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The prevention of money laundering and combating the financing of terrorism

The role of the Gambling Commission

1.35 The Commission requires operators to prevent gambling being a source of crime or disorder, being associated with crime or disorder or being used to support crime. This guidance document is an important frame of reference to help casino operators meet that objective. Whilst potential breaches of POCA and the Terrorism Act will normally be reported to the NCA and fall to the police to investigate, the Commission, in its role as the gambling regulator, seeks assurance that risks to the licensing objectives posed by money laundering activity and terrorist financing are effectively managed, and this guidance will assist casino operators to meet their obligations under POCA, the Regulations and the Terrorism Act, where appropriate.

1.36 Under the Regulations (Regulation 7(1)(d).) the Commission is designated as the supervisory authority for casinos. The Regulations (Regulation 46(1) and (2)) stipulate that a supervisory authority must:

  • effectively monitor the relevant persons for which it is the supervisory authority and take necessary measures for the purpose of securing compliance by such persons with the requirements of the Regulations
  • adopt a risk-based approach to the exercise of its supervisory functions, having identified and assessed the risks of money laundering and terrorist financing to which the relevant persons for which it is the supervisory authority are subject
  • ensure that its employees and officers have access to relevant information on the risks of money laundering and terrorist financing which affect its sector
  • base the frequency and intensity of its on-site and off-site supervision on the risk profiles it has prepared
  • keep a record in writing of the actions it has taken in the course of its supervision and of its reasons for deciding not to act in a particular case
  • take effective measures to encourage its sector to report breaches of the provisions of the Regulations to it.

1.37 In accordance with its risk-based approach, the supervisory authority must take appropriate measures to review:

  • the risk assessments carried out by relevant persons to identify and assess the risks of money laundering and terrorist financing to which the business is subject
  • the adequacy of the policies, procedures and controls adopted by the relevant persons and the way that those policies, procedures and controls have been implemented (Regulation 46(4)).

1.38 The Commission therefore adopts a risk-based approach to its role as supervisory authority. We focus our attention on circumstances where the processing of criminal funds or criminal spend indicates serious failures in an operator’s arrangements for the management of risk and compliance with POCA, the Regulations and the Terrorism Act or a breach of a licence condition, or makes a reasonably significant contribution to the financial performance of the business, particularly concerning their continued suitability to hold a licence (public statements available at: http://www.gamblingcommission.gov.uk/news-action-and-statistics/news/news.aspx?searchKeywords=&categories=0/1/24/51&page=0#main.)

1.39 Where a casino operator fails to uphold the licensing objectives, for example by being ineffective in applying AML/CTF controls or ignoring their responsibilities under POCA, the Regulations and the Terrorism Act, or breaches an applicable licence condition, the Commission will consider reviewing the operating licence under section 116 of the Act. This could result in the suspension or revocation of the operator’s licence under sections 118 and 119 of the Act. The Commission may also consider imposing a financial penalty where a licence condition has been breached, in accordance with section 121 of the Act.

1.40 Certain activities carried out by non-remote casinos regarding the methods of payment that they accept in respect of gambling services are categorised as money service business (MSB) activities. By acting as a cheque casher or currency exchange, or by accepting winners’ cheques and foreign currency, casinos are subject to registration with, and supervision by, HM Revenue and Customs (HMRC). The exemptions that remove this requirement, where the MSB activities are occasional or very limited, do not apply to casinos because of the value of the transactions typically involved. However, in order to avoid dual regulation, and as provided by the Regulations (Regulation 7(2) and (3)), there is an agreement between HMRC and the Commission that the Commission performs the supervisory role for the MSB activities in question. This means that it is not necessary for non-remote casinos to register with HMRC in this regard. Casinos should however note that, in its capacities as a supervisory authority and a law enforcement authority, HMRC may use the UK AML regime to gather information for tax purposes. (Regulations 3 and 44 define HMRC as a law enforcement authority for the purposes of the Regulations. Regulation 52 allows supervisory authorities to disclose AML information to law enforcement authorities to fulfil the law enforcement authorities' functions, which, in the case of HMRC, includes collecting information for tax purposes. There are also obligations at regulations 21, 43-45, 49-50, 52, 63 and 64 in respect of law enforcement authorities, which broadly require relevant persons to respond to certain enquiries from law enforcement authorities and to provide information, and for law enforcement authorities and supervisors to cooperate and share information.)

Next chapter: Purpose of this Guidance