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THE LAW NEEDS TO BE IMPROVED

“We have to be honest, there are a lot of open questions that deter and confuse investors, both foreign and domestic… But I am a supporter of the fact that there are certain working conditions and you need to work with what you have, not wait until everything is perfect, and only then give results.”

The Voice Of The State — An Interview With The Head of The Commission for Regulation of Gambling and Lotteries of Ukraine Ivan Rudy

Recently, our magazine had the opportunity to talk to the head of the Commission for the Regulation of Gambling and Lotteries (here and after CRGL) Ivan Rudy. In an open and sincere conversation, Rudy spoke about the main difficulties in the work of the Commission, the imperfections of the law and what needs to be changed, how the war experience helps him, what the state does to attract foreign investments and what revenues have already filled the budget.

How long have you been the Head of CRGL and how would you assess the progress of the Commission during this time?

One of the most common difficulties is the harmonization of regulations and the reluctance of civil servants to accelerate. That is, if the term of processing the letter is 30 days, then it is unlikely that someone will consider it on the first or second day if you do not call and ask to speed up. Everyone is too slow, they do not want to improve their work processes. There are also difficulties in documents approval, as there are many obstacles. Some consider themselves experts and, in my opinion, they simply lobby someone’s interests when agreeing or not agreeing on regulations that we desperately need. Then the market asks us: “Where? When?”. For example, the monitoring system. We sent the line of its work for approval almost six months ago. And now the Ministry of Finance is blocking it, inserting simply illegal changes there, and thus burying this process. But I think we will overcome it.
Regarding attacks. Depends on what you mean. If we talk about information, then let’s be honest. The market has been in the shadows for more than 10 years, and many people benefit from staying there. Therefore, to bring down the work of the Commission, to discredit it — this is on the agenda of many specially hired people who are sending tons of meaningless requests or articles. For example, when there was a fact of NABU (National Anticorruption Bureau of Ukraine) searches, no one even made an effort and did not check the information, but simply immediately wrote that I took a bribe. And no one even thought that back at home my mother was heartsick before she learned the truth. But we do not pay attention to it. As we say in Ukraine — the dog barks and the caravan goes.

You immersed yourself in the work of the Commission almost as a person without experience in the gaming industry. How do you feel in this “pioneering” role? Does your previous experience, both working and as a participant of the anti-terrorist operation (war in Eastern Ukraine), contribute to this work, how much strong endurance is needed?

Who said I had no experience in the gaming industry? This is the same project as any startup. An effective manager has the managerial qualities that I have, because I worked a lot as a producer, led projects. That is why such work is not new for me. As for my experience in the anti-terrorist operation, here I see the benefit in the fact that I have an intolerance of corruption, a sense of justice and an attitude that puts the country’s interests over personal.

Please tell us about the greatest achievements of the Commission during its existence? How many licenses have been issued this year and how much money has been raised from them?

All we have done are our big and small victories. From the approval of the Principles of Responsible Gaming to the approval of license conditions, from the first license payment received by the Treasury to the fact that almost 100 employees work in the Commission. Perhaps the greatest achievement is that everyone around us is very meticulous and tries to stop us because many central executive bodies set us as an example of an effective and operational body. My achievement is the lack of interest in organizational issues, such as a company car, whether I have a reception room, and so on. For me, the result was a priority. Therefore, the first license was issued in February. In total, more than 40 licenses were issued, with budget revenues of more than UAH 1.2 billion.

Where and how could the work of the Commission be improved?
If you look at it in terms of common sense and effective management, then in every aspect. I am such a person who strives for perfection in everything. And even if I see a cool result, I will praise myself and my team, but then I will come back and think “how could I do it even better?”.

Indeed, there are many gaps, but in my opinion, the first thing we need is to take important steps to address legislative issues. Without this, all our ideas and problems that currently exist will not be solved. Issues of supervision and monitoring, financial sanctions, advertising, financial monitoring, and bank control over deposits remain important. We need to at least be able to block transactions with illegal operators and also be able to close illegal establishments, rather than simply sending a letter about their activities to law enforcement agencies. No questions asked, they work, but it’s an extra link. So we will work on these issues and hope for the support of the Government.

In one of your previous interviews, you said that this year there will be, if I’m not mistaken, UAH 6–7 billion in license revenues and that there won’t be many applicants after that, but there will be room for investment. Do you and your team cultivate a separate investment policy?

We are not just cultivating, we are trying to implement it. And a clear example of this is that after our travels abroad and communication with foreigners, the educational forum comes to Ukraine. But here we need to be frank, there are a lot of open questions which restrain and confuse investors both foreign and domestic. This is uncertainty in tax legislation, uncertainty with competitive selection. At the moment, everyone is waiting for at least some clear rules, which can be followed. Concerning UAH 6–7 billion. Again, when we talk about the fact of issuing a license, if you take the amount received and multiply it by 5 years (as you know, the license is paid for 5 years, and not for 1 payment), then the above-­mentioned amount will come out. According to this formula, in 5 years the budget will receive almost 7.5 billion.

Do you think that the current relevant legislation and the work of the Commission contribute to attracting foreign direct investment in the industry, and how good is the Ukrainian law on gambling compared to other European countries?

The law is imperfect, and I have already said that it needs to be changed. But I am a supporter of the fact that there are certain working conditions and you need to work with what you have, not wait until everything is perfect, and only then give results. It needs to be improved, but many operators come in, many are interested. Therefore, we are working on these issues in line with other priorities.

