Spreadex to pay £1.36m after the UKGC finds social responsibility and AML failings

Spreadex has agreed to pay the UK Gambling Commission (UKGC) a £1.36m settlement after the regulator found failings in the operator’s social responsibility and AML policies.

The settlement payment will go towards socially responsible purposes. The firm also agreed to pay £7,831 towards the UKGC’s costs of investigating the case.

Investigators found these failings in the period between January 2020 and May 2021.

The failings included separate violations of licensing conditions relating to anti-money laundering and one violation of social responsibility rules concerning customer interaction.

In regards to the anti-money laundering failing, the UKGC found that Spreadex had led multiple customers to deposit and lose significant amounts of money without doing sufficient source of funding (SOF) checks.

In one instance, a customer was able to deposit £365,000 and lose £284,000 over a three-month period without any source of funding checks.

In another example, a customer who met a £25,000 financial deposit alert and had the alert for further review increased to £100,000 based on a self-declaration of income and an open-source check.

Lastly, another player was able to continue depositing after providing redacted bank statements when asked for source of funding evidence.

When looking at the social responsibility failings, the UKGC found that the company had put ineffective financial alerts in place, which allowed players to lose a lot of money in a short space of time.

The operator was found to be over-reliant on financial alerts to identify potentially at-risk gamblers and failed to record and evaluate customer interactions.

The example the UKGC found was that one customer was able to deposit £1.7m and lose £500,000 in a month and, while this person was interacted with, the Commission felt the operator did not consider the effectiveness of restricting the account.

As part of its ruling, the regulator found that the operator failed to update its risk assessment annually, and it didn’t take into account and consider information on the risks of money laundering and terrorist financing available by the regulator.

The UKGC also found that the St-Albans-based firm did not assess all relevant customer, product and geographical risk factors.

The regulator found that the operator had weaknesses and shortcomings in its AML policies and procedures, stating that customers could deposit large sums of money without any interaction from Spreadex.

According to the Commission, Spreadex also failed to review its SOF documentation, was over-reliant on these electronic checks and did not have the staff in-house to respond to the triggers promptly.

Lastly, the UKGC found that Spreadex failed to adhere to Social Responsibility Code 3.4.1, paragraphs 1 and 2, which says that all licensees must interact with their customers to minimise the risk of gambling harm.

The Commission noted several aggravating and mitigating factors when conducting its investigation.

The aggravating factors included the seriousness of the breaches, the impact on the licensing objectives and that some of the breaches were similar to previous offences, which led to the publication of lessons to be learnt by the industry, which Spreadex did not follow.

The regulator did consider some mitigating factors, such as how the operator recognised the seriousness of the breaches by self-suspending its casino arm for five months to limit the risk.

The operator also provided an action plan on how it will improve its compliance capabilities, and it also offered an early regulatory settlement.

Leanne Oxley, UKGC director of enforcement and intelligence, said: “Whilst it is disappointing to see anti-money laundering and social responsibility breaches occur despite our extensive published cases highlighting similar failures, we note the swift and robust action the licensee took to bring itself back to compliance. We expect similar commitment and engagement across the gambling sector.”

This is the third action taken by the UKGC this month after Entain and LeoVegas were issued separate fines earlier this month.

Entain agreed to pay a record £17m settlement after a number of social responsibility and AML failures were found across its land-based and online divisions. UKGC chief executive Andrew Rhodes said Entain could lose its UK licence if it continued to breach the rules.

LeoVegas was fined £1.3m after the regulator found a number of social responsibility and AML breaches.