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Public statement

Skill On Net Limited Public Statement

Published:

23 May 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.

Skill On Net Limited Executive Summary

This investigation followed the commencement of a section 116 regulatory review of Skill on Net Limited (the Licensee), Combined Remote Operating Licence number: 039326-R-319358-050. The regulatory review found failings in the Licensee’s processes which were aimed at safer gambling and preventing Money Laundering (ML).

Between the period of January 2021 and December 2022¹, the Licensee 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 the prevention of 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 1a, b 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
• failed to adhere to Ordinary Code Provision (OCP) 2.1.1 - Anti-Money Laundering guidance.

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 £305,150, which includes a £105,650 divestment, and agreement to conduct an independent third-party audit as regards the effective implementation of the Licensee’s AML and safer gambling policies, procedures and controls within 12 months of the conclusion of the Licence Review.

Skill On Net Limited Findings

The investigation and our subsequent regulatory review found:

• insufficient policies, procedures and controls to comply with its Anti-Money Laundering (AML) responsibilities
• deficiencies in its responsible gambling policies, procedures, controls and practices, including weaknesses in implementation.

We found that, between the period of January 2021 and December 2022, Skill on Net 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 between May 2021 until December 2022, 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 Commission found the relevant risk assessment failed to:

• appropriately consider payments received from unknown or unassociated third parties of the customer
• appropriately consider organised crime groups and mule accounts
• take into account and adequately consider information on the risks of ML and TF made available to them by the Commission.

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 Licensee accepted that issues identified by the Commission indicated deficiencies in their policies and procedures and accepted they were in breach of licence condition 12.1.1(2) between May 2021 and March 2022.

The Commission’s concerns included:

• failure to have appropriate procedures in place to consider customer’s salary or wealth in order to identify disproportionate spend, and reliance upon customers’ declarations to mitigate the ML risks posed
• failure to effectively risk profile customers from an AML perspective and consider the risks outlined within the Licensees’ Risk Assessment
• the Licensee relied on unevidenced verbal comments and monetary thresholds when considering disproportionate spend
• a failure to require that the nominated officer provides an annual report covering the operation and effectiveness of the operator’s systems and controls to combat ML and TF, and take any action necessary to remedy deficiencies identified by the report in a timely manner.

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 Licensee acknowledged their policies and procedures were not fully compliant with licence condition 12.1.1(3) between May 2021 and December 2022.

The Commission’s concerns included:

• failure to take into account the Prevention of money laundering and combating the financing of terrorism guidance applicable at the time of the assessments
• several customers were able to deposit and lose more than double the £2,000 limit the Licensee had in place to mitigate the risks of unverified payment methods
• there was an over-reliance on re-staked gambling winnings with the belief that funds won and withdrawn by the customer were evidence of available funds up to 30 days later
• the Licensee made assumptions that customers were recycling winnings without obtaining any evidence from the customer to support that assertion.

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 the Licensee comply with The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the 2017 Regulations).

The Licensee accepted its policies and processes were not fully compliant and that there was a breach of licence condition 12.1.2 between May 2021 and December 2022.

Commission officials consider the Licensee failed to adequately implement the measures described in the relevant regulations laid out in the 2017 Regulations for reasons including:

• the Licensee failed to take appropriate steps to identify and assess the risks of ML and TF
• the Licensee failed to establish and maintain effective policies, procedure and controls
• the Licensee failed to adequately take into account information made available to them by the supervisory authority (the Gambling Commission) under regulation 17(9).

Failure to comply with SRCP 3.4.1 paragraphs 1 and 2

SRCP (1) and (2) 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.”.

The Licensee accepted they were not in full compliance with SRCP 3.4.1 as follows:

• paragraph 1a – May 2021 and 1 March 2022
• paragraph 1b – January 2021 until 8 July 2021
• paragraph 2 - January 2021 and 1 March 2022.

The Commission was concerned in particular with the following customer interaction failings regarding SRCP 3.4.1(1):

• failure to identify customers who displayed markers of harm following a win such as an increase in sessions and stakes
• customers were able to deposit and gamble high value bets at high velocity without company safer gambling controls activating due to a technical issue
• failure to identify customers at risk or those disproportionately spending - for example, one customer was able to deposit and lose up to £3,000 per month which was more than their evidenced monthly salary
• failure to recognise night play as a marker of harm due to its procedures not being correctly followed – one customer had a seven-hour session and admitted to being at work on nights with his phone on autoplay
• failure to effectively interact with some customers by relying upon automated pop-ups
• customer interactions did not effectively minimise the risk of customers experiencing harms associated with gambling. For example, one customer deposited £16,000 in total and had a net loss of £3224.74 over 41 days. The customer received multiple automated safer gambling popups and emails as well as receiving two alerts for their activity. The customer has a number of safer gambling chats which provided basic information to the agent’s questions and as a result the customer was able to continue gambling. The Licensee’s interactions were not effective in capturing the necessary information in order to make an assessment on whether an individual was at risk or not. The interactions that did take place were minimal and took the customer’s word at face value without any further scrutiny or attempt to seek further information to support decision making.

The Commission was also concerned the Licensee failed to take into account the Commission’s guidance on customer interaction, in accordance with SRCP 3.4.1(2) as:

• there was no evidence to suggest high staking behaviour following a win had been taken into account as a potential marker of harm (CI Guidance – Sections 2.7f)

Skill On Net Limited Regulatory Settlement

This regulatory settlement consists of:

• £305,150 payment in lieu of a financial penalty, which will be directed towards socially responsible causes
• agreement to the publication of a statement of facts in relation to this case
• payment of £9,079.00 towards the Commission’s costs of investigating the case
• agreement to conduct an independent third-party audit as regards the effective implementation of the Licensee's AML and safer gambling policies, procedures and controls within 12 months of the conclusion of the Licence Review.

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

Aggravating factors:

• the nature of the breaches may mean other customers were affected that the Commission has not reviewed
• 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 Licensee was subjected to three compliance assessments which all identified failings resulting in a prolonged period of non-compliance
• officials still identified failings following two periods of special measures.

Mitigating factors:

• the Licensee has now taken steps to rectify the breaches highlighted
• the Licensee has accepted the key failings
• the Licensee has acted in a timely manner and been co-operative with the investigation.

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 lessons learned from public statements flow into your policy and processes?
• does your ML and TF risk assessment meet all the requirements?
• are your customer risk profiles formed by or linked to your ML and TF risk assessment?
• do you have sufficient processes and systems in place to identify and interact with customers displaying markers of harm?

Notes

¹ This varies for each licence condition and the dates for each one is detailed under the relevant sections