Is enough really being done?

 

Money Laundering.  Our Basic understanding.

The basics of compliance with money laundering regulations is whether the individual/company knows or suspects that the money used to the fund the business arrangement is done so as a result of crime.  Believing that a UKGC holder would not be so negligent as to conduct business knowing that money is being laundered the focus is therefore on their suspicions.  Licence holders are duty bound to report any such suspicions to the National Crime Agency (NCA) in the form of Suspicious Activity Reports (SARs) which is a requirement under The Proceeds of Crime Act, 2002 (POCA) and there is now an onus on licence holders to also notify the GC concurrently (remarkably this never used to be the case).  

Once a business relationship has been formed (the opening of a gambling account) there is a requirement for the licence holder to monitor the relationship on an ongoing basis and this means that all transactions should therefore be duly monitored.  The source of funds used is an imperative requirement to ascertain or determine whether suspicions could easily be allayed. 

 Some of the rules we think apply:

Part 2, section 7: it is a requirement for the company to complete CDD for every customer once a business relationship has been entered (ie. Upon first deposit made by customer).  

 Part 2, section 8: clearly states that each customer within this ongoing relationship requires to have their activity monitored on an ongoing basis.  

Furthermore:    “Ongoing monitoring” of a business relationship means— 

(a)scrutiny of transactions undertaken throughout the course of the relationship (including, where necessary, the source of funds) to ensure that the transactions are consistent with the relevant person’s knowledge of the customer, his business and risk profile;  

We don’t want to bog you down with all the rules.  The Gambling Act 2005 has other points of interest that would also be relevant as do the Licence Conditions and Codes of Practices (LCCPs) which are governed by the Gambling Commission.  But it seems, certainly not so historically, that many companies are selective as to which ones they comply with and The Gambling Commission are disinterested in cases presented to them to show such breaches. 

It’s interesting to note that the vast majority of such regulatory action taken by the Gambling Commission are in relation to cases of disordered gambling involving criminality.  It would be unfair to suggest that all criminality that has been used to fund disordered gambling would and should result in gambling companies committing ML offences.  If, for example, someone had multiple accounts with a number of different companies, we absolutely recognise that there could be circumstances for someone to escape suspicion.  

A ‘theoretical’ case study:

Let’s imagine that a gambler opens one online account and remains solely with this company.  Let’s suggest that the customer’s maximum available spending per month is £750, this being an amount that would cause the customer difficulties paying bills/cost of living expenses.  Within a few months the customer spends all of this available money in a matter of hours, whereas the months before, he had spent a lower amount over the course of the entire month.  Then due to the compulsivity of his need to chase losses and literally losing all control of his rational thoughts, he begins to steal money from his employer because he is in a position of trust and has access to vast amounts of money.  Over the course of the next few months, his gambling activity sees him sometimes spending several thousands of pounds sporadically daily.  His employer is none-the-wiser, the gambling company ask no questions, aside from sending him an email asking whether he is ‘OK with his level of spending’ and sending him a link to Gamcare just in case he’s not.  They do, however make him a ‘VIP’ and make contact to give him some ‘free’ bonus betting money.  Often these come when he’s managed to not gamble and steal for a couple of weeks, thus this induces more stealing and triggers him again.  This pattern of behaviour (both from him and the company) continues and he steals even more and gambles more frequently.  

Eventually, after 2 years he’s stole nearly £400k and his secret is out.  He pleads guilty and is sentenced to three years imprisonment.  After there is some media interest in the case it is established that the gambling company has eventually paid the victim back the money that was stolen.  Again, as a result of media attention, the Gambling Commission publicly states that the gambling company concerned will be ‘investigated’.  

Now consider the following points:

 –       If the company has not complied with their requirements under Money Laundering Regulations, which we suggest, they clearly haven’t, they have committed an offence and should be investigated – in court.  

–       If the company did have suspicions and submitted a Suspicious Activity Report but continued to allow the gambling, this is an offence (save for SAR defence from the NCA).  If they did not do so, this could be negligence and still constitutes an offence. 

–       If the Gambling Commission or the police conduct an investigation into the company, the person should not be sentenced until such an investigation has concluded.

–       For there to be fair hearing, someone should not have their case heard and or be sentenced until the investigation into the company itself has concluded.

–       All relevant material has to be disclosed to the defence therefore, material from such an investigation would need to be made available (CPIA).   

Theoretical case study 2; removing the criminality:

 Now consider the exact same case, but now remove the element of theft.  Let’s suggest that exactly the same circumstances existed with the gambling and behaviours shown, both by the company and the customer.  However, this time the customer has amassed the £400k sum by maxing out several credit cards, obtaining large loans and eventually losing his house.  Should we view the two cases differently?  Our view is absolutely not.  It’s the disordered gambling behaviours and traits that are of importance to the compliance of the Money Laundering Regulations.  A company cannot simply state that the policies relating to the monetary thresholds they have in place didn’t trigger their compliance or submission of a Suspicious Activity Report.  What is key to understand is that someone should not have to commit an offence to fund their disordered gambling for a company to be guilty of offences under Money Laundering Regulations.  

 

Being Balanced

In the interests of being balanced and fair it wouldn’t be right to say that all stolen money used in gambling could be detected. For example, low amounts of money wagered and spent would not trigger suspicion. Similarly, if someone spread the stolen money out across many different online sites it would again arguably be difficult to detect. It is actually down to the gambling companies themselves to have policies in place with regards to ML. But these policies have to be based around the law and the repeated guidance issued by The Gambling Commission, particularly via the past regulatory action they’ve taken over the years. But the trend is that the cases are so similar year upon year and questions have to be asked about whether the messages have been listened to or not. In some cases, the same company has been fined more than once for similar failings. Something isn’t adding up.