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Policy

Licensing, compliance and enforcement under the Gambling Act 2005

The Commission’s approach to risk underpins its licensing, compliance and enforcement functions.

  1. Contents
  2. 5 - Regulatory enforcement

5 - Regulatory enforcement

Through our regulatory enforcement activity, the Commission aims to protect consumers and the wider public, and to raise standards in the gambling industry through targeted actions that drive a culture where operators:

  • act in a way that minimises the risks to the licensing objectives and reduces gambling related harm
  • have due regard to the interests of consumers, treating them fairly and communicating with them in a clear way that allows them to make a properly informed judgment about whether to gamble
  • work with the Commission in an open and co-operative way
  • are deterred from acting in a way that does not comply with either the letter or the spirit of the regulatory framework set by the Commission.

The Commission’s role is to uphold the licensing objectives set out in the Act. There are a variety of ways that the Commission can deal with non-compliance by licensees, ranging from enhanced compliance procedures and regulatory settlements to licence reviews and formal enforcement action. The Commission also has powers to launch criminal investigations and bring criminal proceedings against companies and individuals. Enforcement forms an essential part of the Commission’s work to keep gambling fair and safe for all.

Formal enforcement

The Commission's effective and proportionate use of its enforcement powers plays an important role in the pursuit of the licensing objectives. Enforcement activity contributes to the protection of consumers and the wider public and serves to deter future contraventions of the Act and other applicable requirements. It can also be a particularly effective way, through the publication of enforcement outcomes, of raising awareness of regulatory standards.

There are a number of principles underlying the Commission's approach to the exercise of its enforcement powers:

The effectiveness of the regulatory regime depends to a significant extent on maintaining an open and co-operative relationship between the Commission and the licensed community.

  • The Commission will seek to exercise its enforcement powers in a manner that is transparent, proportionate, responsive to the issue, and consistent with its publicly stated policies.
  • The Commission will seek to ensure fair treatment when exercising its enforcement powers.
  • The Commission will aim to change the behaviour of the operator or person who is the subject of its action, to deter future non-compliance by others, to eliminate any financial gain or benefit from non-compliance, and where appropriate, to remedy the harm caused by the non-compliance.

Licence reviews

What are licence reviews?

Section 116 of the Act (opens in new tab) gives the Commission the power to review the performance of licence holders and the operation of licence conditions. The section provides for two different types of review.

Under section 116(1) of the Act the Commission may review matters relating to a class or type of licence. The purpose of such a review will be to review the manner in which a particular class of licensees carry on the licensed activities authorised by their licences, and, in particular, how the licensees in question comply with the conditions attached to the class of operating licence.

Section 116(2) of the Act gives the Commission the power to review any matter relating to a licence if the Commission:

  • suspects that conditions of a licence have been or are being breached
  • believes that the licence holder or any person connected with the licensed activities, has been convicted of a relevant offence in Great Britain or abroad.

Or, for any reason:

  • suspects that the licence holder may be unsuitable to perform the licensed activities
  • thinks that a review would be appropriate.

A review can be carried out even if there is no suspicion as to the licence holder's activities. This means that a licence could be reviewed solely on the grounds that the Commission considers a review would be appropriate. There will, however, always be a reason for starting a review, whether, for example, it is part of a sampling exercise to enable the Commission to maintain a good understanding of the industry, or whether it is a potentially licence-threatening concern. The Commission will ensure that the letters sent to licensees when a review is being initiated clearly explain the grounds for the review.

The process for reviewing a class or type of licence

The Commission may decide to review a class or type of licence. There are many reasons why the Commission may wish to do this. For example, the Commission may wish to assess the manner in which the licensed activities authorised by a class or type of licence are being carried out; the Commission may wish to review whether the conditions attached to the class of operating licence are being complied with; or, the Commission may decide to review a class of licences in order to ensure that the conditions and codes that apply to those licences remain appropriate.

Commencing a review of an individual licence

Before commencing a review of an individual operating or personal licence, the Commission must notify the licensee and inform him or her of the procedure to be followed in the conduct of the review. In most cases the Commission will fulfil this obligation by issuing a notice to the licensee, which sets out:

  • the grounds for commencing a review
  • the procedure to be followed
  • confirmation of the licensee’s right to make representations, the form of those representations (oral and written), and when those representations should be made.

