Gamvisory report into criminal justice/regulator accountability.

Author: Alex Macey, Chair of Gamvisoy Group

Supplementary submission to original report sent to Public Accounts Committee 22.04.2020.

Sensitive case related material made available upon request.

Crime and punishment: who are the disordered?

How gambling companies profit from disordered gambling and crime

Gamvisory have seen strong evidence that the Gambling Commission is failing to achieve one of the three fundamental principles of the Gambling Act, to keep gambling free of crime. Another of the three principles is to protect children and vulnerable persons from gambling harm. Therefore, if gamblers who are clearly showing signs of suffering from gambling disorder, can go on to commit crime to fund this disorder, in simple terms, two of the three key principles of the Gambling Act have been failed.

Gambling companies break Social Responsibility and Anti-Money Laundering rules

We are becoming increasingly aware of individuals that have committed crime to fund their disordered gambling. It is our strong belief that, as a direct consequence of gambling companies not adhering to the Social Responsibility and Anti-Money Laundering (AML) requirements, and ineffective enforcement by the Gambling Commission, disordered gamblers have been able to commit the levels of crime they have. I have seen a wealth of evidence from disordered gamblers that have committed crime, showing they have been able to pump hundreds of thousands and sometimes several millions of pounds in stolen money into their gambling accounts. All signs of harm and disordered gambling were ignored, numerous licence conditions were not complied with, money laundering laws weren’t complied with and previous regulatory rulings from years back become replicated yet again.

Disordered gamblers carry all the consequences

Whilst individuals that resort to crime are not necessarily a high proportion of the disordered gambling population, the issue cannot and should not be ignored. Nearly all such defendants are first-time offenders and are nearly always completely compliant with the criminal process, often admitting their guilt before they are caught. The evidence clearly shows these subjects were exploited by the gambling companies they gambled with, and that if the law and regulations had been complied with, their criminal behaviour would have been identified much sooner. Instead, those suffering from disordered gambling end up receiving long custodial sentences, with their lives and those close to them, families and children, devastated by gambling harm. Meanwhile, the gambling companies and their employees have never faced any criminal proceedings for benefitting from crime or breaking UK law – on a matter as serious as money laundering, with its potential links to organised criminality, for example terrorist organisations.

The regulator is ineffective

It appears that the Gambling Commission often does not become aware of such cases of crime, remarkably, until a case is actually heard within the court, or more worryingly, as a result of media exposure. This is evidence in itself that the regulator simply has not had a grip on this issue and it’s very concerning. Furthermore, the evidence shows that when the Commission are aware of cases involving criminality, they are ineffective in dealing with it. That the Gambling Commission and gambling companies have failed to prevent the proceeds of crime by individual disordered gamblers flowing through gambling operations, does not give confidence that the UK gambling industry is free of organised crime. It should be noted that many of the licence holders are based in tax havens in Malta, Gibraltar or Guernsey and operate across the world, including in a range of markets in Africa and South America.

In this document

This document sets out the change that is needed. It first outlines the unjust way crimes committed to fund disordered gambling are dealt with in the criminal justice system. Second, it provides detailed evidence of failings by gambling companies when it comes to disordered gamblers stealing vast sums to fund their gambling. It does this through case studies of two accounts of disordered gamblers, with well-known licence holders. It concludes with recommendations for change. By highlighting these issues around criminality, real change can be made for safer and protected gambling. Disordered gamblers are not excusing criminality or asking for special treatment. We simply want a fair hearing, to be afforded the same as any person with a mental health condition in the criminal justice system, and that gambling companies and their employees be accountable for breaking the law, like any other organisation or citizen.

Criminal justice system failings

I can understand completely how a disordered gambler could end up in the situation others have found themselves. As a former police officer, turning to crime to fund my gambling was never an option for me, as I knew that the implications of doing so would be catastrophic. I have been in positions where vast sums of cash and drugs have been before me and for a split second, I saw an opportunity to either ease my current financial state or allow me to gamble. However, I did not cross the line and abuse my position, for many reasons, not least that my life in a prison cell would have been more unpleasant than the disordered and painful life I was currently experiencing.

That said, I have recently spoken with two serving police officers who have stolen from family members to fund their disordered gambling. The immense pain they feel for their actions is unimaginable. Perhaps if my career had been a different one, and I had an opportunity to access company funds as a regular civilian, whilst in the grips of gambling, I could well have done so. It is easy to see how the first act committed would lead to a spiralling of the crime, chasing losses and hoping to repay the funds stolen, yet clearly unable to achieve this. It should be remembered that a symptom of the mental health condition of gambling disorder is kleptomania. To reiterate, this does not permit criminal actions, it simply adds to the mitigation.

To put things simply, it appears that the majority of disordered gamblers that have turned to criminality to fund their gambling are inherently good people and first-time offenders. They often help their victims to work out exactly what they’ve stolen and take responsibility for their crimes.

