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Three online gambling operators have been investigated by the Gambling Commission for social responsibility and money laundering failures as part of the Commission’s ongoing drive to raise standards through its tough enforcement action. 

BGO Entertainment Limited, GAN PLC and NetBet Enterprises Limited were all subject to licence reviews following a number of failures which included not doing enough to keep consumers safe and failing to prevent money laundering and criminal spend.

As a result of those reviews, two of the businesses, BGO and Gan PLC, have had new conditions imposed on their licences and all three will now improve their policies and procedures as well as making payments to progress the work of the National Strategy to Reduce Gambling Harms.  The Commission will also be reviewing the actions of the individual Personal Management Licence holders in all three of these cases

Richard Watson, executive director at the Gambling Commission, said: “Licensees must protect consumers from harm and treat them fairly. Our recent investigations uncovered a variety of consumer protection and anti-money laundering failings at each of these three operators and as a result we are using a range of enforcement tools against them.  We will continue to crack down on failing operators through our tough and proactive compliance and enforcement work.” 

BGO Entertainment Limited 

BGO failed to have effective policies and procedures in place for customers who may be displaying signs of problem gambling between 25 September 2018 and 23 March 2020. It also failed to have effective and adequately resourced anti-money laundering controls in place between 25 September 2018 and 21 July 2020.  

As a consequence BGO will have additional conditions imposed on its licence which involve carrying out extra social responsibility and anti-money laundering checks on its top customers. The business will also pay £2m to support the implementation of the National Strategy to Reduce Gambling Harms

Read the following BGO public statement.

GAN PLC 

Between August 2018 to September 2019 GAN failed to comply with four licence conditions focused on social responsibility and anti-money laundering. Failures included having ineffective anti-money laundering policies and procedures, not displaying warnings that underage gambling is an offence on its website and poor customer interaction guidance. 

As a consequence GAN will have additional conditions imposed on its licence which involve continued reviewal of the effectiveness and implementation of its AML and SR policies, procedures and controls, and extra training for personal management licence holders and senior staff. The business will also pay £146,000 to progress the National Strategy to Reduce Gambling Harms

Read the following GAN public statement.

NetBet Enterprises Limited 

Between 20 November 2018 and 29 May 2019 NetBet failed to comply with two licence conditions focused on social responsibility and anti-money laundering. Failures included not carefully scrutinising source of funds documentation provided by customers and not implementing its responsible gambling policy effectively. 

As a consequence NetBet will make a number of changes to its processes including giving greater regard to the log-in time of its customers during responsible gambling customer assessments, automatic limits placed on customers demonstrating early signs of problem gambling and providing consumers with access to an affordability calculator. 

The business will also pay £748,000 to progress the National Strategy to Reduce Gambling Harms

Read the following Netbet public statement.

Notes to editors

  1. More information about how we regulate the gambling industry. 
  2. Useful statistics on the gambling industry
  3. Journalists can contact our press office on 0121 230 6700or email: communications@gamblingcommission.gov.uk  

 

BGO Entertainment Limited public statement 

Key failings

Anti-Money Laundering: 

  • Licence Conditions 12.1.1 
  • Licence Condition 12.1.2 

Social responsibility: 

  • Social Responsibility Code Provision 3.4.1.(1) 

October 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. 

Introduction 

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. 

Executive summary 

This case concerns BGO Entertainment Limited (BGO) which holds a combined operating licence authorising it to operate as a remote operator and includes casino. 

The Commission conducted a compliance assessment in September 2018, in which a number of customer accounts were examined. Failures were identified concerning the manner that BGO interacted with the customers from a social responsibility (SR) and anti-money laundering (AML) perspective. 

Our investigation subsequently uncovered systemic failings in respect of both BGO’s SR and AML controls which affected a significant number of customers across its online casinos. These failings stemmed from inadequate Risk Assessments relating to AML together with inadequate AML and SR policies and controls. 

On 4 September 2019 the Gambling Commission gave BGO notice that we were commencing a review of its operating licence. 

BGO cooperated with the Commission throughout the compliance assessment and the subsequent investigation and acknowledged that between 25 September 2018 

and 21 July 2020 it did not have effective and adequately resourced AML controls in place to consistently address risks presented by higher risk customers. 

