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Public statement

BGO Entertainment Limited Public Statement

Published:
28 October 2020
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Key failings

Anti-Money Laundering:

Licence Conditions 12.1.1 Licence Condition 12.1.2

Social responsibility:

Social Responsibility Code Provision 3.4.1.(1)

October 2020 Operators are expected to consider the issues here and review their own practices to identify and implement improvements in respect of the management of customers.

Introduction

Licensed gambling operators have a legal duty to ensure that their gambling facilities are being provided in compliance with the Gambling Act 2005 (opens in new tab) (the Act), the conditions of their licence and in accordance with the licensing objectives, namely to:

  • prevent gambling from being a source of crime or disorder, being associated with crime or disorder or being used to support crime
  • ensure that gambling is conducted in a fair and open way
  • protect children and other vulnerable people from being harmed or exploited by gambling.

BGO Entertainment Limited Executive summary

This case concerns BGO Entertainment Limited (BGO) which holds a combined operating licence authorising it to operate as a remote operator and includes casino.

The Commission conducted a compliance assessment in September 2018, in which a number of customer accounts were examined. Failures were identified concerning the manner that BGO interacted with the customers from a social responsibility (SR) and anti-money laundering (AML) perspective.

Our investigation subsequently uncovered systemic failings in respect of both BGO’s SR and AML controls which affected a significant number of customers across its online casinos. These failings stemmed from inadequate Risk Assessments relating to AML together with inadequate AML and SR policies and controls.

On 4 September 2019 the Gambling Commission gave BGO notice that we were commencing a review of its operating licence.

BGO cooperated with the Commission throughout the compliance assessment and the subsequent investigation and acknowledged that between 25 September 2018

and 21 July 2020 it did not have effective and adequately resourced AML controls in place to consistently address risks presented by higher risk customers.

The settlement agreement consists of additional licence conditions which have been imposed and agreed by the Licensee to protect consumers they consist of:

(i) Licensee shall apply enhanced due diligence measures (EDD) to the top 250 customers within its customer profiling system where it is required to do so in accordance with both the Money Laundering Regulations 2017 and the Gambling Commission’s published guidance concerning AML. This will consist of the top 125 customers by drop (deposits) and the top 125 customers by loss, in each case based on customers who have placed a bet in the previous 12 months, irrespective of whether such customer’s account is, at the relevant time, active, frozen / closed or self-excluded. The top customers shall be determined by their drop (deposit) and loss in the previous 12-month period. This EDD is to be conducted within three months of the publication of the public statement and conducted thereafter every 12 months as required. The findings of each review should be presented to the Board of Licensee and acted upon. Records are to be maintained and presented to the Gambling Commission when required.

(ii) Licensee shall maintain a record of the effectiveness of the Responsible Gambling checks that it undertakes on the top 250 customers within its customer profiling system. This will consist of the top 125 customers by drop (deposits) and the top 125 customers by loss, in each case based on customers who have placed a bet in the previous 12 months, irrespective of whether such customer’s account is, at the relevant time, active, frozen / closed or self-excluded. The top customers shall be determined by their drop (deposit) and loss in the previous 12-month period. The Responsible Gambling checks should be conducted in line with the Gambling Commission’s published guidance. This review is to be conducted within three months of the publication of the public statement and conducted thereafter every 12 months as required. The findings of each review should be presented to the Board of Licensee and acted upon. Records are to be maintained and presented to the Gambling Commission when required.

In addition, the Licensee will make a payment of £2,000,000 in lieu of a financial penalty to address failings identified by the Commission. The Licensee will also pay Commission costs of £31,023.87p

BGO Entertainment Limited Findings

Failure to identify problem gambling behaviour

Social responsibility (SR) code provision 3.4.1(1)

Which states that “Licensees must put into effect policies and procedures for customer interaction where they have concerns that a customer’s behaviour may indicate problem gambling. The Policies must include:

(e) specific provision for making use of all relevant sources of information to ensure effective decision making and to guide and deliver effective customer interaction including in particular:

  • provision to identify at risk customers who may not be displaying obvious signs of, or overt behaviour associated with, problem gambling; this should be by reference to indicators such as time or money spent.
  • specific provision in relation to customer designated by the Licensee as ‘high value’, ‘VIP’ or equivalent.
  • specific provision for interacting with customers demonstrating signs of agitation, distress, intimidation, aggression or other behaviours that may inhibit customer interaction.”

Operators should also keep a record of customer interactions, and where an interaction has been ruled out.

BGO accepted that between 25 September 2018 and 23 March 2020 it did not have effective policies and procedures in place for customers who may be displaying signs of problem gambling. The Licensee had also failed to take into account the Commissions guidance regarding responsible gambling and affordability. This led to BGO not always identifying and interacting with customers who were displaying signs of problem gambling and, even when the customer interaction process was triggered, there was a failure to follow up with an interaction.

Examples of the social responsibility failings include:

  • Customer A this customer won a substantial amount on the on the National Lottery. In the following three months the customer lost in the region of £159,000 and activated a considerable number of RG triggers. On reviewing the account, it revealed that customer interactions consisted of thirty pop up questionnaires which had been sent out whilst only three RG interactions were made.

