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Public statement

Videoslots Limited Public Statement

Published:

15 June 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 & other vulnerable people from being harmed or exploited by gambling.

Videoslots Limited Executive Summary

This investigation followed two compliance assessments which resulted in the commencement of a section 116 regulatory review¹ of Videoslots’ Limited, Combined Remote Operating Licence number: 039380-R-319311-032.

The regulatory review found failings in the implementation of Videoslots’ processes which were aimed at preventing Money Laundering (ML) and ensuring safer gambling.

Between October 2019 and February 2022², Videoslots failed to comply with certain Licence Conditions and Codes of Practice (LCCP), specifically:

• paragraph 3 of licence condition 12.1.1, requiring licensees to ensure that ML 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
• paragraphs 1a, 1b and 2 of Social Responsibility Code Provision (SRCP) 3.4.1, requiring licensees to identify and 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.

In line with our Statement of principles for licensing and regulation, Videoslots will make payments in lieu of a financial penalty of £2,000,000. A breakdown of the regulatory settlement is set out in the following pages.

The investigation, and our subsequent regulatory review, found:

• failings in Videoslots’ implementation of Anti-Money Laundering (AML) policies, procedures and controls
• deficiencies in its responsible gambling controls and practices, and weaknesses in the implementation of the existing policies procedures and controls.

Videoslots Limited Findings

We found that Videoslots had been in:

Breach of licence condition 12.1.1(3)

Licence condition 12.1.1(3) states that “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.”

Videoslots accepted it breached this licence condition between March 2021 and April 2022 for the following reasons:

• it had not implemented its own risk-based processes appropriately due to significant delays in conducting the required action (such as an AML review or request for source of funds) following an AML trigger. For example, Customer A hit several AML triggers and was able to deposit £112,225 and, AML analysts did not properly implement all actions required by the Licensee's AML policies and procedures. Similar failings were demonstrated with other customers
• it had not fulfilled elements of customer due diligence as early as intended in accordance with its risk-based approach
• it did not have sufficient AML analysts to process the volumes of data or undertake the AML account reviews that were required to be performed in accordance with its AML policies and procedures
• there were examples where analysts did not properly implement the Licensee's policies and procedures in respect of AML, which allowed a number of high-risk customers to continue to gamble significant amounts.

Failure to comply with 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.

During the period covered by the compliance assessments SRCP 3.4.1 (ceased in 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.

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

Videoslots accepted it was not fully in compliance with SRCP 3.4.1 during the following periods:

• SRCP 3.4.1 paragraph 1a between March 2021 and October 2022
• SRCP 3.4.1 paragraph 1b between March 2021 and March 2022
• SRCP 3.4.1 paragraph 2 between October 2019 and February 2022.

Videoslots accepted it breached this SRCP for the following reasons:

• in some instances, it did not ensure that customers displaying risk behaviours were identified as potentially experiencing harm because responsible gambling reviews were not undertaken as early, or as well as they should have been
• it did not use restrictive measures such as forced deposit limits and playblocks as regularly as it could have
• it failed to identify whether a customer was at risk of experiencing harm by not considering whether the amount being deposited or lost was appropriate. For example, Customer C had a self-declared income of between £60,000 and £80,000 and savings of between £20,000 and £50,000. This customer was able to deposit and lose £98,000 within 6 months which was more than all of their savings and estimated earnings combined. The reviews and interactions with this customer did not take into account the fact that this customer deposited disproportionately to their declared salary
• it allowed customers showing indicators of harm, and those of medium and high risk, to continue to gamble significant amounts after interactions, despite their behaviour continuing. For example, Customer A deposited £112,225 and lost £58,725 between 21 November 2021 and 7 January 2022. During that period this customer hit a number of triggers such as gambling for long periods, gambling in the early hours and losses exceeding thresholds based on declared source of wealth. As a result of the triggers the Licensee completed three account reviews (one being as a result of the customer being a top winner) and sent an automated email. However, for this customer an account review was missed on 8 December 2021 and delayed on 29 December 2021. The operator’s approach to interactions set out in their responsible gambling policy and procedures was not implemented as it should have been. The customer not amending their behaviour demonstrates that the interactions, as a result, were not effective in minimising the risk of harm
• it did not carry out effective interactions where it had information (such as numerous markers of harm triggered) which may have demonstrated that an enhanced approach or intervention was required
• its process for escalating interactions or intervening were ineffective due to an over reliance on customer responses and source of wealth declarations
• in some of the customer accounts reviewed, there were instances where, contrary to the Licensee's policy, affordability was not fully considered by responsible gambling analysts in allowing customers to continue to gamble.

Videoslots Limited Regulatory Settlement

A regulatory settlement penalty package of £2,000,000 has been agreed, which consists of the following elements:

• a payment in lieu of a financial penalty of £1,505,158.02 which will be directed towards socially responsible causes
• divestment of £494,841.98
• agreement to the publication of a statement of facts by the Commission
• payment of £11,308.00 towards our investigative costs.

Conclusion

Our investigation found, and Videoslots accepts, that there were significant weaknesses in its ability to implement its policies and procedures for AML and safer gambling purposes.

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
• some of the breaches continued for a period of 1 year and 9 months
• this is the second S116 review the Licensee has been subjected to. The first resulting in a settlement of £1 million.

Mitigating factors:

• the Licensee has taken steps to rectify the breaches highlighted
• the Licensee’s has accepted the key failings
• the Licensee has acted in a timely manner and been co-operative with the investigation
• the Licensee was transparent during the review period and outlined that operational effectiveness was severely impacted during the relevant period by the Covid pandemic.

Good practice

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

• do lessons learned from public statements flow into your policy and processes?
• are you providing your staff with appropriate training to ensure that they are aware of the law relating to money laundering and terrorist financing, and how to recognise and deal with transactions, activities or situations which may be related to ML or terrorist financing? 
• do you have sufficient resilience within your AML and social responsibility functions?

Notes

¹ The Commission commenced its regulatory review on 9 February 2022

² This demonstrates the overall breach period. The period the Licensee was in breach for each condition varies and has been detailed further under the relevant sections below.