Disordered gamblers are not treated fairly

Offences that involve abuse of position and theft by an employee are by statute to be dealt with robustly, and often carry an automatic custodial sentence, seemingly on a sliding scale depending upon the monetary loss. Those suffering from disordered gambling do not receive a fair hearing and end up receiving long custodial sentences. This exacerbates gambling harm with further life-destroying consequences for people, families and children. The culpability of the gambling company in encouraging and exploiting the disordered gambler and breaking SR and AML rules is not taken into account.

Disordered gamblers suffer prejudice and stigma, and this is played out also in the criminal justice system. Disordered gambling is not afforded the same consideration as other mental health conditions and addiction. Government has recognised that simply incarcerating people with mental health conditions is not in the best interest of individuals, or society, and often costs a great deal. As a result, mental health conditions are to be taken into account at all stages of the criminal justice system, and there are liaison and diversion schemes, favouring the use of treatment orders and community sentences where appropriate.

In a recent case, in November 2019 (Ben Jones and Betway) the gambling company came to an arrangement with the victim (probably via an NDA), to pay the stolen funds back. Yet, the defendant was subsequently served with a Proceeds of Crime Act (POCA) order for the full amount stolen, plus an inflationary increase. I personally wrote to Ben’s legal team to ask why they were allowing this to happen. This case in now still ongoing. A POCA order is made to retrieve stolen funds because of the gain made from the crime committed. If the defendant didn’t, for example, make regular withdrawals from ‘winning’ during the gambling and didn’t use that money for personal gain (e.g. buying a car or a holiday), which I am reliably informed he didn’t, then the only gain from criminality was for Betway. Therefore, the POCA order should not have been made, or at the very least, an intrusive scrutiny of the defendant’s bank accounts and Subject Access Request (SAR) material from the gambling company would have easily identified any amounts that were withdrawn to use for personal gain. I cannot describe to you the pain and suffering that both the defendant and his family had to endure whilst going through this process, which should never have even existed.

Gambling companies operate outside the law with impunity

Meanwhile, in terms of the gambling company, one of three scenarios take pace. None of these scenarios are acceptable in holding the licence holder to account.

• The company concerned pay the victim back the funds stolen by the defendant.

• The company may face a fine from the Gambling Commission via regulatory action, normally some considerable time after the offence.

• The company face no investigation and the whole incident slips into the abyss.

Consider the very real likelihood that in six months or a year, the Gambling Commission fine Betway a couple of million pounds, for SR and AML failings. In fact, this has now happened, with the Commission fining Betway 11.6m. Well, let me tell you what doesn’t happen, because you can read all the regulatory rulings that could easily be cut and pasted since 2014, and the Betway ruling is the same. What doesn’t happen is that the company is criminally held to account for such failings, in particular, money laundering offences. What doesn’t happen is that those individuals within the companies that have encouraged the disordered gambling, exacerbated and prolonged the behaviour and completely breached AML law, putting company profits and their personal bonuses first, are criminally held to account.

Let’s consider the fact that very often a VIP manager is also responsible for the safeguarding of their VIPs. So, the person pushed by the gambling company to increase profit from their VIPs, the person that receives bonuses for that increased profit, also has the responsibility for SR and AML requirements. Has it really been any wonder that profit has come before safeguarding and compliance? Identifying who should be held criminally accountable should be straightforward. Is it fair and justified to hold such VIP managers to account if the evidence clearly shows they have put profit over compliance? Is it fair and justified that the bosses of the VIP managers pushing them to extract maximum profit are held to account? Is it justified that the CEO of the company is held to account? That is something for lawyers to look into, by simply reviewing the evidence that exists and looking at the offences within the Gambling Act and AML law.

Should POCA orders be made against the company during such potential criminal trials? Absolutely, if the company hasn’t paid back the stolen funds to the victims.

The change we want

We want a complete overhaul of the Gambling Commission, led by government, and a complete overhaul of how the gambling regulator deals with crime.

1. Any gambling-related offence identified by a licence holder, the Gambling Commission or the police (monetary threshold test can apply) to be instantly shared between the police and the regulator.

2. The Commission to instigate an immediate investigation into whether SR and AML requirements have been broken by the licence holder.

3. The Commission’s investigation into the licence holder to be expedited alongside the police investigation against the defendant.

4. Scrutiny of the material gathered by the Gambling Commission, to ensure all relevant material has been collected, including the licence holder’s use of any third parties.

5. Any act of criminality not being dealt with by the police to be dealt with in the same way as active criminal investigations, with the onus on licence holders.

6. Accountability for any member of the Commission, if findings show malpractice or negligence.

7. All crime related cases to be fully investigated for SR and AML offences committed by the licence holders before the defendant’s case is brought to charge.

8. Full disclosure of the Commission’s investigation into the licence holder, and all material, including material from third parties, to the police and Crown Prosecution Service (CPS), prior to a charging decision being made.

9. CPS decision to charge then made with consideration as to how identified failings by the licence holder affect the charge made.

10. Criminal offences against the licence holder relating to the outcome of the Commission’s investigation to be considered by the CPS, and rationale for not taking criminal action to be evaluated against the impact it may have on the defendant’s case.

