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Raising Standards for consumers - Compliance and Enforcement report 2019 to 2020

The Gambling Commission's report on Compliance and Enforcement action 2019 to 2020

Published: 6 November 2020

Last updated: 8 December 2021

This version was printed or saved on: 30 September 2022

Online version: https://www.gamblingcommission.gov.uk/report/raising-standards-for-consumers-compliance-and-enforcement-report-2019-20

Chief Executive's message

Holding an operating licence or a personal licence is a privilege, not a right, and we expect our licensees to protect consumers from harm and treat them fairly.

The aim of our compliance and enforcement work is to raise standards through targeted actions that drive a culture where licensees:

In the summer of 2017, we made it clear that we would take a tougher approach to enforcement. At the time, some commentators doubted that we were serious about tougher penalties, but as this report shows, where licensees fail to meet the standards we expect, we will take tough action, including the suspension and revocation of licences. We also indicated our focus was shifting towards personal management licence holders. Those in boardrooms and senior positions need to live up to their responsibilities and we will continue to hold people to account for failings they knew, or ought to have known, about.

Regulatory settlements are a way of resolving enforcement cases which we have used to good effect. Frankly, however, there are too many occasions where settlement proposals are made at a late stage of our investigation process or approached as if a licence review is a commercial dispute to be negotiated. That is not acceptable.

Our Statement of Principles for Licensing and Regulation (opens in a new tab) makes it clear that settlements are only suitable where a licensee is open and transparent, makes timely disclosures of the material facts, demonstrates insight into apparent failings and is able to suggest actions that would prevent the need for formal action by the Commission. Only licensees who meet those criteria need make settlement offers; licensees who choose to contest the facts before conceding at a later stage need not make offers of settlement.

In summary, our compliance and enforcement work in the last financial year included:

Everyone has a part to play to make gambling safer and learning the lessons from the failings identified in this report is one way of doing that.

Neil McArthur Chief Executive

Please note: This year’s report, which covers the period from April 2019 to March 2020, has been published later due to COVID-19 impacts.

Triggers and customer affordability

Customer protection has continued to be a priority for the Commission and consideration of affordability should be a significant driving factor in customer risk assessments.

Considering affordability is of significant importance to protecting consumers we are consulting on introducing new requirements as part of a strengthened approach to customer interaction. Operators should learn the lessons contained in this report as well as preparing for any new requirements that may emerge from our consultation. Twelve months ago, we recommended that operators reassess their framework on triggers to consider their customer base and individual customer’s disposable income levels as a starting point for setting benchmark triggers.

The intention behind this was to ensure vulnerable customers were identified as early as possible and interacted with appropriately. Despite this recommendation, the compliance and enforcement teams have continued to review cases where, in the last twelve months, individuals have demonstrated gambling-related harm indicators and still been able to continue to gamble without effective engagement.

Furthermore, these individuals have funded their gambling without satisfactory affordability checks and appropriate evidence being obtained. Casework and compliance assessments which resulted in action being taken by the Commission, have shown:

Open source data that can help operators assess affordability for GB customers and improve its risk assessment and customer interventions has not notably changed since last year’s enforcement report (opens in a new tab).

According to the office for National Statistics Annual Survey of Hours and Earnings:

Based on the above, 50% of the full-time employees in the UK receive less than £30,500 gross earning per year and 50% of the full-time managers, directors and senior officials in the UK receive less than £45,000 gross earnings. These earnings are what is received before expenses such as income tax, national insurance, mortgage/rent payments, telephony contracts, travel costs, food and utilities are paid for. We would expect such expenses to be considered in affordability frameworks so the starting point adequately reflects the true level of available disposable income for that individual.

Open source information is an important element of an affordability framework because it is a parameter to consider when setting benchmark triggers that will drive early engagement with customers. Officials are aware of affordability frameworks being considered by operators, but they are not being implemented at pace despite our guidance and advice.