Do you have a dialogue with business at all? To what extent does the Commission listen to market needs?

I do not communicate with business, this is my position. We can cross at official events, but a representative of some operator will not come to my office. To do this, we have an advisory expert council, UGC — a powerful newly formed gambling association, which brought together almost all operators. So they can convey their wishes, problems, suggestions for solutions, and we listen to them. Let’s be honest, this is a path that must be taken together. It is impossible for the state to rigidly dictate conditions and the market to adapt to them. We need to be flexible and understand that legal gambling is our client, our reliable partner in the fight against the illegal market, and these are the people who fuel the newly created sector of the economy. Therefore, it cannot be said that the gambling law is exclusively about casinos. It’s about garment factories, about new jobs in factories that make equipment, it’s about additional taxi calls, and so on. The sphere is so global and wide that I cannot say that I only play the role of the head of CRGL, it is the responsibility of the whole sector of the economy. The fate of people depends on my decision, and it is a great responsibility.

Please share CRGL’s strategy for the next 5 years — priority steps, combating the illegal market, interaction with business, plans for bills, etc.?

The main strategy is to fight illegal business. I would add the protection of citizens’ rights because we have to be responsible for those segments of the population who have problems with gambling addiction. And we need to think not about how to increase the number of casinos, but how to make sure that people do not suffer from it. There must be an understanding that casinos are entertainment, not a job you have to go to earn money. It is necessary to conduct educational activities to reveal the difference between legal and illegal markets. All the troubles that ordinary citizens or populist officials complain about are the problems of the illegal gambling business, which does not hesitate to use dirty methods to turnout people’s wallets and “put them on the needle of the game”, starting with direct SMS advertising and ending with alcohol and drugs in the clubs. Therefore, there are many difficult tasks, but they must be performed and we have to think about how to protect our Ukrainians, how to attract investment and not to spread gambling addiction. I believe that Ukraine is very attractive both in terms of tourism and in terms of investment. All that is needed is clear, understandable laws and their observance.

At present, large companies mostly complain about the impossibility of advertising and inadequate tax policy. Earlier you said that you share the opinion of market operators about taxes (tax on tax). So, what steps are planned in this direction? Do you have a good legal team for advocacy and lobbying, how good is your dialogue with MPs and relevant committees?

We have a dialogue only at the level of civil servants. Recently, at a government committee, I argued for the need to pass a new tax law, 2713‑d, which would spell out new rules for gambling taxation, which I think are great, to begin with. If you look closely, there are issues that you would like to resolve, but you do not need to immediately try to build the perfect model. You need to start and see what can be improved or changed. Concerning advertising, the situation is as follows — our law is quite conflicting. Many tasks are assigned to us, but it is not specified how we can perform them or not. For example, the fact of an illegal institution. I can’t go and close it, I’m not even allowed to go there, I can only pass this information to law enforcement agencies. With advertising, we have a similar situation. We have a legitimate advertising activity conducted by the State Consumer Service. We, as the Commission, cannot, under the current legislation, detect the fact of illegal advertising. Legal or illegal — this is determined by the relevant authority. Instead, we can impose financial sanctions. This needs to change and we need clearly defined responsible persons with their powers.

Based on the current results of the Commission’s work and cooperation with business — what do you “predict” for 2022, what amounts should the state expect from revenues from the gambling industry and whether there will be a foreign direct investment and to what extent?

Unfortunately, I don’t have a magic glass ball to accurately predict the future. However, I can say that we are not going to weaken or reduce the course and the pace we have set. At a minimum, these will be subsequent payments from those licensees who have already received a license. They will continue their activities and will continue to pay them. I am sure that after the changes in tax legislation we should expect a second wave of licensees. Because let’s be honest, we’re talking about huge investments, and all the operators are looking at each other. Someone has bought a license, the rest is watching and drawing conclusions. A certain period has passed and there is no “whitewashing” of operators, no one goes and “nightmares” them with checks, or some stupid requirements to “fix” something. I believe that we coexist in harmony with the gambling market. And this is a great example for future investors who will see that the operators have worked quietly for a year and can move on. Concerning investments, I also expect that foreign partners will enter under investment licenses. Everything in its time.

During all this period of work as the head of CRGL — were there any inappropriate offers from the participants of the gambling market, and did you have to say goodbye to some of the people from your team because they could not resist the temptation?

Good question. I was not offered because I limited this opportunity. As I said before, I do not communicate with market representatives. Secondly, the Commission is a collegial body with a very complex decision-­making system. If you simulate the situation, it is difficult to “make an agreement” with all members of the Commission, and then on top of that pay money to the budget — that’s weird logic. Did I have to say goodbye to someone who could not resist the temptation? Not yet. And I think one of the factors is that we have decent wages. I insisted on this at the budgeting stage. I said that no repairs of premises are needed, no cars are needed, no additional benefits, but people should receive a decent salary. This is to avoid the temptation to look the other way for money. Thirdly, I understand that the issue concerns a recent scandal involving a member of the Commission. My position is that until there is a court decision, I will not comment on this situation. It is very easy to approach from the “dark side”, and when you try to accuse someone of something, assumptions will come to the surface. Therefore, when there is a court decision, then we will comment on this situation.