Curacao’s Regulatory Transformation: A New Chapter in Gambling Management

At the core of every iGaming initiative is the necessity for a dedicated licence from a credible authority. Curacao emerges as a leading choice among various global locales, known for its cost-effectiveness in the first place. This makes it an ideal option for newcomers to the niche as well as a reliable destination for growth among established ventures.

For a comprehensive insight into the evolving dynamics of the licensing process, Casino Market offers a thorough guide on effective strategies for obtaining a Curacao permit. It provides an extensive examination of the present conditions, recent changes, and future modifications for business owners to understand the landscape.

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Curacao Gambling Overhaul

For the past two decades, the destination has been recognised as a paradise for securing a flexible gambling licence that facilitates global operations. However, recent legislative updates have redefined regulatory practices and introduced stricter controls.

The need for reform was driven by several key factors:

• intensified scrutiny from international organisations such as the Financial Action Task Force on Money Laundering (FATF) and the Organisation for Economic Co-operation and Development (OECD);
• ongoing global discussions about the future of Curacao’s iGaming sphere, given its impact on the nation’s well-being;
• the economic repercussions of the Coronavirus pandemic, which prompted the government to overhaul gambling laws in return for financial support from the Netherlands;
• the island’s inadequate measures against money laundering and its lenient approach to combating tax evasion;
• actions like cease-and-desist orders and penalties levied on Curacao-based operators by overseas regulators.

Moreover, despite existing regulatory frameworks, master licensees are beginning to enforce new norms for their subsidiaries. This helps align with global advancements in anti-money laundering and financial guidelines.

The historical context of the reform:

• Curacao’s prominence as a key centre for iGaming enterprises starting in the 1990s;
• the introduction of the NOOGH legislation in 1993, which simplified the registration process;
• the establishment of the master licensing system in 1996;
• a surge in subsidiaries following the rise in iGaming demand;
• high volume of gambling transactions with insufficient oversight;
• ambiguity surrounding the actual number of registered sublicensees.

In recent years, the situation has become particularly strained within the jurisdiction. Regulators struggle to ascertain the exact number of licensees and their adherence to the established guidelines, prompting the introduction of the new control framework.

Temporary Operational Permit

As new regulatory adjustments are being rolled out, Curacao authorities have introduced an option for acquiring provisional access to gambling services presentation. The commission is now issuing what is known as a transitory licence. The new framework has not been fully enacted yet, therefore, these permits are being granted following provisional directives from the Ministry of Finance.

Key aspects of the transitory document:

1. The proof of registration encompasses all online gambling categories: casinos, sportsbooks, and live platforms.
2. The application remains unchanged and requires the completion of standard forms and submission of a comprehensive document set.
3. Candidates must be based within the state, have their content verified by certified laboratories, and undergo 6 audits in the first 6 months.
4. Essential obligations, such as adherence to responsibility practices and marketing rules, are mandated.
5. The time of approval generally revolves around 2 months, although this can vary with the level of cooperation from the applicant.
6. The licence is valid for one year and requires a one-time fee of $55,000.

Enterprises holding sublicences official until autumn 2024 are given up to 6 months to secure an actual permit under the LOK guidelines. Companies with documents expiring before autumn 2024 are advised to secure a transitory licence and operate under its provisions until the LOK regulations are implemented. The conditions of the temporary permit align closely with those anticipated under the new legislation.

Currently, ventures lacking a sublicence may only apply for a transitory permit and operate under its terms until the introduction of new options.

Forthcoming Adjustments

The approaching changes are not entirely new concepts. They integrate the aspects of the existing framework with elements reminiscent of Malta’s legal system.

The principal focus of this new legislation is the direct issuance of licences by the authority, which will enhance oversight and improve tax revenue collection. This more direct approach will also facilitate better tracking of operational fees and simplify monitoring, particularly if there are suspicions of misconduct.

Key insights into the new legislation:

1. Development of the impending LOK law has been ongoing since late 2020.
2. The Ministry of Finance unveiled the draft in December 2023.
3. Effective April 30, 2024, the renewal of existing master licences will cease, and the formation of new subsidiaries will not be permitted.
4. The LOK law is slated for approval between July and August 2024 and is expected to come into force in autumn 2024.
5. Licences will be granted exclusively to organisations based in Curacao.
6. The fee is set at $55,000, plus an additional $275 per domain, with a three-month timeframe to secure the licence.
7. Permits will be permanent and non-transferable.
8. Mandatory background investigations will be conducted on shareholders, ultimate beneficial owners (UBOs), directors, and key personnel.
9. Compliance with certifications, ensuring payout of winnings, adherence to responsible gaming, and other regulatory essentials are required.