We are concerned licensees are creating complex and convoluted matrices and mappings within their affordability framework to place customers into trigger groups well over the gross earnings stated above, before disposable income is factored in. Of more concern, these trigger groups are set without any sort of customer interaction to influence their true affordability determination. Operators must interact with customers early on to set adequate, informed affordability triggers to protect customers from gambling related harm. Failure to do so could render the operator non-compliant.

Customers wishing to spend more than the national average should be asked to provide information to support a higher affordability trigger such as three months’ payslips, P60s, tax returns or bank statements which will both inform the affordability level the customer may believe appropriate with objective evidence whilst enabling the licensee to have better insight into the source of those funds and whether they are legitimate or not.

We appreciate that operators have established customer bases and these customers will either be in a loss position or a profit position with the operator. For customers in the loss position a sensible approach would be to assign the customers a national average affordability trigger, irrespective of historical deposits and withdrawals, and move these customers to higher affordability triggers once appropriate affordability evidence is received.

For customers in a profit position, operators may have adopted a framework which allows triggers to be moved up from the national average without affordability evidence as their winnings are evidence of what these customers can afford. With this type of customer, we would expect an operator to still be considering affordability whilst also monitoring the customers play activities to be satisfied that they are not exhibiting signs of gambling-related harm. This especially applies to large one-off winners such as jackpot winners.

If winning customers are not being asked for affordability evidence but are withdrawing and redepositing funds, we consider checks are required to mitigate any Social Responsibility or Money Laundering risks as customers could be misappropriating funds and re-depositing fresh criminal spend the operator mistakenly believes are previous winnings.

Operators need to consider this and obtain evidence when appropriate to satisfy themselves that this is not the case.

At the time of writing this report, the long term financial impact of the COVID-19 crisis is yet to be fully understood, although initial data analysis (opens in a new tab) published by the Commission indicated that 40% of people saw a decrease in their disposable income. This was occurring whilst 20% of the population reported a decrease to their mental health and during lockdown may have sought additional forms of entertainment, or to replace betting activity no longer available such as on live sports.

In response to evidence showing some gamblers maybe at greater risk of harm during lockdown, the Commission published new guidance for online operators to help reduce the risk of harm in these unprecedented circumstances. The guidance clearly sets out that we expect operators to:

  • Urgently review their thresholds and triggers to reflect the change in circumstances, adopting a precautionary approach.
  • Keep under review duration of play for customers which can be an indicator of harm and keep this under review to identify changes which warrant intervention.
  • Conduct effective affordability checks during the life of the customer relationship but particularly during this crisis.
  • Prevent reverse withdrawals which has been linked to problem gambling behaviors and harm.
  • Restrict bonus offers to those displaying indicators of harm.

The Commission recommended operators urgently, given the impact of COVID-19, revisit their framework on triggers and consider their customer base and their disposable income levels as a starting point for benchmark and affordability triggers, building upwards, to ensure vulnerable customers are identified as early as possible and interacted with appropriately. Knowing and identifying customers at risk of or experiencing harm and acting early and quickly could help stop or prevent any harm worsening. The Commission continues to monitor the impact of COVID-19.

Customer Interaction and Social Responsibility failings

The Gambling Commission exists to safeguard consumers and the wider public by ensuring that gambling is fair and safe.

We are committed to making gambling safer and we do this by placing consumers at the heart of regulation and maintaining the integrity of the gambling industry. Safer gambling (also known as Social Responsibility) is all about protecting people from gambling-related harm.

The Compliance team measures operators against the Social Responsibility code provisions by undertaking operator assessments, reviewing operator commitments such as Assurance Statements or by way of thematic work. Typically, the areas where operators fall down are:

We have set out clear expectations for operators in relation to safer gambling. We expect operators to actively work and accelerate cooperation with each other to prevent, mitigate and minimise harm, collaborating to accelerate progress and evidence impact. We want a focus on ‘what works’ and we expect operators to empower and protect consumers.

This area of regulatory oversight is broad and includes proper identification and engagement with those who may be at risk of or experiencing harms; ensuring terms and conditions are clear, fair and straightforward; ensuring they do not target people who may be vulnerable and properly supporting self-excluded customers.

