Investigation into control and governance failings at Camelot
23 August 2018
The Gambling Commission has completed an investigation into historic control and governance failings at Camelot.
The investigation was launched because failings relating to the governance, risk and control framework were identified at the National Lottery operator.
To ensure Camelot took swift action to improve its levels of compliance with the licence conditions, the Commission initially put the investigation on hold and directed Camelot to focus its efforts and resources on implementing solutions.
Camelot’s response was a programme of activity it called the ‘Operational Excellence Programme’ (OEP). In addition, the Commission directed that Camelot conduct a Board Effectiveness Review (BER).
Once Camelot had made sufficient progress on the OEP and BER, the Commission progressed the investigation. This included looking into other controls related failures that had emerged subsequent to the start of the investigation.
Richard Watson, Gambling Commission Executive Director, said: “Camelot has taken a number of steps to rectify the issues and given us assurances that they now have the right processes in place to prevent reoccurrences. It is crucial that the National Lottery is run fairly, safely and with integrity and we’ll continue to hold Camelot to account."
Camelot will pay a £1.15m penalty package for failings which included a fault within a mobile app and publishing an incomplete list of raffle prizes following a Lotto draw.
Regulatory Settlement following control failings investigations
On 7 December 2016 the Gambling Commission launched an investigation following reports of control and governance failings at Camelot.
We wanted to ensure Camelot was complying with its requirements under the Section 5 licence as quickly as possible, in particular those conditions relating to the governance, risk and control framework. Having assessed the extent of the failings on 21 December 2016 we directed Camelot to focus its efforts and resources on implementing solutions to address our concerns. Camelot’s response in December 2016 was a programme of activity it called ‘Operational Excellence Programme’ (OEP). In addition, in February 2017 we directed that Camelot conduct a Board Effectiveness Review (BER) using our powers under Condition 17 of the Section 5 National Lottery Licence. We decided to put formal investigation on hold, whilst these measures were in progress.
In November 2017, once Camelot had made sufficient progress on the OEP and BER, we progressed the investigation. This included looking into other controls related failures that had emerged subsequent to the start of the investigation.
The conditions relevant to those matters we have concluded by means of a regulatory settlement are:
- Condition 5.1: The Licensee shall ensure that at all times its running of the National Lottery is Fit for Purpose, as that phrase is defined in the Licence.
- Condition 5.10A(b): The Licensee shall ensure that all Processes and Procedures are Fit for Purpose.
- Condition 5.15 (a): The Licensee shall ensure the security of all equipment, systems, data, ticket materials and other consumables used in connection with the National Lottery and any Constituent Lottery and all proceeds arising from any Constituent Lottery and Ancillary Activity so as to minimise opportunities for theft, fraud or misuse
- Condition 5.17: The Licensee shall ensure that any data and other information relating to any Constituent Lottery cannot be accessed, read, added to, removed or altered by unauthorised persons
- Condition 5.20 (b): The Licensee shall ensure that an appropriate level of security is maintained in or over Secure Areas
- Condition 7.42 : The Licensee shall ensure that material to enable a Player to play in a Constituent Lottery is accurate, does not mislead players and is compatible with the terms and conditions, rules, procedures and game specific rules of the Constituent Lottery.
- Condition 10.4(c): The Licensee shall establish and keep up to date on a monthly basis a register of Key Licensee Subcontracts
- Condition 10.9 (a:) The Licensee shall provide secure accommodation for the exclusive use of Commission Staff at the Licensee’s head office or at such other location as the Commission shall specify.
- Condition 12.4(a)(iii): The Licensee shall not allow any person to become a party to any Key Licensee Subcontract without the prior consent of the Commission
- Condition 15.15 (a): every Licensee Subcontract, Series Subcontract and Sub Series Subcontract shall contain such provisions to enable the Licensee to fulfil its obligations under and comply with the Licence
We identified five controls-related matters that were sufficiently serious that payment of a financial penalty would be appropriate:
- Lotto: Olympic medal prize promotion incomplete results publication on web
- Mobile results checker/QR scanner incorrect prize outcomes
- Direct debit instruction failure
- Security measures failings
- Post Office control failings
We also sought additional safeguards in respect of key licensee subcontract (KLS) management. The details, licence breaches and outcome for each of these matters can be viewed on a separate document (opens in new tab). A further ten licence breaches (opens in new tab) – which Camelot accept as breaches and will be recorded as such - did not require further action having considered Camelot’s positive response to the incidents.
The penalty package comprises:
- payment in lieu of a financial penalty in the sum of £1,150,000 which wewould otherwise impose for breach of licence conditions in accordance withthe National Lottery Enforcement Policy
- identified licence breaches are recorded
- undertakings in respect of the Post Office, KLS and Security measuresmatters
- agreement to the publication of this statement outlining the failings by Camelot.
In agreeing the settlement, we acknowledge that Camelot engaged positively with us to address our concerns. We gave credit to Camelot for the early acceptance of failings, and the work it has undertaken to update and enhance its procedures and controls to mitigate the risk of future issues.
The penalty package will be paid by Camelot and is for the benefit of good causes.
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Last updated: 16 March 2021
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