Developments: Gambling and Electronic Betting in Cyprus
Introduction The Betting Law of 2012 has been enacted and fundamentally revised the regulative measures of both traditional and newer forms of betting in Cyprus. During 2004 and after Cyprus has joined the EU, online gambling service providers licensed in other EU Member States have exploited the legal loophole that existed and which allowed them to operate from premises situated in Cyprus. At that point, the Attorney General provided a legal opinion that the exploitation of the legal loophole had to be allowed, since there was an absence of specific legislation to regulate this matter. After much public debate over the legality of online gambling by officials, led to the enactment of Law 106(I) of 2012 (“the Betting Law”) which, in general, regulates the provisions of betting services and provides also a prohibition and criminalization on all games of chance, including online games.
The law was based on the Directive 98/34/EC of the European Parliament and the European Commission concerning the establishment of information procedures in the field of technical prototypes and standards and also Directive 2006/96/EC concerning the regulations relating to social services and information. Under the Betting Law, the National Betting Authority (“NBA”) was established and is the regulator for all betting activities including land-based and online.
The NBA is also responsible for the licensing and supervision of operators of authorised gambling services and for monitoring and combatting illegal betting activities. Recently, July 2016, the NBA announced that as of 1st of October 2016 will accept also Class B (explained below) applications for licenses, which in general allows a gambling operator to provide betting services online. It is worth of noting, that physical or legal persons who hold licenses to process electronic bets issued by a member state in the EU, will be prohibited from operating in Cyprus, unless they submit an application to obtain a license, within one month from the notification of the date that the Authority will accept applications; thus until 1st of November 2016.
What kind of Licenses is there for the provision of betting services? CLASS A: Encompasses betting services provided within physical premises (except those services included in Class B licenses). CLASS B: Covers the provisions of online betting services excluding slot machines, online casino games of chance and horse racing.
Applications for Class B Licenses: Eligibility Requirements Firstly, in order for an entity to operate electronic bets, it does not necessarily need to be registered in Cyprus or be a locally incorporated private company. An application may be submitted by a company with shares established abroad and which has a branch in the Republic of Cyprus, with its main activity being to carry on bets and it’s issued and paid-up share capital is at least EUR500.000. The company needs to maintain a local managing director. The application should also be accompanied by a Bank Guarantee from a commercial bank or cooperative bank in Cyprus or from a bank situated in the European Union, for EUR550.000, the validity of which should be for a period expiring six (6) months after the bookmaker’s licence applied for expires. Furthermore, the applicant of a Class B license must submit specifications and information of the back-up server which needs to be situated within the territory of the Republic of Cyprus and linked to the main facilitator for deposition of real-time particulars and information established by the Authority, including a computerised software and support system. Additionally, Directives 13-16 have been recently published by the Authority as guidelines for all applicants concerning the establishment of a back-up server and computerised support system, domain and website guidelines, terms and conditions guidelines based on the betting services to be provided to gamblers, bookkeeping and record keeping of the betting placements.
License Fee Each applicant should pay a fixed fee at EUR30.000 for a one year licence or EUR45.000 for a two year license. A Class B license will be subject to renewal for a further one or two year period depending on the validity of the initial application and on the fee paid. The NBA has, however, the power to suspend the said license for a period of 6 months in the case where the licensee violates the terms of the license and/or in case of violation of the economic standards and obligations.
Due Diligence It is widely known that based on Anti-Money Laundering Legislation a service provider must, in order to carry out a transaction or enter into a business relationship with another perform a thorough customer due diligence procedure for client identification purposes (Know-your-client – KYC). With that said, Article 56 of the law, extends the due diligence obligations of the Class B Licensee and the following information need to be obtained for a player to be able to be registered: Proof that the player is over 18 years old Identification of a player Proof of residence address Declaration that the player is fully aware of the terms and conditions of the betting provider
Tax and Contribution Implications Article 71 of the Law imposes to the licensed bookmaker a gaming tax and a contribution to the NBA for the bets carried out. Particularly, a 10% tax is imposed, on the amount of betting in every accounting period, on the net proceeds from the licensed bookmaker’s bet for the corresponding period. Furthermore, a 3% tax of the net proceeds from bets for the corresponding accounting period is levied as contribution to the Authority.
 The Betting Law of 2012 – www.nba.gov.cy/wp-content/uploads/TheBettingLawof2012.pdf  Directive 98/34/EC – http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CONSLEG:1998L0034:20070101:EN:PDF  Directive 2006/96/EC – http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex:32006L0096  National Betting Authority – www.nba.gov.cy  Directives Website – http://nba.gov.cy/archiki-selida/rythmistiko-plesio/odigies/