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Public statement

Ladbrokes Betting & Gaming Limited Public Statement

Published:

17 August 2022

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Our public statements make reference to breaches of the Licence Conditions and Codes of Practice (LCCP) requirements which were in effect at the time of the breach. In some cases, the requirements have since been updated.

This licensee is part of the Entain Group (Entain) (formerly named the GVC group) of companies.

Operators are expected to consider the issues outlined as follows and review their own practices to identify and implement improvements in respect of the management of customers’ accounts.

Introduction

Licensed gambling operators have a legal duty to ensure gambling facilities are 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, which are 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.

Ladbrokes Betting & Gaming Limited Executive summary

This investigation followed a compliance assessment and resulted in the commencement of a section 116 regulatory review¹ of Ladbrokes Betting & Gaming Limited (LBG), Combined Non-Remote Operating Licence number: 001611-N-102408-022. The regulatory review found failings in LBG’s processes which were aimed at preventing Money Laundering (ML) and safer gambling.

Between December 2019 and October 2020 LBG failed to comply with certain Licence Conditions and Codes of Practice (LCCP), specifically:

• paragraphs 2 & 3 of licence condition 12.1.1 – Prevention of money laundering and terrorist financing
• paragraphs 1 & 2 of Social Responsibility Code Provision (SRCP) 3.4.1 – Customer Interaction.

Taking into account remedial action taken by LBG and in line with our Statement of Principles for licensing and regulation, LBG will voluntarily divest itself of £212,849.86 and pay £2,787,150.14 in lieu of a financial penalty resulting in a total payment of £3,000,000.

Ladbrokes Betting & Gaming Limited Findings

The investigation and our subsequent regulatory review found:

• failings in LBG’s implementation of Anti-Money Laundering (AML) policies, procedures and controls
• deficiencies in its responsible gambling policies, procedures, controls and practices, including weaknesses in implementation
• weaknesses in its reporting arrangements.

We found that, between December 2019 and October 2020, LBG had been in breach of the following licence conditions and Social Responsibility Code Provisions:

Breach of paragraphs 2 and 3 of licence condition 12.1.1

Licence condition 12.1.1 (2) states: “Following completion of and having regard to the risk assessment, and any review of the assessment, licensees must ensure they have appropriate policies, procedures and controls to prevent money laundering and terrorist financing.”

Licence condition 12.1.1(3) states “Licensees must ensure that such policies, procedures and controls are implemented effectively, kept under review, revised appropriately to ensure that they remain effective, and take into account any applicable learning or guidelines published by the Gambling Commission from time to time.”

LBG accepted:

• weaknesses and shortcomings in relation to the adequacy and maintenance of its policies and procedures, and their implementation
• certain customers identified by the Commission were able to stake large amounts of money without having been monitored or scrutinised to the standard expected by the Commission
• customer G was a high staking cash customer who regularly loaded cash of £500 or more onto shop terminals. This customer placed their first bet on 10 January 2020 and staked circa £168,000 in the proceeding eight months, losing a total of circa £28,000. They were not considered by the Licensee for AML checks, largely due to not being referred for review by shop staff and not hitting the Licensee’s AML threshold triggers. The Licensee acknowledged that it did not commence due diligence checks in relation to this customer until it conducted a review as part of its Governance process in September 2020
• customer H’s last 12-month stakes were £440,474 with losses of £68,867 over the same period. The Licensee acknowledged that further formal AML thresholds and checkpoints would have been appropriate in respect of stake levels and has confirmed that it has since amended its approach.
• in relation to certain customers identified by the Commission, it placed overreliance on recycled winnings
• in particular cases, despite training, local staff or area managers could have escalated potential concerns sooner.

The Commission’s review of the specific customers identified during the compliance assessment found no evidence of criminal spend with the Licensee.