The Commission will normally include an indication of whether it intends to give other persons an opportunity to make representations. The notice will confirm the fact that the Commission will be undertaking a licence review, as opposed to a criminal investigation. However, in such cases, if further incriminating information comes to light, the Commission may commence a criminal investigation. If the Commission considers that a criminal investigation is required it will notify the licensee of that fact.

In the case of reviews of operating licences, the holder of an operating licence will also be reminded that it is an offence, under section 122 of the Act (opens in new tab), to fail without reasonable excuse to comply with a request to produce written or electronic records or information about the licensed activities. They will further be reminded that it is an offence to give to the Commission information which is false or misleading without reasonable excuse in connection with a licence review under section 342 of the Act (opens in new tab).

Initial meeting

The Commission may, prior to or during a licence review, hold an initial meeting with the licensee to clarify the issues, and to establish what information will be required by the Commission during the course of its review. However, in many cases, such an initial meeting will be unnecessary because the issues will be sufficiently clear.

Interviews

In addition to requesting specified information, the Commission may wish to interview persons who it considers can supply relevant information in connection with the review. Such interviews may be recorded. Where necessary and appropriate the interview will be conducted under regulatory caution and the interviewee reminded that the Commission may draw adverse inferences if they do not provide answers to the Commission’s questions. If an interview is recorded and the Commission intends to use the transcript as evidence, it will inform the interviewee.

In Scotland, where the Commission determines to carry out an interview of an individual suspected of committing an offence that person will be issued with a caution but under Scottish law no adverse inference may be drawn from a failure to answer questions.

Preliminary findings following an investigation

Following an investigation, the Commission will send a preliminary findings letter to the licensee.

The letter and documents which accompany it will contain details of:

  • the preliminary facts found during the review
  • where relevant, how those facts relate to any apparent breach of a licence condition or social responsibility provision of a code of practice, or show an apparent disregard for an ordinary code provision
  • a preliminary assessment of the seriousness of the case in terms of possible outcomes
  • any relevant policy considerations.

The preliminary findings letter will also normally set out the details of the documents and any other evidence on which the Commission relies, and details of any documents which might be said to undermine the Commission’s case or assist that of the licensee.

The letter will remind the licensee of their right to make representations as to both the preliminary findings and the preliminary assessment of seriousness, and set out the procedure and the timetable for those representations to be made. Licensees will normally be given 28 days to make representations, but there may be occasions when a shorter period is appropriate.

Licensees who feel unable to prepare a written response will be offered the opportunity to make oral representations, which will be recorded in writing by the Commission.

Notification of the outcome of the review

Following the consideration of the licensee’s representations, or if no representations are received within the specific period, the Commission will send a further notice setting out the settled findings of the review, and the outcome of the review. If the Commission is minded to impose a financial penalty the licensee will be given a further opportunity to make representations to the Commission about the proposed penalty. The licensee will be informed within this letter that they may accept the outcome of the review or refer the matter, both the findings and the proposed sanction, to a Regulatory Panel for determination.

Cases which due to their scale, complexity, or novelty are of strategic importance to the Commission will be referred to a Regulatory Panel by the Commission for determination.

The Commission’s regulatory powers

Following a review under section 116(1) or (2) of the Act, the Commission may:

  • decide to take no further action
  • decide to give the licensee advice as to conduct
  • decide to exercise its powers set out in section 117 of the Act.

Under section 117 of the Act (opens in new tab), it can:

  • give the licensee a warning
  • add, remove, or amend a condition to the licence
  • suspend a licence
  • revoke a licence
  • impose a financial penalty.

The powers under section 117 of the Gambling Act 2005 are not mutually exclusive and may, if appropriate, be exercised in combination.

Financial penalties

A financial penalty can be imposed either following a review, or without a review having taken place, but may only be imposed where the Commission thinks that a condition of a licence has been breached (which by virtue of section 82 of the Act includes a breach of a social responsibility provision of a code of practice). 5.25 Section 121(6) of the Act requires the Commission to prepare a statement setting out the principles to be applied by the Commission in exercising its powers to impose financial penalties and to have regard to the statement when exercising a power under this section. The Commission’s Statement of Principles for Determining Financial Penalties can be found on the Commission’s website.

