Fourth National Lottery Licence: Regulatory Handbook
27. What will trigger an investigation
27.1 When we become aware of a compliance risk or suspected Section 5 or 6 Licence breach, we first expect to escalate our monitoring activities in the relevant area. Depending on the evidence from our increased monitoring activity we will then consider further options for informal action, although in some circumstances - for example, because of the seriousness or repeated occurrence of a compliance risk – we may consider it appropriate to proceed immediately to opening a formal investigation.
27.2 Where we initiate informal action, we would still expect to open a formal investigation if the informal action proves insufficient to address the compliance risk sufficiently. We will seek to identify the circumstances around the potential compliance risk(s) to determine how best to respond. We will draw on the most appropriate intervention(s) available (the specific interventions we apply are therefore not pre-determined). This is consistent with wider regulatory best practice.
27.3 We may become aware of a compliance risk or suspected Licence breach from different sources of information, for example:
- meetings with the Licensee
- participant complaints or enquiries to us
- analysis of data and subsequent trends
- regulatory reporting data and assurance reporting (including Licensee performance standards; see Assurance and Regulatory Reporting Requirements, Table 3)
- formal reports provided under Licence requirements
- public interest disclosures
- issues raised by the Licensee’s staff or subcontractors.
27.4 Examples of informal action that may form part of our escalation process ahead of opening a formal investigation are as follows:
- dialogue with Licensee to seek clarification (for example, meetings, letters)
- increased depth of reporting requirements (for example, more in-depth and detailed evidence/assurance requirements)
- increased frequency of certain reporting/assurance requirements
- review of relevant Licensee policies, processes, and procedures
- an informal undertaking based on evidence from above activity.
27.5 If our informal actions are not sufficiently effective, and/or we have sufficient concerns regarding the matter under consideration, we expect to then proceed to formal enforcement activity by opening an investigation.
27.6. In Figure 3 we show an overview of our risk-based escalation approach, which illustrates the stepped approach to enforcement that we would often expect to consider appropriate. As is noted above, however, under certain circumstances – for example, because of the seriousness and/or urgency of the relevant compliance risks - we may consider it appropriate to move directly to opening a formal investigation.
Risk-based escalation (and de-escalation) of enforcement activity (regulatory escalator)
Step 1: Dialogue with Licensee for clarification
Step 2: Increased reporting / assurance requirements (more in depth/increased frequency)
Note - We expect to engage with the Licensee and tighten assurance and reporting requirements in the relevant area of compliance risk.
Step 3: Informal undertaking, Business Area Review or Advice to Conduct
Note - We may seek to exert influence on the Licensee ahead of taking formal action.
Step 4: Potential formal action includes: Formal Investigation; Direct internal audit; Financial Distress Remediation Plan; Independent Performance Review; Amend / new Licence conditions; Legal injunctions; Financial penalties.Previous section
26. Our general enforcement principles Next section
28. Approach to formal investigations
Last updated: 1 February 2024
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