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Raising Standards for consumers - Compliance and Enforcement report 2020 to 2021

The Gambling Commission's report on Compliance and Enforcement action 2020 to 2021

Published: 9 December 2021

Last updated: 9 December 2021

This version was printed or saved on: 7 October 2022

Online version: https://www.gamblingcommission.gov.uk/report/raising-standards-for-consumers-compliance-and-enforcement-report-2020-to

Enforcement and Compliance report foreword

This year has been one of the busiest for our Enforcement and Compliance teams as the Gambling Commission continues to take strong action against operators who fail to meet the required standards. And while Covid-19 caused global disruption, our Compliance and Enforcement teams have continued to work throughout.

Our casework led to the suspension of five operator licences and the revocation of licences for one operator and nine personal management licence holders.

A total of £32.1million was paid by 15 gambling businesses as a result of fines or regulatory settlements – more than any previous year.

As part of our refined focus and process, we conducted 25 full assessments of online operators and five targeted assessments of land-based operators.

Additionally, we carried out 83 website reviews and 262 security audits. Some 29 personal licence reviews were commenced and 57 were finalised.

We know the last two years have been difficult with Covid-19 severely impacting both consumers and businesses. Throughout this period we have regularly gathered data and then drawn on that data to better protect consumers. As the Commission’s new Chief Executive, I am impressed by the amount of enforcement work carried out, but it is also disappointing that it should be necessary. Looking back at enforcement in 2020 to 2021 we see the same two weaknesses in almost every case – operators failing to adhere to social responsibility and anti-money laundering rules.

These regulations are there for two very good reasons – to protect people and ensure that gambling is crime-free. These rules underpin two of the three licensing objectives, without which it would be impossible for us to permit gambling as laid out in the Gambling Act 2005 (opens in new tab). So, adherence should be at the forefront of every operator’s mind.

The reasons for these failings are almost as concerning as the failings themselves. Our casework reveals that operators are either not making suitable resources available or are simply putting commercial objectives ahead of regulatory ones.

This is simply unacceptable and will be seen as such by others in the industry who work hard to achieve compliance.

Of course, I know that many gambling firms have had a difficult 18 months, and that the future of many companies was unclear. Hard decisions were made to save jobs and livelihoods. Whilst the threat of Covid-19 hasn’t gone away, the gambling sector has largely resumed operations. As the Great Britian’s regulator for the gambling industry, we still see far too many breaches of regulations where everyone in the industry agrees we should not see them. The industry has the resources, skills and knowledge to change this.

Our Enforcement and Compliance work will continue to focus on customer protection, as consumers have every reason to expect. This will vary from paying very close attention to novel products to checking that operators are looking after their customers by meeting the LCCP requirements and taking into account the current Commission guidance on anti-money laundering and customer interaction (which will shortly be updated and consolidated following our consultation on this topic).

I hope you find this report informative and a timely reminder how the Commission seeks to ensure regulatory compliance. I look forward to working with you all to make gambling safer, fairer and crime free.

Thank you.

Anti-money laundering and counter terrorist financing

Introduction

Whilst we fully understand that Covid-19 has presented challenges to the industry, including the issue of problem gambling and the impacts of significant periods of closure for land-based operators, a major area of concern remains ensuring gambling stays free from crime and the proceeds of crime.

Issues identified through casework

Significant and substantial assessment continued for both land-based and online gambling businesses in the previous year (2019 to 2020). Compliance activity and enforcement cases continue to show that some licensees’ money laundering (ML) and terrorist finance (TF) risk assessments, and policies, procedures and controls continue to be not fit for purpose despite numerous case publications and ongoing guidance issued by the Commission to assist operators.

The Commission is finding increasing instances of gambling operators failing to consider how problem gambling can be linked to ML and TF despite both the Commission’s Guidance for remote and non-remote casinos: The prevention of money laundering and combating the financing of terrorism and Duties and responsibilities under the Proceeds of Crime Act 2002: Advice to operators (excluding casino operators) stating:

a pattern of increasing spend or spend inconsistent with apparent source of income could be indicative of money laundering, but also equally of problem gambling, or both.

Common poor practices

Inadequate due diligence measures:

Repeated instances of inadequate customer due diligence (CDD) and enhanced due diligence (EDD) measures in place, along with insufficient KYC (Know Your Customer) checks.

