#cypruslottery #gaming #coi #aleo

​Vlaemminck & Partners BV BVBA operating under the brand name of PharumLegal and Angelides, Ioannides Leonidou LLC - LLPO Law Firm, (acting as the legal experts of the KPMG Ltd led advisory team, also including, QLot Consulting AB and J&E Davy Holdings Limited) have been selected by the Ministry of Finance of Cyprus and the Republic’s Privatization Unit as the retained consultants of the Cyprus Government for the provision of professional services regarding the private sector participation in the National Lottery.

Pharumlegal and LLPO Law Firm will offer their legal services to:
(a) provide a legal analysis of the lottery market in Cyprus and the relevant trends in the global gaming market,

(b) identify, analyse and present the private sector participation options and respective legal structures regarding the National Lottery,

(c) assess and adequately develop Cyprus’ existing legislative and regulatory framework pertaining to the lottery activities and any relevant impending legislation and draft/ prepare/ amend all necessary underlying laws and regulations and secure their enactment,

(d) manage all legal aspects of the Project from design, initiation, preparation, execution and management up to the financial close of the Transaction

About PharumLegal - Vlaemminck & Partners BV BVBA (www.pharumlegal.eu)
Pharumlegal, is a leading law firm, with its headquarters located in Brussels, Belgium, specialising in the lottery industry and a key contributor to the relevant EU and national gaming legislations. The lawyers of the firm have been advising governments, regulators and operators all over Europe for the past 30 years, and have been involved in every gambling case at the Court of Justice of the EU since 1994.
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About LLPO Law Firm - Angelides, Ioannides, Leonidou LLC (www.llpolawfirm.com)
LLPO Law Firm is a leading law firm, with its headquarters located in Nicosia, Cyprus, practicing in all major areas of commercial and financial services law, providing amongst other services legislative and regulatory compliance services and advice on commercial law, lotteries, gambling and gaming, intellectual property, corporate and company law.

For more information contact Christos O. Ioannides or Andreas N. Leonidou.

Following the enactment of the new Betting Law 2012, the newly formed National Betting Agency, approved and published the application forms for a Class A Betting Services License. The forms include the Class A Operator application form, the Class A representative application form and the Class A Authorised Premises application form.

It is reminded that the new legislation provides for two Classes of lawful betting services. Class A Betting Services is the license designed for services that are to be provided on – shore through local premises by the operator himself or his authorized representatives. The second Class of lawful betting services namely Class B Betting Services concerned those betting serviced provided online and have no connection to an on shore activity.

The applicable requirements for a Class A betting activities license in Cyprus are the following:

1. Incorporation of Corporate Entity (Cyprus) limited by share

Class A Betting Services License is granted only to corporate entities. The entity may be either a Cyprus company or a foreign company limited by shares. In case of an overseas company is intended to be used, a Cyprus Branch needs to be established. In either case the main activity of the company must be betting services and its issued and paid up share capital must be at least of Euro 500.000. This means that the shareholder must have proof of paying the capital in the company which capital may be used for materializing the company activities and services.

That company as a matter of law and practice will need to have:

• One or more registered Shareholder(s). The registered shareholder(s) may be the real beneficiary(ies) or a trustee shareholder. Cyprus law recognizes the medium of a trustee shareholder holding the shares on behalf of the real beneficiary. In any case there is a respective duty on the company to declare the real beneficiaries having more than 5% interest in the share capital of the company. Strictly speaking shareholders are not responsible for the activities of the company and in any case their liability will not exceed the unpaid amount of their share in the company.
• One or more registered Director(s). The registered director(s) may be the real beneficiary(ies), an appointed third party, or a nominee director. The directors of the company are exercising the powers of the company and are responsible for the offences committed in so far as they are aware of the circumstances giving rise to the offence.
• One registered Secretary. A list of the duties of the secretary can be found in the document titled Company’s Secretary Responsibilities. Briefly, the duties comprise of statutory reporting and secretarial compliance.
• An official Registered Address. This is the address which the company declares to the authorities in order to receive all relevant communication directions and requests. It is always advisable that the registered address be connected in a way to the registered secretary so that compliance and information be exchange swiftly

The people that appear in this company must share the following characteristics:

1. They must have no criminal conviction for a related offence.
2. They must have completed their 25th year of age
3. They must be proper for the appointment, something that will be judged on their current financial condition and record, such as their financial means available from the provision of the relevant services and in case of previous convictions the nature of the conviction and the height of the imposed penalty.

Apart from the company’s officers Cyprus law and/or practice requires from a corporate entity to have:

External Auditors who proceed with the statutory audit of the financial affairs of the company and prepare the annual accounts of the company.

Even though not specifically provided by legislation it is advisable that a company has proper legal consulting available at a daily basis.

