1.1 The purpose of this memo is to provide a high level summary of the Operations and Casino Control Law 2014 (the "Casino Law") and the Regulations issued therewith (the "Regulations").
1.2 The memo will address the central elements/features of the Casino Law:
- Licensing of Casino and Casino Employees;
- Casino Operations;
- Supervision and Control;
- Enforcement, Penalties and Offences.
1.3 The expressed scope of the Casino Law is to (a) provide for the operation and regulation of a casino and casino gaming in the casino, (b) regulate casino gaming machine premises, (c) establishment of the Cyprus Casino Gaming Commission ("CCGC") and its powers and functions and (d) provide for the authorisation and regulation of an integrated casino resort.
1.4 This memo will not consider the detail of the CCGC beyond to point out that it is the licensing and regulatory authority.
2.1 In this part we consider the procedure and requirements for the licensing of the integrated casino resort and its employees. No person can operate a casino resort or gaming machines premises without a licence from CCGC. The central element is that a simple monopolistic licence is granted for a 15 year period – during this period no other casino licence will be granted. Furthermore the monopoly is absolute – the licensed operator cannot during that period of 15 years develop or operate any other casino.
2.2 The licence granted will be for the development and operation of:
- A single integrated casino resort; and
- Up to four casino gaming machine premises each having up to 50 gaming machines. No casino games, gaming tables or electronic table games will be permitted at such locations.
The integrated resort licence will cover both the casino resort and the gaming machines premises, which must be located in districts other than where the casino resort is located. The resort licence cannot be sold, transferred or assigned to any person.
The ownership structure (i.e. shareholding) is also regulated in that:
- no shareholder of the casino resort owner or owner of land and buildings can dispose of 10% (if a public company) or 5% (in other cases) without the prior written consent of CCGC;
- similar restrictions apply to the acquisition of a shareholding in the casino resort owner or the owner of the land and buildings.
2.3 The licensing procedure is detailed in the Casino Law and in the Regulations. It is a competitive procedure involving two stages:
stage one: pre-selection stage where an expression of interest is required from interested persons. From those submitting an expression of interest a maximum of 3 candidates will be pre-selected.
stage two: the pre-selected candidates must submit a comprehensive offer. At this stage the candidates scoring highest on the evaluation of the offer will be selected. The selected candidate will be subject to ratification by the Council of Ministers.
2.4 Once ratified by the Council of Ministers, the chosen candidate must submit an application to the CCGC in prescribed form to prove its suitability to hold an integrated casino resort. The CCGC has the power to reject the candidate if it deems it to be unsuitable. The suitability is determined by reference to the suitability of the shareholders (those holding 10% or more in the case of public company and those holding 5% or more in other cases) and the management.
2.5 In determining appropriateness the CCGC will have regard to a person's history, character, criminal record, business activities and financial affairs and in particular if the applicant:
- is of good repute as to character, honesty and integrity;
- is of sound and stable financial background;
- being a legal entity, has suitable capital structure and corporate structure;
- has or is able to obtain suitable financial resources so as to ensure the financial viability of the integrated casino resort;
- has the services of persons having sufficient experience in the management and operation of an integrated casino resort;
- has sufficient business ability to establish and maintain a successful integrated casino resort;
- has associates that in the opinion of CCGC are not of good repute;
- has directors, executives or officers or others involved in the ownership, management or administration of the operations or business of the applicant is suitable to act in that capacity;
- is a suitable person to develop maintain and promote the integrated casino resort as a compelling tourist destination which meets prevailing market demand and industry standards and contributes to the tourism industry in Cyprus.
The CCGC has the power in conducting its due diligence to request all and any information it deems appropriate.
