Lindar Media Limited Public Statement
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.
Operators are expected to consider the issues outlined below 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 their 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, safe and open way
- protect children and other vulnerable people from being harmed or exploited by gambling.
Lindar Media Limited Executive Summary
The Gambling Commission commenced a section 116 regulatory review of Lindar Media Limited (the Licensee), Combined Remote Operating Licence Number 051250-R-328289-006, following a compliance assessment conducted in September 2022.
The regulatory review found failings in Lindar Media Limited’s processes aimed at preventing Money Laundering (ML) and protecting individuals from being harmed or exploited by gambling.
Officials found that, between July 2021 and September 2022, Lindar Media Limited failed to comply with the following Licence Conditions and Codes of Practice (LCCP):
- paragraphs 1, 2 and 3 of licence condition 12.1.1 requiring compliance with measures to prevent ML and Terrorist Financing (TF)
- ordinary code provision 2.1.1 requiring non-remote and remote casino licence holders to act in accordance with the Commission’s guidance on Anti-Money Laundering (AML): The Prevention of Money Laundering and Combating the Financing of Terrorism – Guidance for remote and non-remote casinos
- licence condition 15.2.1(4) – requiring licensees to notify the Commission of specific key events, such as the appointment of a person to, or a person ceasing to, occupy a key position
- licence condition 1.2.1(3) – requiring compliance relating to specified management offices
- paragraphs 1a, 1b and 2 of Social Responsibility Code Provision (SRCP) 3.4.1 - requiring licensees to identify and interact with customers who may be at risk of or experiencing gambling related harms in a way which minimises the risk of customers experiencing harms associated with gambling, and to take into account the Commission’s guidance on customer interaction
- SRCP 5.1.6 – requiring licensees are compliant with advertising codes
- SRCP 3.1.1(2) – requiring licensees to make an annual contribution in relation to combating problem gambling.
Taking into account the remedial action taken by Lindar Media Limited prior to and immediately following the compliance assessment, and in line with our Statement of principles for licensing and regulation, Lindar Media Limited will pay a total of £690,947.
Lindar Media Limited Findings
A Commission compliance assessment and subsequent regulatory review found:
- failings in Lindar Media Limited’s implementation of its AML policies, procedures and controls
- deficiencies in its responsible gambling policies, procedures, controls and practices
- weaknesses in its reporting arrangements in respect of key events
- the person responsible for the Licensee’s gambling regulatory compliance function (Head of Regulatory Compliance) occupied other management posts without the Commission’s approval
- failure to advertise its marketing products in a socially responsible manner
- failure to make an annual financial contribution to an organisation which support research, prevention and treatment for those harmed by gambling.
The investigation and our subsequent regulatory review found Lindar Media Limited had been in breach of the following:
Breach of paragraph 1 of licence condition 12.1.1
Licence condition 12.1.1(1) states: “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, 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.”
The Licensee failed to have an appropriate ML and TF risk assessment, as it did not to reference that it had adequately assessed risk relating to:
- customers
- means of payment
- additional inherent risks
- emerging risks operator control.
In addition, the ML and TF risk assessment did not specifically address certain key risk factors as set out in the Money Laundering Regulations 2017 (the Regulations) and the Commission’s Prevention of money laundering and combating the financing of terrorism (PDF) (opens in a new tab) (February 2021) (the AML Guidance) including:
- customers that are associated with higher risk countries, as a result of their citizenship, country of business or country of residence may present a higher ML and TF risk, taking into account all other relevant factors (Paragraph 2.20 of the AML Guidance)
- disproportionate spend – casino operators should obtain information about customers’ financial resources so that they can determine whether customers spending is proportionate to their income or wealth (Paragraph 2.22 of the AML Guidance)
- when a business relationship is conducted in unusual circumstances (Paragraph 6.33 of the AML Guidance)
- where a customer is the beneficiary of a life insurance policy (Paragraph 6.33 of the AML Guidance)
- when a customer is a third country national who is applying for residence rights in or citizenship of a state in exchange for transfers of capital, purchase of a property, government bonds or investment in corporate entities in that state (Paragraph 6.33 of the AML Guidance).
Breach of paragraph 2 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.”
The following procedures and controls were not appropriate:
- at the point of registration all customers were automatically assigned an ML risk rating of low. There was insufficient information known about the customer at the start of the business relationship to adequately profile the customer and assess the risk of ML or TF. There was at the time an over reliance on financial triggers to identify and manage ML risks. The Commission accepts the Licensee had other triggers which were not financial
- some financial thresholds in place to identify the risks associated with ML and TF were set at a level which allowed a customer to deposit and lose £10,000 a figure which did not appear to be sufficiently risk-based. Other triggers in place did not prevent some customers from depositing and losing £10,000 in a short period of time. Officials acknowledge the Licensee has taken proactive steps to address this and the issue has now been rectified.
Breach of paragraph 3 of licence condition 12.1.1
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.”
The policies and procedures had been reviewed, but not in a timely manner or as frequently as necessary to take into account the Guidelines published by the Commission. They had not been signed off by the Money Laundering Reporting Officer (MLRO). Officials acknowledge the Licensee has taken steps to address this.
Failure to take into account Ordinary Code Provision 2.1.1
Paragraph 1 of Ordinary Code Provision (OCP) 2.1.1 states: "In order to help prevent activities related to money laundering and terrorist financing, licensees should act in accordance with the Commission guidance on anti-money laundering. The Prevention Money Laundering and Combating the Financing of Terrorism Guidance for remote and non- remote casinos".
