Curacao’s Legal Shift: A New Era for Gambling Adherence and Enforcement

For a detailed understanding of the changing situation around the registration process, 2WinPower presents an in-depth guide on practical approaches to Curacao licensing. Detailed coverage of the current situation, recent shifts, and upcoming amendments will help entrepreneurs grasp a complete picture of the destination.

Curacao Gambling Reform

For the last 20 years, the jurisdiction has been considered a destination for a flexible licence application to operate globally. The recent changes in the law have shifted the regulation and imposed new restrictions on this diversity. A lot of state authorities all over the world tend to forward their complaints to Curacao master licensees.

Besides general dissatisfaction, the reform also became necessary due to the following reasons:

• regulatory pressure from international bodies like the Financial Action Task Force on Money Laundering (FATF) and the Organisation for Economic Co-operation and Development (OECD);
• international debates about the future of Curacao’s iGaming sector, considering its significant contribution to the gross domestic product;
• economic challenges because of COVID-19, requiring the government to revise gambling legislation in exchange for financial aid from the Netherlands;
• island’s insufficient anti-money laundering efforts and lax enforcement against tax avoidance schemes;
• cease-and-desist letters and fines imposed on Curacao-certified operators from foreign regulators.

On top of that, master licensees, despite the lack of the current regulations, try to impose new requirements for their subsidiaries, taking into account the international development of AML standards of any financial norms.

Background events of the reform:

• Curacao as a leading hub for iGaming businesses since the 1990s;
• introduction of the NOOGH legislation in 1993 for a streamlined registration;
• the presentation of the master licensing scheme in 1996;
• an immediate spike in the subsidiaries due to the iGaming popularity growth;
• high gambling transaction volume without proper regulatory support;
• no exact information about the number of registered sublicensees.

The situation within the jurisdiction has become particularly tight in recent years. The regulators can neither understand the exact number of licensees nor can they perceive more about their compliance with the requirements. This became one of the triggering reasons for introducing the new regime.

Transitory Licence

While the new regulative measures are being implemented, the jurisdiction decided to provide the possibility to get new permits temporarily. Currently, the authorities issue a so-called transitory licence. The new legislation has not yet been adopted, so permits are provided based on the sum orders of the Ministry of Finance that right now is handling all the questions.

Key takeaways of the transitory licence:

1. The temporary permit covers all online verticals (casinos, bookmakers, live, etc.).
2. The application process is standard, with the filling out of the forms and presentation of the package of the documents.
3. The operator must be established in the country, have all its content certified by independent labs, and be ready to undergo 6 audits in the first half of a year.
4. Usual requirements like responsible gambling principles and marketing standards are also included in the to-do list.
5. The processing time is around 2 months but can be less depending on the assistance of the applicant.
6. The licence is viable for a year with a one-time payment of $55,000.

Companies with sublicences active until autumn 2024 will have up to 6 months to apply for a direct permit under the LOK framework. Organisations whose documents expire before autumn 2024 should apply for a transitory licence and operate under it until the LOK regulations take effect. The terms of the temporary document are 85–90% similar to what will be installed according to the new law.

Upcoming Changes and New Legislation

The implemented regulative measures are not entirely clean-sheet laws and notions. They are a mixture of the old regime and resemble a bit the legal boundaries of Malta.

The key idea of this new instalment is direct licensing by the regulator, which means increased control and tax collections. A better accounting for fees will help understand how many operators are there on the island. It will become easier to get a grasp on them if there is suspicion that they are doing something wrong.

Key takeaways of the new law:

1. The work under the upcoming LOK legislation has been in progress since late 2020.
2. The Ministry of Finance presented the draft in December 2023.
3. Starting on April 30, 2024, the existing master licences will not be extended, and no new subsidiaries can be acquired.
4. The LOK legislation is expected to be adopted in July-August 2024 and will take effect in autumn 2024.
5. The operational permits will be issued exclusively to Curacao-based organisations.
6. The licensing fee will be at the level of $55,000 plus $275 per domain with 3 months to obtain the document.
7. The permit will be considered eternal and cannot be transferred.
8. Obligatory background checks on shareholders, ultimate beneficiary owners (UBOs), directors and key persons will be conducted.
9. Standard certifications, insurance of winnings, responsible participation adherence, and other typical nuances must be covered.

The model of White Label operations will still be available. Every operator may be able to add how much domain they would like to into their licensing application. It was initially a concern when the first draft of the law was published due to the unclear wording that “the permit may not be transferred, shared, or otherwise divided between several parties.” It may be deduced that the White Label industry may see some issues because its essence just means letting somebody else use the licence. However, it seems for now there is no issue here.

