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Enforcement policy in relation to the National Lottery

Policy detailing our approach to enforcing the National Lottery and how we will use our powers in an appropriate and proportionate manner.

Published: 6 May 2022

Last updated: 9 May 2022

This version was printed or saved on: 5 December 2022

Online version: https://www.gamblingcommission.gov.uk/policy/enforcement-policy-in-relation-to-the-national-lottery

1 - Introduction

The Gambling Commission is the regulator of the National Lottery.

We grant a licence under section 5 of the National Lottery etc. Act 1993 (opens in new tab) (as amended) (hereafter referred to as the Act) and licences under section 6 of the Act to promote National Lottery games.

This Enforcement Policy (hereafter referred to as the policy) is a public statement. It aims to set out clearly our approach to enforcement and to demonstrate how we will use our powers in an appropriate and proportionate manner. It details the enforcement measures available and the factors that are likely to be considered by us when deciding on action to be taken.

We shall exercise our functions under this policy in the manner we consider the most likely to secure the following1:

We will, as necessary, work with other regulators and law enforcement agencies to ensure that we coordinate our respective powers. This will avoid duplication and inconsistencies and ensure that the most appropriate action is take.

This policy is a key part of the overall regulatory regime implemented by us. Although not bound by it, we will generally apply enforcement actions consistently with this policy. In the event of any departures from this, we will explain our reasons for doing so.

2 - General principles

The general principles to which we will seek to apply overall in decisions as to regulatory action are as follows.

Proportionality

To only intervene where necessary with targeted enforcement actions appropriate to secure that the statutory objectives are met. These are set out within the Introduction section of this policy. Our approach will be targeted and focused on the most important operational issues, factors and risks.

Consistency

To treat similar cases in a similar way unless there is a good reason not to. However, where there are repeated failures by the operator, we reserve our right to escalate enforcement action.

Evidence-based decision-making

To seek and make use of the best available evidence when making enforcement decisions.

Accountability and transparency

To explain to key stakeholders how enforcement decisions are made and what actions have been taken. Key stakeholders include the operator, players, potential players (the general public), Parliament, the Government, consumer groups and any other interested parties.

We seek to be clear and open about our enforcement decisions and how they are arrived at. This will help ensure that there can be an understanding of our regulatory concerns and how regulatory and enforcement actions seek to address these.

Human rights compliant

To comply with our obligations under the Human Rights Act 1998 (opens in new tab) as a public authority.

3 - Investigations

What will trigger an investigation?

A regulatory investigation may be commenced if the Gambling Commission thinks that the operator may have breached a licence condition or because there is an issue that gives rise to a risk to the statutory objectives set out within the Introduction section of this policy.

The first step in deciding whether to commence an investigation is to decide whether our regulatory powers should be used at all. It may be that before an investigation is commenced we decide that no further action is necessary.

Matters may come to our attention through a number of channels, including:

How will an investigation be conducted?

The information received is initially reviewed and then submitted to the Issues Management Group, who decide how to progress the matter. It may be that we gather more information regarding the matter initially. If a decision is made to commence a formal investigation then a ‘Notice of Investigation’ will be sent in writing to the operator.

This policy sets a broad framework of the procedure that will usually be adopted, however we retain a discretion to conduct investigations in a manner we consider appropriate and proportionate.

Initial meetings

We may, either when considering whether to commence an investigation, or after notifying the operator that we propose to commence an investigation, hold an initial meeting with the operator to clarify and narrow the issues and to establish exactly what information will be sought during the investigation. 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, we may wish to interview persons who we consider can supply relevant information in connection with the investigation. Such interviews may be recorded on tape. If an interview is recorded on tape we will inform the operator of this in advance. We reserve the right to use the contents of the interview as evidence.

Requests for information and/or documents

A request for the production of information will be made either orally or in writing, dependent upon the individual circumstances of each case. Wherever possible, the operator or third party will be given a reasonable period of time to comply with the request. We will only ask the operator or third party to produce documents or records which we believe are necessary. Under condition 10 of the licence the operator shall in the manner prescribed provide the requested information to allow us to carry out our duties and exercise our powers under the Act.

We are of the view that the operator/ third parties will not breach the requirements of the Data Protection Act (DPA) if they supply information that we have requested even if this relates to personal information that they hold. We have the power to request this information under DPA.

