A gambling operator is to pay £3m as part of the Gambling Commission’s targeted investigation into online casinos.
Mr Green is the ninth gambling business to face action as part of a regulator probe that has led to more than £20m in penalty packages since 2018.
Since the enforcement activity began six operators have surrendered their licence and can no longer transact with consumers in Britain. During the course of investigations into the nine most serious operating licence cases the Commission examined the actions of 22 individual Personal Management Licence holders. Of these, six surrendered their licence, six received a formal warning, one received an advice to conduct, seven are still ongoing and no further action was taken against two.
As part of today’s penalty package Mr Green will pay £3m to the National Strategy to Reduce Gambling Harms because it failed to have effective procedures aimed at preventing harm and money laundering.
As a result of these failures Mr Green:
- did not carry out social responsibility interaction with a customer who won £50,000, gambled it away and deposited thousands more pounds
- took ten-year-old evidence of a £176,000 claims payout as satisfactory evidence of source of funds (SOF) for a customer who deposited over £1m
- accepted a photograph of a laptop screen showing currency in dollars on an alleged crypto trading account as adequate SOF.
Richard Watson, Gambling Commission Executive Director, said: “Our investigation uncovered systemic failings in respect of both Mr Green’s social responsibility and AML controls which affected a significant number of customers across its online casinos.
“Consumers in Britain have the right to know that there are checks and balances in place which will help keep them safe and ensure gambling is crime-free – and we will continue to crack down on operators who fail in this area.”
The online casino enforcement work is in addition to the Commission’s ongoing strategy to make gambling online safer. This has included strengthened online age and identity verification, enhanced rules and guidance on identifying and interacting with customers who may be at risk of harm and the banning of credit cards. The regulator is also pushing the industry to raise standards in the areas of VIP practices, advertising technology and game design, and is currently looking at online stake limits.
All operators are advised to read the public statement below to avoid making the same mistakes as Mr Green.
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Mr Green Limited public statement
- Licence Conditions 12.1.1
- Licence Condition 1.2
- Social Responsibility Code Provision 4.1
- Ordinary Code Provision 4.2.
27 February 2020
Operators are expected to consider the issues here and review their own practices to identify and implement improvements in respect of the management of customers.
Licensed gambling operators have a legal duty to ensure that their gambling facilities are being provided in compliance with the Gambling Act 2005 (the Act), the conditions of their licence and in accordance with the licensing objectives, namely to:
- prevent gambling from being a source of crime or disorder, being associated with crime or disorder or being used to support crime
- ensure that gambling is conducted in a fair and open way
- protect children and other vulnerable people from being harmed or exploited by gambling.
1. Executive summary
This case concerns Mr Green Limited (Mr Green) which holds a combined operating licence authorising it to operate as a remote casino.
The Commission conducted a compliance assessment in July 2018, in which three customer accounts were examined. Failures were identified concerning the manner in which Mr Green interacted with the customers from a problem gambling and anti-money laundering (AML) perspective.
Our investigation uncovered systemic failings in respect of both Mr Green’s social responsibility (SR) and AML controls which affected a significant number of customers across its online casinos. These failings stemmed from inadequate AML and SR policies and processes.
A voluntary review of its top 120 customers subsequently led to the closure of 113 customer accounts due to the fact those players were unable to satisfy the improved AML requirements.
On 8 October 2019 the Gambling Commission gave Mr Green notice that we were commencing a review of its operating licence.
Mr Green has co-operated with the Commission throughout the compliance assessment and the subsequent investigation and acknowledged that between 1 November 2014 and 16 November 2018 it did not have effective and adequately resourced AML controls in place to consistently address risks presented by higher risk customers.
This period of non-compliance pre-dated the acquisition of Mr Green by William Hill plc (which completed in early 2019)
The settlement agreement consists of a £3,000,000 payment in lieu of a financial penalty and Commission costs of £10349.77 Mr Green has also committed to conducting a compliance assessment of an additional 130 customers.