The customer was not asked if they were in control of their gambling with a general presumption recorded that the customer was able to afford to gamble due to the lottery win. The Commission finds this wholly unacceptable. The Licensee accepted that the customer had hit a significant number of RG triggers and that there was an overuse of pop ups.

  • Customer B’s account was opened in April 2017 and initially the customer was depositing relatively low amounts. Between 6 December and 24 December 2018 the customer deposited a total of £106,800 on 2 occasions in excess of £20,000 in a day.

During this period, the customer received 23 pop ups, all of which were answered by the customer. On 10 December 2018 the customer deposited 13 times between 12am and 1am totalling £6,500. The Licensee’s RG policy at this time (November 2018) stated that this would activate a trigger for the account to be flagged for review and a deposit freeze to be applied. However, the Licensee acknowledged that between the hours of 1am and 7am there was no RG team in place. Officials noted that the Licensee failed to speak with the customer the following day as required by their policy and instead sent an email. The Licensee agreed there was an over- reliance on popups with this account.

Failure to have in place appropriate AML controls

Licence condition 12.1.1 relates to the Prevention of Money Laundering and Terrorist Financing

Licence condition 12.1.1(1) requires:

Licensees must conduct an assessment of the risks of their business being used for money laundering and terrorist financing. Such risk assessment must be appropriate and must be reviewed as necessary in the light of any changes of circumstances

BGO accepts it failed to conduct a risk assessment of the risks of the business being used for money laundering and terrorist financing from September 2018 – July 2020 in accordance with licence condition 12.1.1(1). It also breached licence conditions

12.1.1(2) and 12.1.1(3) by failing to ensure adequate customer Enhanced Due Diligence (EDD) and Source of Funds (SOF) checks had been conducted on customers who presented a higher risk of money laundering.

During our investigations, we identified customers who were able to gamble significant sums of money without adequate EDD and SOF checks being conducted.

The Commission examined the following customer accounts:

In the case of the following customer the licensee did not effectively implement its own policies and procedures.

Customer C the Commission found insufficient evidence had been provided in respect of SOF or SOW. The Licensee accepted that its AML policies and procedures had not reflected current practices and were inadequate in respect of this customer. It could not offer an explanation as to why this customer account was allowed to pass ECDD and this was unacceptable.

In mitigation the Licensee believed there was an error as a result of historic preloaded existing accounts which had been put onto their own internal system.

Licence condition attached to the operating licence in October 2014 (valid from 1 November 2014), superseded by licence condition 12.1.2

The condition attached in October 2014 and licence condition 12.1.2(1) requires:

Licensees to put into place and implement the measures described in Parts 2 and 3 of the Money Laundering Regulations 2007 (superseded by the 2017 Regulations), insofar as they relate to casinos.

BGO accepted that between 25 September 2018 and 21 January 2020 it failed to put in place and implement measures described in the Money Laundering Regulations 2007 and of the Money Laundering Regulations 2017. This was because, between the relevant period, BGO did not have adequate AML controls to consistently address the risks presented by higher risk customers.

An example of the failings identified was found in the customer account of Customer D. This customer deposited in excess of £100,000 and lost more than £65,000 in seven days. It was known that the customer had a salaried income of less than £20,000 but the customer had not provided appropriate SOF or SOW checks.

The Licensee accepted from the customer a screenshot of a current bank account, which was contrary to its policies. The screenshot detailed three transactions of monies which was believed to have come from an online gambling company together with a screenshot showing savings. Neither the source of the monies from the gambling company or the source of the funds from the savings account was established nor challenged by the Licensee.

The Licensee was also aware from checks that this customer had entered into an Individual Voluntary Arrangement (IVA) four months previously but were not aware of the circumstances regarding the IVA. The Licensee did not establish the SOF for this customer, breaching Regulation 28(11)(a) of the 2017 Regulations.

BGO Entertainment Limited Actions taken by BGO Entertainment Limited

BGO acknowledges that the policies relating to AML and customer interaction in force at the relevant time were ineffective. It has now improved those policies and will continue to review them as appropriate.

The Licensee has agreed to make a variation of their licence which includes:

Licensee shall apply enhanced due diligence measures (EDD) to the top 250 customers within its customer profiling system where it is required to do so in accordance with both the Money Laundering Regulations 2017 and the Gambling Commission’s published guidance concerning AML. This will consist of the top 125 customers by drop (deposits) and the top 125 customers by loss, in each case based on customers who have placed a bet in the previous 12 months, irrespective of whether such customer’s account is, at the relevant time, active, frozen / closed or self-excluded. The top customers shall be determined by their drop (deposit) and loss in the previous 12-month period. This EDD is to be conducted within three months of the publication of the public statement and conducted thereafter every 12 months as required. The findings of each review should be presented to the Board of Licensee and acted upon. Records are to be maintained and presented to the Gambling Commission when required.