11. Defence lawyers to be made aware of the Commission’s investigation and findings, in line with early disclosure, to form defence and mitigation.

12. Defence lawyers to consider case law relating to how the ‘permissiveness’ of an offence that the licence holder has committed, impacted upon the offence which the defendant has committed.

13. Any POCA application is done by calculating the actual material gain made by the defendant, rather than money used to gamble/sum stolen.

14. POCA application to be made against the licence holder if they have been found to have breached AML law or any offence under the Gambling Act.

15. Gambling disorder to be given the same recognition and consideration as any mental health condition and addiction, at each stage of the criminal justice process (arrest, charge, court, remand, sentencing), in line with existing government policy.

16. Full transparency, with all cases involving criminality to be published by the Commission, whether the criminal justice system is involved or not.

17. The Commission to publicly provide the rationale for all current and historic cases that have involved criminality and have resulted in no or little action taken against licence holders.

18. Independent review of all cases submitted to the Gambling Commission by individuals or on behalf of individuals, that haven’t involved criminality but show clear breaches in SR and AML, and such cases dealt with no differently to those that have involved criminality.

Case studies

The following two case studies provide evidence of the culpable behaviour of gambling companies. These case studies examine two previous disordered gamblers’ respective online gambling accounts, using material obtained from the companies via SARs.

Rationale for the case studies

The material shows betting activity which was blatantly erratic and harmful and was clearly demonstrating that the individual was suffering from disordered gambling. The material shows that interactions from the gambling company were intended to ensure the betting behaviour continued, through targeted marketing and the inducements of ‘bonus money’ (aka rewards for losing), primarily when the individual had suffered heavy losses. It shows how such interactions were ineffective in complying with SR and AML. There are, of course, instances where it could be argued that the criminal acts would have been difficult to identify. For example, if the gambler had multiple platforms for using the criminal funds to gamble, perhaps spending smaller sums over a variety of online gambling accounts, high-street bookmakers and land-based casinos.

However, there is a clear argument, and demonstrated by these two cases, that even in these circumstances, the gambler would be displaying clear and obvious traits of disordered gambling and such behaviour should then be intervened upon via SR rules that have long been in place. As most disordered gamblers know, loss-chasing, increasing stake and deposit sizes, long hours gambling, amongst others, are key aspects of their behaviour. Therefore, it is unlikely that the disordered gambler using stolen funds is able to hide such behaviour. Even over multiple platforms, these patterns should have been identified via SR. What cannot be argued is that when large sums of stolen money have been used with either one platform or a few, the individual has been failed by those companies due to AML rules not being adhered to and the licence holder should be held to account for those failings.

Case Study A is of one of my own online gambling accounts, open and closed in around a month. The gambling company holds a licence from the Gambling Commission. The study will not reveal the identity of the company, to ensure that I am not seen to be seeking personal resolution of the case. This gambling did not involve crime but, markers of disordered gambling were very evident, and no SR or AML measures were used. The betting activity I was involved in resulted in me wagering £65k during one day. I have emails sent between myself and the company, along with my bank statements, to highlight my inability to afford the amount I was able to spend.

Case Study B is from a subject that has stolen large sums of money from his employer to fuel his disordered gambling. The individual concerned is currently under police investigation. Therefore, the material disclosed within the case study will be anonymous, with permission granted by the subject to allow this. To protect the subject’s identity and to ensure there is no impact on the criminal investigation against him, other online accounts that he also spent vast sums of stolen money with, will not be examined, neither will any financial material belonging to him. I have had access to the subject’s gambling material and experiences whilst committing his crimes up until the present day. The material used here shows vast sums of money being deposited into one of the several online accounts that the subject used to gamble. The analysis clearly shows how the criminal acts should have been identified much sooner by the licence holder he was gambling with. The data shows harm markers were ignored by the gambling company and when attempts were made to interact with the subject, they were perfunctory.

By comparing my case to Case Study B, where the subject’s gambling occurred over a prolonged period and involved criminality, I will show that the level of harm and the failings are very similar, when broken down into the period of the lifetime of my account with the company. These were not the only accounts held by me and ‘subject B’, either concurrently or over time. The material shows that disordered gambling could easily have been identified by gambling companies based on just one account, and in a short period of time, and AML interventions should also have been triggered. Case Study A focuses on Social Responsibility failings and Case Study B focuses on AML breaches. But SR breaches clearly apply to Case Study B and the fact that criminality did not occur (as in my case) does not mean that the company did not breach AML requirements. Although the monetary loss for my account will be seen, by many that have experienced far greater losses, as being relatively low (c£10k over the month), I will draw comparisons between previous regulatory action taken by the Gambling Commission and my own case.