Increased compliance is particularly important from a practical point of view. There is nothing extraordinarily new here, and it is more or less generally accepted practices that can be seen in the world, especially in Europe.

The vivid additions concern the following aspects:

• extra limits for minors;
• more assistance for vulnerable people;
• clearly established player thresholds;
• additional safeguards like minimum or maximum bets or RTP per session.

The regulator will also keep a sharper eye on the issue of UBOs, directors, and other key personnel running the gambling company. The structure will have to include 2 stakeholders and 2 shareholders to be checked. Also, at least 2 directors are to be appointed and 2 UBOs must hold shares in the company or be directly involved in that brand’s investment.

The simpler the thing is, the easier it is to run. None of the businesses want to have the licence application to last a year or more. The transparency of real UBOs and structures will ensure the decreased time for registration due to the cut investigation period and full compliance.

Curacao’s Global Reach and Reaction

One of the most appealing aspects of the country’s licence is the possibility to cover different destinations on a legal basis. But everything has its costs, and other countries are not particularly happy when Curacao-based operators are trying to get access to their local regulated market.

The upcoming legislation implies 2 options on how this typically resolves:

1. The Curacao regulator will try to implement a so-called cherry-picking approach and will try to react to the most aggressive or just compliant country-based operators. This is not optimal for the business, but it is quite practical for the jurisdiction itself. The idea of Curacao is to have as many distributors as possible to have the biggest amount of fees and tax revenue.
2. The second approach is expected to be in the spirit of the law. Curacao is just enforcing regulations on each endeavour of operators who have been seen doing something wrong outside the jurisdiction.

The country’s authorities may not just leave complaints from other regulators unattended. However, to what extent will the regulator enforce this? Ultimately, each complaint will have to be addressed in a certain period.

In the first 2 years following the start of the reform, the newly established regulator in Curacao will try to understand how much power it has. It will be crucial to perceive what process they can influence internally and how to balance the interests of the industry as well as the outside world.

At the same time, there is an established list of countries where it would not be advisable for Curacao-based operators to work. These are the Netherlands, the US, France, and others, where it is common sense not to provide services at all.

When an entrepreneur obtains the licence, they have to comply with the established terms. The permit implies that it is critical to operate taking into account the local regulations. Not much is said apart from that on this subject. So, the upcoming amendments will add some guidelines or at least safeguards to be aware of when operating under the Curacao jurisdiction.

On-Site Presence and Substance Requirements

One of the critical prerequisites to obtaining a local working permit is the necessity to occupy a place within the boundaries of the jurisdiction physically. This is called substance, which is crucial for international tax law. Basically, it implies being in the place of making money.

In the global context, it means that an entrepreneur may establish a company somewhere in the offshore zone and get near zero tax treatment while operating worldwide. This is integral for Curacao in particular because one of the biggest issues with B2C operation here is accepting and processing payments from clients. It is vital to prove to international banks that the operation complies with the established substance requirements.

An ideal presence for a gambling brand would be a physical office with 10–30 people employed locally in a spacious branded building and another 5–10 international contractors working remotely. The new gambling law will introduce the requirement to comply with substance in terms of people employed in Curacao and separate office space. The company will need to have equipment (including servers) as well as people coming in and working from there.

After the law is introduced, Curacao-based operators will have up to 4 years to align the full-fledged requirements regarding the substance. It is not something fundamental right now, but if an entrepreneur plans on getting a local licence for the sake of continuing to function with the country’s permit, it is just the thing to do now. All these new demands related to substance and presence in Curacao are intended to attract money into the economy of this island.

The Main Things about Curacao’s Legal Changes

Critical takeaways from these legal adjustments to help stakeholders understand the upcoming environment they will navigate:

• Curacao has introduced a transitory licensing system to run under temporary permits for brands to function until the full enactment of the LOK decree is anticipated by autumn 2024.
• The reform is foreseen to enhance oversight, increasing the regulatory body’s ability to enforce compliance with audits, background checks, and stricter operational requirements to fight money laundering and tax evasion.
• Factors influencing these legal changes include economic pressures from the COVID-19 pandemic, critiques from international bodies, and the need for financial aid from the Netherlands.
• The new LOK decree transitioning in 2024 abolishes the extension of existing master licences and shifts to direct registration to streamline enrolment, improve transparency, and increase tax and fee collections.
• With the upcoming laws, better compliance will be pushed, including more limits for minors, aid for vulnerable groups, and operational thresholds to align Curacao’s practices with global norms.
• A new emphasis on physical presence and economic substance within the jurisdiction aligns with global tax law changes, making platform owners demonstrate local operations to comply with the new decree.

These shifts are indicative of Curacao’s efforts to modernise its iGaming landscape and align with globally established norms.