The Licensee failed to take into account OCP 2.1.1 in that, contrary to the AML Guidance, the Licensee:
- had not followed the requirements as set out at Section 2 of the Guidance requiring the assessment of threats, vulnerabilities and consequences
- did not sufficiently address how customer risk should be managed to reflect the Guidance in its AML policy
- the Licensee’s AML policy had measures in place in relation to Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD), however they were not always implemented effectively.
Breach of licence condition 15.2.1 (4) - Reporting key events
Licensees must notify the Commission, in such form or manner as the Commission may from time to time specify, of the occurrence of a key event, as soon as reasonably practicable and in any event within five working days of the Licensee becoming aware of the events occurrence.
The Licensee failed to notify the Commission when the Head of Regulatory Compliance (who held the post from 1 August 2019 to 14 June 2022) ceased to hold this position.
The Commission found the Licensee was in breach of licence condition 15.2.1 between 20 June 2022 and September 2022.
Breach of licence condition 1.2.1(3) - Specified management offices – personal management licences
"The person responsible for the licensee’s gambling regulatory compliance function as head of that function shall not, except with the Commission’s express approval, occupy any other specified management office."
At the time of the Assessment the person holding the position of Head of Regulatory Compliance also held a number of other specified management posts without the Commission’s express approval.
The Commission found the Licensee was in breach of licence condition 1.2.1(3) between 20 June 2022 and 3 October 2022.
Failure to comply with paragraph 1b, 1c and 2 of 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 (in force from 31 October 2019 until 11 September 2022) 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.
- Licensees must take into account the Commission’s guidance on customer interaction.”
Failings were identified in respect of the customer interaction processes, relating to identifying customers who may be at risk of or experiencing harms associated with gambling in that:
- the series of financial and non-financial safer gambling triggers used to proactively identify when customers may be experiencing harms were not always effective, in particular new customers being able to deposit at high velocity
- the Licensee did not have a process in place to identify, in real time, customers at risk of gambling related harm, or implement early and quick interactions.
Officials did not see evidence as to how the Licensee had fully taken account of the Commission’s formal customer interaction guidance, Customer interaction - Formal Guidance for remote gambling operators (PDF) (opens in a new tab) (July 2019)1 (CI Guidance) in the following areas:
Identify
- the processes in place did not always identify those potentially experiencing or at risk of gambling related harm or cause a customer interaction to take place at the earliest opportunity. The Commission expects licensees to monitor customer activity and be in a position to interact early and quickly. The review of customer accounts identified that some customers were able to deposit and lose up to and in excess of £10,000 with no controls in place to intervene until the money had been lost (Section 2.9 of CI Guidance)
- disproportionate customer spend in relation to a customer’s personal circumstances was not considered for some customers until they had deposited and lost significant amounts of money
- where financial circumstances were considered, the model relied on County Court Judgements and bankruptcy data to identify affordability concerns, which may not always be effective in identifying customers (Sections 2.10 & 2.11 of CI Guidance).
Interact
- the interaction process in place did not consider the urgency for customer contact, particularly where nothing was little known about the customer’s circumstances (Section 3.4 of CI Guidance).
Failure to comply with SRCP 5.1.6 - the advertising codes
On 29 June 2022 an advertisement posted on behalf of the Licensee by one of its agents relating to its MrQ website appeared on Reddit. This advertisement featured an image showing three carton Spiderman figures.
Further, a review of MrQ.com on 3 August 2022 identified cartoon imagery, not in a restricted gateway. The imagery related to King Kong cash pots, Piggy Bank Bills and The Doghouse Megaways.
On both occasions the images shown were likely to be of particular appeal to children. The Commission acknowledges that, once it became aware of the adverts, the Licensee took immediate action to remove them.
The Commission found the Licensee had failed to comply with SRCP 5.1.6 on 29 June 2022 and 3 September 2022.
Failure to comply with SRCP 3.1.1(2) – Combating problem gambling
Licensees are required to make an annual financial contribution to an organisation, approved by the Commission to support research, prevention and treatment for those harmed by gambling. The Licensee had failed to make such a payment for the year ending December 2021.
The Commission found the Licensee had failed to comply with SRCP 3.1.1(2) for the year ending December 2021.
Lindar Media Limited Regulatory Settlement
This regulatory settlement consists of:
- a payment of £690,947 in lieu of a financial penalty, this includes a divestment of £50,947. The money will be directed for socially responsible purposes
- agreement to the publication of a statement of facts in relation to this case
- payment towards the Commission’s costs of investigating the case.
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
- 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 nature of the breaches may mean other customers were affected that the Commission has not reviewed.
Mitigating factors
The Licensee has:
- taken immediate steps to rectify the breaches identified and, in some cases, had implemented changes prior to the compliance assessment
- made early disclosure of all relevant facts
- accepted the failings at the earliest opportunity
- made an early regulatory settlement proposal
- been fully co-operative throughout its dealings with the Commission.
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 are findings adequately recorded?
- do you have sufficient processes in place to ensure that all key events are notified to the Commission in a timely manner
- is your marketing of gambling products and services undertaken in a socially responsible manner. Do they comply with the advertising codes of practice issued by the Committee of Advertising Practice (CAP) and the Broadcast Committee of Advertising Practice (BCAP)? Have you familiarised yourself with the latest Advice from CAP on 'Gambling, betting and gaming: Appeal to children' (May 2023) (opens in new tab)
- do you efficiently record all compliance-related 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?
- are your customer risk profiles informed by or linked to your money laundering and terrorist financing risk assessment?
- 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 in terms of the level of detail provided?
- do you have out of hours arrangements in place?
- have your staff received sufficient AML and social responsibility training?
Notes
1This guidance is no longer in force, as of 11 September 2022.