Failure to comply with paragraph 1 and 2 of Social Responsibility Code Provision (SRCP) 3.4.1 (Customer Interaction)

Compliance with a SRCP is a condition of the licence by virtue of section 82(1) of the Act. SRCP 3.4.1 (amended from 31 October 2019) states:

“1 Licensees must interact with customers in a way which minimises the risk of customers experiencing harms associated with gambling. This must include:

• a. identifying customers who may be at risk of or experiencing harms associated with gambling
• b. interacting with customers who may be at risk of or experiencing harms associated with gambling
• c. understanding the impact of the interaction on the customer, and the effectiveness of the Licensee’s actions and approach.

2 Licensees must take into account the Commission’s guidance on customer interaction.”.

LBG accepted it was not fully in compliance with SRCP 3.4.1 as:

• it was slow to interact or did not interact with certain customers in a way which minimised their risk of experiencing harms associated with gambling:
• in July 2020 customer I staked £29,372 and lost £11,345 (a third of their 12-month loss). This was the customer’s highest monthly stakes since becoming a monitored shop customer and a loss figure that was significantly higher than any previous recorded monthly losses. The customer was not escalated for a safer gambling review by either the shop or support office teams.
• in particular cases, despite training, local staff or area managers could have escalated potential concerns sooner:
• customer J was able to stake £173,285 and lost £27,753 between October 2019 and October 2020
• customer K who was known to be a delivery driver was able to lose £17,000 between October 2019 and October 2020.
• whilst it was evaluating the adequacy of certain individual customer interactions, it should have conducted such evaluation to a higher standard and recorded the same more clearly:
• the Licensee accepted this failing was relevant in its evaluation of customer L who staked £218,765 and lost £44,597 between October 2019 and October 2020.
• in its interactions with certain customers identified by the Commission, affordability ought to have been considered sooner
• there were instances where interactions were not specifically adapted depending on the extent of potential harm to a customer.

Ladbrokes Betting & Gaming Limited Regulatory Settlement

This regulatory settlement consists of:

• (i) divestment of £212,849.86 and (ii) a payment in lieu of £2,787,150.14 making a total payment of £3,000,000 in lieu of a financial penalty, which will be directed towards socially responsible purposes.
• agreement to the publication of a statement of facts in relation to this case
• agreement by LBG to vary its operating licence to add conditions to its operating licence, namely:
• to appoint a Board-level sponsor, reporting directly to the Chair, to assume responsibility for the implementation of its action plan, and
• undertake a follow-up independent audit of relevant policies and procedures within 12 months to ensure whether it is effectively implementing its AML and safer gambling policies, procedures and controls, and that any further recommendations made by the independent audit should be implemented thereafter.
• payment of the Commission’s costs of conducting the review.

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

Aggravating factors

• the serious nature of the breaches identified
• the impact on the licensing objectives
• there has been a repeated breach or failure by the operator or other group companies
• the breach arose in circumstances that were similar to previous cases the Commission has dealt with which resulted in the publication of lessons to be learned for the wider industry
• the need to encourage compliance among other operators
• the nature of the breaches may mean other customers were affected that the Commission has not reviewed
• LBG’s senior management should have been aware of governance issues that lead to the breaches, given their significance.

Mitigating factors

• the extent of steps taken to remedy the breach – the Licensee implemented an early action plan to remedy its failings
• the Licensee procedurally met the Commission’s timetable in respect of providing material and, where such material could not be provided within the expected time period, sought an extension.

Good practice

Gambling operators should take account of the failings identified in this investigation to ensure industry learning. Operators should consider the following questions:

• do you have formal processes in place to measure the effectiveness of your AML and safer gambling policies and procedures, and are findings adequately recorded?
• do you efficiently record all compliance decisions and are you able to demonstrate to the Commission, on request, evidence of ongoing assessment, evaluation and improvement?
• do lessons learned from public statements flow into your policy and processes?
• do you have a formalised process for analysing the effectiveness of customer interactions to ensure that reviews were adequately documented and consistent in their approach?
• do you log the types of behaviour which have triggered a customer interaction and keep sufficient records of interactions, along with decisions not to interact, especially the level of detail provided?
• have your staff received sufficient AML and SR training?

Notes

¹The Commission commenced its regulatory review on 18 January 2021.