The settlement agreement consists of additional licence conditions which have been imposed and agreed by the Licensee to protect consumers they consist of: 

(i) Licensee shall apply enhanced due diligence measures (EDD) to the top 250 customers within its customer profiling system where it is required to do so in accordance with both the Money Laundering Regulations 2017 and the Gambling Commission’s published guidance concerning AML. This will consist of the top 125 customers by drop (deposits) and the top 125 customers by loss, in each case based on customers who have placed a bet in the previous 12 months, irrespective of whether such customer’s account is, at the relevant time, active, frozen / closed  or self-excluded. The top customers shall be determined by their drop (deposit) and loss in the previous 12-month period. This EDD is to be conducted within three months of the publication of the public statement and conducted thereafter every 12 months as required. The findings of each review should be presented to the Board of Licensee and acted upon. Records are to be maintained and presented to the Gambling Commission when required.  

(ii) Licensee shall maintain a record of the effectiveness of the Responsible Gambling checks that it undertakes on the top 250 customers within its customer profiling system. This will consist of the top 125 customers by drop (deposits) and the top 125 customers by loss, in each case based on customers who have placed a bet in the previous 12 months, irrespective of whether such customer’s account is, at the relevant time, active, frozen / closed or self-excluded. The top customers shall be determined by their drop (deposit) and loss in the previous 12-month period. The Responsible Gambling checks should be conducted in line with the Gambling Commission’s published guidance. This review is to be conducted within three months of the publication of the public statement and conducted thereafter every 12 months as required. The findings of each review should be presented to the Board of Licensee and acted upon. Records are to be maintained and presented to the Gambling Commission when required. 

In addition, the Licensee will make a payment of £2,000,000 in lieu of a financial penalty to address failings identified by the Commission. The Licensee will also pay Commission costs of £31,023.87p 

Findings

Failure to identify problem gambling behaviour 

Social responsibility (SR) code provision 3.4.1(1) 

Which states that “Licensees must put into effect policies and procedures for customer interaction where they have concerns that a customer’s behaviour may indicate problem gambling. The Policies must include:

(e) specific provision for making use of all relevant sources of information to ensure effective decision making and to guide and deliver effective customer interaction including in particular: 

  • provision to identify at risk customers who may not be displaying obvious signs of, or overt behaviour associated with, problem gambling; this should be by reference to indicators such as time or money spent. 
  • specific provision in relation to customer designated by the Licensee as ‘high value’, ‘VIP’ or equivalent. 
  • specific provision for interacting with customers demonstrating signs of agitation, distress, intimidation, aggression or other behaviours that may inhibit customer interaction.” 

Operators should also keep a record of customer interactions, and where an interaction has been ruled out. 

BGO accepted that between 25 September 2018 and 23 March 2020 it did not have effective policies and procedures in place for customers who may be displaying signs of problem gambling. The Licensee had also failed to take into account the Commissions guidance regarding responsible gambling and affordability. This led to BGO 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. 

Examples of the social responsibility failings include: 

  • Customer A this customer won a substantial amount on the on the National Lottery. In the following three months the customer lost in the region of £159,000 and activated a considerable number of RG triggers. On reviewing the account, it revealed that customer interactions consisted of thirty pop up questionnaires which had been sent out whilst only three RG interactions were made. 

The customer was not asked if they were in control of their gambling with a general presumption recorded that the customer was able to afford to gamble due to the lottery win. The Commission finds this wholly unacceptable. The Licensee accepted that the customer had hit a significant number of RG triggers and that there was an overuse of pop ups. 

  • Customer B’s account was opened in April 2017 and initially the customer was depositing relatively low amounts. Between 6 December and 24 December 2018 the customer deposited a total of £106,800 on 2 occasions in excess of £20,000 in a day. 

During this period, the customer received 23 pop ups, all of which were answered by the customer. On 10 December 2018 the customer deposited 13 times between 12am and 1am totalling £6,500. The Licensee’s RG policy at this time (November 2018) stated that this would activate a trigger for the account to be flagged for review and a deposit freeze to be applied. However, the Licensee acknowledged that between the hours of 1am and 7am there was no RG team in place. Officials noted that the Licensee failed to speak with the customer the following day as required by their policy and instead sent an email. The Licensee agreed there was an over- reliance on popups with this account. 

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 

BGO accepts it failed to conduct a risk assessment of the risks of the business being used for money laundering and terrorist financing from September 2018 – July 2020 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. 

The Commission examined the following customer accounts: 

In the case of the following customer the licensee did not effectively implement its own policies and procedures. 