Failure to fully consider the full range of circumstances in which EDD is to be applied:

For example, wherever there is a higher risk of ML/TF as required under Regulation 33 of The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (opens in new tab). Examples include failing to apply EDD on Politically Exposed Persons (PEPs) and customers residing in high risk jurisdictions . The Commission’s casino and non-casino guidance states that:

higher risk customers should be subjected to a frequency and depth of scrutiny greater than may be appropriate for lower risk customers.

Failure to take account of:

Operators referencing out-of-date Commission-issued guidance and or advice: We expect operators to keep up to date with any guidance and or advice we provide and to then update their ML and or TF risk assessment(along with policies, procedures, and controls accordingly) based on this guidance and or advice.

Over reliance on third party providers to conduct due diligence checks:

One remote casino operator had no controls in place to oversee third party activities. The Commission’s casino anti-money laundering guidance and non-casino anti-money laundering guidance states that:

operators should give due consideration to the money laundering risks posed by their business-to-business relationships, including any third parties they contract with.

Social Responsibility Code Provision 1.1.2 of the LCCP states:

Licensees are responsible for the actions of third parties with whom they contract for the provision of any aspect of the licensee’s business related to licensed activities.

Delayed customer identification checks:

There is continued evidence of remote operators carrying out identity checks after the customer has been permitted to gamble. This is a breach of Licence Condition 17.1.1(1) which requires that:

Licensees must obtain and verify information in order to establish the identity of a customer before that customer is permitted to gamble.

Commercial considerations overriding the need to comply with AML and CTF provisions:

As part of ongoing compliance and enforcement activity the Commission has come across operator ML and TF risk assessments that place more importance on areas such as adverse media coverage and reputational damage to their business. There have been instances of operators stating that failure to comply with social responsibility and or AML/CTF requirements will draw negative press, whereas the operator’s primary concern should be concentrating on how to mitigate the risks of ML and TF.

Operators having no clear methodology in place in their ML and TF risk assessments:

By having an inadequate risk assessment methodology in place, operators will not be able to fully gauge the extent of the ML and TF risks relevant to their business (leading to weak policies, procedures, and controls).

Vague references made in operator ML and TF risk assessments:

These have included passing statements made in risk assessments such as, ‘customer monitoring’ or ‘KYC checks’ taking place with no details provided on what these measures actually consist of. Other issues include statementsT such as ‘pre-paid cards and or cryptoassets not accepted’, but again no details have been provided on how the operator prevents such payments and or payment methods.

Problem gambling, ML, and TF:

Repeated examples of operators not considering how problem gambling can be linked to ML and TF. The Commission’s casino and non-casino anti-money laundering guidance states that:

a pattern of increasing spend or spend inconsistent with apparent source of income could be indicative of money laundering, but also equally of problem gambling or both.

High financial thresholds in place before CDD or EDD measures take place:

Repeated instances whereby high and arbitrary financial threshold trigger limits have been set by operators with no underpinning rationale. Such high financial thresholds have repeatedly resulted in CDD and EDD being delayed, which led to financial crime occurring where it should have been identified at a much earlier stage in the customer’s journey.

High financial thresholds based on losses, deposits, or winnings only:

One remote operator only carried out EDD measures once a customer incurred a loss of £12k in a year. The Commission’s casino and non-casino anti-money laundering guidance states that:

in order to be able to detect customer activity that may be suspicious, it is necessary to monitor all transactions or activity.

Furthermore, Regulation 27(5) of the Regulations states that a

transaction’ consists of ‘the deposit of funds…or the collection of winnings, including the withdrawal of funds.

The ML/TF risk assessment not being fully used to inform policies, procedures and controls:

Licence Condition 12.1.1 requires operators to develop and implement a ML/TF risk assessment which should then be used to develop and implement policies, procedures, and controls to prevent financial crime.

Our requirements

All Licensees are expected 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 (opens in new tab), including amendments made by government in 2020 and 2021.

Licensees are also required to take account of the various guidance documents published on the AML section of the Commission’s website. We also provide regular updates on AML and CTF matters on our website, through social media and through our fortnightly e-bulletins.

The Commission is continuing to see repeated examples of operators failing to undertake review of their risk assessments which take into account the Commission’s emerging risk publications. We continue to see insufficient due diligence checks which increases the risk of accepting illicit funds (including the proceeds of crime and terrorist financing).