Case study A

This case study is of my own personal material from a period of disordered gambling that peaked for me during the months of February and March 2017. At the time I was on sick leave, employed by Dorset Police. I was suffering from suicidal thoughts throughout this period. Due to removing myself from the pension scheme, my total monthly wage was around £2,400 and my maximum available spend was in the region of £1500-£1800 (taking away household bills/mortgage or rent, etc). The online account was opened at 21.44 hours on 5 February 2017. The account was closed on 9 March 2017, about a month later. During this time, the account was used for nine days.

Disordered gambling and harm markers

  • Clear and obvious increases in deposit amounts, doubling several times.

  • Rapid losses and clear and obvious loss-chasing behaviour.

  • Increased frequency of deposits.

  • Numerous failed deposit attempts.

  • Stake increases and erratic gambling patterns.

  • Frequent gameplay during the early hours.

  • Some prolonged continuous game play, peaking at ten hours and ten minutes.

  • Intensive gambling at the beginning/end of the month, associated with payday.

  • Communications from me to seek cashback due to heavy losses.

Summary of account

  • Total number of deposits:

  • 37 Total value of deposits: £14,670

  • Total number of withdrawals: 2

  • Total value of withdrawals: £4,920

  • Total number of failed deposits: 24

  • Total value of failed deposits: £11,500 (hypothetical figure)

  • Total number of days failed deposits attempted: 8

  • Highest spending day: 03.03.2017 (£10,770)

  • Second highest day: 05/06.02.2017 (£3,200)

  • Highest frequencies of failed deposit attempts: 03.02.2017 and 05/06.03.2017

  • Total losses: c£10k

Breakdown of wagering

On the most disordered event on 02 March, the total wagering amounted to £64,599 and the average stake size was £42.64, spanning over the two periods, which equated to three hours gameplay, followed by one hour and forty minutes (total time: 4 hours and 42minutes).

  • Event 1, 05.02.2017 Total wagered: £369.50 Av. stake: £16.07 Total time: 6 minutes

  • Event 2, 06.02.2017 Total wagered: £24,133 Av. Stake: £9.55 Total time: 11 hours, 12 minutes (including 10 hours and 10 minutes continual event)

  • Event 3, 08.02.2017 Total wagered: £3,501 Av. Stake: £4.29 Total time: 5 hours, 33 minutes (including a 5-hour continual event)

  • Event 4, 12.02.2017 Total wagered: £2,945 Av Stake: £7.20 Total time: 1 hour, 20 minutes.

  • Event 5, 15,02.2017 Total wagered: £384 Av. Stake: £4.99 Total time: 10 minutes

  • Event 6, 02.03.2017 Total wagered: £64,599 Av. Stake: £42.64 Total time: 4 hours, 42 minutes.

  • Event 7, 04.03.2017 Total wagered: £1,512 Av. Stake: £16.09 Total time: 6 minutes

  • Event 8, 08.03.2017 (and early hours of 09.03) Total wagered: £1,851 Av. Stake: £15.18 Total time: 2 hours, 47 minutes.

  • Event 9, 09.03.2017 Total wagered: £5,233 Av. Stake: £5.75 Total time: 2 hours (approx.)

Source of funding

I gambled well above what was available to me, funded via increases to overdrafts and taking out loans.

• The first two days, 5/6 February saw a continuous gambling event, in which funds ‘available’ were used.

• The second gambling event on 6 February was via an increase in my overdraft by £2,000.

• Subsequent gambling events on 12 and 17 February were also via an increase in my overdraft.

• The commencement of the main gambling event, on 2 March, was through obtaining a £5k loan via the banking app on my phone with HSBC bank. This was spent within approximately two hours.

• Around four hours later, an additional loan of £5k was taken out, with £3k deposited into the gambling account over the course of 21 minutes. • An additional c£3,5k was deposited during the latter part of the morning, over a period of around one and half hours, which caused me to exceed the £5k overdraft to £6k.

• There were then some small deposits towards the end of the account’s life.

• The eventual closure of the account, instigated by me, on 9 March 2017 and withdrawing the £900 ‘bonus’ paid to me.

• The total losses on the account were c£10k with one additional withdrawal of £4020 made on 2 March, coinciding with the main gambling event.

Increasing deposits and failed deposits

There is a pattern of increasing deposit amounts, and multiple occasions where deposits failed.

• Deposits began at £200 during the first event. Between the account opening on 5 February at 21:44 hours and 00:17 hours on 6 February there were a total of six deposits made (see figure 1). The subsequent deposits totalled £948, deposits 1.jpg.

• Then during the day of 6 February, there were an additional five deposits of £200 between 09:47-16:37 hours, four of which were in the two hours between 14:42-16:37.

• Following this, evidently my available cash had run out (total loss of £1,948) and between the hours of 16:53-16:55, three failed attempts at depositing £400 are documented.

• I was then able to extend my overdraft by £2,000 and between the hours of 17:03-17:42 (39 minutes) the deposits increased to £400 each, with five deposits (total £2000).

• At 18:25 hours there was a further failed deposit, this time with the amount increasing to £800. This effectively signalled an empty balance (in fact I had just over £100 left). On 8 February at 01:12 a lone deposit was made of £100.