Customer C the Commission found insufficient evidence had been provided in respect of SOF or SOW. The Licensee accepted that its AML policies and procedures had not reflected current practices and were inadequate in respect of this customer. It could not offer an explanation as to why this customer account was allowed to pass ECDD and this was unacceptable. 

In mitigation the Licensee believed there was an error as a result of historic preloaded existing accounts which had been put onto their own internal system. 

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. 

BGO accepted that between 25 September 2018 and 21 January 2020 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, BGO did not have adequate AML controls to consistently address the risks presented by higher risk customers. 

An example of the failings identified was found in the customer account of Customer D. This customer deposited in excess of £100,000 and lost more than £65,000 in seven days. It was known that the customer had a salaried income of less than 

£20,000 but the customer had not provided appropriate SOF or SOW checks. 

The Licensee accepted from the customer a screenshot of a current bank account, which was contrary to its policies. The screenshot detailed three transactions of monies which was believed to have come from an online gambling company together with a screenshot showing savings. Neither the source of the monies from the gambling company or the source of the funds from the savings account was established nor challenged by the Licensee. 

The Licensee was also aware from checks that this customer had entered into an Individual Voluntary Arrangement (IVA) four months previously but were not aware of the circumstances regarding the IVA. The Licensee did not establish the SOF for this customer, breaching Regulation 28(11)(a) of the 2017 Regulations. 

Actions taken by the Licensee 

BGO acknowledges that the policies relating to AML and customer interaction in force at the relevant time were ineffective. It has now improved those policies and will continue to review them as appropriate. 

The Licensee has agreed to make a variation of their licence which includes: 

  • Licensee shall apply enhanced due diligence measures (EDD) to the top 250 customers within its customer profiling system where it is required to do so in accordance with both the Money Laundering Regulations 2017 and the Gambling Commission’s published guidance concerning AML. This will consist of the top 125 customers by drop (deposits) and the top 125 customers by loss, in each case based on customers who have placed a bet in the previous 12 months, irrespective of whether such customer’s account is, at the relevant time, active, frozen / closed  or self-excluded. The top customers shall be determined by their drop (deposit) and loss in the previous 12-month period. This EDD is to be conducted within three months of the publication of the public statement and conducted thereafter every 12 months as required. The findings of each review should be presented to the Board of Licensee and acted upon. Records are to be maintained and presented to the Gambling Commission when required.  
  • Licensee shall maintain a record of the effectiveness of the Responsible Gambling checks that it undertakes on the top 250 customers within its customer profiling system. This will consist of the top 125 customers by drop (deposits) and the top 125 customers by loss, in each case based on customers who have placed a bet in the previous 12 months, irrespective of whether such customer’s account is, at the relevant time, active, frozen / closed or self-excluded. The top customers shall be determined by their drop (deposit) and loss in the previous 12-month period. The Responsible Gambling checks should be conducted in line with the Gambling Commission’s published guidance. This review is to be conducted within three months of the publication of the public statement and conducted thereafter every 12 months as required. The findings of each review should be presented to the Board of Licensee and acted upon. Records are to be maintained and presented to the Gambling Commission when required. 

BGO recognises there have been considerable learnings from these cases and has invested in improving its AML and responsible gambling processes. BGO states it is also committed to working with the industry to raise standards, particularly in relation to safer gambling. 

Regulatory settlement 

In line with our Statement of principles for licensing and regulation, BGO has concluded a regulatory settlement. The settlement agreement consists of: 

  • Agreement to a variation of their licence namely: 
    • Licensee shall apply enhanced due diligence measures (EDD) to the top 250 customers within its customer profiling system where it is required to do so in accordance with both the Money Laundering Regulations 2017 and the Gambling Commission’s published guidance concerning AML. This will consist of the top 125 customers by drop (deposits) and the top 125 customers by loss, in each case based on customers who have placed a bet in the previous 12 months, irrespective of whether such customer’s account is, at the relevant time, active, frozen / closed  or self-excluded. The top customers shall be determined by their drop (deposit) and loss in the previous 12-month period. This EDD is to be conducted within three months of the publication of the public statement and conducted thereafter every 12 months as required. The findings of each review should be presented to the Board of Licensee and acted upon. Records are to be maintained and presented to the Gambling Commission when required.  
    • Licensee shall maintain a record of the effectiveness of the Responsible Gambling checks that it undertakes on the top 250 customers within its customer profiling system. This will consist of the top 125 customers by drop (deposits) and the top 125 customers by loss, in each case based on customers who have placed a bet in the previous 12 months, irrespective of whether such customer’s account is, at the relevant time, active, frozen / closed or self-excluded. The top customers shall be determined by their drop (deposit) and loss in the previous 12-month period. The Responsible Gambling checks should be conducted in line with the Gambling Commission’s published guidance. This review is to be conducted within three months of the publication of the public statement and conducted thereafter every 12 months as required. The findings of each review should be presented to the Board of Licensee and acted upon. Records are to be maintained and presented to the Gambling Commission when required. 
  • £2,000,000 payment in lieu of a financial penalty, which will be directed towards delivering the National Strategy to Reduce Gambling Harms 
  • Agreement to the publication of a statement of facts in relation to this case 
  • Payment of £31,023.87p towards investigation costs. 