As a result of failing to take account of the Commission’s emerging risk publications, these failures by operators could also lead to potential criminal breaches of PoCA and Terrorism Act 2000 (opens in new tab) which requires operators to submit a Suspicious Activity Report (SAR) to the UK Financial Intelligence Unit wherever there is knowledge or suspicion of ML or TF.

Based on our evaluation of operators’ risk assessments they are failing to identify and assess ML and TF risk sufficiently to identify suspicion and knowledge of ML or TF. To mitigate such risk, operators must take into account Commission-issued guidance and any applicable learning, such as emerging risk bulletins. After taking into account any Commission-issued guidelines, businesses must update their risk assessment, their policies, procedures, and controls and provide updated employee training in order to increase consumer protection and reduce money laundering within gambling.

A further area of continued focus for the Commission is raising the standards of businesses in understanding their obligations to report suspicion and knowledge of money laundering and terrorist financing when identified within their business. Land-based premises submissions were impacted by the pandemic, however SARs continued to be submitted during this year.

Commission data (non Covid-19 related time period) demonstrated that only 53% of remote and non-remote casinos and only 4% of non-casino businesses (betting, gaming machine, lottery, arcades, and bingo) reported a SAR to the National Crime Agency (opens in new tab). Focussing upon licensees understanding of their obligations and the proficiency of Nominated Officer and Money Laundering Reporting Officers to discharge their duties will be a continuing focus for the Commission’s AML team.

Businesses must also continue to focus on the quality of the SARs they submit. It is good practice to refer to the National Crime Agency's guidance and view our videos on how to submit better quality SARs.

Case studies

Further to compliance and enforcement activity, in land-based casinos we found the following areas of concern relating to Money Laundering and Terrorist Financing:

Online licensees’ compliance and enforcement activity revealed:

A compliance assessment with an online casino operator identified the following good practice:

Our notable enforcement cases

The following action and regulatory settlements were imposed against these operators:

Double Diamond Limited were required to pay a regulatory settlement for AML and social responsibility failings. The sum consisted of a £247,000 payment in lieu of a financial penalty, which will be directed towards socially responsible purposes and accelerating delivery of the National Strategy to Reduce Gambling Harms and payment of £24,530.81 towards the Commission’s costs of investigating the case.

Les Croupiers Casino Limited were required to make a payment in lieu of a financial penalty for AML and social responsibility failings. The sum consisted of £202,500 plus Commission costs of £14,794.62.

Shaftesbury Casino Limited were required to make a payment in lieu of a financial penalty for AML and social responsibility failings. The sum consisted of £260,000 plus Commission costs of £11,690.41.

White Hat Gaming Ltd were required to make a payment in lieu of financial penalty for AML and social responsibility failings. The sum consisted of £1,334,053.18 plus Commission costs of £9,816.63.

Our investigations found failings in Netbet Enterprises Limited’s implementation of AML policies, procedures and controls and they were required to pay a total of £748,000 in lieu of a financial penalty.

Regulatory reviews found systemic failings within Caesars Entertainment UK Limited (CEUK)’s governance arrangements, resulting in a disconnect between it and the Licensed Entities. There were key failings in processes which were aimed at preventing ML and protecting the vulnerable. AML and social responsibility requirements are expected to be in place to keep crime out of gambling and protect vulnerable people. CEUK paid a total of £13 million in lieu of a financial penalty.

Operators should familiarise themselves with these and other public statements issued by the Commission highlighting failings in the AML and CTF measures taken by operators as they highlight the standards that the Commission and UK legislation expects operators to comply with.

Guidance and lessons learned

The Commission publishes formal guidance and advice which operators are required to take into account when ensuring they are compliant with the LCCP requirements. During the first lockdown, we issued additional guidance to remote operators on how to meet Social responsibility code 3.4.1 on customer interaction: Gambling Commission instructs tighter measures to protect consumers.

We then conducted a consultation on further amendments to Social responsibility code 3.4.1 and associated guidance: Remote customer interaction - Consultation and Call for Evidence (opens in new tab).

We will shortly be publishing the response to this consultation and updating the LCCP requirements. At that stage, all of the Commission’s formal guidance for remote operators on customer interaction will be updated and consolidated into one formal guidance document.