2. Bank Guarantee

Any application for a Class A Betting Services License must be accompanied by a bank guarantee for the amount of Euro 550.000 from a local or EU banking or cooperative institution with effect up to 6 months after the expiry of the intended period of the license (i.e one or two years). The law specifically provides that the said bank guarantee must create an irrevocable liability to the bank or cooperative institution to pay any amount which the licensee is required to pay but nevertheless neglects to pay, to:

1. Any player who participating in bets and won thereunder,
2. The Republic of Cyprus as bet tax,
3. The National Betting Committee as contribution.

The law also provides that should the Committee acknowledges that the bank guarantee does not cover the 10% of the annual turnover of the said company, it may request the raising of the guaranteed amount up to such amount so as the 10% of the annual turnover is covered.

3. The ability and suitability of the Class A recipient

The company to be licensed must be able to exhibit:

• that it has or is able to retain, sufficient funds and to maintain a minimum reserve which ar fixed from the Committee, so that the payment of players wins-proceed are safeguarded,
• that it maintains a proper (computerized) control system and audit control of the services provided,
• that it applies the terms and conditions which were set by the committee to safeguard the players,
• that it ensures the suitability of the operation of any equipment used,

4. Computerised System of Slip Marking

The applicant for a Class A License needs to submit an application to the Committee to have its computerised system of slips’ marking approved. In general all prescriptions of the relevant system must be described but in particular the application needs to describe,

1. the General procedures that will be followed,
2. the particulars and prescriptions, of the software to be used
3. the accounting systems and procedures,
4. the procedures and the samples for the maintenance, security, upkeep and transfer of the equipment,
5. the procedures for the creation and maintenance of the security installations, including the general compliance and internal controls in relation to the access to critical systems,
6. the disaster recovery plan,
7. satisfactory data maintenance system
8. and any other information that the Committee might request.

The above also apply in cases of amending or altering the computerised system. The costs of audit of the computerised system will be the applicant’s burden but currently the Authority does not disclose such costs.

It should be noted that the necessary equipment, which includes the electromechanical parts and the software of the computerised system for slips marking should be located and remain located in the Republic of Cyprus.

5. Application and License Fee

For a one year Class A license the fee is Euro 30.000 and Euro 45.000 for a two years license. For a one year representative license the fee is Euro 2000 and Euro 3000 for a two years representative license.

6. Annual Accounts

Every Class A licensee needs to submit to the authority the latest by the 30th of June every year, annual accounts for the previous year, audited from an accredited auditor which must include, the total amount that has been paid by the licensee in relation to bets placed during the said year, the total amount of pay-outs irrespective of the period in which they were placed, the names of the authorised representatives and particulars of sums paid to them as commission and any other information that may be requested by the authority.

7. Books and records

The licensee is responsible to maintain in a specific book the particulars relevant to every betting slip, or other document ;or electronic data which was delivered to the licensee, and to submit declaration of the amount collected or the amount that has become collectable either by himself or any of his representatives.

8. Betting Tax

Every licensee pays to the Republic of Cyprus a 10% tax on the clean revenue from bets and a 3% contribution on the clean revenue from bets for every calendar month. The Clean Revenue is determined as an X minus Y, whereas X equals to the total amount paid to the licensee in relation to bets held by himself and Y equals to the total amount of payouts to winning players. Betting tax is payable at the end of every calendar month.

Since the birth of the Republic of Cyprus in 1960, Cyprus legislation has prohibited the engagement in games of chance or chance and skill for money or monetary return. Since 1960, Cyprus gambling legislation has had 6 amendments, the last taking place in 2006. Despite the provisions of the recently adopted and well publicised Betting Act 2012, much of the old legislation remains unaffected, if not reinforced.

Efforts to ban any gambling activity have been constant by the Cyprus Authorities. In 1996, a new law was enacted the main purpose of which was to control the public use of various machines programmed to offer games of skill and chance. This law regulated certain touchscreen machines offering the ability to engage in table card games and other games of skill and chance. Despite the legislative concession of regulating the use of these machines, the law specifically prohibited the public use of any machine, which was offering profit or other monetary return and specifically banned the use of slot machines, poker machines, horse race machines etc.

In addition to the above prohibition, the law specifically prohibited any attachment, peripheral, or computer software, which can be applied and operated through a screen, which as a whole was resulting in a machine offering profit or monetary return to the player. The above two laws constituted the entire gambling legislation in Cyprus..

Specific sport betting regulation has existed since 1972,, which regulates collective bets. This law only addresses sports betting and not gambling, which as mentioned above remained completely prohibited. The main feature of the betting legislation was that it prohibited acceptance of bets by any person except those licensed to do so by the Ministry of Finance of the Republic who was the competent authority to review, accept and overlook the operations of sport betting enterprises.