Preliminary findings following an investigation

At the conclusion of the investigation we will send a preliminary findings letter to the operator. The letter and documents which accompany it will normally contain details of the following:

The operator will then be offered the opportunity to make written representations in response to our preliminary findings. The operator will normally be given 21 days to make such representations, however a shorter period may be imposed in cases where there is a need for urgency.

Whilst we recognise that there are likely to be many cases in which there will be no dispute of fact, if there is a dispute of fact, we will apply the civil standard of proof when making findings of fact.

4 - Decision making

Who will make decisions?

Decisions will be taken in accordance with our Corporate Governance Framework which sets out the Delegation of Functions under the National Lottery etc. Act 1993 (opens in new tab) (as amended) (contained at Appendix 4 of that document).

How will decisions be reached?

The operator will have an opportunity to make written representations before a decision is reached as to whether they have acted in breach of a licence condition or otherwise not acted in accordance with the statutory objectives under section 4 of the Act as set out within the Investigations section of this policy. The operator will also have an opportunity to make written representations as to what sanction or other action (if any) we decide to impose or take2.

We will follow a three3 staged approach as to decisions on what regulatory action (if any) should be taken.

Stage one of reaching decisions

The decision maker should consider all of the circumstances of the case in determining what regulatory action (if any) should be taken, including but not limited to the factors set out as follows:

Outcomes for the National Lottery

Outcomes for players involved

Outcomes for good causes

Operator’s financial gain from non-compliance

Operator’s governance and controls

Additional factors specific to circumstances

Stage two of reaching decisions

Having assessed the case by reference to the factors at Stage One, the decision maker should then consider the purpose of any sanction in line with the following sanction principles (this should not be read as a list or as principles that all need to be present)4:

A sanction should aim to change non-compliant behaviour

To ensure that the operator changes in behaviour and moves back to compliance.

A sanction should aim to eliminate any operator financial gain or benefit from non-compliance5

In doing so, sanctions will ensure that any benefit to the operator or loss to good causes following on from licence breaches, financial or otherwise, can be recouped, removing any incentive towards non-compliance.

A sanction should aim to be responsive and consider what is appropriate for the operator and the regulatory issue

Discretion should be used in imposing sanctions, taking into account the reason for compliance failure. The aim will always be to bring the operator back to compliance and therefore a flexible approach is necessary in order to uphold a credible enforcement and sanctioning regime.

A sanction should aim to be proportionate to the offence and harm caused

The individual circumstances of the case should be considered, taking into account the nature and duration of the non-compliance and also the consequences including the extent of harm caused or the risk of harm posed.

A sanction should aim to restore the harm caused by regulatory non-compliance, where appropriate

In addition to ensuring the operator takes responsibility for its actions, consideration should be given to arrangements adopted by the operator for compensating disadvantaged players and to restoring any detriment to good causes.

A sanction aims to deter future non-compliance

It is important that the operator should expect that non-compliance with regulatory requirements will be investigated, and, if appropriate, be subject to enforcement action in accordance with this policy.

In order to reflect our unique regulatory position in relation to our National Lottery duties, in that we regulate one business operation and have a specific duty to maximise the returns to good causes, the wording of the principles has been adapted so we can apply these principles appropriately.

Following the use of any sanction or other action we will normally undertake assurance reviews and/or compliance checks on case issues. This will be in a timely manner dependent on the seriousness of the regulatory concerns and will assist in focusing the operator on future compliance and in the measuring of regulatory success. If matters remain unresolved it may be appropriate to take further enforcement action.

Stage three of reaching decisions

Based on the assessment undertaken at stages one and two and all the circumstances of the case the decision maker will then consider what sanction is appropriate.

As a general principle, the earlier that disclosure of all relevant facts and appropriate admissions are made during the investigation process, the more credit will be given to the operator for making such a disclosure. The amount of credit to be given will be decided on a case by case basis.

The options for the decision maker are:

No further action

Decision makers should first decide whether it is appropriate to take any action at all. Deciding that there should be no further action may be appropriate if the decision maker considers that there are no matters of concern, or where further formal action would not be a proportionate response to the established facts as there is no ongoing risk to the statutory objectives. In the latter case it may be appropriate to give the operator some advice as to their future conduct.