The Commission has also released publications setting out further information about problem gambling, reducing the risk of gambling-related harms and the steps the Commission is taking to improve standards:

This year also saw the misuse of the Government Priority Scheme by gambling consumers, through fraudulent use of Bounce Back Loans and Self-Employment Income Support Scheme explicitly for use on online gambling. Key indicators of this risk were identified and shared through the Commission’s emerging risk bulletins, highlighting particularly the risk of problem gambling and financial crime being co-dependent issues. It was expected that businesses would consider publications made by the Commission during this reporting period and mitigate these emerging risks through the review and amendment of their risk assessment, policies, procedures, controls, and employee training to increase consumer protection and reduce money laundering within gambling.

In October 2020 the Commission introduced new Licence Conditions for AML and CTF:

The Commission also amended the following Licence Conditions:

Review of the impact and effectiveness of these new and amended Licence Conditions and how well the industry has embedded them into their day-to-day practices will be a future focus for the Commission.

All the above highlights the need for operators to:

AML health-check good practices

Due diligence measures:

Having robust KYC/CDD and EDD measures in place to monitor customer activity. This includes not basing AML and customer interaction triggers on financial thresholds only. A range of risk factors should be considered by the operator when conducting due diligence checks such as customer, transactional and product risk. Operators should also satisfy themselves as to a full range of risks to which they may be exposed. For example, carrying out local or open-source information checks such as press reports may be useful.

Review and update of ML/TF risk assessments:

Reviewing and updating the ML/TF risk assessment in the light of any changes of circumstances, including the introduction of new products or technology, new methods of payment by customers, changes in the customer demographic or any other material changes, and in any event reviewed at least annually. Operators’ policies, procedures and controls should then be updated accordingly based on any changes to the ML/TF risk assessment.

Commission guidance:

Take account of Commission issued guidance in order to formulate and develop a ML/TF risk assessment. This risk assessment should then be used to develop and implement policies, procedures, and controls.

ML/TF risk assessment methodology:

Operators are required to have a clear risk assessment methodology in place. The casino and non-casino anti-money laundering guidance requires operators to consider:

…the nature, sources, likelihood, impact and consequences of the identified risks or risk factors – assign a relative value or importance to each risk or risk factor.

The Commission’s current Risk Assessment of the gambling industry assesses the risk of ML and TF in terms of ‘likelihood’ and ‘impact.’

High financial thresholds:

The casino and non-casino anti-money laundering guidance states that, ‘…there is no minimum financial threshold for the management and reporting of known or suspected money laundering or terrorist financing activity.’ One casino operator was found to have only carried out CDD checks once a customer deposited £5k in 24 hours. By having high financial thresholds in place, operators run the risk of falling foul of the requirements under the LCCP, The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (opens in new tab), the Proceeds of Crime Act 2002 (opens in new tab), the Terrorism Act 2000 (opens in new tab), and the Gambling Act 2005 (opens in new tab). ML triggers must be reviewed to ensure they are fit for purpose, aligned to the licensees specific business risks and include rigorous checks on individuals at the appropriate points.

Staff supervision:

Do you have adequate supervision of table gaming and gaming machines to minimise the risk of ML, criminal lifestyle spend, cheating and collusion?

Casino sector:

Casinos face several enhanced legal responsibilities under the Regulations (as they are part of the financial regulated sector). These include having policies, procedures and controls that must detail:

Please refer to our casino guidance for further information that casinos are required to include in their policies, procedures, and controls

Nominated Officer:

Casinos must appoint a member of the firm as their Nominated Officer, as well as a member of the board of directors (or equivalent) as their officer responsible for compliance with the Regulations.

Regulation 21 require that casino businesses:

Where the nominated officer has received a disclosure, that officer must consider it in the light of any relevant information which is available to the relevant person and determine whether it gives rise to knowledge or suspicion or reasonable grounds for knowledge or suspicion that a person is engaged in money laundering or terrorist financing.

Licensed operators and financial stability

Introduction

It is not surprising given the significant challenges the pandemic has posed globally, that we have observed a significant increase in gambling operators, particularly land-based operators, experiencing extreme financial difficulty. In such situations it is imperative that operators, and their representatives are mindful of what is required of them in relation to the Licensing Objectives and customer protections. We urge licensees who are encountering financial stability issues to engage with the Commission at an early stage.

The messages in this chapter are not new, but it is important that operators give full regard to them should they find themselves in such a situation.

