Changes to the licence conditions and codes of practice on High Value Customers
5 - Oversight and accountability for HVC teams
A number of licensees have created dedicated teams to manage HVCs. Given the regulatory risks these teams are directly involved in managing, their operation and performance should be subject to proper oversight and scrutiny by the licensee’s senior management and Board. However, in a number of cases the focus of such teams has been orientated too heavily towards the delivery of commercial performance, resulting in:
- HVC teams operating in isolation from safer gambling, compliance, or AML teams.
- A lack of appropriate oversight and senior accountability for HVC teams.
- An absence of appropriate records and audit trails for decisions taken within HVC teams or at Executive level.
- Tailored approaches to safer gambling or AML processes being undertaken by HVC teams or Senior Executives with commercial considerations taking precedence over regulatory risk.
- Breaching internal polices for HVCs.
The draft guidance reinforced the need for licensees to have implemented effective policies and procedures for the operation and governance of their HVC schemes. It notes the disproportionate revenue provided by HVCs, relative to the wider customer base, and proposes a number of measures to mitigate the risk of commercial motivations conflicting with regulatory compliance.
- Do you agree with the proposed guidance on oversight and accountability for HVC schemes?
- Do you agree with the proposed guidance on maintaining an audit trail for HVC schemes?
- Are there additional safeguards or good practice which should be included in the guidance relating to oversight and accountability?
A majority of respondents were in support of the proposed guidance relating to oversight and accountability. On audit trails for HVCs, some respondents expressed their agreement with the proposals insofar that audits are subject to regular quality-review processes.
Other respondents emphasised that audit trails should be reviewed externally, with one respondent proposing that audit trails and other customer data be monitored by an ombudsman to address any conflict between commercial motivations and regulatory compliance.
Audit trails were largely welcomed as a means of facilitating compliance and enforcement action. Some respondents expressed their support on the condition that equal attention be given to preventative measures, including enhanced know your customer checks and sustainability of spend.
Several respondents noted that whilst in agreement with the proposals on audit trails, some of the wording could go further to strengthen the guidance.
It was suggested that a change in the use of ‘should’ to ‘must’ would satisfy this. Respondents also asked for further clarification on what exact material the record of decisions should include. Others suggested that not all customer contact, particularly unsuccessful attempts at contact, should be considered notable.
Some noted that the proposed guidance was clearly set out and placed due emphasis on customer welfare. Several respondents suggested that enhanced know your customer checks would reduce the risk of customer harm, with one response noting that light-touch or inaccurate checks – often as small as an address mismatch – are a barrier to Gamstop working effectively.
Further responses suggested that Gamstop, or a similar external platform, should be employed to track customer spending patterns across multiple licensees.
Some respondents were of the view that the proposals relating to oversight and accountability had gone too far and infringe on licensees’ livelihoods. One response predicted a large revenue loss resulting from additional internal auditing, suggesting that the cost of implementation will outweigh the commercial benefits. A small number of responses suggested that ‘customer autonomy’ should be further considered in the guidance.
The proposed guidance addresses the need for licensees to maintain records detailing how a HVC relationship has been managed and to have clear oversight arrangements for how HVC schemes operate. Properly implemented, such measures should instil clearer accountabilities to prevent adverse outcomes. Where adverse outcomes do occur, these controls will help effective and efficient investigation to establish whether all reasonable steps have been taken by the licensee.
We note that many respondents were in favour of these proposals and agree that proper audit trails enable the Commission to hold licensees to account. They also provide a licensee and their staff with the ability to demonstrate the steps they have taken to prevent adverse outcomes. We further agree that regular reviews and quality-checks of internal procedure should be routinely actioned to monitor the efficacy of such trails.
We intend to retain the term record of decisions, which refers to any decision made around an HVC’s status and incentives offered. In line with the guidance, we are in favour of an outcomes-focused approach, particularly as a licensee’s decisions are situational and based on known information specific to that individual customer.
We further recognise that the proposed changes may incur a cost for implementation, which we have considered in paragraph 3.35. Much of what we are proposing will not represent a significant additional burden to compliant licensees as it draws together pre-existing requirements and how they should be applied to HVCs. This consultation was driven by the concern that licensees have unsustainably or, in some cases, irresponsibly offered incentives to HVCs.
We consider the cost of maintaining appropriate records, audit trails and oversight a prerequisite for a licensee to demonstrate how they are operating HVC schemes responsibly. Where a licensee is unable to apply these minimum standards, they should not be operating HVC schemes.Previous section
HVC Response 4 - Know your customer - assessing and mitigating risk Next section
HVC Response 6 - Relationship management
Last updated: 29 September 2020
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