Licensee shall maintain a record of the effectiveness of the Responsible Gambling checks that it undertakes on the top 250 customers within its customer profiling system. This will consist of the top 125 customers by drop (deposits) and the top 125 customers by loss, in each case based on customers who have placed a bet in the previous 12 months, irrespective of whether such customer’s account is, at the relevant time, active, frozen / closed or self-excluded. The top customers shall be determined by their drop (deposit) and loss in the previous 12-month period. The Responsible Gambling checks should be conducted in line with the Gambling Commission’s published guidance. This review is to be conducted within three months of the publication of the public statement and conducted thereafter every 12 months as required. The findings of each review should be presented to the Board of Licensee and acted upon. Records are to be maintained and presented to the Gambling Commission when required.

BGO recognises there have been considerable learnings from these cases and has invested in improving its AML and responsible gambling processes. BGO states it is also committed to working with the industry to raise standards, particularly in relation to safer gambling.

BGO Entertainment Limited Regulatory Settlement

In line with our Statement of principles for licensing and regulation, BGO has concluded a regulatory settlement. The settlement agreement consists of:

  • Agreement to a variation of their licence namely:
  • Licensee shall apply enhanced due diligence measures (EDD) to the top 250 customers within its customer profiling system where it is required to do so in accordance with both the Money Laundering Regulations 2017 and the Gambling Commission’s published guidance concerning AML. This will consist of the top 125 customers by drop (deposits) and the top 125 customers by loss, in each case based on customers who have placed a bet in the previous 12 months, irrespective of whether such customer’s account is, at the relevant time, active, frozen / closed or self-excluded. The top customers shall be determined by their drop (deposit) and loss in the previous 12-month period. This EDD is to be conducted within three months of the publication of the public statement and conducted thereafter every 12 months as required. The findings of each review should be presented to the Board of Licensee and acted upon. Records are to be maintained and presented to the Gambling Commission when required.
  • Licensee shall maintain a record of the effectiveness of the Responsible Gambling checks that it undertakes on the top 250 customers within its customer profiling system. This will consist of the top 125 customers by drop (deposits) and the top 125 customers by loss, in each case based on customers who have placed a bet in the previous 12 months, irrespective of whether such customer’s account is, at the relevant time, active, frozen / closed or self-excluded. The top customers shall be determined by their drop (deposit) and loss in the previous 12-month period. The Responsible Gambling checks should be conducted in line with the Gambling Commission’s published guidance. This review is to be conducted within three months of the publication of the public statement and conducted thereafter every 12 months as required. The findings of each review should be presented to the Board of Licensee and acted upon. Records are to be maintained and presented to the Gambling Commission when required.
  • £2,000,000 payment in lieu of a financial penalty, which will be directed towards delivering the National Strategy to Reduce Gambling Harms
  • Agreement to the publication of a statement of facts in relation to this case
  • Payment of £31,023.87p towards investigation costs.

In considering an appropriate resolution to this investigation, the Commission has had regard to the following aggravating and mitigating factors:

Aggravating

  • BGO accepted that these breaches were not isolated and occurred over a sustained period of time, this despite ongoing input by the Commission.
  • The systemic nature of the breaches means customers not known to the Commission were likely affected.
  • The breaches arose in circumstances similar to previous cases which have resulted in the publication of lessons to be learned for the wider industry.
  • The need to encourage compliance amongst other operators.
  • BGO failed to have adequate MLTF Risk Assessment in place as well as appropriate AML Policies and controls despite continued guidance being provided by the Commission.

Mitigating

  • BGO has now put in place renewed policies and procedures which it says will prevent similar failings recurring.
  • BGO accepted responsibility for the failings at an early stage and has been co- operative during the review process.

BGO Entertainment Limited Good practice

We consider this case provides valuable learning for operators. They should consider the following questions:

  • Do you have policies and procedures in place to identify customers who may be experiencing or at risk of developing problems with their gambling?
  • Do you have systems in place to identify potential problem gamblers?
  • Do these include appropriate trigger points for when the usual pattern of gambling becomes unusual (these should not be just financial)? How do you protect new customers (where a pattern of play cannot yet be established)?
  • Are your staff sufficiently trained to spot problem gamblers and know how to report concerns? Are there clear procedures once a concern has been raised?
  • Do you know your customer (KYC)? Are you gaining a holistic picture of the customer’s source of funds, particularly in relation to VIP customers?
  • Are you critically assessing assurances you receive as to source of funds?
  • Have you ensured you have clear, up-to-date, and fit for purpose Responsible Gambling Policy which takes into account the Commission’s guidance and includes a customer’s affordability?
  • Have you ensured you have clear, up-to-date, and fit for purpose AML policies and procedures available to all who require guidance?
  • Have you ensured your policies and procedures have been informed by our guidance on AML?
  • Have you taken into account the Commission’s Money Laundering and terrorist financing risk assessment?

For further guidance on good practice read our Enforcement report (opens in new tab)

News

Gambling Commission imposes tougher licence conditions on online operators

Published: 28 October 2020

Read the news story about gambling commission imposes tougher licence conditions on online operators
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