TGP Europe / money laundering / white label

Request

Under the relevant FOI legislation, I would like to request the following information:

• the additional conditions attached to the operating licence of TGP Europe (account no. 38898) as a result of February's sanction against the licensee.
• a document or documents (such as ministerial briefings, reports or spreadsheets) from the period beginning 1 Jan, 2020, where they exist, that outline/compile the Commission's findings into money laundering concerns related to white label operations. (I am not requesting all documents that relate to this matter, simply any that might bring together and detail your research in this space.)

I am happy to receive these in PDF format.

Given the public interest nature of this request, I would kindly ask that any fees for this be waived.

Response

Thank you for your request which has been processed under the Freedom of Information Act 2000 (FOIA).

In your email you have requested the additional conditions attached to the operating licence of TGP Europe (account no. 38898) as a result of February's sanction against the licensee.

Once licensed, gambling operators are subject to ongoing compliance requirements and are subject to regulatory action should they fail to meet their licence requirements.

The Commission is a regulatory body with licensing, compliance, and enforcement functions; through our regulatory activity, the Commission aims to protect consumers and the wider public, and to raise standards in the gambling industry. Regulatory action may only be imposed where the Commission thinks that a condition of a licence has been breached. Section 116 of the Gambling Act (opens in new tab) gives the Commission the power to review the performance of licence holders and their compliance with the LCCP. The section provides for two different types of review.

Following a review under section 116(1) or (2) of the Act, the Commission may:

• decide to take no further action
• decide to give the licensee advice as to conduct
• decide to exercise its powers set out in section 117 of the Act (Regulatory powers).

Under Section 117 of the Gambling Act (opens in new tab), it can:

• give the licensee a warning
• add, remove, or amend a condition to the licence
• suspend a licence
• revoke a licence
• impose a financial penalty.

We release details of our enforcement activity through public statements. The specific public statement in relation to this case can be viewed here:

Gambling business TGP Europe fined £316,250 (gamblingcommission.gov.uk)

The public statements will detail the nature of the failings by the operator and the amount of the fine or settlement. Further to this, the Commission also publishes a list of recent regulatory sanctions we have imposed on licence holders. as a result of regulatory action or investigation. The specific Sanctions in relation to this case can be viewed here:

Sanction for TGP Europe Limited (gamblingcommission.gov.uk)

When we publish these statements and sanctions, we take care to present as much information as possible to ensure that lessons can be learned by operators. However, we must also be careful not to reveal any information that could hinder our ability to conduct investigations or enable those we may investigate to avoid detection.

The Gambling Commission do not provide comment on any information held regarding specific operators, unless it is in the public interest to do so. As such, we are unable to provide any further information falling within the scope of your request.

I can confirm that further information is held by the Gambling Commission falling within the scope of your FOI request, however, we consider these records to be exempt in their entirety by virtue of s31 of the FOIA.

Our considerations for engaging this exemption are as follows:

Law Enforcement – Section 31

Section 31(1)(g) exempts information whose disclosure would, or would be likely to, prejudice the exercise by any public authority of its functions for any of the purposes specified in subsection (2).

The Commission considers the subsections below apply and therefore the information is exempt from disclosure:

i. Subsection 31(2)(a) refers to the purpose of ascertaining whether any person has failed to comply with the law,
ii. Subsection 31(2)(b) refers to the purpose of ascertaining whether any person is responsible for any conduct which is improper,
iii. Subsection 31(2)(c) refers to the purpose of ascertaining whether circumstances which would justify regulatory action in pursuance of any enactment exist or may arise,
iv. Subsection 31(2)(d) refers to the purpose of ascertaining a person’s fitness or competence in relation to the management of bodies corporate or in relation to any profession or other activity which he is, or seeks to become, authorised to carry on

Public interest test

The factors the Commission has considered when applying the public interest test have been detailed below.

Arguments in favour of disclosure:

• The Commission is a public body which is required to regulate the gambling industry in the public interest. There is therefore a public interest in members of the public having confidence the Commission is being open and honest with the information it holds so that it can be held to account.
• It is important that the public are assured that the Commission is carrying out its functions in ensuring that any individuals or organisations who are involved in providing gambling facilities to the public have undergone the necessary assessments and will uphold the licencing objectives ensuring that consumers are protected.
• Disclosure of the requested information could demonstrate to stakeholders and relevant parties how the Commission is assessing licensees and, furthermore, this disclosure may encourage stakeholders to work with us and contribute to our programme of work, increasing confidence in the Commission as a regulator and its ability to uphold the law.

Arguments in favour of maintaining the exemption:

• Licensed operators have a reasonable expectation that this level of detail would not be published on an individual basis.
• There is an expectation of confidence in much of the Commission’s work, particularly when discussing areas of a licensee’s compliance with the LCCP. It is the impact on this work of the Commission which is more likely to be affected by disclosure.
• Disclosure of this information would also undermine the Commission's ability to uphold the licensing objectives which would impact on the trust and confidence of the public in it as a regulator.

Weighing the balance

The Commission acknowledges that there is a public interest in promoting the accountability and transparency of public authorities and the importance of having sufficient information in the public domain to support consumers with their choice of operator, however, disclosure of the information would be damaging to the Commission as a regulatory body which ultimately serves to protect the wider public interest.

It is important that the public are assured that the Commission is carrying out its functions in ensuring that any individuals/organisations who are involved in providing gambling facilities to the public have undergone the necessary assessments and will uphold the licencing objectives ensuring that consumers are protected.