Our requirements

The Statement of Principles for licensing and regulation (June 2017) puts the onus of responsibility for regulatory compliance at all times on the Licensee, whether this is the business or an appointed administrator. Social responsibility code 1.1.2 states that

Licensees are responsible for the actions of third parties with whom they contract for the provision of any aspect of the licensee’s business related to the licensed activities.

We expect operators to:

Orderly closedown of businesses

Where there is a planned wind down of a business, or it becomes apparent to an operator that long term viability of the business is in jeopardy, operators and PML holders ought to be aware that our focus will be on making sure licensees are treating consumers fairly.

Licensees should:

Lessons learned

Businesses in administration

Increasingly the Commission has been regulating businesses which have entered into administration. Although this can be a challenging time for licensees, it remains the case that regulatory responsibilities continue and vest in the administrator.

In situations where an administrator is formally appointed, the expectations pass to them as the current licensee, and they must act swiftly to ensure they become fully cognisant of, and compliant with, their legal obligations to run a licensed gambling business. Failure to do so will result in action from the Commission and could result in suspension activity until compliance is ensured. The Commission appreciates this in itself can have a financial impact on the business, however we will do so where it is evident this action is required to ensure consumer protection.

If you are appointed an administrator for a licensed operator you need to inform us if you intend the business to continue to trade. You need to state who will have responsibility for overseeing operations, and if these people do not hold a personal licence or are not approved Annex A holders, they will need to apply for personal management licences (PMLs).

In addition, we will require:

Once the company is in administration, and they continue to trade, the administrator is responsible for ensuring the business complies with the Gambling Act 2005 (opens in new tab) and Licence conditions and codes of practice (LCCP).

Administrators are reminded that they:

The Commission requires administrators to, amongst other things, ensure they take care to organise and control affairs responsibly and effectively and have adequate systems and controls to minimise the risks to the licensing objectives. We require sufficient and appropriately experienced and competent individuals who hold PMLs to have oversight of the day to day running of the business.

Administrators should ensure that commercial considerations do not hinder regulatory responsibilities.

Special measures and licence suspensions

Special measures

Introduction

During 2020 to 2021 the Commission reviewed its compliance and enforcement processes as it had become evident that an additional process was required to ensure non-compliant operators could raise standards, at pace, to meet the full requirements of the LCCP.

Issues identified through casework

Previously, the available regulatory options only included advice to conduct notices, warnings, licence reviews and suspensions, which all served a useful purpose but did not always result in swift intervention and remediation.

To counter this, the special measures process was introduced for isolated situations where we had a high level of confidence that a licensee had accepted its failings, committed to raising standards, mitigated risks to consumer harm, offered redress where appropriate, and had no history of protracted non-compliance.

Our requirements

The process of special measures is commenced by the Commission and requires a licensee to meet the following requirements:

The Commission will consider the submitted action map and decide whether it appears acceptable. A further short extension may be given if some alterations are required (not more than two days) to enable agreement on the suggested revision. Following this, the licensee is required to adhere to the following requirements:

Cases which we do not believe suitable for special measures will not enter this process and will be subject to the usual suite of regulatory action. Where there is evidence that consumers may be at significant risk of harm, we will consider suspending licensable activity immediately and special measures will be deemed inappropriate.

Special measures are appropriate where the licensee has reached the threshold for an s116 review but the Commission determines we have a very high level of confidence that there is no or limited ongoing risk of consumer harm, with demonstration of early acceptance of failings and a clear, proactive commitment to swiftly remediating the failings.

Case studies

During a compliance assessment, Anti-money laundering (AML) policies and procedures and safer gambling control deficiencies were identified. The licensee was considered suitable for special measures; they accepted the failings, demonstrated immediate action to mitigate any potential risks and the key persons provided the Commission with a high level of confidence that improvements would be made.

As a result of engagement between the Commission and the licensee, the following safeguards were immediately implemented due to the specific circumstances of the failings:

The licensee provided weekly updates to show progress against their action plan and a follow up compliance assessment was completed three months later to satisfy the Commission the licensee was now suitably compliant, and the following further safeguards had been effectively implemented:

The licensee worked at pace to resolve significant failings to ensure adequate safer gambling controls and AML procedures were implemented, positioning customer wellbeing at the heart of the business, rather than a sole focus on commercial gain. The safeguards implemented reflected the customer and business risk the licensee had identified and felt appropriate for its specific customer base. The licensee engaged positively with the Commission to raise its standards and demonstrated meaningful co-operation to protect the Licensing Objectives based on the specific risk profile of its customer base.