In considering an appropriate resolution to this investigation, the Commission has had regard to the following aggravating and mitigating factors: 

Aggravating 

  • BGO accepted that these breaches were not isolated and occurred over a sustained period of time, this despite ongoing input by the Commission. 
  • 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. 
  • BGO failed to have adequate MLTF Risk Assessment in place as well as appropriate AML Policies and controls despite continued guidance being provided by the Commission. 

Mitigating 

  • BGO has now put in place renewed policies and procedures which it says will prevent similar failings recurring. 
  • BGO accepted responsibility for the failings at an early stage and has been co- operative during the review process. 

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 Responsible Gambling Policy which takes into account the Commission’s guidance and includes a customer’s affordability? 
  • 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

 

Public statement Games Account Network PLC 

Key failings:

  • Breach of Licence Condition 12.1.1 (1), (2) and (3) (Prevention of money laundering and terrorist financing.
  • Breach of Licence Condition 12.1.2 Anti-money laundering measures for operators based in foreign jurisdictions
  • Non-compliance of social responsibility code provision (SRCP) 3.2.11 paragraph 2(b) – Access to gambling by children and young persons
  • Non-compliance of SRCP 3.4.1 paragraph 1(e) - Customer interaction
  • Non-compliance of SRCP 5.1.6 paragraph 1 – Compliance with advertising codes

28 October 2020

Operators are expected to consider the issues outlined above and review their own practices to identify and implement improvements in respect of the management of customers’ accounts.

Introduction

Licensed gambling operators have a legal duty to ensure their gambling facilities are provided in compliance with the Gambling Act 2005 (the Act), the conditions of their licence and in accordance with the licensing objectives, which are 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, safe and open way
  • protect children and other vulnerable people from being harmed or exploited by gambling.

Executive summary

This investigation resulted in the commencement of a section 116 regulatory review (the Commission commenced its regulatory review on 21 January 2020) of GAN PLC, hereafter referred to as GAN, Combined Remote Operating Licence number: 002604-R-104107-023. The regulatory review found failings within GAN’s processes on their website casino.winstar.com, which were aimed at preventing money laundering (ML) and protecting vulnerable people.

Between August 2018 to September 2019 GAN failed to comply with the Licence conditions and codes of practice (LCCP), specifically:

  • Licence condition 12.1.1 (1), requiring an operator to conduct an assessment of the risks of their business being used for money laundering and terrorist financing.
  • Licence condition 12.1.1 (2) and (3), requiring compliance with the prevention of money laundering and terrorist financing.
  • Licence condition 12.1.2 requiring operators based in foreign jurisdictions to comply with the MLRs. 
  • Social responsibility code provision (SRCP) 3.2.11 requiring warning potential customers that underage gambling is an offence.
  • Social responsibility code provision (SRCP) 4.1, requiring effective policies and procedures for customer interaction; particularly the requirement to make use of all relevant sources of information, to identify at-risk customers who may not be displaying obvious signs, and to interact with customers designated as “VIPs”.

In line with our Statement of principles for licensing and regulation, GAN will have additional licence conditions and pay a total of £146,754 in lieu of a financial penalty.

In agreeing to conclude our review by way of regulatory settlement, we considered the factors in the Commission's statement of principles for determining financial penalties including:

  • GAN's openness and cooperation with our investigation.
  • Its proposal of a regulatory settlement on acceptable terms at the earliest opportunity in proceedings.

The steps taken by GAN to remedy the shortcomings identified.

