On 29 November, the UK Gambling Commission (the "Commission") announced that online casino companies and their senior management had been subject to widespread action as part of an ongoing investigation into the way the industry combats problem gambling and money laundering.
The Commission made clear that it was still investigating a further six operators and three individuals, making it likely that additional enforcement action will follow in the near future.
This landmark statement includes the previously announced recent action against Daub Alderney t/a Stride ("Stride"), which resulted in a financial penalty of £7.1m.
Following a licence review and a reference by the Commission to the Regulatory Panel, Casumo Services Limited ("Casumo") has been ordered to pay a financial penalty of £5.85m. Videoslots Limited t/a www.videoslots.com ("Videoslots") reached a regulatory settlement with the Commission without a licence review being initiated, including an agreement to pay £1m in lieu of a financial penalty.
Between the three companies, the penalty packages total almost £14m, and come as result of the Commission’s findings that they each failed to put in place effective safeguards to prevent money laundering and to keep consumers safe from gambling-related harm.
The Commission also took regulatory action against the individuals responsible for the failings. Three Personal Licence ("PML") holders have also now surrendered their licenses, and a further four PML holders, including two individuals from Stride, have been issued with a warning. Finally, two PML holders were issued with "Advice as to Conduct" which is the lowest level sanction.
Further, it was announced that CZ Holdings will no longer be able to provide gambling services to consumers in Britain. This followed the company's decision to surrender its licence after a licence review by the Commission had been commenced.
Casumo accepted that it had breached conditions of its licence relating to anti-money laundering measures ("AML") as per licence condition 12 of the Commission’s Licence conditions and codes of practice. This included failure to have in place appropriate risk assessments and to carry out monitoring in relation to terrorist financing and as an operator based in a foreign jurisdiction.
Further, Casumo had failed to comply with social responsibility codes of practice by failing to interact with customers that demonstrated potential signs of problem gambling, not flagging customers whose losses were sizeable, and not having in place appropriate policies and procedures to prompt such action.
As a result of these failings, the Commision issued Casumo with a warning, imposed additional conditions on Casumo's operating licence and imposed a financial penalty of £5,850,000. The Commission’s public statement included that this was deemed to be a proportionate outcome, taking into account the steps taken by Casumo to remedy the breaches and its cooperation during the investigation
Following a compliance assessment by the Commission focussing on the measures that a remote gambling operator should have in place in relation to AML and terrorist financing, the Commission investigated Videoslots.
The Commission identified a number of failings which included a lack of adequate risk assessment in respect of AML and terrorist financing. At the time of the assessment the Commission found that Videoslots conducted only basic checks on all customers, supported by a verification process once a deposit level of 2,000 Euros was reached in a 24-hour period. This approach to customer due diligence was inadequate because the same approach was adopted for all customers irrespective of the level of risk attributed to the customer. Further, the AML measures required by virtue of being an operator based in a foreign jurisdiction were also inadequate, including the lack of staff training.
The Commission also identified some failures in respect of compliance with the social responsibility codes of practice. For example, where a customer self-excluded, Videoslots could not provide any evidence of customer interactions in respect of responsible gambling.
Finally, Videoslots was found to have breached its licence by failing to ensure that specified management offices were held by PML holders. For an 11 month period in 2015/2016 the Commission identified that an individual occupying the regulatory compliance function did not hold a PML.
The regulatory settlement package includes that Videoslots will make a payment in lieu of a financial penalty of £1,000,000, which included a divestment of £310,478.08. Videoslots will also have additional conditions placed on its licence and must pay £12,000 towards the Commission's investigative costs.
The Commission’s public statement confirms that the settlement package took into account the fact that Videoslots had been proactive in addressing the issues, had been transparent and cooperative throughout the investigation, and accepted that the failings were serious.
These cases are yet further examples of the tougher stance that the Commission is taking on operators in relation to anti-money laundering and social responsibility compliance. Two of the three operators have been ordered to pay multi million pound financial penalties and the public statements of the Commission do not identify any portion of those penalties as relating to divestment of profits made from the operators’ failings. The level of penalties has been determined by the Commission expressly by reference to its Statement of principles for determining financial penalties (June 2017). However, based on the facts described in the public statements it is difficult to reach a proper understanding as to why the payments by the operators ranged so significantly from £1million to over £7million.
The fact that the Commission has now begun to penalise individuals for the failures of online operators signals a further escalation in respect of enforcement of AML and social responsibility breaches. Individual liability may create different legal issues to that of corporates, and so operators should be aware of the wider implications of breaches.
Neil McArthur, the Commission CEO, said: “I hope today’s announcement will make all online casino operators sit up and pay attention, as our investigations found that a large number of operators and their senior management were not meeting their obligations….
Anyone in a position of authority needs to be aware that we will not only act against businesses when we take regulatory action - we will also hold individuals to account where they are responsible for an operator’s failings.”
Once again, the message from the Commission continues to focus on the importance of compliance and monitoring. It is likely that the remaining six operators and three individuals still under investigation will, if found to have committed breaches, be subject to similar enforcement action.
Operators are advised to read and put into action the Commission's lessons to be learned regarding this investigation.