In a further example of special measures success another operator:

Lessons learned

The pilot scheme has been in operation since September 2020 with a total of eight operators so far entering special measures. Of those, seven demonstrated significant improvements with only very minor failings identified after three months. However, one licensee could not demonstrate that a sufficient level of compliance was being put into practice. That licensee is now the subject of casework which may include a formal review of the licence.

We have reviewed the impact of the special measures process and decided to extend the pilot until spring 2022. We are currently preparing to consult on the permanent implementation of a special measures process.

Licence suspensions

Introduction

This year has seen sustained regulatory activity resulting in more licence suspensions where we have needed to reduce risks to the licensing objectives and ensure adequate consumer protection at pace.

Issues identified through casework

During this period, the Commission has:

Our requirements

The Commission recognises that suspension can have significant financial impacts upon a business and will carefully consider if there are other methods, short of suspension, by which we can ensure compliance.

We require licensees to work with us effectively in implementing the suspension, ensuring there are adequate customer communications and signposting in place and that licensable activities do not continue to be provided.

Once a suspension is authorised the Commission can decide whether the suspension should take immediate effect and which – if any – activities should be allowed while the suspension continues. The Commission will continue to engage with the licensee in relation to remedial steps they will be taking to address our concerns and will ensure suspensions are lifted when we are satisfied the risks have been appropriately managed.

Case studies

A licensee held an operating licence which permitted it to produce and supply gambling software, to offer remote general betting (live events) products, remote general betting (virtual events) and to provide an online casino.

There had been compliance issues identified historically and a further compliance assessment was planned. During the website review, breaches of licence conditions and social responsibility codes were identified. Before the assessment could be completed by reviewing live customer accounts the licensee informed the Commission it would no longer co-operate with the assessment but would provide records if requested.

Despite efforts encouraging them to reconsider their position, agreement could not be reached. The matter was considered, and a decision was taken to suspend the operating licence as the situation posed an unacceptable risk to the licensing objectives and to consumers given the continuous failures to operate compliantly. Taken together with the refusal to allow the Commission to assess the licensee’s facilities as required, this brought into question the licensee’s suitability to hold a licence. As a result, an s116 licence review commenced.

On the same day, Commission employees identified that the licensee’s website had a banner which appeared to make light of the compliance issues which had been raised as grounds for licence review and suspension. Officials contacted the licensee’s legal representatives with a screenshot of the banner content highlighting that it raised questions regarding the operator’s suitability to hold a licence. The banner was subsequently removed.

The licensee appealed the suspension, asserting that they had not carried out the licensed activity in a manner inconsistent with the licensing objectives or in breach of a licence condition, and the only reason for the Commission suspending the licence was based on suitability (section 120 (1)(d)). In particular, they argued the licence was suspended because the licensee would not agree to participate in a Skype call.

The Third Tier Tribunal considered the appeal and found in the Commission’s favour, concluding that there were grounds to suspect that one of the section 120(1) conditions may apply, that the licensee had breached numerous conditions of their licence, that the breaches were serious enough to warrant suspension, and that their failure to attend the compliance assessment exacerbated these breaches, and so the licence should be suspended. It is of note that the Judge went on to comment that there was nothing to indicate that the Commission was not justified in its original decision.

The finding also confirmed that the Commission has the power to require licensees to attend remote compliance assessments. It confirmed that the Commission can require licensees to provide records and documentation during the course of the assessment and can view customer and audit records. Following this decision, the operating licence was surrendered, and two Personal Management Licence holders also surrendered their licences.

Licence suspensions - Lessons learned

Where there is a risk to the licensing objectives the Commission may consider if it is proportionate and appropriate to suspend an operating license. The Commission may do so if it is satisfied that:

Once a suspension is authorised the Commission can decide whether the suspension should take immediate effect and which – if any – activities should be allowed while the suspension continues.

Within 14 days of an operating licence being suspended the licensee has the right to request the Regulatory Panel review the decision to suspend. The panel will make a de novo decision on the facts available to it at the time of the hearing, and this decision replaces that of the initial Commission decision both as to whether to suspend, when the suspension takes effect, and which activities may continue. The Licensee may also seek to have the decision considered by the First Tier Tribunal.

