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Public statement

Mr Green Limited Public Statement

Published:
28 March 2023
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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.

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 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.

Mr Green Limited Executive Summary

This investigation followed a compliance assessment and resulted in the commencement of a section 116 regulatory review1 of Mr Green Limited (the Licensee/MRG), Combined Remote Operating Licence number: 000-039264-R-319432-0192. The regulatory review found failings in the Licensee’s processes which were aimed at safer gambling and preventing Money Laundering (ML).

Between May 20203 and 18 October 2021, MRG failed to comply with certain Licence Conditions and Codes of Practice (LCCP), specifically:

  • paragraphs 1, 2 and 3 of licence condition 12.1.1, requiring the conducting of an appropriate risk assessment, the implementation of appropriate policies and procedures and keeping such policies under review to ensure their effectiveness, all with the objective of preventing ML and Terrorist Financing (TF).
  • licence condition 12.1.2 requiring operators based in foreign jurisdictions to comply with the ML, TF and Transfer of Funds (Information of the Payer) Regulations 2017
  • paragraphs 1 and 2 of Social Responsibility Code Provision (SRCP) 3.4.1, requiring licensees to interact with customers 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
  • paragraphs 1 and 2 of SRCP 3.9.1 requiring licensees to put into effect policies and procedures designed to identify separate accounts which are held by the same individual and where customers hold more than one account, the Licensee must have and put into effect procedures which enable them to relate each of a customer’s such accounts to each other.

Taking into account remedial action taken by the Licensee and in line with our Statement of principles for licensing and regulation, the Licensee will voluntarily make a payment in lieu of a financial penalty of £3,750,000, which includes a £218,310.20 divestment, and will vary its licence to add additional licence conditions.

Mr Green Limited Findings

The investigation and our subsequent regulatory review found:

  • failings in the Licensee’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
  • certain customers who were the subject of AML restrictions on different brands were able to open account(s) with MRG.

We found that between 20 September 2020 and 22 October 2021 MRG had been in:

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 accepted it breached this licence condition as its ML/TF risk assessment did not sufficiently reflect the Commission’s expectations or fully take into account the Commission’s ML/TF risk assessment of the British gambling industry.

The failings were that the Licensee’s risk assessment did not:

  • make explicit reference to specific risks in relation to TF
  • make specific reference to high monetary thresholds or organised crime gangs use of mule accounts4.

We found that between May 2020 and 18 October 2021 MRG had been in:

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.”

MRG accepted it breached this licence condition as:

  • there were weaknesses and shortcomings in relation to the adequacy and maintenance of its policies and procedures, and their implementation
  • its policies, procedures and controls lacked guidance on appropriate action to take following the results of customer profiling and how its findings should be used to establish the appropriate outcome
  • its procedures and controls lacked hard stops to prevent further spend and mitigate against ML risks before customer risk profiling is completed
  • certain customers were able to deposit large amounts of money without timely Enhanced Customer Due Diligence (ECDD) - a particular example included Customer A who deposited £52,985 before ECDD profiling.
  • a failure to resource due diligence teams sufficiently following a change in triggers resulted in a backlog of ECDD reviews to complete
  • it made assumptions that the fact certain customers were in a winning position reduced the risk for ML without gathering supporting evidence to support that assertion. In addition, for certain customers, the Licensee could not demonstrate it held adequate evidence or could not point to recorded decisions that allowed it to assert a customer’s recycling of winnings reduced the ML risk posed to the business
  • it placed an undue reliance on open-source information and should have taken further steps to corroborate the customer’s Source of Funds (SoF) information
  • AML staff training provided insufficient information on risks and how to manage them, in particular risks such as those associated with politically exposed person’s and high-risk jurisdictions
  • the Commission identified that certain customers were able to deposit large amounts of money without the Licensee conducting appropriate know your customer checks
    • With Customer B, who deposited £73,535 and lost £14,068 in four months, the Licensee focused on the net worth of the companies with which the customer identified as being a director, rather than establishing personal income derived through a salary or dividend payments.

Breach of Paragraph 1 of licence condition 12.1.2 (Anti-money laundering measures for operators based in foreign jurisdictions)

Paragraph 1 of this condition has been in place since October 2016 and requires that:

“Licensees must comply with Parts 2 and 3 of the Money Laundering Regulations 2007 (UK Statutory Instrument No. 2157 of 2007) as amended by the Money Laundering (Amendment) Regulations 2007 (UK Statutory Instrument No. 3299 of 2007), or the equivalent requirements of any UK Statutory Instrument by which those regulations are amended or superseded insofar as they relate to casinos (the MLR) whether or not the MLR otherwise apply to their business”.