Over the past year, we have continued to take action where operators are not doing enough to identify and engage with customers who may be at risk. We have continued to see incidences of customers who were experiencing significant problems with their gambling being upgraded to ‘VIP’ status, with operators missing the clear signs of harm as they focus on profit. We have also experienced repeated examples of customers being allowed to gamble significant sums of money in short time frames, way beyond their personal affordability, without any operator intervention. These problems can be particularly acute over weekends and during the night.

We will continue to take a firm regulatory enforcement approach whilst also further improving gambling harms research and evaluation so there is widespread adoption of what works.

Operators are encouraged to reflect on their performance in this area, and in particular to consider whether they can evidence the following:

  • They have effective safer gambling policies and procedures in place which are tested and periodically reviewed and updated to reflect impact assessments and new research.
  • They check to make sure the policies and procedures are truly implemented in the business and are being acted upon.
  • Appropriate safer gambling triggers are in place that lead to meaningful customer interactions. Those interactions should be regularly reviewed by management to critically assess their impact on customers and overall effectiveness.
  • There should be effective challenge and oversight by senior management with clear accountability throughout the organisation.
  • That the teams responsible for conducting Social Responsibly interactions are adequately resourced so that at-risk customers are not missed or identified too late.

Enforcement cases:

We have taken regulatory action against several licensees who failed to meet customer interaction requirements to identify and appropriately progress customers who are or may be problem gamblers. Notable cases included:

Case studies

During one compliance assessment of an online casino operator, which led to a licence review, officials found:

Action was taken against one online bingo operator when it was discovered:

Other online operator failings which resulted in Commission action include:

Areas for improvement are not limited to online operators. In one assessment on a land-based casino we found:

Customer Interaction and Social Responsibility failings - good practice

You should be asking yourself the following key questions with regards to customer interaction and identifying problem gamblers:

Anti-money laundering and counter terrorist financing

Work to ensure gambling stays free from crime and the proceeds of criminal finance continues to be a major area of concern for the Commission. Significant and substantial assessment continued for both land- based and online gambling businesses, including money service businesses activities offered by the casino sector.

Compliance activity and enforcement cases continue to show that some licensees’ money laundering (ML) and terrorist financing (TF) risk assessments, and policies, procedures and controls are not fit for purpose.

We expect licensees to comply fully with the terms of their licence as relevant to anti-money laundering (AML) and counter terrorist financing (CTF). Casino licensees must additionally comply with the requirements of The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the Regulations), and pay close regard to the various guidance documents we publish which are available on the AML section of the Commission’s website. We provide regular updates on AML and CTF matters on our website and through industry newsletters.

There continues to be a lack of understanding of how to conduct a robust and appropriate risk assessment for the prevention of money laundering (ML) and terrorist financing (TF) for gambling businesses.

Areas where operators fall down often include:

We are encouraged to see positive examples where some operators have more closely integrated their VIP management teams with their AML and CTF teams. Integrating social responsibility and the prevention of financial crime, which are frequently co-dependent issues, is a positive and encouraging improvement and we encourage other operators to consider embedding this approach into their existing practices. We have also been encouraged by significant investment by some operators in systems and techniques to profile customers. AML and CTF are areas where collaboration and evaluation of what works could be shared between operators to reap additional benefit for themselves and consumers.

Our notable enforcement cases

Case studies:

Further failures at land-based casinos which resulted in Commission action include:

Online licensees’ compliance and enforcement activity revealed:

Good practice

During the year we published advice to operators through public statements. You should consider the following to ensure you are complying with the terms of your licence:

Personal Management Licence Reviews

The Commission has been signaling for the past few years that we will increasingly focus on the role played by Personal Management Licence holders (PML) when undertaking Compliance and Enforcement investigations.

PML licences are required to be held by anyone with responsibilities for:

We recognise that these roles can be challenging and we have seen progress in leadership within companies as Board and Executive teams drive cultural change. Sadly, we continue to identify failings and had to sanction individuals fulfilling these roles.