• The main disordered event on 2 March resulted in the depositing of £10k, with five of the deposits being £1000.

Erratic and increasing betting

Unsurprisingly, the level of betting generally increases, in line with the increase in deposit sizes.

• Upon opening the account on 5 February, ‘Blackjack’ was played briefly with an average stake of £20.

• This morphed into the event on 6 February, on virtual fruit machines, ‘Piggy Riches’ and ‘Jack and the Beanstalk’, with stakes beginning at £3/spin, gradually increasing to £30/spin.

• On 12 February, the disordered event commenced in the early hours, and was continued for several hours after a short sleep. This was largely betting on virtual fruit machines at £5/spin. The event ended with 15 live roulette bets of between £20-£55/spin.

• As funds were now low, on 15 February there was a ten-minute event of £5/spin on a virtual fruit machine.

• The disordered event that commenced in the early hours on 17 February, was again on virtual fruit machines and lasted around 3 hours.

• The main event on 2 March resulted in stakes commencing at £8/spin and peaking at £90/spin, this lasting around three hours. The event continued when I woke up five hours later and lasted one hour and forty minutes, gambling on the fruit machine at a consistent £50/spin.

• On 4 March, a small event lasting just six minutes occurred on virtual machines, with stakes of £14 and £20/spin. At this point, funds were depleted, hence the event lasting minutes.

Timeline of harm makers linked to disordered events

• The creation of the account saw an average stake of £16.07 over a very short period, just six minutes, and was close to payday.

• The following day saw the second highest amount deposited (£3,200), an exceptionally long continuous period of gambling (over ten hours) and a high frequency of failed deposit attempts. Deposit sizes had also doubled from £200 to £400.

• Following event three, emails were instigated by me to negotiate bonuses. Despite losses of many thousands being discussed, there were no discussions around affordability or any other safeguarding. Eventually a £400 bonus was given with no wagering requirements and a 10% cashback on all losses.

• Event three saw five hours of continual gambling at a lower average stake size of £4.29. The reality behind this reduction of stake size (which is still high to most people) was that my available funds running low because of event two. Events four and five were clearly indicative of me running out of money. Several failed deposit attempts after this event support this.

• Event six, again occurring shortly after payday, resulted in a huge leap in average stake size to £42.64, wagering £64,599 over a period of four and three quarter hours. Deposits doubled again to £800s and then peaked at £1000s. Prior to the event, there were 12 failed deposit attempts on 1 and 2 March.

• Event seven shows a very short event which was as a result of funds being depleted.

• The gap between events seven and eight/nine was as a result of waiting for the withdrawal of £4,020 to clear. The money was then spent on these events, as well as well as paying £1,100 to clear the unauthorised overdraft, which exceeded my £5k limit and went to £6,300.

• Event nine resulted in final depletion of funds and the closure of the account, withdrawing the £900 cashback given to me.

• The account was closed by me withdrawing the £900 bonus rebate on 9 March, to allow me to have some ‘breathing space’. I informed the company I couldn’t control my gambling and that I wished to self-exclude.

Measures taken by the company to comply with Social Responsibility and Anti-Money Laundering requirements

This section is empty because there is no material that exists that was provided to me via the SAR and is therefore unlikely to exist. As can be seen within the communications between myself and the company (see contact screenshots 1-27), there was never once any intervention, interaction or measures taken by the company to ascertain my Source of Wealth or to comply with SR requirements, when clear harm markers were in existence. It can be seen that I instigated communications by negotiating a 10% cashback ‘bonus’ on my losses (less any amount withdrawn). This effectively made me a VIP which resulted in a VIP manager calling me on the phone twice to ascertain what my sporting interests were to offer me tickets to events. The VIP manager never asked me what I did for a living, neither did he ask me for any proof I was able to spend the sums I was.

What did the director of the company say?

• Denial that the below Licence Condition and Code of Practice (LCCP) had been breached.

• Stated, ‘he’d seen much worse’.

• Conceded that, ‘We will learn from this’ and that ‘More needs to be done’.

What rules were clearly breached?

Social responsibility code provision: 3.4.1.1(e), from the LCCP (relevant at the time the account was active): Licensees must put into effect policies and procedures for customer interactions where they have concerns that a customer’s behaviour may indicate problem gambling. The policies must include specific provision for making use of all relevant sources of information to ensure effective decision making, and to guide and deliver effective customer interactions, including in particular:

• provision to identify at risk customers who may not be displaying obvious signs of, or overt behaviour associated with, problem gambling: this should be by reference to indicators such as time or money spent

• specific provision in relation to customers designated by the licensee as ‘high value’, ‘VIP’ or equivalent.

Comparisons with Gambling Commission regulatory action

In November 2018, the Gambling Commission published ‘lessons to be learned’ from its 2017 assessment of online casino companies’ compliance with AML. The Commission reported it had also identified action that needed to be taken in respect of SR code breaches:

We reviewed a large number of customer accounts during the assessments and identified potential signs of problem gambling based on consumers’ gambling pattern and spend. In many cases however this behaviour did not trigger a customer interaction. Customer account records did not show any evidence of customer interactions taking place and operators were of the view that these customers did not raise any concerns. We therefore consider that licensees may be breaching social responsibility code provision 3.4.1.1(e) (i) customer interaction.