Failure to identify problem gambling behaviour
Social responsibility (SR) code provision 3.4.1(1) and Ordinary Code Provision 3.4.2
Operators must put into effect policies and procedures for customer interaction where they have concerns that a customer’s behaviour may indicate problem gambling.
Operators should also keep a record of customer interactions, and where an interaction has been ruled out, the reasons for this.
Mr Green accepted that between 1 November 2014 and 7 November 2018 it did not have effective policies and procedures in place for customers who may be displaying signs of problem gambling. This led to Mr Green not always identifying and interacting with customers who were displaying signs of problem gambling and, even when the customer interaction process was triggered, there was a failure to follow up with an interaction. Where interactions did take place these were not always recorded.
Examples of the social responsibility failings include:
- When making decisions in relation to customer interaction, Mr Green did not appear to proactively review complete customer accounts. Instead, it looked at isolated incidents of play. This was highlighted in the case of one customer (Customer C) who played once a month and spent large amounts when they played. Commission officials suggested that this game play may be indicative of someone who receives a monthly salary and plays until this is spent. The Licensee agreed that this could be the scenario but says it had not considered it. In our view, this led to Mr Green failing to take account of all available information to undertake SR interactions at the appropriate.
- Under Mr Green’s Customer Interaction Policy, the VIP team were responsible for conducting SR customer interactions without adequate compliance oversight to ensure no conflict of interest could arise. For example, Mr Green’s Responsible Gambling team referred Customer C’s play to their VIP manager after the customer won £50,000, proceeded to play all the winnings away and then deposited thousands more pounds. The VIP manager responded by stating the customer’s level of gameplay was normal and no customer interaction was initiated. At the time this customer had losses of £210,000.
- In relation to another customer (later described as Customer B) Mr Green failed to follow its own VIP policies and procedures. These required an interaction via telephone and email when a customer was designated a VIP. There was no record a telephone call was made, or email sent to Customer B.
Failure to have in place appropriate AML controls
Licence condition 12.1.1 relates to the Prevention of Money Laundering and Terrorist Financing
Licence condition 12.1.1(1) requires:
Licensees must conduct an assessment of the risks of their business being used for money laundering and terrorist financing. Such risk assessment must be appropriate and must be reviewed as necessary in the light of any changes of circumstances, including the introduction of new products or technology, new methods of payment by customers, changes in the customer demographic or any other material changes, and in any event reviewed at least annually.
Licence condition 12.1.1(2) requires:
Following completion of and having regard to the risk assessment, and any review of the assessment, licensees must ensure they have appropriate policies, procedures and controls to prevent money laundering and terrorist financing.
Licence condition 12.1.1(3) requires:
Licensees must ensure that such policies, procedures and controls are implemented effectively, kept under review, revised appropriately to ensure that they remain effective, and take into account any applicable learning or guidelines published by the Gambling Commission from time to time.
Mr Green accepts it failed to conduct a risk assessment of the risks of the business being used for money laundering and terrorist financing from November 2016 – November 2017 in accordance with licence condition 12.1.1(1). It also breached licence conditions 12.1.1(2) and 12.1.1(3) by failing to ensure adequate customer Enhanced Due Diligence (EDD) and Source of Funds (SOF) checks had been conducted on customers who presented a higher risk of money laundering.
During our investigations, we identified customers who were able to gamble significant sums of money without adequate EDD and SOF checks being conducted. A review of the top 120 existing customers of Mr Green revealed that 113 had to be closed as they failed to pass Mr Green’s AML checks.
The Commission examined the following customer accounts:
In the case of this customer the licensee did not effectively implement its own policies and procedures. Failures included:
- The Licensee’s ‘AML – Source of wealth’ policy states that documentation or evidence should be current and not historic. However, Mr Green took ten-year-old evidence of a £176,000 claims payout as satisfactory evidence of SOF for a customer who deposited over £1m.
- The Licensee’s ‘AML – Source of wealth’ policy states that the Licensee should carry out appropriate source of funds checks on higher risk customers. This procedure was not followed.
In this case Mr Green failed to identify the customer as a risk despite a screenshot from the business account showing a company of which he was a director was nearly £12,000 overdrawn.
