Gambling Commission assessments result in regulatory action against five casinos

England and Wales

On 30 March 2021, the Gambling Commission (the “Commission”) published a statement giving details of enforcement action taken against five land-based casinos, which were all found to have failed to comply with social responsibility and anti-money laundering requirements.

The statement provides details of the Commission’s investigatory findings in respect of each of the operators and the subsequent regulatory action that was taken. The outcome was four regulatory settlements (with payments in lieu of financial penalties ranging from £202,500 to £260,000) and one fine (of £377,340).

Clockfair Limited

The Commission commenced a review of Clockfair Limited’s (“Clockfair”) operating licence in October 2019 which revealed that Clockfair had breached a number of conditions of its operating licence. These breaches related to:

  • Social Responsibility Code 3.4.1(1) – Customer interaction The investigation identified weaknesses in Clockfair's safer gambling controls and found that it had failed to put into effect policies and procedures for customer interaction. The Commission cited an instance where a customer lost £58,830 in a 12-month period with Clockfair. During that same period, the customer’s two companies showed a loss of around £100,000 in their company accounts. Clockfair interacted with the customer once yet no further interactions were recorded.

  • Licence Condition 12.1.1 Prevention of money laundering and terrorist financing – Clockfair accepted that its anti-money laundering policies, procedures and controls were not appropriate. In particular, its monitoring and review of customers to ensure the proceeds of crime were not being spent were found to be insufficient. The Commission found that Clockfair had failed to undertake checks to verify the underlying source of the customer funds in some instances. In other instances, where checks had been undertaken, they had been insufficient to verify the source of the customer funds. The Commission also found that Clockfair failed to conduct adequate checks in relation to Politically Exposed Persons (“PEPs”) and persons subject to financial sanctions, despite some customers originating from high-risk jurisdictions.

  • Licence Condition 5.1.1 Usage of cash and cash equivalents – Clockfair was found to have failed to implement appropriate policies and procedures concerning the use of cash and cash equivalents by customers.

Clockfair has committed to an ongoing programme to improve its policies, procedures and controls. Clockfair’s remedial programme includes undertaking significant staff training exercises, assessing its internal and external reporting processes, incorporating within its social responsibility policy properly defined indicators of risk for the identification of problem gambling, and reviewing and updating its policies and procedures for anti-money laundering and social responsibility.

Regulatory Settlement:

The regulatory settlement reached between the Commission and Clockfair consists of:

  • A £260,000 payment in lieu of a financial penalty, which will be directed towards delivering the National Strategy to Reduce Gambling Harms; and

  • A payment of £11,690.41 towards the Commission’s costs of investigating the case.

The Commission cited the duration of the breaches, the fact that Clockfair should have been aware of the breaches, the seriousness of the breaches, the fact that the breaches arose in circumstances that were similar to previous cases that the Commission has dealt with, and the need to encourage compliance among other operators as aggravating factors. In mitigation, the Commission noted the co-operation of Clockfair and the fact that an ongoing programme of remedial action was commenced in response to the breaches being brought to Clockfair’s attention.

Shaftesbury Casino Limited

The Commission investigated Shaftesbury Casino Limited’s (Shaftesbury”) licence following concerns identified at a compliance assessment in August 2019. The Commission’s investigation found that Shaftesbury had breached a number of conditions of its operating licence:

  • Social Responsibility Code 3.4.1(1) – Customer interaction Shaftesbury accepted that it had failed to put into effect policies and procedures for customer interaction with specific provision for making use of all relevant sources of information to ensure effective decision making and to guide effective customer interactions. The Commission’s statement highlights that a VIP customer incurred losses of £205,714.04 between 2017 and 2019. The Commission found Shaftesbury did not undertake any responsible gambling interactions with this customer.

