On 6 November 2020 the Great Britain Gambling Commission published its report on Compliance and Enforcement action for 2019 – 2020 (“Enforcement Report”).

In a year that has been like no other, Neil McArthur explains that, amongst other things, the Commission has:

• commenced section 116 reviews on 49 PML holders;
• suspended 5 operating licences;
• revoked 11 operating licences;
• enforced 12 financial penalty packages or regulatory settlements – totalling over £30 million; and
• conducted 350 compliance assessments of land-based and online operators.

The Enforcement Report is split into seven sections which we set out in further detail below.

1. Triggers and customer affordability

Customer protection continues to be a priority for the Commission, and, over the past year, we have seen the Commission add more weight to the consideration of affordability as a significant driving factor in customer risk assessments.

According to the office for National Statistics Annual Survey of Hours and Earnings, the median gross weekly earnings for full-time employees in the UK has increased 6.4% to £585 from £550 (2019 provisional and 2018 revised results, and 2017 provisional and 2016 finalised). This figure shows that 50% of all full-time employees in the UK receive less than £30,500 per year (before tax) and does not factor in expenses such as mortgage/rent payments, telephone contracts, travel costs, food and utilities. The Commission expects such expenses to be considered in affordability frameworks so the starting point adequately reflects the true level of available disposable income for that individual.

Remarkably, the Commission states:

“Customers wishing to spend more than the national average should be asked to provide information to support a higher affordability trigger such as three months’ payslips, P60s, tax returns or bank statements which will both inform the affordability level the customer may believe appropriate with objective evidence whilst enabling the licensee to have better insight into the source of those funds and whether they are legitimate or not.”

In our view, a suggestion in an enforcement report, that an operator is in breach of a licence condition or code of practice if they don’t ascertain the legitimacy of the funding source of a player who spends more than the “national average” goes way beyond both the current regulatory requirements, as well as completely ignoring the risk-based approach enshrined in money laundering regulations. We will be writing more about this approach from the Commission in the coming days.

The Commission has recently issued a consultation and call for evidence with its ‘Remote customer interaction requirements and guidance’ (which we will write about in more detail shortly). This consultation calls for evidence on what the thresholds for these affordability assessments should be, the nature of these affordability assessments and how operators are required to protect consumers following an assessment.

2. Customer Interaction and Social Responsibility failings

Over the past year, the Commission has continued to take action where operators are not doing enough to identify and engage with customers who may be “at risk”. It has continued to see incidents of customers who were experiencing significant problems with their gambling being upgraded to ‘VIP’ status, with operators missing the clear signs of harm as they focus on profit. Such failings have been seen across online operators and land-based casinos and include:

• allowing a customer to spend £1.5m over 34 months without being able to provide evidence of any social responsibility interactions being carried out. The customer displayed signs of problem gambling including logging into their account an average of 10 times a day for a month;
• customers simultaneously seeking return of winnings to their personal bank accounts to prevent further play, whilst seeking to increase the maximum they could deposit by cheque; and
• a repeated self-excluded customer being permitted to lose £50,000 in 1 day.

With customers increasingly engaging in gambling during these unprecedented times, the Commission has provided licensees with a list of key questions that should be asked with regards to customer interactions and identifying problem gamblers.

3. Anti-money laundering and counter terrorist financing

Over the past year the Commission has seen a number of operators fall down on key terms of their licences which are relevant to anti-money laundering and counter terrorist financing. This includes:

• adopting a ‘one size fits all’ approach to their AML Risk Assessment when it should be tailored to the specific money laundering and terrorist financing risks pertinent to their business;
• a failure to adequately demonstrate that a Risk Assessment has due regard to the Commission’s own AML Risk Assessment and that they are keeping up to date with fluctuating standards in alternative jurisdictions whilst rigorously meeting GB legislation and standards; and
• operators and PML holders failing to learn lessons from the Commission’s compliance and enforcement activity.

Enforcement cases this year have focussed largely on AML failings and the Commission have provided a number of public statements throughout the year.  Operators should ensure that they have read these public statements carefully and made relevant changes to their processes where need be.

4. Personal Management Licence Reviews

Personal licence holders must take all reasonable steps to ensure the way in which they carry out their responsibilities in relation to licensed activities does not place the holder of the operating or any relevant premises licence in breach of their licence conditions.  Over the course of the past year, the Commission has found that, on numerous occasions, there has been a lack of clarity around decision making and accountability, with PML holders unclear who was responsible for issues, and that there has been a clear prioritisation of commercial outcomes over regulatory responsibility.

The Commission have also found there to be a lack of technical knowledge for PML holders in the area that they have specific responsibility for (particularly AML) and it is advised that PML holders receive regular training.

5. Illegal Gambling

In order to keep crime out of gambling the Commission is focused on identifying and disrupting those illegal websites which are targeted at the young and vulnerable gamblers and which often provide little, or no, customer protection. The Commission assesses intelligence gathered from multiple sources which often results in cases being referred to the Enforcement team for investigation and focused disruption (for example one investigation found that customers of a particular illegal website had previously been self-excluded via GamStop).

Enforcement at the Commission have tackled 59 instances of remote unlicensed operators this year and have engaged with 15 international regulators. The Commission urges licensed entities to remain vigilant as to the risk of these illegal sites using their software without authorisation and to report any such instances to them immediately. It is important to note that those advertising these unlicensed websites may have been committing a criminal offence under Section 330 Gambling Act offences (unlicensed advertising of such facilities).

6. White Label Partnerships

In its report, the Commission highlights the importance for GBGC licence holders to conduct appropriate due diligence checks on their prospective white label partners before entering into a business relationship. Responsibility for compliance will always sit with the licence holder so it is important for a licensee to satisfy themselves that appropriate safeguarding measures and controls are in place before committing to contractual obligations.

In the last year the Commission has conducted compliance and enforcement work focused on this specific area and that work revealed that licensees were failing to appropriately mitigate the risks to the licensing objectives. A failure to properly scrutinise ownership of white label partners, address money laundering and politically exposed persons’ risks along with what the Commission describes as ‘general poor oversight of activities’ led to the Commission producing revised guidance to remind operators of their obligations.

7. Betting Exchanges

This year has seen increased regulatory activity related to betting exchanges; an area of growing complexity as operators expand the breadth of markets available and the jurisdictions from which they draw their customers. The Commission explains that operators of betting exchanges must apply critical, risk-based thinking in advance to address these challenges, and that assuming something that is good enough for one regulator will be acceptable to another is flawed and is not likely to withstand the Commission’s scrutiny if it is found that these standards do not meet GB requirements.

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The Enforcement Report highlights the continued efforts that the Commission have taken to ensure that licensees are compliant with the conditions set out in their licence.  The Commission continues to conduct regular compliance checks and, as this report shows, where licensees fail to meet the standards that are expected, the Commission will take tough action, including the suspension and revocation of licences.  In addition, the Enforcement Report shows that the Commission has started to clamp down on those holding personal management licences. Those in boardrooms and senior positions need to ensure that they fully understand their responsibilities and the Commission have stated that it will continue to hold people to account for failings they knew, or ought to have known, about.

The Enforcement Report can be read here.