Common failings have emerged from:

The Commission expects PML holders to adhere to the terms of their licence in particular; ‘Suite of general conditions to be attached to personal licences under Section 75 of the Gambling Act 2005’, which includes:

‘Personal licence holders must take all reasonable steps to ensure that the way in which they carry out their responsibilities in relation to licensed activities does not place the holder of the operating or any relevant premises licence in breach of their licence conditions’.

The Commission’s Statement of principles for licensing and regulation (June 2017) (section 4.3) sets out that we expect individuals occupying senior positions, whether or not they hold PMLs, to, amongst other things:

  • Uphold the licensing objectives and ensure compliance of operators with the Licence conditions and codes of practice (LCCP).
  • Organise and control their affairs responsibly and effectively.
  • Have adequate controls to keep gambling fair and safe.
  • Conduct their business with integrity.
  • Act with due care, skill and diligence.
  • Have due regard to the information needs of consumers and communicate with them in a way that is clear, not misleading, and allows them to make an informed judgment about whether to gamble.
  • Manage conflicts of interest fairly.
  • Disclose to the Commission anything which the Commission would reasonably expect to know.
  • Work with the Commission in an open and cooperative way.
  • Comply with both the letter and spirit of their licence, the licence of their operator, and associated Commission regulations.

We have an expectation that senior PML holders ask questions, intervene and ensure compliance with the licence conditions. We will continue to hold PML holders to account for when there are regulatory failings within operators and PML holders fail to take appropriate and reasonable steps in a timely manner to halt these breaches.

During this reporting period we have commenced section 116 reviews on 49 PML holders. Outcomes have included the requirement for training, additional licence conditions, warnings and licence revocations. Cases resulting in warnings over the past year included:

The Commission has previously communicated its acknowledgement that businesses do not make decisions – people do. Licensees can expect us to continue to take action against accountable individuals to ensure standards are raised to the levels required, whether in relation to the business or individual capability.

Illegal gambling

Part of our statutory remit and a key licensing objective is to keep crime out of gambling. We are particularly focused on identifying and disrupting those illegal websites which are targeted at the young and vulnerable gamblers and which often provide little, or no, customer protection. When consumers access illegal gambling sites, they expose themselves to many risks and are not afforded the protections in place in the regulated sector.

We assess intelligence gathered from multiple sources and work closely with partner agencies to prevent access to illegal websites by GB consumers. If an intelligence-led approach is unsuccessful, cases are referred to the Enforcement team for investigation and focused disruption. This approach ensures that our focus is on those websites presenting the greatest consumer threat. Our focus has been on investigating Section 33 Gambling Act offences – making available unlicensed gambling facilities, and Section 330 Gambling Act offences – unlicensed advertising of such facilities. Our investigations have shown:

We continue to have a staged approach and when we become aware of suspected individuals or companies who may be offering unlicensed gambling facilities to GB consumers our initial action is to issue cease and desist demands. Where this is not adhered to and GB consumers remain at risk, we use disruption techniques where appropriate. Our methods have included utilising our relationships with web hosting companies to bring down websites, payment providers to remove payment services and social media sites to prevent websites appearing on search engines or being hosted. All of these methods ensure that we continue to react proportionately and appropriately to the illegal provision of gambling facilities and prevent unlicensed operators interacting with GB consumers.

Enforcement have tackled 59 instances of remote unlicensed operators this year and engaged with 15 international regulators. We will continue to put out messages on our media feeds and website to ensure consumers know the risks of using such sites.

We urge licensed entities to remain vigilant as to the risk of these illegal sites using their software without authorisation and to report any such instances to us immediately.

We continue to investigate allegations of cheating under s.42 of the Gambling Act where appropriate and work together with sports governing bodies and betting operators in tackling this type of crime. In this year two possible criminal investigations were considered for action.

We continue to support/have provided support to police forces within the United Kingdom with their criminal investigations and provide advice through NPCC stakeholder engagement.