Instead, Mr Green accepted a photograph of a laptop screen showing currency in dollars on an alleged crypto trading account as adequate SOF.
They also failed to scrutinize the transactions within bank statements showing a combined total balance of £57,000.
Licence condition attached to the operating licence in October 2014 (valid from 1 November 2014), superseded by licence condition 12.1.2
The condition attached in October 2014 and licence condition 12.1.2(1) requires:
Licensees to put into place and implement the measures described in Parts 2 and 3 of the Money Laundering Regulations 2007 (superseded by the 2017 Regulations), insofar as they relate to casinos.
Mr Green accepted that between 1 November 2014 and 16 November 2018 it failed to put in place and implement measures described in the Money Laundering Regulations 2007 and of the Money Laundering Regulations 2017. This was because, between the relevant period, Mr Green did not have adequate AML controls to consistently address the risks presented by higher risk customers.
In the case of one customer (Customer A) Mr Green flagged this customer as high risk in accordance with its AML Policy and Procedures when deposits exceeded £25,000. It also carried out open source checks and requested SOF evidence on three occasions.
In response the customer provided a letter of an insurance pay-out, which was over 10 years old and was addressed to the customer and their partner. The Licensee admitted that it did not establish the SOF for this customer, breaching Regulation 28(11)(a) of the 2017 Regulations.
3. Actions taken by the Licensee
Mr Green acknowledges the policies relating to AML and customer interaction in force at the relevant time were ineffective. It has now improved those policies and that process remains ongoing.
Mr Green carried out a review its top 120 customers, applying improved AML processes to its existing customer base. This led to 113 of those customer accounts being closed due to those accounts being unable to satisfy the improved AML requirements.
The Licensee has agreed to complete a compliance assessment of the next 130 top customers. Once this is complete it will have assessed all of its top 250 customers (measured by lifetime Gross Gambling Yield).
Mr Green recognises there have been considerable learnings from these cases and has invested in improving its AML and responsible gambling processes. Mr Green states it is also committed to working with the industry to raise standards, particularly in relation to safer gambling.
4. Regulatory settlement
In line with our Statement of principles for licensing and regulation, Mr Green has concluded a regulatory settlement. The settlement agreement consists of:
- £3,000,000 payment in lieu of a financial penalty, which will be directed towards delivering the National Strategy to Reduce Gambling Harms
- Agreement to conduct a review of an additional 130 customers in the same manner as previously undertaken to follow on from the initial 120 customers who were initially reviewed.
- Agreement to the publication of a statement of facts in relation to this case
- Payment of £10,349.77 towards our investigative
In considering an appropriate resolution to this investigation, the Commission has had regard to the following aggravating and mitigating factors:
- Mr Green accepted that these breaches were not isolated and occurred over four years.
- The systemic nature of the breaches means customers not known to the Commission were likely affected.
- The breaches arose in circumstances similar to previous cases which have resulted in the publication of lessons to be learned for the wider industry.
- The need to encourage compliance amongst other operators.
- Following its acquisition by William Hill, Mr Green has put in place renewed policies and procedures which it says will prevent similar failings recurring.
- Mr Green accepted responsibility for the failings at an early stage and has been co- operative during the review process.
5. Good practice
We consider this case provides valuable learning for operators. They should consider the following questions:
- Do you have policies and procedures in place to identify customers who may be experiencing or at risk of developing problems with their gambling?
- Do you have systems in place to identify potential problem gamblers?
- Do these include appropriate trigger points for when the usual pattern of gambling becomes unusual (these should not be just financial)? How do you protect new customers (where a pattern of play cannot yet be established)?
- Are your staff sufficiently trained to spot problem gamblers and know how to report concerns? Are there clear procedures once a concern has been raised?
- 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 source of funds?
- Have you ensured you have clear, up-to-date, and fit for purpose AML policies and procedures available to all who require guidance?
- Have you ensured your policies and procedures have been informed by our guidance on AML?
- Have you taken into account the Commission’s Money Laundering and terrorist financing risk assessment?
For further guidance on good practice read our Enforcement report
Posted on 27 February 2020