Notification of licence breach without the imposition of a financial penalty

This is the first sanction that should be considered if it is deemed that no further action is inappropriate. The notification approach allows us to formally record the licence breach without going on to take further action. This outcome may be appropriate where:

If the decision maker is of the view that the above options withn the No further action section and the Notification of licence breach without the imposition of a financial penalty section of this policy are inappropriate they may wish to consider any of the following sanctions as set out in the following paragraphs up to and including the Court injuction/ interdict or court order section of this policy. It is important to note that the following sanctions are not ranked in order of seriousness (nor does the decision maker need to address each one when reaching their decision as to sanction) but they represent the possible options available depending on the exact circumstances of the case.

Undertakings

Undertakings are a set of actions which the operator commits to implement. These will include an explanation of the events which gave rise to the undertaking, the actions to be taken and the timeline for achieving these. We may also consider these alongside sanctions. Although the intention is for these to be proposed by the operator there is no reason precluding the initiative being taken by us.

The operator cannot be required to enter into an undertaking and there is no requirement for us to accept any offer made.

We will only accept an undertaking where it is an appropriate enforcement response and if implemented will achieve an effective outcome. Previous use should not be taken as a basis for our future acceptance of an undertaking. The success or otherwise of earlier agreements will be a key factor in determining suitability.

Our usual approach will be to publish the details of any undertakings, however we recognise that there might be good reasons for departing from that approach in particular cases.

An undertaking may be considered appropriate where either:

And:

Requirement for an independent review

A requirement for an independent review may be considered appropriate in any of the following circumstances:

Imposing new or amended licence conditions

Amending conditions of a licence or imposing additional conditions is a flexible means of dealing with a concern. A finding of breach is not required to impose a new or amended licence condition. The licence continues with the additional or amended conditions that have been considered necessary to minimise the risk to the statutory objectives in the future.

We will seek to ensure that players will not be seriously disadvantaged or affected by any new or amended conditions, either directly or indirectly, and that the conditions will protect players and the general public during the period they are in force.

The imposition of new or amended licence condition(s) may be considered appropriate in the following circumstances:

In seeking to impose new or amended conditions to the licence the decision maker will need to ensure that, in the absence of the operator’s consent, the operator has been given a reasonable opportunity to make written representations about the variation.6 The decision maker shall serve a notice on the operator informing them of the variation, and state the variation shall take effect at the end of such period as may be specified in the notice7. Any written representations made by the operator will be taken in to consideration when making the final decision as to whether or not to make the variation.

Court injunction/ interdict or court order

This remedy may be appropriate where we seek to compel the operator to do or refrain from specific acts. If the operator failed to comply with an injunction they can face criminal or civil penalties. It is not envisaged that these will be used frequently in the context of enforcement surrounding the National Lottery.

Under section 9 of the Act the court may grant an injunction restraining the contravention (or, in Scotland, an interdict prohibiting the contravention) or make an order requiring the licensee (and any other person who appears to the court to have been party to the contravention) to take such steps as the court may direct to remedy it where the court is satisfied:

Only if the decision maker considers that the sanctions set out above are inappropriate based on their assessment at Stages One and Two will they go on to consider a financial penalty.

Financial penalty

If the decision maker is satisfied that the operator has contravened a condition in a licence under section 5 or 6, he may impose a financial penalty. The aims of a financial penalty are twofold, namely to deter persons from contravening conditions in licences under section 5 or 6, and to eliminate any financial gain/ benefit from non-compliance with licence conditions (subject to the former Director General’s directions referred to within this section of the policy).

In certain cases in which we are considering a financial penalty, or a payment in lieu of financial penalty, and in which timely disclosure and admissions have been made by a licensee, we will seek to give a discount to the penal aspect of a financial penalty.

We are required by law to act in accordance with the attached extract from the former Director General of the National Lottery's publication Financial Penalties: Principles and Procedures (contained at Appendix A (PDF)) and sections 10A and 10B of the Act. There are a number of procedural steps which must be taken before we can impose a financial penalty, including the service of a notice on the operator setting out the details of the breach8 and giving the operator the opportunity to make written representations or to notify us of their intention to make oral representations.

A financial penalty may be considered appropriate in the following circumstances where:

Licence revocation

Licence revocation is the most serious sanction and should only be considered where it is decided that all other sanctions are inappropriate. We shall revoke the licence where:

We may revoke a licence granted under section 5 or 6 if:

As a final check, the decision maker will conduct an overall assessment to ensure that the proposed regulatory action is compliant with those priniples within the General principles section of this policy.