Before imposing a financial penalty the Commission will notify a licensee in writing of its intention to impose a financial penalty, the amount of the proposed penalty, the reasons for imposing such a penalty, and giving opportunity for the licensee to make representations. Licensees will normally be given 14 days to make representations, but there may be occasions when a shorter period is appropriate.

Suspension at the outset or during a review

The Commission has the power to suspend a licence on deciding to conduct a review or during a review if the Commission suspects that:

  • a licensed activity is being or has been carried on in a manner which is inconsistent with the licensing objectives
  • a condition of the licence has been breached
  • a licensee has failed to cooperate with a review, or
  • the licensee is unsuitable to carry on the licensed activities.

Suspension or revocation of a licence following a review

The Commission may suspend or revoke a licence if, following a review, the Commission considers that:

  • a licensed activity is being or has been carried on in a manner which is inconsistent with the licensing objectives
  • a condition of the licence has been breached
  • a licensee has failed to co-operate with a review, or
  • the licensee is unsuitable to carry on the licensed activities.

Regulatory settlement

Where concerns have been raised about a licensee the Commission may commence an investigation. Where appropriate, in certain specific cases, the Commission may seek to fulfil its statutory obligations and pursue the licensing objectives through means that stop short of a completed formal licence review under section 116 of the Act. One means for achieving this will be by way of regulatory settlement, which the Commission will consider where a licensee is:

  • open and transparent in its dealings with the Commission
  • able to make timely disclosure of material facts to the Commission
  • able to demonstrate that they have insight into the apparent failings
  • able to suggest actions that would prevent the need for formal action by the Commission
  • prepared, where appropriate, to agree to the publication of a public statement by the Commission setting out the failings in order to deter future non-compliance by others and/or share learning that may be beneficial to the wider industry or other stakeholders including the public
  • prepared to divest itself of any gross gambling yield or costs savings which accrued as a result of the failings
  • prepared to follow advice and implement procedures to ensure there is no repetition
  • prepared to contribute to the direct costs to the Commission of investigating the matter in respect of which the regulatory settlement is sought
  • prepared to volunteer a payment in lieu of the financial penalty the Commission might otherwise impose for breach of a licence condition in accordance with the Statement of Principles for Determining Financial Penalties.

Even where a formal review has started but a licensee makes admissions and full disclosure of all the relevant facts, the Commission may consider if the review needs to continue, or whether it is prepared to agree the findings and the nature of the sanction (if any) which would be appropriate, or in appropriate cases what action short of the equivalent of a formal sanction should be taken. The Commission is keen to encourage licensees to come forward and make full disclosure of all the relevant facts relating to a matter and propose actions which would make imposing formal sanctions unnecessary at as early a stage as possible.

The Commission will set clear and challenging timetables for settlement discussions to ensure that they result in a prompt outcome. Where timetables are not adhered to the Commission is likely to commence or continue a formal licence review, as applicable.

Regulatory settlements in the Commission context are not the same as ‘out of court’ settlements in the commercial context. A regulatory settlement is a regulatory decision, taken by the Commission, the terms of which are accepted by the licensee concerned. When agreeing the terms of a settlement, the Commission will carefully consider its statutory duties and other relevant matters such as the importance of sending clear, consistent messages through enforcement action, and will only settle in appropriate cases where the agreed terms of the decision result in acceptable regulatory outcomes.

It may be particularly important in this respect to provide redress to consumers who may have been disadvantaged by a licensee’s misconduct, or to relieve licensees of the profits or gross gambling yield resulting from their failures. In almost all circumstances, regulatory settlements will result in some degree of publicity (see Chapter 7 - Publicity), unlike commercial out of court settlements, which are often confidential.

The Commission will not normally initiate the regulatory settlement process, but may remind licensees at the outset of the review process that such an option exists. Furthermore, the Commission considers that in general the earlier settlement discussions can take place the better this is likely to be from a public interest perspective. However, the Commission will only engage in such discussions once it has a sufficient understanding of the nature and gravity of the suspected misconduct or issue to make a reasonable assessment of the appropriate outcome.

