On 2 April 2020, the Gambling Commission (the “Commission”) agreed a record £13m regulatory settlement with Caesars Entertainment UK Limited (“Caesars”) in relation to anti-money laundering, social responsibility and customer interaction failures. This is the largest settlement agreed to date (following on from the £11.6m settlement with Betway last month which we reported on here).
Caesars operates 11 casinos across Britain (the “Licensed Entities”). The Gambling Commission’s investigation found that between 2016 and December 2018, its Licensed Entities were in breach of the Commission’s Licence Conditions and Codes of Practice (“LCCP”).
The investigation found “serious systematic failures” with regards to Caesars’ handling of VIP customers, and highlighted social responsibility, money laundering and customer interaction failures. Neil McArthur, Chief Executive of the Commission, expressed concern for the gravity of the breaches, noting that the failures were “extremely serious” and that Caesars failed to put “customer safety at the heart of business decisions”.
The investigation resulted in three senior managers surrendering their personal licences. Investigations into these Personal Management Licence holders are still ongoing by the Commission.
The Commission found that Caesars’ Licensed Entities had repeatedly failed to comply with the LCCP. Key breaches related to:
- Licence Condition 12.1.1 – Prevention of money laundering and terrorist financing – Amongst other failings, Caesars accepted that its AML controls did not adequately address the risks presented by higher-risk customers.
The Commission found that Caesars’ AML policies and procedures were outdated (as they had not been updated since March 2016). AML failures were compounded by Caesars’ compliance team being under resourced and the key PML holders not maintaining adequate oversight over customers’ source of funds or source of wealth.
The Commission cited examples whereby:
a customer’s spend was not proportionate to their stated occupation;
enhanced CDD checks were found to have been inadequate; and
there was a lack of scrutiny over source of funds (“SOF”) information provided by customers.
This led to customer failings within its casinos. By way of example, one customer lost around £795,000 over a 13-month period. They triggered several financial alerts which should have prompted further enhanced CDD checks, particularly as this customer was recorded as a politically exposed person (and so high risk). However, adequate SOF evidence was not obtained.
With regards to social responsibility failings, the Commission found that there had been inadequate interactions with customers who had previously displayed signs of problem gambling, or who had self-excluded. SOF checks had also been inadequate. In addition, Caesars’ responsible gambling policy, much like their AML policy was out of date and had not been updated since March 2015.
The Commission highlighted examples where problem gambling (such as a customer whose gambling sessions included 30 sessions exceeding 5 hours) should have prompted meaningful interactions but were inadequate. Another customer (who had previously self-excluded) was able to gamble £820,000 with a total loss of £240,000 over a 13 month period. Although the customer had prior to this period formally de-registered from self-exclusion, the Commission expected that in light of the previous self-exclusion there should have remained a heightened level of review of this customer’s gambling behaviour.
In addition, the Commission’s licence reviews identified further failings:
Licence Condition 15.2.1 – Reporting key events – Caesars had failed to report a number of key events to the Commission as required.
Licence Condition 15.3.1 – Submitting regulatory returns – Caesars’ inadequate governance meant that regulatory returns were not submitted by the required due dates.
Licence Condition 5.1.1 – Cash and cash equivalents – Caesars had not updated relevant guidance as the Commission would have expected.
Social Responsibility Code 10.1.1 – Assessing local risk – One of Caesars’ gambling premises did not have a local risk assessment in place.
It was agreed that Caesars will pay a £13m regulatory settlement, in lieu of a financial penalty. This sum will go towards delivering the National Strategy to Reduce Gambling Harms.
In addition, certain conditions have been added to the licences held by Caesars’ Licensed Entities. These conditions include requirements for those entities to improve their AML and SR policies and procedures. Such as, ensuring that all PML holders, senior management and key control staff undertake outsourced AML training.
In reaching this settlement, the Commission considered the aggregating factors (the serious nature of the breaches, their duration and repetition) as well as the mitigating factors (the fact that Caesars had been cooperative and open with the Commission, and made voluntary early disclosures).
All gambling operators (whether their business is online or on the high street) must interact effectively with their customers to check what they can afford to gamble with, and have adequate policies and procedures in place to step in when they see signs of harm. This decision shows that the Commission continues to scrutinise VIP practices, and their tough approach is not limited to online businesses.
Operators must be mindful, particularly in the current climate with more people at home than normal, whether they have adequate policies and procedures in place for identifying at risk customers. Operators must be aware of the signs of problem gambling, and ensure customers are gambling within their means.
The Commission’s public statement detailing the regulatory settlement is accessible here.