Findings

The investigation and our subsequent regulatory review found failings in GAN’s AML and SR policies and procedures.

Licence condition 12.1.1 (1)

Licence condition 12.1.1 (1) requires licensees to conduct an appropriate assessment of the risks of their business being used for money laundering and terrorist financing.

GAN has accepted that, between August 2018 and September 2019, it was in breach of this Licence condition. At the time of a Commission assessment in 2018 the Licensee’s business risk assessment document was not deemed appropriate. During a further Commission assessment in 2019 it was found that although the operator’s risk assessment had been amended and improved, it had not been updated to take into account the Commission’s money laundering and terrorist financing risk assessment (CMLTFRA) of June 2019 and still was not up to the expected standard. The Licensee accepted the risk assessment did not include reference to the AML risks which need to be considered when crypto-assets are encountered in source of funds (SOF) checks and that its risk assessment document required further amendment to address the issues identified.

Licence condition 12.1.1 (2) and (3)

Licence condition 12.1.1(2) requires that, 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 that 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 Commission from time to time.

Casino operating licences were subject to ‘The Money Laundering Regulations 2007’ (the 2007 Regulations) and are currently subject to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017’ (the 2017 Regulations), which superseded the 2007 Regulations.

GAN has accepted that, between August 2018 and September 2019, it was in breach of this licence condition and that its AML controls did not adequately address the risks presented by its customers due to:

  • in one case, accepting bank statements submitted by a customer which were in a different name. This indicated the funds originated from a third party who the Licensee knew nothing about or where those funds may had originated
  • in another case, analysis of SOF documents provided by a customer was not sufficiently critical and,
  • in a third case, there were insufficient assessment of concerns around the use of a cryptocurrency

Licence condition 12.1.2

At the time of the 2019 assessment GAN’s AML policies and procedures remained ineffective. GAN had failed to establish, maintain and regularly review policies, procedures and controls to mitigate and manage effectively the risks of money laundering and terrorist financing (including the monitoring and management of compliance with such policies, procedures and controls), as required by Licence condition 12.1.1 and Regulation 19 of the 2017 Regulations. GAN accepted that its process was incomplete.

Social Responsibility code provision (SRCP) 3.2.11

Licensees are required to ensure they display warnings that underage gambling is an offence. During the 2019 assessment Commission Officials were not satisfied with the location of the warning.  GAN took immediate action to rectify the issue. The location of the warning had not been sufficient to meet the requirements of this SR code provision as it was located in an area of the website typically accessed by registered customers and not potential customers landing on the homepage who are considering, or intending on, registering with GAN. Therefore, the Commission considered GAN had not complied with paragraph 2(b) of SRCP 3.2.11and in doing so had breached a condition of its licence.

Social Responsibility code provision (SRCP) 3.4.1(1)

Licensees must put into effect policies and procedures for customer interaction where they have concerns that a customer’s behaviour may indicate problem gambling. The policies must include:

(e)

  • provision to identify at risk customers who may not be displaying obvious signs of, or overt behaviour associated with, problem gambling: this should be by reference to indicators such as time or money spent.
  • specific provision in relation to customers designed by the licensee as “high value”, “VIP”, or equivalent.

GAN’s Responsible Gambling Policy, in place at the time, did not fully reflect the requirements of SRCP 3.4.1 including a specific provision for VIP customers.

Furthermore, the Commission examined copies of GAN’s Customer Interaction Guidance (CIG) and Social Responsibility Monitoring report. The CIG did not reference the Commission’s Guidance for remote operators issued in February 2018 and neither of the policies were dated or signed by senior management. In addition, there were also no arrangements in place for monitoring and identifying customers who are potentially at risk of gambling related harm through regular patterns of gambling but who are not displaying obvious signs of problem gambling. GAN accepted that shortcomings with its customer interactions had been identified.

Social responsibility code provision (SRCP) 5.1.6 (1)

Licensees should not use game tiles containing cartoon imagery as they may appeal to children.  

During the 2019 assessment of www.Winstar.com a number of game tiles were illustrated with cartoon imagery. The Licensee advised it had carried out a review of all of its game tiles following the 2018 assessment and these had been updated and any content which appealed to children removed.  However, although one game had been redesigned, an updated tile still contained cartoon imagery which may be attractive to children.

Commission officials consider the Licensee had not complied with SRCP 5.1.6(1). GAN accepted this breach which was down to human error when an old version of the game tile was uploaded inadvertently.