It is important to remember that the vast majority of Gambling Commission regulatory action relates to when crime has been committed, involving significant amounts of money and extending over a fairly long period of the offender’s gambling (normally over numerous months/over a year). In the case of my online account, this looks at a period of disordered gambling over roughly a 4 week period, with approximately a third of those days with active gameplay, and the approximate loss equating to £10k. However, in October 2017, the Gambling Commission took regulatory action against SJU Limited trading as Stan James Online, in which a customer stole £40k over the period of a year to fund his online gambling – more within the region of my loss on this account. The company was found to be in violation of LCCP code: 3.4.1 (as quoted above) and 2.1.2, which is a failure to adhere to financial requirements to prevent money laundering.

Analysis of the licensee’s responsible gambling policy revealed the policy did not meet the required standards. It is our view that had the licensee followed effective procedures then there would have been better social responsibility interactions with the customer.

Between 1 November 2014 and 30 October 2016 the customer lost £40,000 with Stan James Online but during this period the social responsibility interactions were limited to emails containing social responsibility sign posting. The emails were triggered by purely monetary alerts and did not take the holistic view of the customers gambling activities that we would have expected. A further interesting development occurred last year, on 31 July 2019, when GVC were fined £5.9m relating to the usual failings of SR and AML. Two key points made this case significant.

The first is that the company accepted that between 1 November 2014 and 1 October 2017, ‘it did not have effective policies and procedures in place for customers who may be displaying signs of problem gambling’. You may assume that there would be an onus on the company to identify all of those affected by this startling admission. However, it is unclear whether this has been the case, other than the ruling stating that just fifty other accounts would be reviewed. The second is that the value of losses for one of the subjects in the case amounted to £98k, over a two and a half year period. Whilst this is a large sum of money, considering that is was over a fairly lengthy period, like the Stan James Online action, I believe it could also be compared to my case, and indeed many others.

Case study B

Case Study B relates to gambling activity with a well known UK gambling licence holder. The subject held a prominent position within the company he was employed with. The individual was earning approximately £5k per month, with a potential maximum monthly spend available of c£3k, this being roughly double to that of myself in Case Study A. The subject’s gambling was funded through a combination of his own wages, multiple credit cards and stolen money from the company he worked for. The subject amassed debts via several cards. Due to the vast sums of money that were stolen, over a period of around five years, the subject concerned is unable to state what proportion of the money spent on this particular account was stolen. However, knowing the individual’s approximate salary and available spend, it is relatively straightforward to ascertain when criminality began to take over from the subject’s only legitimate source of funds through his salary. It is believed that a large proportion of the money spent through this account was stolen money. The subject’s gambling resulted in him losing his marriage (which he mentions to the gambling company) and subsequently having his home repossessed.

The subject reported his offending behaviour to his employer and assisted his employer in attempting to ascertain the amount he stole. The following day, his employer reported the matter to the police, and he has been completely forthcoming with assisting the investigation. During this time, the subject made a SAR and received the required material relating to his activity with the gambling company. He asked the gambling company whether they believed they had complied with the licensing conditions to safeguard him and prevent money laundering and the company informed him that they had done. It is unlikely, despite the overwhelming evidence from the SAR that they have breached SR and AML rules, that the company completed a Suspicious Activity Report relating to the subject. It is further unlikely that the company self-reported this case to the Gambling Commission, once the subject suggested to them that there had been suspected breaches. It is unknown whether the Commission are aware of this case. The subject has not had any correspondence with them. The police requested that the subject allowed them to receive the material from the gambling company to assist the investigation, which the subject agreed to. It is not known whether the police and the Commission have communicated with each other regarding the case.

Summary of account

The subject held the account from 2007 and the data available to review starts in December 2008 and concludes in October 2017. Within his deposit/withdrawal material (see, depositsredacted document), annotations made on this document have the total sum withdrawn and the total amount deposited after each month. These figures were rounded up, which is the amount approximated rather than the official amount documented by the company (see caseBemails).

  • Total deposits Approximate: £1,882,450. Figure given by company: £1,570,610.

  • Total withdrawals Approximate: £854,550. Figure given by company: £692,419.

  • Net loss Approximate: £1,027900 Figure given by the company: £1,059,835.

  • The difference between net loss approximation and the official figure is £31,935.

Variable and very large monthly deposits

The average monthly amount deposited based on the approximated figures is £17,758 (compared to the official figure of £14,817). The average monthly withdrawal is £8,061 (compared to the official figure of £6,532). This makes the average monthly loss £9,697 (compared to official figure of £8,285 (the difference being an average of £1,412 per month). Even using the official figures, the average monthly loss over nearly a ten year period are £8,285, which is 2.5 times the maximum available spending capacity of the subject.

