Report
Raising Standards for consumers - Compliance and Enforcement report 2019 to 2020
The Gambling Commission's report on Compliance and Enforcement action 2019 to 2020
8 - Betting Exchanges
This year has seen increased regulatory activity related to betting exchanges; an area of growing complexity as operators expand the breadth of markets available and the jurisdictions from which they draw their customers.
There is no ambiguity for the Commission in respect of the standards we expect to be applied to any bet struck under our licence. It needs to comply fully with requirements of the Gambling Act and the LCCP including Social Responsibility and AML provisions.
Operators of betting exchanges must apply critical risk-based thinking in advance to address these challenges- assuming something good enough for one regulator will be acceptable to another is flawed and is not likely to withstand our scrutiny if we believe an inferior standard is being fulfilled instead of GB requirements.
The most prominent Enforcement matter this year related to the activities undertaken by Triplebet Ltd who trade as Matchbook. They were licensed in Alderney and by the Gambling Commission. They were taken before a regulatory panel and subject to a substantial penalty including the suspension of their licence. Failings revealed in their framework for managing an exchange are applicable for consideration by all such GC licensed operators.
Account to account transactions
Triplebet had permitted account to account transactions, whereby one customer can move money to another customer or account, or even another account in his/her name, including abroad, without the kind of controls which would attach to banking transactions for similar amounts and creating an appearance of legitimate monies to be withdrawn or spent.
Money laundering risks included:
- Prior to October 2017, account to account transfers were not documented at all.
- Transfer request documents post-October 2017 failed to record the reason for the transfers.
- There were instances of customers transferring monies after depositing them with little or no play.
- There were examples of single customers being listed against different countries and/or making transfers between accounts in their own name.
Between November 2014 and May 2018, approximately £3.2 million and $2.4 million was transferred from GB customers to non-GB customers, with £1.1 million and $1.8 million passing in the other direction.
Triplebet could not produce any record of it refusing account to account transfers.
In the absence of adequate checks and controls, account to account transfers of this nature are highly risky from a money laundering and terrorist financing point of view, as customers can transfer money between themselves or may borrow money from unconventional sources, including other customers, which can offer criminals an opportunity to introduce criminal proceeds into the legitimate financial system through gambling accounts. It also allows criminals and terrorist financers to transfer value between each other in a way that it goes undetected and remains outside of the traditional financial sector. In this case, the transfers may also have unwittingly facilitated international money laundering and terrorist financing.
Syndicate
One of Triplebet's main customers was a syndicate, whose lead contributor was a professional gambler, who also held a beneficial interest in Triplebet itself. Over an 18-month period from November 2016, the syndicate matched bets on the Exchange totalling in excess of $55 million, without any documented risk assessment.
Triplebet submitted that its actual customer was the lead contributor of the syndicate and that therefore there was no obligation upon it to ascertain the identities of the other contributors or consider their source of funds or source of wealth. The Panel found that the consequence was that gamblers had been permitted to gamble very large sums without due diligence.
Due Diligence must be undertaken for each individual customer
Social Responsiblity Failings
The Gambling Commission's Social Responsibility Code requires licensees to interact with customers in a way which minimises the risk of gambling-related harm.
The Panel determined that, in breach of the Code, Triplebet had failed to put into effect its policies and procedures for customer interaction in a number of cases. These included:
- A player who gambled a large sum of money on one day from 2.30am to 4.30am, again at 7am, 8am to 11am, 12pm to 12.30pm and 11pm to 12am, with a similar pattern the following day, and no interaction whatsoever.
- A player who registered, played and self-excluded on the same day, re-opened his account six months later, playing for 10 hours a day on two consecutive days and nights, and then losing a large sum in a single day before self-excluding again, all without any monitoring or interaction.
- A gambler who lost $714,000 in a year, without any evidence of due diligence being carried out by Triplebet.
Triplebet policies had failed to comply with the Social Responsibility Code provision then in force, by failing to refer to indicators such as time or money spent, and also by failing to contain specific provision in relation to ‘high value’ or ‘VIP’ customers. This in turn led to Triplebet's failure to identify and sufficiently interact with a number of at-risk players and also syndicates.
Triplebet accepted that the structure of syndicates resulted in customers not being appropriately assessed from a social responsibility perspective.
Monitoring of business relationships
The Panel found that Triplebet did not conduct appropriate ongoing monitoring of business relationships in several respects, including the following:
- Monitoring did not place sufficient emphasis on addressing anti-money laundering risks.
- There was insufficient recording of outcomes of monitoring.
- Monitoring did not always result in appropriate steps being taken in accordance with Triplebet's procedures, which resulted in too little emphasis on obtaining documentary evidence, including evidence relating to source of funds.
In several cases, customers had been permitted to gamble very large sums without any checks of their source of funds or source of wealth. In one case, a customer put at risk over £2 million in a single day without any source of funds or source of wealth being required. In another, a customer deposited and shortly afterwards withdrew a large sum of money without any gambling activity, a risk factor for money laundering, yet Triplebet had carried out no checks on the customer other than to verify his identity and address one year earlier.
The Panel rejected Triplebet’s submission that professional gamblers are a known low risk category for money laundering, since money laundering includes the simple use of criminal funds to fund gambling as a leisure activity, and criminals may also be gamblers.
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Last updated: 27 July 2023
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