credit institutions could “not tell the difference”. With regard to European realities, the SZ also makes reference to the SPD/Green Party government in Baden-Wuerttemberg, who made it clear in its reply to a parliamentary inquiry as early as 2012: “The procedure does not work “if the finance institution is based abroad”.”
Should the plans of the Federal States be implemented, this would “correspond to a dragnet investigation”, Dr. Wulf Hambach, Munich lawyer and EU law expert comments. He basically thinks that it would be too costly to implement this, and warns that the affected companies may claim damages. “I think we may be talking about astronomically high figures which the providers may assert here against the state, in particular within a European internal market where such bans should not take place”, he told the ARD MIttagsmagazin http://www.daserste.de/information/politik-weltgeschehen/mittagsmagazin/sendung/2014/gluecksspiel-staat-verbot-100.html.
Cross-party request for EU-compliant gambling law regime
Despite these warning voices, the Federal States seem to be sticking to their firm view, and to continue to fuel the existing legal uncertainty in the German gambling market. Experts think that this may be the last attempt to prevent the enforcement collapse of the Inter-State Treaty on Gambling, whose practical application has obviously failed. After the admission by the responsible Hesse Ministry of the Interior, who said that the Inter-State Treaty does not promote the objective of curtailing illegal sports betting, Schleswig-Holstein gambling expert Hans-Jörn Arp (CDU) and Wolfgang Kubicki asked Minister President Torsten Albig (SPD) to implement the Schleswig-Holstein model on the federal level: “The Federal State assigned by the gaming committee with the issue of the 20 licenses has now given up. One cannot state more clearly that the Treaty has failed than the Hesse Minister of the Interior in his reply to a parliamentary inquiry regarding the structure and duration of the proceedings (printed matter 19/446)”, Arp said. The document states as follows: “The limitation of the number of licenses has proven to be highly complicated, prone to disputes and long-winded. However, it has in particular not promoted the objective of curtailing illegal sports betting, but, quite the opposite, has harmed this objective.” Due to the system of limited licenses, sports betting in the illegal area has in the meantime become more and more extensive, without serious steps being able to be taken against this.
The two politicians say that the Hesse Ministry of the Interior announced as early as in July that it expects law suits by the 21 applicants who were not granted one of the 20 licenses. This will further delay the issue of the licenses. This is why the evaluation date, which had already been postponed, and which is scheduled for November, will not be able to be complied with either. “How could the Minister Presidents evaluate a Treaty if they cannot even issue licenses after more than two years?” Kubicki asks. Just as Arp, he continues to advocate the Kiel gambling act passed by the CDU/FDP coaltion. “Our model is easier, accepted by the honest providers, combats the illegal providers and money laundering, and has already been reviewed by the EU Commission. It works, protects the players, and generates revenue for the state.”
A ray of light on the horizon of the gloomy gambling landscape: The Green Party in the Hesse parliament have obviously realised that the current Inter-State Treaty is doomed to failure. They now support not only the abolition of the limitation regarding the number of licences, and its replacement by qualitative elements in the context of the issue of licenses, but also the extension of this principle – similar to the Kiel model – to casino games and poker. It seems the time has come for a legally safe EU model for the regulation of gambling.