Application Process and Fees
2.6 An application must be filed in the prescribed form and be accompanied by all such information prescribed in the Regulations adopted under the Casino Law, which included:
- name address and contact details of the applicant;
- details of site and premises for the proposed integrated casino resort;
- details of all directors, officers and key employees to be involved in the ongoing operation of the applicant, in particular those involved in strategy, marketing and commercial development, financial planning, control and budgeting, IT and security and regulatory compliance;
- group structure chart;
- audited financial statements and tax returns for last 10 years for each entity appearing in group chart;
- Policies and Procedures manual covering matters detailed in the Regulations such as anti-money laundering procedures, security measures, electronic surveillance and other crime prevention procedures, procedures for dealing with suspect transactions, policies to ensure gambling is conducted fairly and openly.
In addition to requesting such further information it deems necessary, the CCGC has the statutory right to conduct such investigations and inquiries as it deems necessary.
2.7 At the time of application, there is payable an application fee and an investigation fee in the amount prescribed in the Regulations.
2.8 In addition, there is payable following final approval of the applicant by CCGC and prior to the licence becoming effective, the initial licence fee which is the amount the applicant agreed to pay as set out in its comprehensive offer. The CCGC will invoice the applicant for such amount. An annual licence fee, commencing on the first anniversary of the grant of the licence, shall be payable in the amount of €2.5m for first four years and €5m for the following four years. Thereafter, the CCGC shall review the licence fee where an increase is justified to support the costs of CCGC operations based on the approved budget for CCGC.
Grant of Licence and Term
2.9 The CCGC shall grant a licence for the development, operation and maintenance of an integrated casino resort as a whole and not merely for the casino. The CCGC has a wide discretion to impose such conditions as it deems appropriate. The initial term of the licence is 30 years, which can be renewed subject to approval of CCGC and the Council of Ministers for such term and licence fees as shall be so approved. An application for renewal cannot be made prior to the expiry of 15 years of the initial term. The licence granted is not transferable and cannot be encumbered save with the prior written consent of the CCGC and the Council of Ministers. Any proposed transferee will be subject to the same scrutiny as to suitability.
3. Licensing of Employees
3.1 No person shall be permitted to be employed as a casino employee unless he/she holds a valid casino employee licence issued by the CCGC. The Regulations set forth the criteria to be applied and again the CCGC has a wide power as to confirmation to be provided and inquiries it can carry out. No person will be granted a casino employee licence if the applicant:
- has been convicted of a felony in the past 10 years in any jurisdiction;
- is currently being criminally prosecuted or has charges pending for a felony in the past 10 years in any jurisdiction; or
- the applicant has been barred from any casino in any jurisdiction in the last 10 years.
3.2 A person proposed to be employed as a key casino employee must be the holder of a valid casino key employee licence issued by CCGC.
3.3 The application can and usually will be filed by the operator in the prescribed form together with the application fee (being €200) and in the case of key casino employees, an investigation fee.
3.4 In the case of casino key employees there are additional standards to be met and CCGC will conduct an investigation. In particular the criteria that key employees will have to meet include:
- evidence of financial stability, personal background, integrity and responsibility;
- general reputation as to character, honesty and integrity;
- suitability to perform work proposed to be employed for including job history;
- information as to any civil judgements or criminal convictions in any jurisdiction in the last 10 years;
- confirmation of clear criminal record;
- if the applicant has worked in the gaming or casino industry previously a reference letter from the regulator must be provided.
3.5 The Regulations stipulate the information and documentation an applicant has to rubout with respect to a casino key employee or a casino employee and this includes:
- full name and address;
- all residential addresses for last 10 years;
- driving licence and passport details;
- confirmation of identity by a lawyer or the CCGC;
- function and role of proposed employee;
- details of any gambling licences applied for in the last 10 years;
- details of other licences applied for or held over the last 10 years excluding driving licences in connection with employment and providing details of any disciplinary action;
- details of any criminal charges, convictions or investigations over the last 10 years;
- details of civil proceedings over the last 10 years;
- employment history over the last 10 years;
- professional qualifications;
- membership of any professional body.
3.6 Casino Employee licences and casino key employee licences will remain valid and in effect until revoked or surrendered and may be made subject to such conditions as the CCGC may prescribe.