During the years 2002 -2010, Cyprus witnessed the gradual but widespread development of gambling shops advertised as casino kiosks. The reason for their proliferation was simply the inadequate wording of the existing legislation which whilst prohibiting clearly on – premises / off- line gambling, it did not provide anything for remote / on-line gambling. As such it was virtually impossible for the State and the Police to effectively prosecute providers of online gambling. Their inability was an evidentiary inability to prove at a criminal court what, where and by whom the prohibited, (albeit remote / online), gambling service was provided.

This difficult to satisfy evidential burden, resting on the prosecution’s shoulders, was even heavier to discharge, if one was to consider the idea of a European (primarily Maltese) lawful gambling operator appearing behind the gambling services in question, that were provided at these shops. This together with all issues of EU free movement of services that the defense lawyer would raise to the Court contributed in the reluctance to prosecute all these services.

As a middle ground, the Attorney General issued an opinion, which both the police and operators saw as a ‘directive’, setting out circumstances under which the provision of on-line gambling services was officially permitted. This was where the operator held a valid gambling licensee from any European jurisdiction. This opinion has never received judicial approval but nevertheless it was adhered by the police as if it were law.

The major problem with this opinion was that the online gambling in Cyprus was not subject to any State control and the State was not able to approve or disapprove who could engage in this business. The public was further denied the benefit of consumer protection legislation and anti-money laundering procedures. Furthermore, this opinion did not give the State power to tax the proceeds from these gambling services.

These two problems were the main reasons behind the parliamentary deliberations on preparing the draft new legislation. Indeed the deliberations took more than 2 years to conclude and their final product was a complete redrafting of the applicable regulation on betting, online betting, and online gambling sectors of business. The final product was the Betting Act 2012., the title of which is misleading since it also provides for the complete ban of online gambling.


The Betting Act 2012 repeals the previous betting legislation. It provides for the establishment of a central National Betting Authority, the main objects of which will be to prepare and submit for approval to the Ministerial Council regulations dealing with every aspect of on premises sports betting and online sports betting. The National Betting Authority will take and examine applications, approve, license, audit and control the prospective betting shop and online betting operators. As mentioned above, the Parliament instead of finding a way to license online gambling activity, control it and tax it, for reasons that have not been clarified by any of the MPs that promoted the legislation. Online activity relevant to gambling operations and betting exchanges have been completely banned..

Most commentators in the legal community have criticized the newly adopted legislation as unfortunate and disappointing. It is unfortunate because too much effort and resources were spent to prepare what could have been enacted through a simple amendment to existing legislation. It is disappointing because the MPs acted as if they were legislating for another State in a different era.

Most EU States have now embraced, legalized and licensed online gaming and land based casinos. The UK was one of the first to license online gambling with the Gambling Act 2005. Cyprus is at odds with the trend in the rest of the EU in prohibiting both online gambling and casinos.

Even in the conservative US, 22 states have now legalized casino gambling. Although the US has been one of the most stalwart countries in opposing and banning of online gaming, it is also starting to soften and several US states are looking at legalizing and regulating it.

Cyprus’s banning of online gaming in the Betting Act 2012 is being challenged at the ECJ for being discriminatory and contrary to the free movement of goods and services. So the country risks the imposition of an embarassing fine and the time and expense of defending the ECJ claims.

Cyprus MPs have also failed to take into consideration the fact that all the negative problems with the legalization of gambling are already present in Cyprus today. The illegally occupied, Turkish administered part of Cyprus has had legalised gambling for many years. Reports show that many Cypriots regularly visit, play, lose money and revisit these casinos that are located and are operating in North Cyprus. Further there are a number of illegally operating casinos currently in the Republic of Cyprus.

By the use of the casinos in occupied Cyprus and illegal casinos in the Republic of Cyprus, the Cyprus population clearly want to be able to enjoy recreational gambling. Yet, with the blank prohibition of gambling services and the inexistence or lack of promotion of services designed to protect, help and support vulnerable players such as underage and problem gamblers, the Cyprus population remains unprotected.

This is what Cypriot MPs failed to recognize when considering the cons against regulating casino and gambling operations. Along with this failure to protect the public they contributed in prolonging the inability of Cyprus’ economy to obtain tax revenues from gambling and gambling related activities. Bearing in mind Cyprus’ current state of public finances, it is indeed unjustifiable..

Most knowledgeable gaming industry operators and their advisers who understand Cyprus’s economic situation believe that MPs will soon appreciate, their blunder. Within a brief period of time it is expected that Parliament will introduce yet another new law regulating instead of prohibiting online and casino gambling.

This is perhaps, the most important development, namely that whilst writing this article it is widely understood that gambling legalization is imminent in time. Investors and operators should not give up on Cyprus as a gambling destination but structure and prepare for their entry into the jurisdiction.