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Curacao’s Legal Transformation: A New Chapter in Gambling Regulation

Submitted by 2winpower on Thu, 05/23/2024 - 23:02

For a comprehensive understanding of the evolving landscape surrounding registration processes, 2WinPower presents an insightful exploration of practical strategies for obtaining Curacao licensing. Delve into detailed insights covering the current scenario, recent shifts, and forthcoming amendments to gain a comprehensive understanding of this destination. Partner with 2WinPower for turnkey solutions and experience robust support from our adept legal team alongside other project development components.

Curacao Gambling Reform
Over the past two decades, Curacao has been regarded as a prime destination for obtaining flexible licenses to operate globally. However, recent legislative changes have reshaped regulations and imposed new constraints, prompting a shift in the jurisdiction's regulatory framework. Various factors have necessitated this reform, including:

  • Regulatory Pressure: International bodies like the Financial Action Task Force on Money Laundering (FATF) and the Organisation for Economic Co-operation and Development (OECD) exerted pressure on Curacao to enhance its regulatory framework.
  • Economic Challenges: The economic fallout from COVID-19 prompted the government to reassess gambling legislation in exchange for financial assistance from the Netherlands.
  • Enforcement Concerns: Concerns regarding the island's anti-money laundering efforts and lax enforcement against tax avoidance schemes have underscored the need for regulatory reform.
  • Increased Scrutiny: Cease-and-desist letters and fines imposed on Curacao-certified operators by foreign regulators have drawn attention to compliance issues within the jurisdiction.

These factors, coupled with the efforts of master licensees to enforce stricter requirements on their subsidiaries, have catalyzed the need for regulatory reform.

Background of the Reform
Curacao emerged as a leading hub for iGaming businesses in the 1990s, bolstered by the introduction of streamlined registration processes and the master licensing scheme. However, the exponential growth of the iGaming sector outpaced regulatory support, leading to regulatory gaps and compliance challenges.

Transitory License
As regulatory measures are being implemented, Curacao offers temporary permits known as transitory licenses. These licenses are issued while the new legislation is pending adoption, providing operators with temporary authorization to operate.
Key aspects of the transitory license include:

  • Comprehensive Coverage: The temporary permit encompasses all online verticals, including casinos, bookmakers, and live gaming.
  • Standard Application Process: Operators must adhere to standard application procedures, including form submission and document presentation.
  • Operational Requirements: Operators must establish a physical presence in Curacao, certify their content with independent labs, and undergo six audits within the first six months.

Upcoming Changes and New Legislation
The forthcoming regulatory changes in Curacao blend elements of the existing regime with concepts akin to Malta's regulatory framework. Key highlights of the new legislation include:

  • Direct Licensing: The new law emphasizes direct licensing by the regulator, enhancing control and tax collection efforts.
  • Enhanced Compliance Measures: The legislation introduces stringent background checks on shareholders, ultimate beneficiary owners (UBOs), directors, and key personnel.
  • White Label Operations: Despite initial concerns, the model of White Label operations remains available, allowing operators to sublicense their licenses.

The evolving regulatory landscape in Curacao underscores the importance of increased compliance and transparency. By streamlining registration processes and enhancing compliance measures, Curacao aims to foster a regulatory environment conducive to sustainable growth and integrity in the iGaming sector.

Navigating Curacao’s Licensing Dynamics
Curacao's licensing allure lies in its potential to offer legal access to diverse markets. However, this privilege isn't without its challenges, as other countries often scrutinize Curacao-based operators seeking entry into their regulated domains.

The forthcoming legislation presents two potential approaches to address this issue:

- Cherry-Picking Strategy: Curacao may adopt a selective approach, reacting to operators based on their compliance levels. While this may not be ideal for businesses, it aligns with Curacao's goal of maximizing fee and tax revenue.
- Enforcement-Based Approach: Alternatively, Curacao may enforce regulations on operators with a history of non-compliance beyond its jurisdiction's borders.

The country's authorities are expected to address complaints from other regulators promptly. However, the extent of regulatory enforcement remains uncertain, with each complaint requiring due consideration within a specified timeframe.

Transition Period and Compliance
In the initial two years post-reform, Curacao's regulatory body will ascertain its regulatory scope. Balancing industry interests and global expectations will be paramount during this period.

Furthermore, Curacao-based operators are advised against servicing certain countries, including the Netherlands, the US, and France, due to regulatory complexities.

Compliance with local regulations is a critical aspect of operating under a Curacao license. While specific guidelines remain forthcoming, upcoming amendments will likely outline essential operational protocols for license holders.

On-Site Presence and Substance Requirements
A significant prerequisite for obtaining a Curacao operating license is establishing physical presence within the jurisdiction. This concept, known as substance, is vital for international tax compliance and necessitates tangible economic activity within Curacao's borders.

The new gambling law will mandate compliance with substance requirements, including local employment and dedicated office space. Operators will have a grace period of up to four years to align with these requirements, aimed at stimulating economic activity on the island.

Key Takeaways from Curacao’s Legal Evolution
Recent regulatory shifts in Curacao signify a significant departure in its operational landscape. Understanding these changes is crucial for stakeholders:

  • Transitory Licensing System: Temporary permits will facilitate operations until the full enactment of the LOK decree in autumn 2024.
  • Enhanced Oversight: Stricter regulations will enforce compliance through audits, background checks, and operational requirements.
  • Global Influences: Economic pressures and international critiques have driven these legal reforms.
  • Direct Registration: The LOK decree will transition to direct registration, streamlining enrolment and enhancing transparency.
  • Emphasis on Compliance: New laws will introduce stricter compliance measures to align with global standards.
  • Physical Presence Requirement: Operators must demonstrate local economic activity to comply with evolving tax laws.

Curacao's evolving regulatory framework reflects its commitment to modernize its iGaming sector and align with international norms.