LAWBOOT CEO Viacheslav Ustimenko – correct public offer is the main protection tool for a gambling product

LAWBOOT CEO Viacheslav Ustimenko – correct public offer is the main protection tool for a gambling product

Adhering to the terms of the gambling license is not difficult, but services of experienced lawyer are still required, believes the head of LAWBOOT legal firm Viacheslav Ustimenko. On November 15, the expert will make a presentation “Simple solutions for crucial legal issues in affiliate marketing” at Kyiv iGaming Affiliate Conference.

In the interview for Kyiv iGaming Affiliate Conference, Viacheslav described the problems of publishers, compared different gambling licenses and told about legal changes introduced for affiliate programs this year.

Interviewer: Kyiv iGaming Affiliate Conference (KiAC).

Respondent: Viacheslav Ustimenko, CEO at LAWBOOT legal firm (VU).

KiAC: Please, tell us about the main aspects of taxation in the affiliate marketing.

VU: Publishers including web masters and arbitrage specialists, advertisers (advertising networks, affiliate networks, advertisers) are obliged to pay taxes.

Publisher’s income consists of payouts made by the advertising network or direct advertiser in exchange for advertising services. The payout amount is calculated basing on a complex formula depending on the pricing model. For example, in the CPA model advertiser pays for the action – a deposit or registration, in the CPM or CPC models – for attracted traffic or clicks.

Terms should be specified in the public offer – a legal document published on the website of the affiliate network or direct advertiser.

In case a publisher is a physical person, he must declare income and pay personal income tax. If a publisher has registered a company, taxation depends on the place of registration. For example, Hong Kong offers freedom from taxes and 0% tax rate.

As for advertisers, their payouts to publishers are deductible expenses that reduce the tax base. Direct advertisers are usually registered in taxable zones, while advertising networks choose jurisdictions without tax on income.

If an advertiser is registered in a jurisdiction that implies taxes or an obligation to file annual financial statements, a public offer should be available on the website.


KiAC: How have registration conditions changed for affiliate programs in 2018? Which changes can companies expect in the future?

VU: In my opinion, main changes took place at the beginning of 2018, when a banking crisis started in Europe. At that time, a part of companies lost financial tools intended to pay referral fees to web masters.

European and the US regulators are tightening the screws on financial institutions, and the latter are reconsidering their business strategies, which affects entrepreneurs.

Some financial institutions have refused to process gambling-related funds or lost the possibility to issue Visa or MasterCard plastic cards. European banks have a problem with dollar transactions.

One should also pay attention to the fact that the EU GDPR has come into effect. The regulation has introduced a number of requirements to processing and storage of personal data belonging to the EU residents. This enactment has touched upon all companies that work with the European traffic. The violation may cost companies a fine of €20 million.


KiAC: Which pitfalls may affiliate networks face in the GDPR?

VU: There are no pitfalls, companies just have to comply with the rules. The law fundamentally describes the requirements to companies that store or process personal data of the EU residents.

Advertising networks process a big amount of personal data and act as both processors and controllers. Companies should develop or bring into compliance with the GDPR the following standard package of documents:

  • Consent Forms;
  • Privacy & Data Protection Policy;
  • Terms Of Use;
  • Data Processing Agreements with Advertisers;
  • Data Sub-Processing Agreements with Publishers;
  • Standard Contractual Clauses;
  • Binding Corporate Rules.

KiAC: What consequences can the violation of the gambling license have for advertisers?

VU: Everything depends on the license type and seriousness of violation. Companies that hold Curacao license are lucky, as regulators are tolerant there and often ignore player complaints.

The main protection tool of a gambling product is a correctly written public offer for players and game rules. It is important to lay a correct foundation in these documents. For example, a gambling product should possess the right to conduct an investigation and not to pay out winnings to the player in case the latter is suspected of fraudulent activities.

The regulator of Malta has a more serious attitude and one should not expect a loyal attitude. In case of the law violation, the regulator can withdraw the license. It is simple to adhere to the terms of the license; your lawyer should have profound knowledge of the legislation.


KiAC: Which problems can publishers face when they receive remuneration from affiliate networks?

VU: A common problem for publishers – legal entities – is the blocking of the bank account. Not every bank is ready to work with companies that offer advertising services for gambling. The banking crisis has led to the situation when LP or LLP + bank accounts do not work in Latvia anymore. Czech and Estonian banks stopped being loyal to companies owned by residents of the CIS.

Publishers need to change corporate structures, the place of company’s registration, or choose loyal banks.

There is no universal answer to such questions as where physical persons can open a bank account and how to withdraw money from payment systems legally.


KiAC: What will you tell about at Kyiv iGaming Affiliate Conference?

VU: I will explain how to comply with the GDPR, give advice to publishers and advertisers, and mention the issues of privacy and taxation. I will comprehensively cover the topic and share an important insight about Curacao.

Learn more about the legal side of affiliate marketing from the expert at the conference!

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