Illegal lotteries on social media

Social media lotteries are a growing issue due to their increasing presence on Facebook and other sites. Historically such lotteries were low-level events, and intelligence identified many were being run from home by a small group of people and for low value prizes. However recent intelligence suggests larger, more organised operations may be in effect, generating significant profit for the individuals ultimately controlling these. From May 2019 to May 2020, 245 illegal lotteries were referred by us to Facebook for closure.

The protection of vulnerable consumers is a core licensing objective and continues to be an enforcement priority. The Commission will take strong and proportionate action when unlicensed websites or illegal lotteries are seen to be targeting vulnerable consumers who are most at risk of experiencing gambling harm.

Case study

The Commission became aware of unlicensed websites being promoted to gamblers who had self-excluded from GAMSTOP. Since 1 April 2020, licensed operators are required to adhere to social responsibility code provision 3.5.5 – which requires that all online operators are fully integrated with GAMSTOP. This ensures that vulnerable consumers are able to self-exclude from all online gambling products.

Those advertising these unlicensed websites may have been committing a criminal offence under Section 330 Gambling Act offences (unlicensed advertising of such facilities).

Once the Commission became aware of these websites, we utilised our criminal powers to investigate and disrupt these websites through liaising with website hosting services, search engines, social media, payment service providers and licensed software providers of popular casino games. This was a cynical, targeted effort to attract those most at harm and demonstrates the very real risks individuals can be exposed to should they choose to gamble with an unlicensed operator.

White Label Partnerships

The white label operating model continues to be popular within the GB market with there being over 700 white label partners within the industry at present. One of the reasons this model is becoming increasingly popular is that this type of arrangement can bring global exposure to an operator’s products, via the arrangements their white label partners have in place with sports teams for example. However, there is a concern that unlicensed operators who would potentially not pass the Commissions’ initial licensing suitability checks, are looking to use the white label model to provide gambling services in Great Britain.

Therefore, it is essential that UKGC licence holders conduct appropriate due diligence checks on their prospective white label partners before entering into a business relationship. Responsibility for compliance will always sit with the licence holder so they should satisfy themselves appropriate safeguarding measures and controls are in place before committing to contractual obligations to ensure compliance with LCCP SR Code provision 1.1.20 Responsibilities for Third Parties. Failure to do this may bring into question the suitability of an operator to hold a licence.

In the last year the Commission has conducted compliance and enforcement work focused on this specific area. That work revealed licensees were failing to appropriately mitigate the risks to the licensing objectives. A failure to properly scrutinise ownership of the white label partners, address money laundering and politically exposed person’s (PEP) risks and general poor oversight of activities completed by such partners led to the Commission producing revised guidance to remind operators of their obligations. Areas where operators fell down were:

Operators should:

  • Conduct risk-based due diligence with a view to mitigate risk to the Licensing Objectives before entering a relationship with a white label partner.
  • Continually manage and evaluate its white label partner relationships.
  • Ensure service agreements between the licensee and white label partner explicitly articulate where overall responsibly for regulatory functions lie.
  • Ensure white label partnership contracts contain a clause permitting the licensed operator to terminate the business relationship promptly where the partner is suspected to place the Licensing Objectives, as set out in the Gambling Act 2005, at risk or fails to comply with the requirements contained in the LCCP.
  • Provide training to their partners and conduct ongoing oversight of the activities which should be clearly documented and retained for the life of the business relationship.
  • Ensure that any system the licence holder has in place to manage or detect multiple accounts for individual customers works across all white label partners so they will have a holistic view of customer activity.
  • Ensure that source of funds, affordability or markers of harm triggers are based upon this holistic view and not solely on an individual domain basis. Failure to do so conflicts with the licensing objectives to keep crime out of gambling and to ensure vulnerable people are protected. A single customer view will always be desirable.

Notable Enforcement Cases

Case Studies

Licensees with white label partnerships:

As a reminder to all online operators, it is important that you inform the Commission of any white label agreements you enter into as part of the key event reporting process. Operators are encouraged to read our advice and guidance (opens in new tab) advice and guidance on white labels.