The Licensee accepts it breached this licence condition as the AML failings, set out above, constitute a breach of the 2017 Money Laundering Regulations, namely:

  • regulation 18 requires that the ‘relevant person’ take appropriate steps to identify and access the risks of ML and TF to which its business is subject
  • regulation 19 (1)(a) requires that the ‘relevant person’ must maintain policies, controls and procedures to mitigate and manage effectively the risks of ML and TF identified in any risk assessment undertaken by the relevant person
  • regulation 28 (11)(a) requires ongoing monitoring of a business relationship which includes, where necessary, checking source of funds to ensure that the transactions are consistent with the relevant person’s knowledge of the customer, the customer’s business and risk profile
  • regulation 33 imposes an obligation to apply ECDD measures and enhanced ongoing monitoring in any case identified as one where there is a high risk of ML or TF.

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 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.”

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

  • it failed to identify certain customers at risk of experiencing gambling related harm and checks should have been undertaken at a significantly earlier stage in the customer's journey:
    • customer C opened an account on 3 January 2021 and had deposited £23,000 in 24 hours because was no trigger in place to capture and prevent high velocity gambling without any interaction taking place
    • customer D opened an account on 16 March 2021 and lost £14,902 in 70 minutes, illustrating there was no effective trigger in place to capture and prevent high velocity gambling without any interaction
  • due to poor systems, and a lack of oversight across brands, there was no complete picture of a customer’s activity available to staff in order to identify risk from previous interactions or safeguards put in place
  • inadequate record keeping hampered the operator’s ability to decide how and when to interact with customers
  • it had insufficient controls in place to protect new customers, and to effectively consider high velocity spend and duration of play until the customer may have been exposed to the risk of substantial losses in a short period of time:
    • customer E was allowed to open a new account and spend £32,500 over two days in January 2021 without any checks
    • customer F was allowed to open a new account and spend £19,000 in 33 days over February and March in 2021 without any checks
    • customer C was allowed to open a new account and spend £23,000 in 20 minutes on 3 January 2021 without any checks
    • customer D was allowed to open an account and spend £18,000 in 24 hours on 3 January 2021 without any checks
  • there was a reliance from Licensee on email interactions when customers hit safer gambling alerts. Whilst the emails were not automated, they were not sufficiently tailored to customers’ individual circumstances.

Failure to comply with paragraph 1 and 2b of SRCP 3.9.1 (Identification of individual customers)

Paragraph 1 of SRCP 3.9.1 states:

“Licensees must have and put into effect policies and procedures designed to identify separate accounts which are held by the same individual”.

Paragraph 2b states:

“Where licensees allow customers to hold more than one account with them, the licensee must have and put into effect procedures which enable them to relate each of a customer’s such accounts to each of the others and ensure that: all of a customer’s accounts are monitored and decisions that trigger customer interaction are based on the observed behaviour and transactions across all the accounts”.

MRG accepted it was not fully in compliance with SRCP 3.9.1 as:

  • the Commission review revealed the Licensee failed to establish that at least four consumers had, or previously had, accounts, with WHG earlier enough in the customer journey. The linked accounts were discovered by MRG at the point it completed ECDD by which point significant amounts had been staked.

Mr Green Limited Regulatory Settlement

This regulatory settlement consists of:

  • a total payment of £3,750,000 in lieu of a financial penalty, which will be directed towards socially responsible purposes, which includes a divestment of £218,310.20
  • agreement to the publication of a statement of facts in relation to this case
  • agreement by the Licensee to vary its operating licence to add conditions to its operating licence, namely:
    • to appoint a Board-level sponsor, either reporting directly to the Chair or the Executive Chair, to assume responsibility for compiling and progressing a 12-month action plan to deal with post case activity, and
    • undertake a follow-up independent audit of relevant policies and procedures by 13 February 2024 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 nature of the breaches may mean other customers were affected that the Commission has not reviewed
  • the Licensee’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?
  • 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 the level of detail provided?
  • have your staff received sufficient AML and social responsibility training?

Notes

1 The Commission commenced its regulatory review on 30 September 2021

2 Mr Green Limited trade under: Mr Green

3 There are some variances of starting date for breach, but they all fall within this common period. Specific variations from this date, include breach of paragraph 1 of Licence condition 12.1.1 which occurred between 20 September 2020 and 22 October 2021; Failing to comply with paragraphs 1 and 2 of SRCP 3.4.1 between 4 December 2020 and 18 October 2021; Paragraphs 1 and 2 of SRCP 3.9.1 between 4 December 2020 and 18 October 2021.

4 The AML Guidance and the Commission’s ML/TF risk assessment sets out a number of factors licensees must and should consider when undertaking their own ML/TF risk assessments. In addition, the Licensee is required, by virtue of Regulation 18(2)(a) of the Regulations, to take these documents into account when carrying out its own ML/TF risk assessment.

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