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Duties and responsibilities under the Proceeds of Crime Act 2002

This advice explains how operators can make sure they and their employees comply with their obligations under The Proceeds of Crime Act 2002 (POCA).

  1. Contents
  2. Part 2 - The advice
  3. 5 - Customer relationships

5 - Customer relationships

Operators should be mindful that some risk indicators (for example, a pattern of increasing spend or spend inconsistent with apparent source of income) could be indicative of money laundering, but also equally of problem gambling, or both. There may also be patterns of play (for example, chasing losses) that appear to be indicative of problem gambling that could also be considered to indicate other risks (for example, spend that is inconsistent with the individual’s apparent legitimate income could be the proceeds of crime). While patterns of play may be one indicator of risk, operators should satisfy themselves that they have asked, or are prepared to ask, the necessary questions of customers when deciding whether to establish a business relationship, maintain the relationship or terminate the relationship. In summary, it is perfectly plausible that an individual attempting to spend criminal proceeds or launder money could also be a problem gambler, but one does not necessarily follow the other. The responsibility is on the operator to be in a position to understand these dynamics and mitigate any risks to the licensing objectives.

Operators are subject to both certain provisions of POCA and the Act (and the relevant licence conditions and codes of practice). Operators have the responsibility to comply with the licensing objectives and, therefore, they should carry out appropriate enquiries and assessments to ensure that they do so. While the conclusions drawn and actions taken may differ according to whether money laundering and/or social responsibility risks are identified, the effective identification and management of these risks rests upon the ability of operators to have a comprehensive knowledge of their customer relationships and for managers to be clear on their responsibilities.

It is also important that the operator is able to reconcile information relating to customers' gambling activities in different parts of the business so that they have a more complete picture of the risks posed by the activities of individual customers.

Commercial and business information should be considered for AML as well as social responsibility purposes when transacting with an individual. This should include arrangements for the monitoring of customers with whom a business relationship has been established. For example, information about customer spend can be used by the operator to proactively monitor high risk customers in relation to their money laundering risk.

Customer relationships need to be managed proficiently and records should be maintained as to what information was communicated to the customer, why it was communicated and what considerations were made. If players expect that customer interaction is likely should they play with large amounts of money, or for lengthy periods, and such interaction is consistently applied, there would be less reason for customers to question or become suspicious of the motives of these interactions. Operators may find it helpful to provide their customers with a leaflet which explains why they are being asked questions about their game play.

The Commission recognises that some operators may find their obligations under POCA challenging, particularly in relation to the management of customer relationships, but it is incumbent on operators to have policies, procedures and controls in place to ensure that they comply with all relevant provisions of POCA (and the Act and the relevant licence conditions and codes of practice), in particular in relation to the reporting of money laundering activity by customers and the obtaining of a defence (appropriate consent) where necessary.

Customer relationships for AML purposes consist of three aspects:

  • the establishment of the business relationship with the customer
  • the monitoring of customer activity, including account deposits and withdrawals
  • the termination of the business relationship with the customer.

At all stages of the relationship it is necessary to consider whether the customer is engaging in money laundering (including criminal spend); whether there is a need to report suspicious activity and seek a defence (appropriate consent); and any risks posed to the licensing objectives.

Establishment of business relationship

The establishment of a business relationship with a customer is likely to occur when, for example, the customer:

  • places a wager or bet with the operator using cash or cheque, or pays using a bank or similar card
  • opens a gambling account with the operator or joins a membership scheme (where one is offered by the operator)
  • places money on account with the operator.

When establishing a business relationship, operators will need to give consideration to the following:

  • the potential money laundering risk posed by the customer
  • whether it is necessary to do KYC or due diligence checks on the customer
  • whether it is known or suspected that the customer may launder money (including criminal spend).

Where the operator becomes aware that the customer is attempting to use the operator to launder criminal proceeds (including criminal spend), the operator must carefully consider whether either not to establish the business relationship, or to suspend or terminate the business relationship at the earliest opportunity. In either case, it is recommended that a SAR is submitted to the NCA and, where there are funds to be returned to the customer, seek a defence (appropriate consent) to a principal money laundering offence.

Customer monitoring

Where, through their customer profile or known pattern of gambling activity, the customer appears to pose a risk of actual or potential money laundering, the operator should monitor the gambling activity of the customer and consider whether further due diligence measures are required. This should include a decision about whether a defence (appropriate consent) should be sought for future transactions, or whether the business relationship with the customer should be terminated where the risk of breaches of POCA are too high.

Operators should ensure that the arrangements that they have in place to monitor customers and the accounts they hold across outlets, products and platforms (remote and non-remote) are sufficient to manage the risks that the operator is exposed to. This should include the monitoring of account deposits and withdrawals. Those operators that rely heavily on gaming machines should also have practical systems in place to effectively monitor and reconcile customer spend on gaming machines. Any suspicious activity should be reported by means of a SAR to the NCA.

Once knowledge or suspicion of criminal spend is linked to a customer in one area of the business (for example, over the counter bets), operators should monitor the customer’s activity in other areas of the business (for example, gaming machine play).

If the customer’s patterns of gambling lead to an increasing level of suspicion of money laundering, or to actual knowledge of money laundering, operators should seriously consider whether they wish to allow the customer to continue using their gambling facilities, otherwise the operator may potentially commit one of the principal money laundering offences.

Termination of business relationship

As already discussed, to avoid potentially committing one of the principal money laundering offences, operators need to consider ending the business relationship with a customer in the following circumstances:

  • where it is known that the customer is attempting to use the operator to launder criminal proceeds or for criminal spend
  • where the risk of breaches to POCA are considered by the operator to be too high
  • where the customer’s gambling activity leads to a steadily increasing level of suspicion, or actual knowledge, of money laundering.

Where the operator terminates a business relationship with a customer and they know or suspect that the customer has engaged in money laundering, they should seek a defence (appropriate consent) from the NCA before paying out any winnings or returning funds to the customer.

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Risk-based approach
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Duties under the Proceeds of Crime Act 2002
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