On 12 March 2020, the Gambling Commission (the “Commission”) agreed a record £11.6m regulatory settlement with Betway Limited (“Betway”) in relation to its failure to implement adequate social responsibility and anti-money laundering measures.
The settlement came following an investigation into Betway’s handling of seven customers’ accounts, who were predominantly “VIP” customers, following complaints from customers and reports from other agencies. Three customers in particular were the subject of police investigations, which established that stolen money had been spent on Betway’s website. The Commission’s examination revealed what it deemed systemic historical failings in Betway’s management of customers at risk of money laundering and problem gambling, stemming from inadequate anti-money laundering (“AML”) and social responsibility measures.
The Commission’s investigation found Betway to be in breach of the following provisions of the Licence Conditions and Codes of Practice (“LCCP”):
- Social Responsibility Code Provision 3.4.1(1) – Betway failed to implement appropriate policies and procedures for problem gambling interactions and did not always maintain adequate records of such interactions;
- Licence Condition 12.1.1 – Betway failed to have adequate AML controls to consistently assess the risks presented by higher risk customers; and
- Licence Condition 12.1.2 – Betway failed to comply with the Money Laundering Regulations 2007 or Money Laundering Regulations 2017 (together the “AML Regulations”).
As regards the social responsibility breaches, Betway failed to have effective policies and procedures in place to spot and address instances of problem gambling. There was no customer interaction policy until April 2015, and that policy did not specifically deal with VIP customers until January 2017. In addition, these policies and procedures did not prompt effective interactions with at-risk customers, nor were they always recorded properly. By way of illustration, Betway showed no evidence of social responsibility interactions with a customer who had self-excluded on numerous occasions, including one occasion when they deposited and lost £50,000 in a single day. In another instance, a customer spent £187,000 in two days which prompted an interaction with that customer, but Betway then decided to leave the customer’s account open. Betway interacted with that customer again only when a family member contacted them, at which point the customer asked to self-exclude.
The Commission also found that Betway had fallen short of its AML and customer due diligence obligations by failing to have effective policies and procedures in place to identify and assess risk, nor were there effective procedures in mitigating such risks once identified. In particular, Betway did not effectively monitor and review customers to ensure proceeds of crime were not being spent on its website and did not keep adequate records where such reviews did take place. This meant that Betway failed to satisfy the measures required under the AML Regulations. For example:
- One customer had 11 separate accounts with Betway and deposited more than £494,000 over a period of 1 year and 5 months, £300,000 of which was over 5 months. The customer was subject to 18 reviews by Betway but they undertook no checks to establish source of funds, because the financial thresholds set at that time were not triggered by the customer’s activity. This customer was subsequently convicted of fraud.
- One of Betway’s top GB customers deposited over £8m over a 4-year period. Betway sought to establish the customer’s source of funds when the financial thresholds were triggered on over 20 occasions, but each time the operator relied upon information communicated by the customer, without independent verification, to establish source of funds. Only when the customer could not provide further evidence upon request from Betway, was an external report commissioned to investigate the customer’s source of funds and their financial circumstances. Throughoutthis process, the customer had been allowed to continue to gamble. Following the external review, it was confirmed that source of funds could not be established, but Betway continued the relationship with the customer. The customer triggered another 33 financial thresholds, but the account was only closed when the police contacted Betway.
As a result of the Commission’s findings, the following regulatory settlement has been agreed:
- £5.8m payment in lieu of a financial penalty, to be directed towards delivering the National strategy to Reduce Gambling Harms.
- £5.8m divestment, the majority of which to go to victims where funds have been found, or could reasonably suspected to be, proceeds of crime.
- Betway will undertake the following within a reasonable time and report the findings to the Commission:
- An independent review of its current policies and processes, operations and management oversight;
- A compliance led review of all current / active UK customers who have not been reviewed in the past six months and require review, applying its current processes for AML and social responsibility, which will be dip-sampled to test the robustness of a review;
- A full assessment of its top 25 customers by gross gambling yield (GGY) and top 25 customers by deposit for years 2015, 2016, 2017 and 2018 to consider whether any of the failings identified are evidenced and if so, to divest the GGY accordingly;
- Review any new high or higher risk customers as may be identified by the Commission; and
- A review of the next 12-month compliance development road maps.
- Agreement to the publication of a statement of the facts in relation to this case.
- Payment of £18,940 towards the Commission’s costs of investigating the case.
In reaching the regulatory settlement, the Commission had regard to the following aggravating factors:
- The breaches were consistent across a four-year period;
- The systemic nature of the breaches and the potential that other customers not known to the Commission were affected by those breaches;
- The breaches arose in similar circumstances to previous cases the Commission has dealt with, which resulted in the publication of lessons to be learned for the wider industry and statements to raise awareness;
- The involvement of relevant middle and senior management;
- The impact on customers and the general public;
- The awareness and involvement of the Licensee’s board; and
- The need to encourage compliance by other operators.
The Commission also considered the following mitigating factors:
- Betway’s new resources, policies and PML holders it has put in place, and its engagement with the Commission regarding improvements being implemented;
- Betway’s steps taken to remedy the breaches and the outline of its review to be undertaken; and
- Betway’s full cooperation with the Commission’s investigation.
Betway’s settlement with the Commission involved the largest combined payments in lieu of penalty and divestments to-date and sends a clear message that it will pull no punches when sanctioning betting operators deemed to have fallen well short of their obligations and responsibilities under the LCCP and AML Regulations. It also demonstrates the Commission’s willingness to take strong retrospective action in respect of betting operators’ failings in the past decade.
In addition, the decision illustrates the Commission’s robust approach to gambling companies’ management of high-value customers, who may be showing signs of problem gambling and/or money laundering offences. The Executive Director to the Commission, Richard Watson, said that the “treatment and handling of high value customers” was a significant part of the Commission’s “ongoing programme of work to make gambling safer”. Betting companies must therefore ensure they have effective policies and practices in place to deal with customers gambling at all levels.
Furthermore, some perceive the Commission’s decision to be indicative of the political pressures it faces to react to the strong criticism of the online gambling sector. Given the record status of the financial element of the settlement with Betway, and the fact that the Gambling Act 2005 is due for review this year, which is likely to lead to more stringent measures, it would be prudent for gambling operators to review their policies and processes and ensure they are in full compliance with the 2005 Act, the current AML Regulations and LCCP.