The factors we consider when we look to end a suspension

Whilst a suspension is ongoing the Commission will periodically review the circumstances to ensure that it remains proportionate for the suspension to continue. The Licensee will always be informed of what measures it must take to enable us to properly lift the suspension. Factors to which the Commission will pay significant regard are:

The Commission advises all licensees that it will continue to use suspension when appropriate to protect consumers and the licensing objectives.

Personal Licence reviews

Introduction

Businesses do not make decisions - people do. This is why the Commission continues to ensure that personal licence holders are held accountable, where appropriate, for the regulatory failings within the operators they manage. There have been a range of outcomes in the past year including:

Key issues identified through casework

Inadequate source of fund or source of wealth checks

Casework this year has seen continuing evidence of PML holders not maintaining adequate oversight and not being sufficiently curious in respect of source of funds or source of wealth used to gamble by their customers.

Record keeping

There have been repeated instances of a lack of adequate documentation and audit trails to demonstrate properly informed decision making by PML holders for Anti-Money Laundering (AML) and countering terrorist financing (CTF) obligations.

Reporting criminal offences

There continue to be reporting delays or failures to report Schedule 7 offences as a key event as required under the Gambling Act 2005 (opens in new tab).

Nominated officer/ Money Laundering Reporting Officer (MLRO) poor practice

The Commission has noted numerous instances of poor practice by the nominated officer/MLRO, who also holds a Personal Licence, including:

Senior management lacking oversight

Having insufficient strategic oversight of the business’s assessment of the risks it faces for money laundering and terrorist financing.

PML holder requirements

Personal Management Licences are required to be held by anyone with responsibilities for:

Personal Management Licences are subject to a number of conditions under section 75 of the Gambling Act 2005 (opens in new tab) which include:

Gambling operators must have a specified management office holder for regulatory compliance. Compliance with anti-money laundering and counter terrorist financing requirements under the Licence Conditions and Codes of Practice (LCCP), the Proceeds of Crime Act 2002 (opens in new tab) and the Terrorism Act 2000 (opens in new tab) are key elements for this PML position. In addition, casino businesses and regulatory compliance PMLs must adhere to all requirements of The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (opens in new tab) and subsequent amendments made in 2020 and 2021 (the Regulations).

Nominated Officer role requirements

Reporting requirements

Any changes in these key positions should be communicated to the Commission and where applicable the incumbent should submit a personal licence application.

Changes include, but are not limited to:

  • where a key person has left
  • details of who will be taking over the former key person’s position
  • details of any relevant experience, qualifications, skills, knowledge and expertise that the new person holds

Further reporting requirements include:

Case studies

In April 2020 the Commission announced that Caesars Entertainment UK Limited will pay £13m (Caesars Entertainment UK Limited Public statement) and implement a series of improvements following a catalogue of failures including those involving ‘VIPs’.

The investigation into PML holders was launched following the conclusion of action against the business because there were concerns they had failed to take all reasonable steps to ensure effective compliance in the execution of their duties.

As a result of the investigation:

In addition:

In a separate incident, one Caesars’ PML holder had his licence revoked following an altercation with a guest at his place of work.

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.

PML holder healthcheck

We outline in our Statement of principles for licensing and regulation that we expect individuals occupying senior positions, whether or not they hold PMLs, to, amongst other things:

Illegal gambling

Introduction

Part of our statutory remit and a key licensing objective is to keep crime out of gambling. When consumers access potentially illegal gambling sites, they expose themselves to many risks and are not afforded the protections in place that are expected in the regulated sector.

To tackle this issue, we use an intelligence led approach, assessing information gathered from multiple sources and working closely with partner agencies to prevent access to illegal websites by GB consumers.

Our initial action is to issue Cease and Desist (C&D) letters. If this action does not prove successful, we use disruption techniques, which include utilising our relationships with web hosting companies to suspend or IP block GB consumers from accessing the websites, contacting payment providers to remove payment services and liaising with social media sites to prevent websites appearing on search engines or being hosted.

These methods help to ensure that we continue to react proportionately and appropriately to the illegal provision of gambling facilities and prevent unlicensed operators interacting with GB consumers. If these methods fail then a criminal prosecution may be authorised.

We are particularly focused on identifying and disrupting websites which are targeted at young or vulnerable people, those who experience significant harms from their gambling and self-excluded gamblers.

The most widely reported complaints from members of the public related to the allowance of gambling. This accounted for 62% of all unlicensed remote reporting for the financial year 2020 to 2021 representing a 17% increase compared to the financial year 2019 to 2020.