Betting Exchanges

This year has seen increased regulatory activity related to betting exchanges; an area of growing complexity as operators expand the breadth of markets available and the jurisdictions from which they draw their customers.

There is no ambiguity for the Commission in respect of the standards we expect to be applied to any bet struck under our licence. It needs to comply fully with requirements of the Gambling Act and the LCCP including Social Responsibility and AML provisions.

Operators of betting exchanges must apply critical risk-based thinking in advance to address these challenges- assuming something good enough for one regulator will be acceptable to another is flawed and is not likely to withstand our scrutiny if we believe an inferior standard is being fulfilled instead of GB requirements.

The most prominent Enforcement matter this year related to the activities undertaken by Triplebet Ltd who trade as Matchbook. They were licensed in Alderney and by the Gambling Commission. They were taken before a regulatory panel and subject to a substantial penalty including the suspension of their licence. Failings revealed in their framework for managing an exchange are applicable for consideration by all such GC licensed operators.

Account to account transactions

Triplebet had permitted account to account transactions, whereby one customer can move money to another customer or account, or even another account in his/her name, including abroad, without the kind of controls which would attach to banking transactions for similar amounts and creating an appearance of legitimate monies to be withdrawn or spent.

Money laundering risks included:

Between November 2014 and May 2018, approximately £3.2 million and $2.4 million was transferred from GB customers to non-GB customers, with £1.1 million and $1.8 million passing in the other direction.

Triplebet could not produce any record of it refusing account to account transfers.

In the absence of adequate checks and controls, account to account transfers of this nature are highly risky from a money laundering and terrorist financing point of view, as customers can transfer money between themselves or may borrow money from unconventional sources, including other customers, which can offer criminals an opportunity to introduce criminal proceeds into the legitimate financial system through gambling accounts. It also allows criminals and terrorist financers to transfer value between each other in a way that it goes undetected and remains outside of the traditional financial sector. In this case, the transfers may also have unwittingly facilitated international money laundering and terrorist financing.

Syndicate

One of Triplebet's main customers was a syndicate, whose lead contributor was a professional gambler, who also held a beneficial interest in Triplebet itself. Over an 18-month period from November 2016, the syndicate matched bets on the Exchange totaling in excess of $55 million, without any documented risk assessment.

Triplebet submitted that its actual customer was the lead contributor of the syndicate and that therefore there was no obligation upon it to ascertain the identities of the other contributors or consider their source of funds or source of wealth. The Panel found that the consequence was that gamblers had been permitted to gamble very large sums without due diligence.

Due Diligence must be undertaken for each individual customer

Social Responsiblity Failings

The Gambling Commission's Social Responsibility Code requires licensees to interact with customers in a way which minimises the risk of gambling-related harm.

The Panel determined that, in breach of the Code, Triplebet had failed to put into effect its policies and procedures for customer interaction in a number of cases. These included:

Triplebet policies had failed to comply with the Social Responsibility Code provision then in force, by failing to refer to indicators such as time or money spent, and also by failing to contain specific provision in relation to ‘high value’ or ‘VIP’ customers. This in turn led to Triplebet's failure to identify and sufficiently interact with a number of at-risk players and also syndicates.

Triplebet accepted that the structure of syndicates resulted in customers not being appropriately assessed from a social responsibility perspective.

Monitoring of business relationships

The Panel found that Triplebet did not conduct appropriate ongoing monitoring of business relationships in several respects, including the following:

In several cases, customers had been permitted to gamble very large sums without any checks of their source of funds or source of wealth. In one case, a customer put at risk over £2 million in a single day without any source of funds or source of wealth being required. In another, a customer deposited and shortly afterwards withdrew a large sum of money without any gambling activity, a risk factor for money laundering, yet Triplebet had carried out no checks on the customer other than to verify his identity and address one year earlier.

The Panel rejected Triplebet’s submission that professional gamblers are a known low risk category for money laundering, since money laundering includes the simple use of criminal funds to fund gambling as a leisure activity, and criminals may also be gamblers.