5 - Informal procedures and settlement

Informal resolution

There may be instances where a more informal procedure is required to address issues with the operator, as opposed to the formal investigation and enforcement approach set out in the previous sections of this policy. This may be where, for example, the operator has admitted licence breaches therefore diminishing the need for an investigation or where there are issues with the operator linked to governance issues that may be better addressed otherwise than by way of the use of enforcement powers.

There may also be other situations where an informal process would assist and a decision will be taken on the facts of the specific case as to whether this approach is appropriate.

Regulatory settlement

In certain circumstances we may seek, where appropriate, to fulfil our statutory obligations and pursue the licensing objectives through means that stop short of formal enforcement action. One means of achieving this will be by way of regulatory settlement, which we may consider appropriate, particularly where the operator has been:

Regulatory settlements can allow us to avoid a protracted investigation or conclude an investigation more swiftly than would often be the case but will only be appropriate where they meet an appropriate regulatory outcome. A decision to settle early should not be seen as a soft option. We will set timetables for settlement discussions and where these are not adhered to we are likely to revert to formal regulatory action.

6 - Appeals

Rights of appeal against sanctions are detailed in the legislation governing the National Lottery. The right of appeal in relation to a decision taken by us to revoke a licence or impose a financial penalty is to the High Court (or Court of Session in Scottish cases). In relation to a court injunction/interdict or court order made by the High Court (or the Court of Session in Scottish cases) the right of appeal lies to the Court of Appeal.

The only regulatory actions that are not subject to a statutory right of appeal are as follows:

Undertakings are voluntary agreements and as such there is no need for appeal arrangements. However, any failures to implement an undertaking, where there is continued or recurring breach of a licence condition, will inform our decision whether to impose a financial penalty in respect of that breach. The appeal process in such instances are the same as for financial penalties where no case related undertaking has been given.

7 - Publication of decisions and the reasons for decisions

Openness and transparency are central to our work. Publication of details of our work in enforcement plays an important role in improving compliance in and beyond the licensed community, and in increasing confidence in us as a regulator.

General approach to publication in cases where the investigation is ongoing

In making decisions on publication in enforcement cases, we will at all times bear in mind the public interest, and we will act compatibly with the right to privacy enshrined in Article 8 of the European Convention on Human Rights.

Generally, we will limit the release of information about on-going regulatory investigations, only releasing details if we have determined that it is in the public interest to do so. This protects the integrity of investigations and protects the operator from being unfairly associated with unsubstantiated allegations.

This means that generally we will only announce publicly that we are investigating a matter in exceptional circumstances; we will only make such an announcement if we consider it is desirable to:

In deciding whether to make an announcement, we will consider the potential prejudice that may be caused to the operator who is or is likely to be, subject to investigation and weigh this against the benefits of making an announcement.

The exceptional circumstances referred to above may arise where the matters under investigation have become the subject of public concern, speculation or rumour. In this case it may be desirable for us to make public the fact of investigation in order to allay concern, or contain speculation or rumour.

We will not normally publish details of the information found or conclusions reached during the course of our investigations. In many cases, restrictions on the disclosure of information obtained by us in the course of exercising our functions are likely to prevent publication. These restrictions may include disclosing someone's confidential or legally privileged information or prejudicing other investigations or legal proceedings.

In exceptional circumstances, and where we are not prevented from doing so, we may publish details. Circumstances in which we may do so include those where the fact that we are investigating has been made public, by ourselves or otherwise, and we subsequently conclude that the concerns that prompted the investigation were unwarranted. This is particularly so if the operator wishes for us to clarify the matter.

General approach to publication in enforcement cases once a formal regulatory decision has been taken

However, once a formal regulatory decision has been taken, such as the imposition of a financial penalty, or revocation of a licence, we will ordinarily publish all such decisions in full, even if a decision is subject to appeal. Such publication will take place 14 days after a decision has been taken. Even if a regulatory settlement has been reached, such decisions will ordinarily be published.

Removal of notices

As stated previously, publicity is important to ensure the transparency of our decision-making; it informs the public and helps to maximise the deterrent effect of enforcement action. Notwithstanding that, we will upon request review any compliance or enforcement-related notices that are published on our website. We will determine whether continued publication is appropriate, or whether such notices should be removed or amended.

In carrying out the review we will consider all relevant factors. In particular, we will take into account:

8 - Other information

This document is not intended to be a guide to the law or licence conditions. Copies and links to the legislation and licences can be found within our website.