Reports from members of the public concerning refusal to payout accounted for the second highest reporting category during the period 2020 to 2021. 37 reports were identified, which is consistent with previous levels, some of which also complain about allowance of play.

Issues identified and actioned

Enforcement identified 99 unlicensed remote operators transacting with GB customers during the financial year 2020 to 2021. This figure includes instances of multiple reports on the same illegal website.

We achieved the following:

Action taken against unlicensed remote operators transacting with GB customers during the financial year 2020 to 2021
Action taken Number of unlicensed operators
GB registration removed (operator prevents players based in GB from gambling) 14
GEO IP Blocked 13
Removed by Host 10
Removed by Owner 7
Website Suspended 3

Other action

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

In addition, we engaged with 15 international regulators in this business year 2020 to 2021 to share information and learning to help raise prominence of this issue internationally. Our international engagement ensures we continue to refine and focus our own approach in relation to our tactics and disruption activity.

Further, The Gambling Commission will be responding and providing advice to Department of Culture, Media and Sport (opens in new tab) (DCMS) as part of the Government initiated Gambling Act Review. Illegal gambling, an area of which is specifically considering the risks of illegal gambling and what the Commission approach in terms of powers, resources and remit should be.

Consumer guidance on unlicensed websites

Unlicensed operators present greater risks to GB consumers. We would remind members of the public not to gamble on any unlicensed websites and to read our guidance on this topic.

Please inform The Commission of any examples of such sites so that we can take appropriate action by contacting the following email address:

intelligencereports@gamblingcommission.gov.uk (opens in new email)

If you choose to gamble, check that you are gambling with a licensed operator. If you have any doubts, check their licence status on our website.

Illegal lotteries on social media

We are seeing an increase in illegal lotteries on social media. During this financial year, a total of 823 instances were identified where an allegation of a social media platform either hosting or advertising illegal gambling was received.

Reports signify each instance of notification of illegal gambling via a social media platform and in some instances, more than one report has been submitted in relation to a single subject. In addition, upon further assessment, 391 of the reports demonstrated no evidence of illegal activity and so no further action was taken.

Where more than one social media platform has been utilised for a single instance of illegal gambling, each platform will have been counted individually. The 823 reports can be broken down as follows:

Platforms used for illegal gambling
Hosted and or facilitated Advertised and or promoted Total
Facebook 664 65 729
Instagram 27 20 47
Snapchat 0 1 1
Twitter 5 18 23
Youtube 6 12 18
whatsapp 0 2 2
Reddit 0 1 1
Twitch 2 0 2
Total 704 119 823

Facebook accounted for the highest volume of reports received, (this includes Instagram) followed by Twitter and YouTube.

Issues identified and actioned

We have reported 391 lotteries to Facebook during the financial year 2020 to 2021. Of these, 378 have so far been removed by Facebook.

Facebook lotteries are continually evolving both in volume and complexity. The prizes are increasing in value and becoming more diverse. The Commission is engaged with several partner stakeholder agencies, including Police, DWP & local authorities to disrupt the activity referred to.

We have reported 23 lotteries to Twitter, 5 concerned hosting and 18 promoting. Of these 2 reports have been dealt with by issuing a Cease and Desist. 18 reports were received regarding YouTube of which 4 have been removed.

The Commission is committed to continually reviewing our approach and response to the fast-changing environment of online illegal gambling. We are assessing whether we need further legislative powers, in addition to our current range of tactics, to respond appropriately.

We will advise government of our conclusions via our formal advice on the current review of the Gambling Act 2005 (opens in new tab). We are also developing our collaboration with foreign regulators to identify joint approaches to the rise in illegal lotteries on social media and with the social media sites themselves in terms of education regarding the issue.

Consumer guidance

If members of the public wish to set up and run a lottery they are directed to the published guidance for fundraising and lotteries on the Commission website. The guidance is very clear in that Lotteries in Great Britain can only be promoted for charities and other good causes. They cannot be promoted for private or commercial gain.

If members of the public suspect an illegal lottery is taking place, we would ask that you report it by contacting intelligencereports@gamblingcommission.gov.uk (opens in new email). Providing evidence of the suspect illegal activity in the form of a screenshot showing the offending group or post and any linked Uniform Resource Locator (URL) will assist us in assessing appropriate disruption or enforcement action.