THE IMPACT OF REGULATORY ACTION

Investigations should be concluded before someone appears in court:

It would appear that the Gambling Commission deal with such cases involving criminality retrospectively, normally a period of 1-2 years.  The biggest question that this poses is: How can someone receive a fair hearing if it is later established that the GC have then identified failings related to the case concerning Social Responsibility (LCCP breaches) and more importantly, Money Laundering offences?  Would it not be logical to suggest that the material gathered during the GC’s investigation and indeed the findings, would be absolutely relevant to the case of the defendant?  Such material could have the potential to have a significant impact on the case and thus sentencing decision.

Regulatory action taken….but what’s changed?

We can look back at the regulatory action by the GC all the way to 2014 where William Hill were fined £6.2m relating to five customers.  This involved criminality through disordered gambling and the company was found to have ‘breached’ Anti Money Laundering and Social Responsibility ‘regulations’.  The ruling found that that the company ‘did not adequately seek information about the source of their funds or establish whether they were problem gamblers.’ 

So here we are some six years later and the same scenarios are happening, seemingly time and time again and arguably more frequently.  The same action taken year upon year, the same outcomes for those at court not having these investigations taken into consideration.

What about cases that are kept out of the courts?

 In the knowledge that the vast majority of regulatory action taken is indeed as a consequence of convicted criminality, what happens to the cases that are not formally dealt with by the criminal justice system?  There could be cases (and we know this to be factually correct) where for whatever reasons, the victims of such crimes have not reported the offences to the police, which is absolutely their right to do so, but the GC have knowledge of the cases nonetheless.  We want to know what the GC does with these cases and whether they treat these differently to those resulting in criminal convictions.  Furthermore, as discussed with our seemingly fictitious case studies (see section on ‘Money Laundering’, which are actually close to reality for many people), if someone was to present the GC with a case which showed very similar traits, both from the disordered gambler and the company concerned, why would this be treated any differently to that which involved criminality?  We find it hard to comprehend why such cases would be treated differently.

RELEVANT COMMENTS BY THE GAMBLING COMMISSION: 

 “Draconian Action”

‘‘Compliance activity and enforcement cases revealed again and again that operators’ AML policies, procedures and controls are not fit for purpose. There has been the incorrect perception that all gambling regulators’ expectations are identical in addition to a failure to digest our guidance and implement the legislative requirements applicable to Great Britain. This must change, for these are not just regulatory matters but breaches of UK law. Those failing to learn these lessons will face further draconian action.

‘‘We have encountered issues and an over reliance on thresholds integrated into operating systems, designed to trigger referrals to specialist teams. Whilst conceptually these seem logical, they are far too often based on internal capacity and commercial considerations, not the risk profile and true affordability of their customers. Operators have then failed to intervene as gambling becomes out of control both in short bursts or over time, and allowed criminal funds to be deposited into accounts.

“Levels of Staff Training Continues to be a Concern”

‘‘We have provided additional information in this year’s report to allow operators to reflect on their approach to thresholds and the issue of affordability.

‘‘We continue to see positive examples where some operators have more closely integrated their VIP management teams with their AML and social responsibility management teams, and encourage other operators to consider embedding this alignment into their existing practices.

‘‘We have also been encouraged by significant investment by certain operators in systems and techniques to profile customers. AML is an area where collaboration and evaluation of what works between operators can reap benefit for themselves and consumers.

‘‘Levels of staff training continues to be a concern with repeated instances of operators failing to provide relevant staff, including money laundering reporting officers, with regular training in how to recognise and deal with transactions and other activities which may relate to money laundering or terrorist financing.”

“A Tick-Box Exercise”

‘‘We are also concerned by the frequent disconnect between operators’ money laundering and terrorist financing risk assessments; policies, procedures and controls; customer risk profiling; customer due diligence and ongoing monitoring; and enhanced customer due diligence and enhanced ongoing monitoring. For many operators this has become a tick-box exercise, without due consideration for their importance in the risk-based approach.

‘‘We have continued to impose increasingly tough financial penalties (or payments in lieu of financial penalties) in cases where there have been major AML failings in order to send a clear message to the industry.

‘‘We have encountered issues and an over reliance on thresholds integrated into operating systems, designed to trigger referrals to specialist teams. Whilst conceptually these seem logical, they are far too often based on internal capacity and commercial considerations, not the risk profile and true affordability of their customers. Operators have then failed to intervene as gambling becomes out of control both in short bursts or over time, and allowed criminal funds to be deposited into accounts.

· Do you know your customer (KYC)? Are you gaining a holistic picture of the customer’s source of funds, particularly in relation to VIP customers? Are you critically assessing assurances you receive as to their source of funds?

· Are you requiring customers to provide their occupation upon registration and then profiling their income for affordability?” Compliance Statement, 2018/2019

“Serious Shortcomings”

·       A customer of a major gambling operator was recently prosecuted for offences under the Proceeds of Crime Act 2002, after spending a six-figure sum with the operator. Information provided by the operator played a key role in the trial by providing a clear record of the spending involved.

·       However, the Commission only became aware of the case due to a referral from a police force, following which the Commission made enquiries of the operator. Ultimately, this led to an investigation that revealed serious shortcomings in the operator’s money laundering controls.

·       Had the police force in question not made the referral to the Commission, it is unlikely that we would have become aware of the case in any other way.” 2015

‘‘We wish to make clear that the fact that the reporting triggers are met (that is, there is a criminal investigation and there could be grounds for us to question whether the required measures to keep crime out of gambling had failed), will not automatically result in regulatory action or sanctions.’’ 2016

“Establish Source of Funds”

‘‘Responses from a number of licensees in the course of the consultation suggest there is a widespread misconception about our approach in this area. To clarify, when we become aware of cases in which the proceeds of crime were spent on gambling, and/or where there may have been money-laundering, we will want to understand what steps the operator took in terms of due diligence to establish the source of the customer’s funds. Provided the operator can show that it made appropriate checks and there are no indications of any failings on the part of the operator, we would not necessarily look to take further action.”

“Significant Due Diligence Failures”

“However, these are serious matters. ‘Know Your Customer’ (KYC) and due diligence are key principles underpinning gambling regulation. It will be important for the operator to evidence their consideration of the threat posed by its customers, the strategies, policies and procedures in place to effectively mitigate risk and how these have been used to support reasonable decisions taken in particular circumstances, if there is to be no further action by the Commission. It is important to note that we have seen cases in which police investigations were conducted and did not result in charging customers with criminal offences, but nonetheless highlighted significant due diligence failures on the part of licensees, and as such we took action. We will continue to decide on the case for regulatory action according to the circumstances of the case in question and based on the evidence.”