  • Licence Condition 12.1.1 Prevention of money laundering and terrorist financing – Shaftesbury’s anti-money laundering policies, procedures and controls were found to be ineffective. The Commission’s statement notes one customer who deposited £2million and incurred losses of £338,000 between 2011 and 2019. Shaftesbury undertook open-source checks to verify the customer’s source of funds which suggested the customer was a former director of a dissolved company. Although Shaftesbury’s anti-money laundering triggers were met, Shaftesbury did not request further source of funds information. Furthermore, the customer originated from a high-risk jurisdiction but Shaftesbury failed to undertake checks for PEPs. 

  • Licence Condition 5.1.1 Usage of cash and cash equivalents – Shaftesbury accepted that it failed to implement appropriate policies and procedures concerning the use of cash and cash equivalents.

In addition to accepting these failings, Shaftesbury has committed to an ongoing programme of improvements to ensure its policies, procedures and controls are appropriate and implemented effectively including, but not limited to, reviewing and updating its policies and procedures for social responsibility and anti-money laundering, reviewing its internal and external reporting processes, and undertaking staff training exercises.

Regulatory Settlement:

The regulatory settlement reached between the Commission and Shaftesbury is very similar to that reached between the Commission and Clockfair. Shaftesbury’s regulatory settlement consists of:

  • A £260,000 payment in lieu of a financial penalty, which will be directed towards delivering the National Strategy to Reduce Gambling Harms; and

  • A payment of £11,690.41 towards the Commission’s costs of investigating the case.

The Commission cited, amongst other things, the duration of the breaches, the fact that the breaches were repeated, the seriousness of the breaches, the fact that the breaches arose in circumstances similar to previous cases the Commission had dealt with which resulted in the publication of lessons to be learned for the wider industry, and the need to encourage compliance among other operators as aggravating factors. The timely co-operation of the licensee, the fact that no attempts were made to conceal the seriousness of the breaches and the ongoing programme of remedial action in response to the breaches were all cited as mitigating factors by the Commission in reaching a settlement.

Les Croupiers Casino limited

The Commission commenced a review of Les Croupiers Casino Limited’s (“Croupiers”) in October 2019 and found that Croupiers was in breach of the following licence conditions:

  • Social Responsibility Code 3.4.1(1) – Customer interaction Croupiers accepted that there were weaknesses in its safer gambling controls and that it had failed to put into effect policies and procedures for customer interaction. An example of such a failing concerned a 22-year-old customer who lost around £20,000 over six months. Croupiers had justified this level of loss based on an assumption that the customer could afford their level of losses because they were a director of a company. The Commission’s investigation found that no interactions were recorded with the customer, nor was there a record of the customer profile having been reviewed by the customer care team.

  • Licence Condition 12.1.1 Prevention of money laundering and terrorist financing – Croupiers accepted that it was in breach of its licence condition to ensure that its anti-money laundering policies, procedures and controls were implemented effectively. Croupiers had failed to undertake sufficient checks to verify the source of funds and in some cases had failed to adequately record the justification for its decisions.

Croupiers has committed to an ongoing programme to improve its practices including the introduction of audits to ensure customer interactions are taking place, refresher training for all employees, investment in a new case management system to ensure all relevant customer information is stored in a single location, the introduction of a new customer due diligence process, and taking steps to ensure that the level of gambling spend is proactively considered against the level of income evidence.

Regulatory settlement:

The regulatory settlement reached between the Commission and Croupiers consists of:

  • £202,500 payment in lieu of a financial penalty, which will be directed towards delivering the National Strategy to Reduce Gambling Harms; and

  • payment of £14,794.62 towards the Commission’s costs of investigating the case.

In mitigation, the Commission stated that there was timely co-operation of the licensee and there was no attempt to conceal the extent of the breaches, alongside the programme of remedial action being undertaken by the licensee. Aggravating factors included the fact that Croupiers should have been aware of the breaches, the seriousness of the breaches and the fact that the breaches were similar to previous cases which had resulted in the publication of lessons to be learned.