The White Label model will continue to be an option. Operators will be able to include multiple domains in their licence applications. Initial concerns arose with the law’s ambiguous draft phrasing that licences “may not be transferred, shared, or otherwise divided among multiple parties.” This led to worries about potential complications for the White Label sector, which inherently involves allowing another entity to utilise a permit. However, current interpretations suggest that these concerns may not pose a significant issue.

Enhanced compliance holds practical significance. Universally recognised implementations will be included, particularly those prevalent in European regions.

Notable improvements:

• stricter limits against underage participation;
• increased support for vulnerable individuals;
• clearly defined user limitations;
• minimum and maximum betting boundaries;
• specified return-to-player rates per session.

Regulatory authorities will intensify investigations over ultimate beneficial owners, directors, and other key figures involved in the management of gambling operations. The required corporate structure must now comprise at least two stakeholders and two shareholders. A minimum of two directors appointed and two UBOs either holding shares or having direct investment in the project.

Process simplification is key to operational efficiency. Companies generally seek to avoid protracted licensing durations exceeding a year. By ensuring the transparency of real UBOs and corporate structures, the registration timeframe can be significantly reduced due to shorter investigation periods and full compliance.

Curacao’s International Influence and Responses

A key benefit of the country’s licensing is its ability to legally engage across various global markets. However, this reach comes with its challenges, as not all nations are receptive to Curacao-based operators entering their premises.

The forthcoming legislation outlines two primary strategies for addressing this:

1. Curacao authorities will adopt what might be described as a cherry-picking strategy. They will focus only on responses to the most assertive complaints. While not necessarily ideal for business, this method proves practical for maximising the jurisdiction’s revenue through fees and taxes by accommodating a large number of operators.
2. The second strategy involves strict enforcement of regulations. This particularly concerns any Curacao-based operators found to be in violation beyond the state.

Local authorities are expected to take action on charges from other regulatory bodies, though it remains to be seen how rigorously these will be enforced. Every complaint must be addressed within a specified timeframe.

In the initial 2 years of the reforms, the new regulatory body in Curacao will assess its effective scope of authority. It will have to determine its internal influence and how to balance both local interests and international expectations.

Additionally, there are specific countries, including the Netherlands, the US, and France, where it is strongly advised against Curacao-based operators conducting business. Legal or practical considerations explain the inability to enter these markets.

Upon acquiring a licence, entrepreneurs must adhere to the stipulated conditions, which emphasise the importance of complying with local laws. While the existing regulations provide little beyond this, the anticipated amendments are expected to introduce further guidelines and safeguards for those operating under Curacao’s jurisdiction.

Local Presence and Substance Definition

A fundamental condition for securing a Curacao operational licence involves establishing a physical office within the area. A concept known as “substance” is critical for compliance with international tax laws. Essentially, this means having a tangible presence in the location where the revenue is generated.

Globally, this setup allows a business owner to incorporate a company in an offshore zone, benefiting from minimal tax obligations while operating internationally. This is particularly crucial in Curacao, especially given the challenges associated with B2C operations like processing payments from clients. Demonstrating to international banks that the business meets substance requirements is essential.

The ideal setup would involve maintaining a physical office employing 10–30 local staff in a well-branded, spacious environment, alongside another 5–10 international contractors who work remotely. The upcoming gambling legislation will mandate compliance with these substance requirements, including the number of on-site employees and dedicated office space. The business must also maintain equipment, such as servers, and ensure staff members are physically present.

Once the law takes effect, operators based in Curacao will have up to four years to meet these substance criteria fully. While not immediately critical, addressing these requirements promptly is advisable for entrepreneurs aiming to maintain activity under a local licence. Introducing these new presence regulations aims to funnel capital into Curacao’s economy to enhance its financial infrastructure.

The Main Things about the Innovative Legislation

The upcoming revisions represent a significant shift aimed at enhancing regulatory oversight, increasing transparency, and aligning with international guidelines. As Curacao adapts its legal framework, these changes are designed to ensure better integration into the global arena.

Key highlights of the anticipated amendments:

• Curacao is issuing transitory documents as it shifts to a new framework for existing and new operators to function while the changes are being finalised.
• The upcoming LOK bill emphasises direct licensing, which will facilitate increased control over operations and improve tax collection.
• Curacao’s registration process will continue to enable international operations but with stricter compliance requirements.
• Future regulations will necessitate a significant physical presence in the state to comply with international tax laws and elevate economic contribution.
• Operators have a transition period of up to 4 years to fully align with the new prerequisites, which is an ample time for adaptation.

These adjustments reflect Curacao’s proactive approach to a safer and more reliable gambling environment. Meanwhile, proficient assistance from an experienced legal team will ensure platform owners adhere to all nuances and function under the relevant guidelines.

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James Burton The Casino Market partner, the owner of the gambling establishments’ network

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