While regulatory settlement is an important part of the Commission’s toolkit, the Commission will not accept undertakings from licensees in cases where regulatory or criminal enforcement is justified as a proportionate means of achieving the licensing objectives.

In deciding whether regulatory settlement is sufficient to protect the licensing objectives, the Commission will take the following matters into account. The list is not exhaustive:

  • the nature and extent of the concerns
  • whether concerns have been raised about the licensee in the past
  • the scale of the concerns across the licensed entity
  • the involvement of senior management
  • the extent of any attempt to conceal any failure
  • the impact on consumers
  • the absence of internal controls or procedures intended to deal with the particular concern
  • the way in which concerns were reported to the Commission.
  • whether the licensee has taken into account any applicable learning or guidelines published by the Gambling Commission.

In those cases where enforcement action is not taken and/or a formal review is not commenced, the Commission will expect the licensee to act promptly to take the necessary remedial action agreed to deal with the Commission's concerns. If the licensee does not do this, the Commission may take enforcement action in respect of the original contravention.

On its website, the Commission may give examples of where it has decided not to investigate or take enforcement action in relation to possible breaches because of the way in which the licensee has conducted itself when putting the matter right.

Credit for timely disclosure

The earlier that disclosure is made during the investigation process, the more credit will be given to the licensee for making such disclosure. This will be so whether the Commission has commenced a formal licence review or not. In certain appropriate cases in which the Commission is considering a financial penalty, either at the conclusion of a formal review or as part of a regulatory settlement, and in which timely disclosure and admissions have been made by a licensee, the Commission will seek to give credit for this in accordance with the Statement of Principles for Determining Financial Penalties.

Assessing suitability

In assessing the suitability of an applicant to carry on licensed activities, section 120 of the Act (opens in new tab) provides that the Commission may, in particular, have regard to:

  • the integrity of the licensee or of any person who exercises a function in connection with or is interested in the licensed activities
  • the competence of the licensee, or of any person who exercises a function in connection with the licensed activities, to carry on the licensed activities in a manner consistent with pursuit of the licensing objectives
  • the financial and other circumstances of the licensee or of any person who exercises a function in connection with or is interested in the licensed activities (and, in particular, the resources available for the purpose of carrying on the licensed activities).

This means that the Commission will consider, amongst other things, a licensee’s integrity (which includes an assessment of their honesty and openness), his or her competence, and any other relevant financial or other circumstances including the resources available to carry on the licensed activities. For example, human resources, financial resources, and the adequacy and effectiveness of the systems and controls which are in place.

The assessment of suitability in relation to the Commission’s enforcement functions will assess many of the same matters which were assessed when the licence was originally granted. However, the Commission may also look at other matters as circumstances require. As such the factors described above are not intended to be an exhaustive list of the factors to be considered.

As with initial applications, there is an obligation on licensees during a review to satisfy the Commission that they are capable of operating consistently with the licensing objectives.

Assessing whether the licensed activities are being carried out in a manner which is inconsistent with the licensing objectives

In deciding whether or not a person has carried on a licensed activity in a manner which is inconsistent with the licensing objectives, the Commission will have regard to its own codes of practice and any other statements it has made. For example, through guidance notes or advice as to conduct letters) about pursuing the objectives.

At any stage in the review process the Commission has the option to:

  • decide that there should be no further action
  • decide to issue advice to the licensee rather than continue the review
  • agree to a licensee’s proposals regarding a regulatory settlement.

There may also be occasions when information gathered during the review leads the Commission to commence a criminal investigation, or should refer the matter to the police or another regulatory body for consideration by them.

The Commission’s other regulatory powers

The Commission has regulatory powers which it can exercise without carrying out a licence review.

The Act gives the Commission the power to:

  • impose a financial penalty, where the Commission thinks that a condition of a licence has been breached
  • void a bet
  • decide that a licence has lapsed if a licensee becomes incapable of carrying on the licensed activities by reason of mental or physical incapacity,
  • revoke a licence for non-payment of an annual fee (which is a duty under the Act).

Financial penalties

The Commission has the power to impose a financial penalty, without a review having taken place, where the Commission thinks that a condition of a licence has been breached (which by virtue of section 82 of the Act includes a breach of a social responsibility provision of a code of practice). It must, however, give the licensee an opportunity to make representations as to the financial penalty.