Regulatory settlement

This regulatory settlement consists of:

  • £100,000 payment in lieu of a financial penalty, which will be directed towards delivering the National Strategy to Reduce Gambling Harms.
  • Divestment of £46,754 which accrued from customer accounts as a result of the failings, which will be directed towards delivering the National Strategy to Reduce Gambling Harms.
  • New operating licence conditions stating GAN shall:
    • Ensure that all persons who occupy the position of Money Laundering Reporting Officer (MLRO) or Deputy MLRO shall be suitably qualified, shall hold a Personal Management Licence (PML) and shall undertake annual refresher training in anti- money laundering (AML)/counter terrorist financing (CTF) and be able to evidence this to the Commission.
    • Ensure that all PML holders, senior management and key control staff undertake outsourced AML training. All such staff must undertake refresher training annually thereafter.
    • Continue to review the effectiveness and implementation of its AML and SR policies, procedures and controls. 
  • Agreement to the publication of a statement of facts in relation to this
  • Payment of £6,000 towards the Commission’s costs of investigating the case.

In considering an appropriate resolution to this investigation, the Commission has had regard to the following aggravating and mitigating factors:

Aggravating factors

  • the serious nature of the breaches identified
  • the impact on the licensing objectives
  • repeated breach or failure by the operator
  • the need to encourage compliance by other operators with the

Mitigating factors

  • the proposal of a regulatory settlement was made at the first opportunity and at an early stage in the licence review process
  • GAN’s openness and cooperation with the Commission throughout the review process
  • GAN took substantial steps to address the issues identified in the assessments
  • SOF documents had been requested from customers
  • customers who refused to provide SOF documents had their account suspended
  • GAN’s financial position.

Good practice

Gambling operators should take account of the failings identified in this investigation to ensure industry learning. Operators should consider the following questions:

  • Are your policies and procedures for identifying high risk customers for AML and SR customer accounts effective?
  • Are your policies and procedures being reviewed regularly?
  • Have you adequately resourced your AML and SR departments, so your staff are always able to put your policies and processes in place for all customers?
  • Have your staff received sufficient AML and SR training?
  • Are you recording all customer interactions, including decisions not to interact with customers, and are these records available for colleagues to refer to when making decisions?
  • Are your customers providing documentation to support their level of spend and loss, and not simply giving assurances?

Public statement: Netbet Enterprises Limited T/a NetBet: 

Key failings: 

  • Breach of Licence Condition 12.1.1 (3) - Prevention of money laundering and terrorist financing 
  • Failure to comply with Social Responsibility Code Provision 3.4.1 paragraph 1(e) - Customer interaction 

28 October 2020 

Operators are expected to consider the issues outlined above and review their own practices to identify and implement improvements in respect of the management of customers’ accounts.  

Introduction 

Licensed gambling operators have a legal duty to ensure their gambling facilities are provided in compliance with the Gambling Act 2005 (the Act), the conditions of their licence and in accordance with the licensing objectives, which are 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, safe and open way 
  • protect children and other vulnerable people from being harmed or exploited by gambling. 

Executive summary 

This investigation resulted in the commencement of a section 116 regulatory review1 of Netbet Enterprises Limited t/a NetBet, (NetBet), Combined Remote Operating Licence number: 000-039170-R-319343-026. The regulatory review found failings in NetBet’s processes on its casino and betting website www.netbet.co.uk, which were aimed at preventing money laundering (ML) and protecting vulnerable people. 

Between 20 November 2018 and 29 May 2019 NetBet failed to comply with the Licence conditions and codes of practice (LCCP), specifically:  

  • Licence condition 12.1.1 (3), requiring compliance with the prevention of money laundering and terrorist financing.  
  • Social responsibility code provision (SRCP) 3.4.1, requiring effective policies and procedures for customer interaction; particularly the requirement to make use of all relevant sources of information, to identify at-risk customers who may not be displaying obvious signs, and to interact with customers designated as “VIPs”.  

Taking into account remedial action taken by the licensee and in line with our Statement of principles for licensing and regulation, NetBet will pay a total of £748,000 in lieu of a financial penalty.  

Findings 

The investigation and our subsequent regulatory review found: 

  • Failings in NetBets implementation of anti-money laundering (AML) policies, procedures and controls 
  • Deficiencies in its responsible gambling policies, procedures, controls and practices, including weaknesses in implementation. 

