Netbet Enterprises Limited T/a NetBet Public Statement
- Breach of Licence Condition 12.1.1 (3) - Prevention of money laundering and terrorist financing
- Failure to comply with Social Responsibility Code Provision 3.4.1 paragraph 1(e) - Customer interaction
28 October 2020
Operators are expected to consider the issues outlined above and review their own practices to identify and implement improvements in respect of the management of customers’ accounts.
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.
Netbet Enterprises Limited T/a NetBet Executive summary
This investigation resulted in the commencement of a section 116 regulatory review1 of Netbet Enterprises Limited t/a NetBet, (NetBet), Combined Remote Operating Licence number: 000-039170-R-319343-026. The regulatory review found failings in NetBet’s processes on its casino and betting website www.netbet.co.uk, which were aimed at preventing money laundering (ML) and protecting vulnerable people.
Between 20 November 2018 and 29 May 2019 NetBet failed to comply with the Licence conditions and codes of practice (LCCP), specifically:
- Licence condition 12.1.1 (3), requiring compliance with the prevention of money laundering and terrorist financing.
- Social responsibility code provision (SRCP) 3.4.1, requiring effective policies and procedures for customer interaction; particularly the requirement to make use of all relevant sources of information, to identify at-risk customers who may not be displaying obvious signs, and to interact with customers designated as “VIPs”.
Taking into account remedial action taken by the licensee and in line with our Statement of principles for licensing and regulation, NetBet will pay a total of £748,000 in lieu of a financial penalty.
Netbet Enterprises Limited T/a NetBet Findings
The investigation and our subsequent regulatory review found:
- Failings in NetBets implementation of anti-money laundering (AML) policies, procedures and controls
- Deficiencies in its responsible gambling policies, procedures, controls and practices, including weaknesses in implementation.
Licence condition 12.1.1 (3)
Licence condition 12.1.1(3) requires:
- “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”.
NetBet has accepted that between November 2018 and May 2019 there were shortcomings in its implementation of policies, procedures and controls as regards to anti-money laundering and accepts it was in breach of paragraph 3 of the licence condition 12.1.1 as a result of:
- Its failure to conduct appropriate levels of Enhanced Due Diligence (EDD) on at risk customers, and in several cases no EDD was carried out at all; and
- Where Source of Funds (SoF) documentation was requested, it was not always critically reviewed in a manner which evidenced a customer’s source of funds to support how they funded their gambling.
Paragraph 1 (e) of social responsibility code provision (SRCP) 3.4.1 (Customer Interaction)
Since its addition to the LCCP in May 2015 up until 31 October 2019 when it was amended, 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 interactions,
including in particular:
(i) 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
(ii) specific provision in relation to customers designated by the licensee as
‘high value’, ‘VIP’ or equivalent
NetBet accepted historic weaknesses in its implementation of its responsible gambling policy resulting in its processes relating to responsible gambling not being consistently followed by staff.
NetBet have addressed failings identified by the Commission by making a number of changes to its processes which include:
- greater regard is given to the log-in time of its customers during responsible gambling customer assessments
- customer winnings do not lower the risk of problem gambling being a concern
- the effectiveness of interactions is now logged in customer profiles
- an affordability calculator has been created for its customers to accurately assess the amount of disposable income they have available
- automatic limits placed on customers demonstrating early signs of problem gambling.
Netbet Enterprises Limited T/a NetBet Regulatory Settlement
This regulatory settlement consists of:
- £748,000 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 £8,806 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:
- 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 need to encourage compliance among other operators
- Breaches were notified to the licensee in November but were not remedied until September 2019
- The nature of the breaches may mean other customers were affected that the Commission has not reviewed
- NetBet senior management should have been aware of governance issues that lead to the breaches, given their significance
- Compliance should have been achieved in a far more timely manner following the initial assessments in November 2018.
- the absence of internal controls led to action plans being required to improve processes, procedures, risk assessments and training gaps in relation to both AML and RG interactions.
- the extent of steps taken to remedy the breach
- the Licensee’s early recognition of failings
- Licensee has been co-operative throughout its dealings with the Commission.
Netbet Enterprises Limited T/a NetBet 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 RG policies and are findings adequately recorded?
- 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 formed 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?
- Are all forms of individual customer interaction (i.e. Email, VIP engagement, customer service calls) recorded on the customer profile, which is the same data point to facilitate relevant staff easy access to monitor current and historical engagement with its customers.
- Do you recognise that winning customers may still be problem gamblers?
- Have your staff received sufficient AML and SR training?