4. Casino Operations
4.1 The licensed integrated casino resort is permitted to operate on a 24/7 basis, however the operator is obliged to submit to the CCGC its proposed hours of operation prior to implementation. Any charges on operating hours must be notified to the CCGC.
4.2 The operator is not permitted, without the prior consent of the CCGC, to impose any entrance fee or membership requirement in order to gain access to the casino.
4.3 Minors are not permitted at any time to play any casino games or gaming machines nor attend or approach any gaming equipment or gaming tables. Further they may not remain in the casino premises and can only pass through the casino on their way to other facilities of the integrated resort if in the company of a parent or other adult.
4.4 The layout of the casino and its gaming tables, gaming equipment and other facilities proposed by the Operator shall be in accordance with the Casino Law and the Regulations and shall be approved by CCGC. Any charges to the layout require prior approval from CCGC. At the time of applying for the integrated resort casino licence, the operator must submit detailed floor plans of the proposed casino which will detail the boundaries of the casino, the floor areas, gaming pit areas and all entrances and exits and type of access controls.
4.5 The operator shall also submit to the CCGC the selection of casino games, modes of play and rules and permitted wagers and payout ratios for each casino game and gaming machine it proposes to offer at the casino. No casino games can be played at the casino until the CCGC has given its approval. The CCGC may grant its approval of rejection of a casino game and it may at any time withdraw such approval and notify the operator that any particular casino game is no longer authorised.
4.6 All gaming equipment proposed to be used by the operator in the casino shall be subject to the prior approval of the CCGC or approval may be waived by the CCGC. The CCGC also has the statutory power to establish the necessary standards that gaming equipment needs to meet.
4.7 All manufacturers and suppliers of gaming equipment also need to be licensed or otherwise exempted from licensing in order to be able to supply the operator.
Casino Internal Controls
4.8 The Operator is obliged to at all times have in place a system of internal controls at the casino premises in order to (i) minimise risk of loss of assets through theft, fraud, and errors of omission and commission, (ii) reduce risk to casino employees and customers safety, and (iii) ensure validity of revenue. The internal controls must be approved by the CCGC and the CCGC can by a 90 day notice request any changes to be made to such internal controls.
4.9 The operator is obliged to maintain ring-fenced bank accounts for all revenue and banking transactions arising from or related to casino operations. The selection of the banking institution is subject to approval of the CCGC. The CCGC also has the right upon authorisation (which must be provided) to receive bank statements for these accounts of the operator.
4.10 The operator shall maintain accurate, true and complete accounting records to correctly record and reflect the transactions and financial positions of the operations of the casino in accordance with approved internal controls and the Casino Law and Regulations. The financial records must be kept in such manner to enable accurate and correct financial statements to be prepared and such statements to be audited in accordance with IFRS. The operator is obliged to prepare audited financial statements in accordance with IFRS, which must be filed within 3 months of the end of the financial year with CCGC.
5. Casino Tax and VAT
5.1 The supply of gaming services is exempt from VAT. The definition of gaming services is as provided in EU law and does not include accommodation, food and beverage, non-gaming entertainment and other goods and services provided in the integrated resort other than gaming services, which will be subject to VAT at the normal applicable rates.
5.2 The operator shall be subject to a casino tax of 15% on gross gaming revenues on a monthly basis payable at the end of the following month and is payable to the CCGC. The CCGC is, for the purposes of the collection of the tax, an agent of the Inland Revenue.
5.3 The Casino Law defines gross gaming revenues as meaning all cash and receipts from cash paid into gaming machines and from the purchase of chips, chip vouchers and tokens to play casino games and gaming machines, including all such chips, chip vouchers and tokens purchased on credit less amounts paid out on winnings. The casino tax is paid on a monthly basis to the CCGC and is paid upon receipt of an assessment from the CCGC at the end of the month following the month to which the assessment relates.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.