Licence condition 12.1.1 (3)  

 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”. 

NetBet has accepted that between November 2018 and May 2019 there were shortcomings in its implementation of policies, procedures and controls as regards to anti-money laundering and accepts it was in breach of paragraph 3 of the licence condition 12.1.1 as a result of: 

  • Its failure to conduct appropriate levels of Enhanced Due Diligence (EDD) on at risk customers, and in several cases no EDD was carried out at all; and 
  • Where Source of Funds (SoF) documentation was requested, it was not always critically reviewed in a manner which evidenced a customer’s source of funds to support how they funded their gambling. 

Paragraph 1 (e) of social responsibility code provision (SRCP) 3.4.1 (Customer Interaction)  

Since its addition to the LCCP in May 2015 up until 31 October 2019 when it was amended, policies must include:  

(e) specific provision for making use of all relevant sources of information to ensure 

effective decision making, and to guide and deliver effective customer interactions, 

including in particular: 

(i) provision to identify at risk customers who may not be displaying obvious 

signs of, or overt behaviour associated with, problem gambling: this should be 

by reference to indicators such as time or money spent 

(ii) specific provision in relation to customers designated by the licensee as 

‘high value’, ‘VIP’ or equivalent 

NetBet accepted historic weaknesses in its implementation of its responsible gambling policy resulting in its processes relating to responsible gambling not being consistently followed by staff. 

NetBet have addressed failings identified by the Commission by making a number of changes to its processes which include: 

  • greater regard is given to the log-in time of its customers during responsible gambling customer assessments 
  • customer winnings do not lower the risk of problem gambling being a concern 
  • the effectiveness of interactions is now logged in customer profiles 
  • an affordability calculator has been created for its customers to accurately assess the amount of disposable income they have available 
  • automatic limits placed on customers demonstrating early signs of problem gambling. 

Regulatory settlement  

This regulatory settlement consists of: 

  • £748,000 payment in lieu of a financial penalty, which will be directed towards delivering the National Strategy to Reduce Gambling Harms
  • Agreement to the publication of a statement of facts in relation to this case. 
  • Payment of £8,806 towards the Commission’s costs of investigating the case.  

In considering an appropriate resolution to this investigation, the Commission has had regard to the following aggravating and mitigating factors: 

Aggravating factors:

  • the serious nature of the breaches identified 
  • the impact on the licensing objectives 
  • the breach arose in circumstances that were similar to previous cases the Commission has dealt with which resulted in the publication of lessons to be learned for the wider industry 
  • the need to encourage compliance among other operators 
  • Breaches were notified to the licensee in November but were not remedied until September 2019 
  • The nature of the breaches may mean other customers were affected that the Commission has not reviewed 
  • NetBet senior management should have been aware of governance issues that lead to the breaches, given their significance 
  • Compliance should have been achieved in a far more timely manner following the initial assessments in November 2018. 
  • the absence of internal controls led to action plans being required to improve processes, procedures, risk assessments and training gaps in relation to both AML and RG interactions. 

Mitigating factors:

  • the extent of steps taken to remedy the breach 
  • the Licensee’s early recognition of failings  
  • Licensee has been co-operative throughout its dealings with the Commission. 

Good practice: 

Gambling operators should take account of the failings identified in this investigation to ensure industry learning. Operators should consider the following questions: 

  • Do you have formal processes in place to measure the effectiveness of your AML and RG policies and are findings adequately recorded? 
  • Do you efficiently record all compliance-related decisions and are you able to demonstrate to the Commission, on request, evidence of ongoing assessment, evaluation and improvement? 
  • Do lessons learned from public statements flow into your policy and processes? 
  • Are your customer risk profiles formed by or linked to your money laundering and terrorist financing risk assessment? 
  • Do you have a formalised process for analysing the effectiveness of customer interactions to ensure that reviews were adequately documented and consistent in their approach? 
  • Do you log the types of behaviour which have triggered a customer interaction and keep sufficient records of interactions, along with decisions not to interact especially in terms of the level of detail provided? 
  • Are all forms of individual customer interaction (i.e. Email, VIP engagement, customer service calls) recorded on the customer profile, which is the same data point to facilitate relevant staff easy access to monitor current and historical engagement with its customers. 
  • Do you recognise that winning customers may still be problem gamblers? 
  • Have your staff received sufficient AML and SR training?  
Posted on 28 October 2020