As indicated previously, the Commission has prepared a Statement of Principles for Determining Financial Penalties which can be found on the Commission’s website.

Voiding bets

The Commission has the power to make an order voiding an individual bet accepted by, or through, the holder of a general betting operating licence, a pool betting operating licence, or a betting intermediary operating licence. Where the Commission exercises this power, any contract or other arrangement relating to the bet will be void, and any money paid in relation to the bet must be returned to the person who paid it. Such repayments will be enforceable as a debt. The power to void a bet only applies to the parties to a specific bet; it does not apply to all bets placed on an event.

The Commission may only make an order to void a bet if it is satisfied that the bet was substantially unfair. In considering whether a bet is substantially unfair, the Commission must, in particular, have regard to any of the following factors:

  • that one or both of the parties to the bet (whether they made or accepted the bet) supplied information in connection with it that was insufficient, false or misleading
  • that one or both of the parties to the bet believed, or ought to have believed, that the race or event about which the bet was made was, or would be, conducted in contravention of any industry rules that apply to the event
  • the fact that one or both of the parties to the bet believed, or ought to have believed, that the offence of cheating (as set out in section 42) had been, or was likely to be, committed in relation to the bet
  • the fact that one or both parties to the bet have been convicted of the offence of cheating as set out in section 42 of the Act.

It follows that the Commission will not automatically void a bet where one of the factors listed above exists; it will only void a bet where it is satisfied that it was substantially unfair.

The power to void a bet will be available to the Commission for a period of six months from the day on which the result of the bet is determined, except where there has been a conviction for cheating, in which case there is no time limit.

The Commission also has the power, under section 338 of the Act (opens in new tab), to make an order freezing any obligation to pay money in relation to a bet, where it suspects that it may need to make an order that the bet is void under section 336. The effect of this interim moratorium is to protect any payments that would otherwise have been made in relation to a bet. The Commission need not be certain that a voiding order will be made before imposing the interim moratorium.

An interim moratorium will last for a period of 14 days, beginning on the day that it is made. The Commission may extend an interim moratorium by a further period of up to 14 days and there is no limit to the number of interim moratoria that the Commission may impose in relation to any bet, although the time limit of six months for making an order to void a bet will continue to apply during any period when an interim moratorium is in place.

The Commission may cancel an order for an interim moratorium before it expires; and must cancel it if it ceases to think that it might want to make an order to void the bet.

Surrender of a licence

A licence ceases to have effect if it is surrendered to the Commission. This provides a voluntary procedure for a licence holder to give up their licence if they so wish.

However, if a licensee surrenders the licence whilst a licence review under section 116 of the Act is under way, the Commission may decide to continue its investigations in order to determine the facts of the case so that they can be referred to in the future. For example, if the licensee subsequently applies for a new licence. The Commission may also publicise the case where appropriate.

Lapse

A licence will lapse, and is not transferable, if the licence holder dies or becomes bankrupt or goes into liquidation; the Commission has no discretion in such cases. In the case of bankruptcy or liquidation, operators should do their utmost to anticipate problems before they arise. A licence will also lapse if, in the Commission’s view, the licensee becomes incapable of carrying out the licensed activities by reason of mental or physical incapacity. In such cases, the Commission will consider all of the circumstances of the case before making a decision, which may involve considering medical advice about the licensee.

Revocation for non-payment of annual fee

Failure to pay annual fees by the fee due date will ordinarily lead to the revocation of an operator’s licence. The Commission has a statutory duty to revoke an operating licence if the licensee does not pay the annual fee (or a personal licence if the periodic maintenance fee is not paid) unless, before it does so, it concludes that the failure to pay was attributable to administrative error.

Revocation of test house approval

In circumstances in which the Commission becomes concerned about non-compliant gambling products entering the market, especially if this is a repeat concern, it may investigate the product, the operator responsible for its appearance on the market, the personal licence holders responsible for the actions of the operator, and the test houses that have approved non-compliant products. Aside from enforcement action the Commission may take against licence holders, it may also revoke the approval of a test house responsible for testing the product before its release on the market.

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