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Shouting the odds: the Gambling Commission gets tough

Gambling firms paid a record £19.6m in fines for failing to stop money laundering and protect problem gamblers. Its latest report highlights the sector’s problems and suggests some solutions.

Gambling businesses and those who lead them need to improve the support they offer consumers who are at risk of harm and do more to guard against money laundering, a new report by the Gambling Commission has said.

The Commission’s ‘Raising Standards for Consumers (Enforcement Report 2017-2018)’ provides an overview of the enforcement work the regulator has undertaken over the past year and sets out future lessons for operators.

Over the past 12 months, the Commission has carried out more than 160 investigations. Enforcement action has resulted in a variety of sanctions against operators and their senior management. Operators have also paid £19.6m in penalty packages because they failed to follow Commission rules aimed at making gambling fairer, safer and free from crime.

More than a third of the total was made up by one £7.1m fine for online casino operator Daub Alderney, which runs a number of sites including Lucky Pants Bingo and Kitty Bingo. Paddy Power Betfair, which has been renamed Flutter Entertainment, received a £2.2m fine.

However, the total amount of fines levied is just 0.13% of the industry’s £14.5bn of profits last year and 1.6% of the amount that gambling-related harm is estimated to cost the UK annually in additional health service and criminal justice costs, as well as welfare claims.

The Treasury received £13m of the penalties, with the rest going to compensate consumers and others who have been affected by the firms’ rule-breaking. The total was up from £18.4m last year and £1.7m the year before.

The report is scathing about the sector over its attitude to money laundering, saying: “Compliance activity and enforcement cases revealed again and again that operators’ AML policies, procedures and controls are not fit for purpose. There has been the incorrect perception that all gambling regulators’ expectations are identical, in addition to a failure to digest our guidance and implement the legislative requirements applicable to Great Britain. This must change, for these are not just regulatory matters but breaches of UK law. Those failing to learn these lessons will face further draconian action.”

It also stated: “We are also concerned by the frequent disconnect between operators’ money laundering and terrorist financing risk assessments; policies, procedures and controls; customer risk profiling; customer due diligence and ongoing monitoring; and enhanced customer due diligence and enhanced ongoing monitoring. For many operators this has become a tick-box exercise, without due consideration for their importance in the risk-based approach.”

Good practice for gambling firms

The report’s authors did, however, offer advice for companies working in the sector on improving their working practices. The report said they need to consider the following to ensure they are complying with the terms of their licence:

  • Have you allocated sufficient resources to AML compliance? 
  • Have you ensured you have clear, up-to-date, and fit for purpose AML policies, procedures and controls available to all who require guidance? 
  • Have you ensured your policies, procedures and controls have been informed by our guidance on AML? Are you assuming if you comply with the AML requirements of another regulator you are compliant with the Commission’s requirements? 
  • Is your money laundering and terrorist financing risk assessment appropriate to your business? Have you taken into account the Commission’s Money Laundering and Terrorist Financing Risk Assessment, and the high-risk factors detailed in our guidance? 
  • Are your policies, procedures and controls informed by the risks identified in your money laundering and terrorist financing risk assessment? Are they revised when the risks change?
  •  Are your customer risk profiles informed by your money laundering and terrorist financing risk assessment? Are you placing an over-reliance on monetary thresholds as risk triggers and ignoring other risk factors? 
  • Is the level of customer due diligence you conduct on particular customers informed by their risk profile? Do you scrutinise transactions to ensure they are consistent with the customer’s risk profile? 
  • Have you ensured staff have, and continue to receive, adequate training on AML matters, including how to recognise and deal with transactions and other activities which may relate to money laundering or terrorist financing? 
  • Are you supporting your nominated officers with the appropriate resources and training and do they have the authority to operate objectively and independently?
  • Are your systems and controls appropriate for your business?

  •  Do you regularly assess the adequacy of your systems and controls and their effectiveness in mitigating the identified money laundering and terrorist financing risks?

  • Do you know your customer (KYC)? Are you gaining a holistic picture of the customer’s source of funds, particularly in relation to VIP customers? Are you critically assessing assurances you receive as to their source of funds?
  •  Are you requiring customers to provide their occupation upon registration and then profiling their income for affordability? 
  • Are you making records of customer interactions and transactions where necessary? 
  • Is your approach governed by risk? Once an alert has been raised, do you have in place procedures to ensure the case is properly reviewed in a timely manner? Will decisions be appropriately recorded? 
  • Are you confident commercial considerations do not outweigh your adherence to the terms of your licence? 
  • Is risk being ‘owned’ at an appropriately senior level within your organisation?

Comment

The Gambling Commission’s chief executive, Neil McArthur, commented: “I want gambling consumers in Britain to be able to enjoy the fairest and safest gambling in the world and I want gambling operators to work with us to put customer enjoyment and safety at the top of their corporate agenda.

“As the report shows, we will be tough when we find operators bending the rules or failing to meet our expectations, but we also want to try to minimise the need for such action by providing advice, a programme of support material and compliance activity to help operators get things right in the first place.’’ 

 By AMLCC