1. Presentation to the “Online Gambling Workshop” - Portfolio Committee on Trade and Industry, 2 March 2012 (Cape Town) The Banking Association Perspective S Grobler 2 March 2012 File: 95754

2. 1 INTRODUCTION  Why regulate online gambling? o Consumer protection? o Revenue income?  Is restrictive regulation of online gambling feasible? o Local vs. “foreign” providers o Local vs. “foreign” punters o World Trade Organisation rules (USA vs. EU compromise) o Commission Report – “a bigger role for the banks”?

3. 2 REGULATION AND COMPLIANCE  Reality vs “miracles”  Compliance costs, and who pays?

4. 3 INTERNATIONAL & LOCAL PAYMENTS SYSTEMS  Facilitate transactions, not restrict them  International standards & conformity  Efficient, reliable, secure, low cost, interoperable  Account number priority  Name screening (UN, OFAC)  false positives  Common Monetary Areas

5. 4 BANKING & PAYMENTS ISSUES re ONLINE GAMBLING (1)  Punter account types o Cheque, credit card, savings, domestic and international  Payment channels o EFT, Credit and debit card, prepaid card, mobile phone, internet, 3 rd party intermediaries, vouchers all developed to facilitate safe & reliable eCommerce

6. 5 ISSUES Continued (2)  Credit card – Merchant acquirer o KYC on account take-on for local “licenced” or “illegal” service providers o Merchant classification codes o Resort services consolidation (e.g. hotel, dining room, casino, golf, online gambling) o Account name confusion o Common Monetary Area o Payouts/reverse cash flows

7. 6 ISSUES Continued (3)  Card issuer o Merchant classification codes o Physical presence of card holder  Within the country  Outside the country o Card holder not present  Transaction volumes Bankserv “off-us” – 1.89b transactions per year average 60 per second, peaking at 152 per second on 23/04/11 (+ 80% of total transactions) (PTO)

8. 7  Account numbers vs. account names o Payment systems use numbers, authorities restrict on names o False positives o Volumes

9. 8 ISSUES Continued (4 )  “Illegal” online gambling vs. “legal” online betting o Bank confusion (“stop all online transactions”) o Difficulties in opening accounts for betting operations  Consumer perceptions  Moral issues o Child pornography vs. online gambling & lottery tickets & bingo & poker

10. 9 ISSUES Continued (5)  Alternative payment methodologies o Internet payments providers (e.g. PayPal, uCash)  Vouchers  Apple iTunes restrictions on SA

11. 10 CRIME PREVENTION  “Normal” eCommerce risks  Probity checks & controls on licensee shareholders and management  Threshold controls on punter behaviour (session wager limits, restrictions on winning payouts)  Casino lists of “prohibited” gamblers  Punter KYC and controls Control via online gambling service provider

12. 11 UNDER-AGE CONTROLS  Bank accounts – KYC controls  Who is actually using the computer, and where?  Parental control

13. 12 SOLUTIONS (1)  Local Merchant acquirer – Do-able  Licenced operators  Denial of service to identified illegal local operators  Local/resident punters – Not reasonably Do-able  Volumes, account numbers, international systems, foreign-originated transactions, alternative structures  Over-riding suspicious transaction reporting regime still prevails for “accountable institutions”

14. 13 SOLUTIONS continued (2)  “New systems” vs. “Old” systems o New online gambling licences vs. established, interoperable payments systems  Consumer education re allowable vs. prohibited transactions

15. 14 DANGERS AHEAD  International competition & WTO challenges  Excessive local compliance burden vs. “free to use” international sites  Who is actually on the keyboard/interactive device, and where?

16. 15 THANK YOU.