There are some large variations to this over the lifetime of the account.

• It is apparent that within the first month he exceeds the approximately £3k available from his salary, by depositing £6k and withdrawing just £300.

• Just three months later, in March 2009, the deposits for the month increased to £14k, with £10k withdrawn.

• By November 2012, the deposits for the month amounted to £30k.

• In August 2013 this spiked to £51k deposits and £53k withdrawals (this being one of a small number of months that money was made, over the nine years).

• The biggest amount deposited in one month was in September 2015, £53.5k (withdrawal of £32.5k) and this was followed by there being no withdrawals in December 2015 and £18k being deposited.

Disordered betting

The very fact that the subject was gambling heavily at poker, horse racing and sports betting (as well as other forms of gambling), at the same time, suggests abnormal gambling behaviour. The subject spent prolonged periods gambling and often engaged in poker during the evenings and into the early hours, without sports betting – but usually was involved in several forms of gambling simultaneously.

• Initially, the gambling is in the form of individual bets, generally in double figures – which in terms of multiple and consecutive betting, is high to most ‘normal thinking’ gamblers.

• Over the course of the years, horse-racing bets increase into the triple figures as one off events, and we see sporting bets increase from single figures to triple figures sporadically.

• As time goes on, these triple figure bet sizes become more common. We start to see gambling events made up of consecutive high stake horseracing bets, peaking at over £800 per single bet. We also see that at the same time, sports bets increase to a peak of £1,000 per bet. • The gambling events begin to become more frequent and last longer.

• Coupled with this clearly disordered betting pattern, we begin to see reverse withdrawals become more frequent and higher in value. Social Responsibility interactions and Source of Wealth checks The licence holder claimed that they complied with SR, through just four phone calls during this entire period (see annotations on depositsredacted and interactionsredacted).

• In November 2014, nearly six years after the material commences, the first social responsibility interaction was made.

• Following this in September 2016 the recorded interaction reads: Called the customer as part of our UK licensing requirements and he confirmed he was still comfortable and actually said he keeps a log of his losses. He also provided details of what he does that allows him to fund his account at the level he does.

During all the SR interactions, the subject was simply verbally asked whether he was ‘comfortable’ with his level of spending. Inevitably, the subject said he was, and lied (as per the conversation above), both behaviours of a gambling disorder. The subject never once proved his Source of Wealth but simply told the company he had the funds – this was enough for him to continue and to then be made into a ‘Platinum’ client. While there were only a few superficial SR interactions from the licence holder, there were numerous other interactions between the subject and the company.

• There is material that shows that the subject had issues with withdrawals as far back as 2007, before the available material starts.

• It was identified that the subject had three active accounts with the company. The company did not use this as a reason to investigate whether the subject could afford his level of gambling at that time.

• The problems the subject was experiencing with withdrawals was as a result of him having numerous different banking cards and credit cards, which should have been a ‘red flag’ for potential money laundering and disordered gambling.

• There are several phone calls made by the company to the subject to ascertain why his spending/play activity had dropped and inducements of bonuses were given to him, well before the first social responsibility interaction.

• The requests the subject made to the company to convert poker points to cashback reward amount related to his significant spending on poker.

• In addition to this, the subject was made into a VIP by the company at some point during 2012/2013. This resulted in the subject receiving invitations to sporting hospitality events.

• Towards the end of the account, we can see material whereby the company finally wish to see evidence for the Source of Wealth. • The request wasn’t followed up immediately by the company and the subject continued to gamble.

• Finally, the subject told the company to close the account, based on the fact he clearly couldn’t provide the material to prove where his funds came from.

What do Anti-Money Laundering regulations require the company to do?

As referred to above, in the Gambling Commission undertook an assessment of AML compliance in the remote casino sector in 2017, finding widespread failings. The Gambling Commission sent a letter to licence holders on 4 January 2018, reminding them of the requirements. Licence holders are required to implement policies, procedures and controls to mitigate money laundering and terrorist financing risk, in compliance with:

• Licence condition 12.1 Prevention of money laundering and terrorist financing • The Proceeds of Crime Act 2002 (POCA) and Terrorism Act 2000 (TACT)

• The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the Regulations).

Using money to gamble, regardless of the amount, which is the proceeds of any crime, can amount to money laundering, if the person using or taking the money knows or suspects that it is the proceeds of crime. Money laundering offences are wide and can be committed by any person, including, for example, an employee of a gambling company, who has knowledge or suspicion that a customer is using the proceeds of crime, or has possession of the proceeds of criminal activity. Typically, classic money laundering consists of a number of stages:

• Placement

• Layering is an attempt to conceal or disguise the source and ownership of the criminal proceeds by creating complex layers of financial transactions which obscure the audit trail and provide anonymity. The purpose of layering is to disassociate the criminal proceeds from the criminal activity which generated them. Typically, layers are created by moving monies in and out of various accounts and using electronic fund transfers (as evident but not acted on in this case)

• Integration of the ‘clean’ money into the economy is accomplished by the money launderer making it appear to have been legally earned or obtained.