However, there is a strong public interest in preserving the processes that the Commission has in place to assess operators’ compliance with the LCCP and identify any operators who will be unable to comply with the licensing requirements. The public trust that the Commission has robust processes in place to assess operators so that when they use the services provided by an operator, they are confident that there has been sufficient scrutiny of that operator to ensure that they are protected. If this information were released it would undermine that confidence.

We consider that the public interest is better served by withholding this information, ensuring that consumers are protected through our processes rather than releasing information about our processes which in our view will not benefit the public as a whole.

Further to this you have requested the following informaiton ‘a document or documents (such as ministerial briefings, reports or spreadsheets) from the period beginning 1 Jan, 2020, where they exist, that outline/compile the Commission's findings into money laundering concerns related to white label operations. (I am not requesting all documents that relate to this matter, simply any that might bring together and detail your research in this space).’

I can confirm that an informal briefing paper has been provided to DCMS regarding White Label Partnerships. The sections of this document falling within the scope of your request are as follows:

8. Failure to ensure that their arrangements with third parties do not result in an offence under section 33 of the Act (providing facilities for gambling without a licence) or non-compliance with LCCP will bring into question the suitability of an operator to hold a licence.

9. Social responsibility provision 1.1.2 (Responsibility for third parties – all licences) makes clear that licensees are responsible for the third parties that they contract with. It also requires licensees to ensure that any contracted third party conducts themselves, in so far as they carry out activities on behalf of the licensee, as if they were bound by the same licence conditions and subject to the same codes of practice as the licensee.

10. To be compliant with SR code provision 1.1.3, licensees must also ensure that third parties who provide user interfaces enabling customers to access their remote gambling facilities:
    i. include a term that any such user interface complies with the Commission’s technical standards for remote gambling systems; and
    ii. enable them, subject to compliance with any dispute resolution provisions of such contract, to terminate the third party’s contract promptly if, in the licensee’s reasonable opinion, the third party is in breach of that term
    

11. In 2019 the Commission conducted compliance and enforcement work into white label arrangements which revealed failings on the part of licensees to appropriately mitigate the risks to the licensing objectives. Areas where licensees fell down were:

• Passing responsibility for customer interactions to their partners with a lack of effective oversight.
• Not having live access to customer interaction records leaving them unable to ensure their partners are upholding the licensing objectives and that customer risk is being managed effectively.
• Being unable to monitor customer spend, length of play and behaviour across all partners in their domain preventing a holistic single customer view.
• Ineffective AML controls in place with individual partners or when viewed across the entire domain for customer activity.
• Little, or no control over marketing and promotional offers published by their partners leaving customers exposed to potentially unfair or unclear material. Some promotional material may have appeared on copyright infringing websites
• Insufficient due diligence being conducted on partners who had links to criminal activity.

12. In response, the Commission published a reminder that responsibility for compliance sits with the licence holder and that we expect licensees to obtain the necessary assurance by conducting adequate due diligence on the third party to ensure (amongst other things) that they are competent and reliable. This was followed by examples of good practice in the annual enforcement report (2019-20), which included the proposal that licensees continually manage and evaluate their white label partner relationship. Enforcement action has been taken in response to serious failings. In summary, these failings can be addressed through existing powers and processes.

White label arrangements present two key risks:

Keeping crime out of gambling

White label arrangements have the potential to be complex and there is a risk that entities with links to criminal activities in other jurisdictions are introduced into the GB market. Our published good practice specifies the need for licensees to undertake “adequate due diligence” of white label partners and there are criminal sanctions that can be brought forward in the event that a licensee knowingly partakes in criminal activity (e.g. POCA).

vi. The scope for money laundering/terrorism funding is limited by the nature of white label arrangements and legislative framework

In the typical example of the “white label sponsorship” arrangement the risk of “classic” money laundering using the licensee’s business does not appear to be high because there is no significant opportunity for the “integration” stage of money laundering. For example, under a fixed fee arrangement, the third party regularly pays the licensee a set amount for the white label arrangement and does not make any money back from that contract. However, such contracts can be profitable because they increase the sums spent gambling with the white label partner overseas in various other markets.

The risk of white label arrangements being used as a vehicle is also low in respect of revenue share arrangements, where the third party receives a portion of the profits derived from the licensee’s website not vice-versa, though the risk of simple criminal spend is not completely removed.

ix. GC has a range of powers available to manage breaches to LCCP

Such powers include:

• Holding licensees accountable for breaches committed by third party services (e.g. fines, licence suspension or revocation)
• Imposing specific licence conditions on higher risk licensees that reduce risk that future breaches occur (including potentially preventing the outsourcing of functions to third parties).

Review of the decision

If you are unhappy with the service you have received in relation to your Freedom of Information request you are entitled to an internal review of our decision. You should write to FOI Team, Gambling Commission, 4th floor, Victoria Square House, Victoria Square, Birmingham, B2 4BP or by reply to this email.

Please note, internal review requests should be made within 40 working days of the initial response. Requests made outside this timeframe will not be processed.

If you are not content with the outcome of our review, you may then apply directly to the Information Commissioner (ICO) for a decision. Generally, the ICO cannot make a decision unless you have already exhausted the review procedure provided by the Gambling Commission.

The ICO can be contacted at: The Information Commissioner’s Office (opens in a new tab), Wycliffe House, Water Lane, Wilmslow, Cheshire SK9 5AF.

Information Management Team
Gambling Commission
Victoria Square House
Victoria Square
Birmingham B2 4BP