Double Diamond Gaming Limited

The Commission’s review of Double Diamond Gaming Limited’s (“Diamond”) licence revealed a number of breaches in respect of its operating licence:

  • Social Responsibility Code 3.4.1(1) – Customer interaction The Commission identified weaknesses in Diamond’s safer gambling controls. The Commission cites an example of a customer who had incurred losses of £46,000. Diamond had identified the customer increased their number of visits and conducted a customer interaction. Diamond maintained that responsible gambling advice was included in all necessary customer interactions but the Commission found no record of this on the customer’s account.

  • Social Responsibility Code 3.5. – Self-exclusion Diamond accepted that it had breached this licence condition. The Commission noted an example of a customer who had self-excluded but was able to enter and gamble at one of its premises. It was noted that Diamond had procedures in place to ensure adherence to Social Responsibility Code 3.5.1 but that an oversight on behalf of an employee led to this breach.

  • Licence Condition 12.1.1 Prevention of money laundering and terrorist financing – Diamond accepted that it was in breach of this licence condition as some of its customer accounts evidenced weaknesses and shortcomings both in relation to the maintenance of its anti-money laundering policies, procedures, and controls and in their implementation. An example of these failings included a customer with a turnover of £152,155 and losses of £14,000 in a 12-month period. The customer had been asked to provide information to verify their source of funds. The customer failed to provide this information and was permitted to visit the casino on a further 90 occasions.

Diamond has committed to improving its policies, procedures and controls. This commitment includes undertaking a review of its top active customers, conducting an extensive review of its anti-money laundering and safer gambling policies and procedures, moving to a “members only” policy and revising its training programme.

Regulatory settlement

The regulatory settlement consists of:

  • A £247,000 payment in lieu of a financial penalty, which will be directed towards delivering the National Strategy to Reduce Gambling Harms; and

  • A payment of £24,530.81 towards the Commission’s costs of investigating the case.

Aggravating factors included the fact that the breaches 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, the need to encourage wider compliance, the duration and seriousness of the breaches, and the fact that Diamond should have been aware of the breaches. In mitigation, the co-operation of Diamond was cited, and its ongoing programme of remedial action and the fact that Diamond showed insight into the seriousness of the breaches.

A&S Leisure Group Limited

Following a review of A&S Leisure Group Limited’s (“A&S”) operating licence, the Commission found that A&S were in breach of the following conditions of its licence:

  • Social Responsibility Code 3.4.1(1) – Customer interaction

  • Licence Condition 12.1.1 Prevention of money laundering and terrorist financing

A&S was given a warning and a financial penalty of £377,340 was imposed (which was stated to be in line with the Commission’s ‘Licensing, compliance and enforcement policy statement, the Indicative sanctions guidance and the Statement of principles for determining financial penalties’). The Commission observed that this was due to failures to:

  • Establish and maintain appropriate risk-sensitive policies, procedures and controls to prevent money laundering and terrorist financing;

  • Ensure such policies, procedures and controls were implemented effectively, kept under review, revised appropriately to ensure they remain effective and take into account any applicable learning or guidelines published by the Gambling Commission from time to time;

  • Promptly interact with customers who may have experience significant harm and losses on the Licensee’s casino products; and

  • Record sufficient information on customer interactions to demonstrate whether the customer should be identified as high risk for the potential of problem gambling.

Comment

These are the latest examples of regulatory action being taken by the Commission and follow a recent £6,000,000 fine against the online gambling business Casumo. These instances demonstrate the Commission’s continuing crack down on operators and highlight the need for operators to update, maintain and actively enforce their policies and processes if they wish to avoid facing similar sanctions. Richard Watson, the Commission’s Executive Director, said that “these failings were identified as part of our ongoing drive to raise standards across the whole gambling industry”, and operators can continue to expect investigations and reviews amongst wider regulatory reform, such as the review of the Gambling Act 2005.

The recurring aggravating factors highlighted by the Commission are important to note for operators. A key aggravating factor was that the breaches arose in circumstances similar to previous cases the Commission had dealt with which resulted in the publication of lessons to be learned for the wider industry. Operators should therefore take note of and learn from the Commission’s enforcement action and the reasons given for sanctions.