The offence of money laundering also includes simple criminal spend (the use of criminal proceeds to fund gambling as a leisure activity) and may not include all the typical stages of the laundering process (if any at all). Gambling license holders are required to identify their customers, keep appropriate records, establish internal procedures to train staff and guard against money laundering, and to report any indications of money laundering to the competent authorities. There is no minimum financial threshold for the management and reporting of known or suspected money laundering or terrorist financing activity by gambling companies.

Licence condition 12.1.1 relates to Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD). Remote casino operators are required to conduct CDD when they establish a business relationship with a customer, suspect money laundering or terrorist financing or doubt the veracity or adequacy of documents or information previously obtained for the purposes of identification or verification.

• It is a requirement for the company to complete CDD for every customer once a business relationship has been entered (i.e. upon first deposit made by customer).

• In addition, each customer with an ongoing business relationship must have their activity monitored continually. Ongoing monitoring of a business relationship means 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, their business and risk profile. Licence holders are told their monitoring should include:

• high spenders – the level of spending which will be considered to be high for an individual customer will vary among casino operators, and among casinos managed by the same operator

• disproportionate spenders – casino operators should obtain information about customers’ financial resources so that they can determine whether customers’ spending is proportionate to their income or wealth (as evident but not acted on in this case)

• casual customers – this includes tourists, participants in junkets and local customers who are infrequent visitors

• regular customers with changing or unusual spending patterns (as evident but not acted on in this case)

• improper use of third parties – criminals may use third parties or agents to avoid detection

• CDD undertaken at the threshold or to buy chips, or they may be used to gamble so as to break up large amounts of cash junkets – junkets can pose several higher risks, including criminal control of the junket operator or participants, the movement of funds across borders which obscures the source and ownership of the money gambled by participants and their identities, and structuring, refining and currency exchange risks

• multiple player accounts – some customers will open multiple player accounts under different names to hide their spending levels or to avoid breaching the CDD threshold (as evident but not acted on in this case).

Section 329(1) of POCA provides that a person commits an offence if that person:

• acquires criminal property

• uses criminal property

• has possession of criminal property (for example, via stakes).

The penalty for conviction on indictment for an offence under sections 327, 328 or 329 of POCA is imprisonment for a term not exceeding 14 years, a fine, or both. In addition, POCA contains provisions for the recovery of the proceeds of crime and forfeiture can be granted, regardless of whether a conviction for any offence has been obtained or is intended to be obtained. Under certain circumstances, criminal property can be recoverable even if it is disposed of to another person. Gambling licence holders are told that, in order to avoid committing offences under POCA, they should report instances of known or suspected money laundering or terrorist financing by customers to the National Crime Agency (the NCA) and, where a defence (appropriate consent) is requested, wait for such defence (consent) to deal with a transaction or an arrangement involving the customer, or wait until a set period has elapsed before proceeding.

Section 4 Fraud by abuse of position

Occupies a position in which he is expected to safeguard, or not to act against, the financial interests of another person, (b) dishonestly abuses that position, and (c) intends, by means of the abuse of that position— (i) to make a gain for himself or another, or (ii) to cause loss to another or to expose another to a risk of loss. (2) A person may be regarded as having abused his position even though his conduct consisted of an omission rather than an act.

Evident breaches of Anti-Money Laundering

There is clear evidence to show AML regulations have been breached throughout the lifetime of the subject’s account. The data provided speaks for itself. No tangible evidence was ever provided to the company of the subject’s source of wealth. This did not exist, not only due to the subject amassing huge personal debt – it did not exist because a large proportion of the money gambled was stolen. The SR interactions came after at least eight years of account activity, despite the high level of spend, averaging £8/9k per month, and in some months much more. These few perfunctory interactions simply entailed the subject being asked if he was comfortable with his level of spending.

Furthermore, the subject engaged numerous times with the company himself. During those occasions, the identified issues with multiple bank cards/credit and even multiple accounts were never documented by the company as being any issues of concern. Rather, the company encouraged him to gamble more and made him a VIP.

Legacy of harm

I recently heard a boss of Paddy Power explain to the House of Lords that his employees are now rewarded for the identification of vulnerable customers, rather than the profit they bring. Whilst I applaud this, unfortunately this is too late for the many that have committed suicide, ended up in jail, lost their homes and much more. In its annual summary of enforcement action and lessons for industry for 2018/19, the Gambling Commission writes (highlights added): 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.

This is an astounding admission from a regulator, and one that somehow gone without significant public attention – that the companies it regulates have been breaking the law, in an area as serious as money laundering and terrorist financing, to make profit, while exploiting customers with mental health problems. While those suffering disordered gambling have been subject to criminal proceedings – and they and their families live with the legacy of harm – the companies that have exploited and profited from them have not.

Abbreviations: NDA:

Non-Disclosure Agreement. SR:

Social Responsibility AML:

Anti Money Laundering SARs: Subject Access Requests