AML failings: Smaller operators could be next in the spotlight
Richard Williams, head of licensing, gaming and regulatory law at Joelson explains how operators can delve deeper into their policies to avoid falling into the Gambling Commission’s AML investigation
The Gambling Commission has called on operators in the remote casino sector to urgently review their anti-money laundering and customer interaction procedures with immediate effect following its recent compliance assessment activity.
It has been reported that 17 online gambling operators have been asked to improve measures to protect customers and prevent money laundering in a letter from the Gambling Commission, with five operators likely to face a review and potentially revocation of their operating licences.
The Commission’s investigation uncovered serious anti-money laundering failings and flaws in operators’ compliance with the social responsibility (SR) code, which is designed to prevent ‘problem gambling’.
The focus of the Gambling Commission has now shifted from land based operators to remote casinos. It’s worrying to read about the lack of compliance uncovered, particularly given the financial penalties for similar breaches by land based casinos in the UK occurring not so long ago – Caesars (December 2015 – £845,000 voluntary settlement) and Gala Coral (April 2016 – £846,699 voluntary settlement).
You would think that those penalties would have hit home with an indication that remote casino operators would be next on the list for closer examination. Those 17 remote operators under investigation really need to get a grip on this as a matter of urgency. For the five who are facing review it may already be too late.
I expect that this is likely to be the tip of an iceberg, because I envisage that the Commission started its investigation at the top (in terms of operator size) and will be working its way downwards. For those operators who have not yet been investigated, they should sit up, take note and obtain some urgent advice to rectify any compliance failings.
It’s not just a case of getting those dusty policies and risk assessments out of the cupboard and updating them – this needs to be an ongoing process, kept under review and it must become part of the operator’s procedures, with all staff aware and trained.
Whilst for larger operators, comprehensive AML procedures will already be deeply ingrained into an organisation, there is a concern that for smaller operators, complying with the requirements will prove to be onerous. Under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, remote casinos MUST (generally) identify customers and verify their identity on establishing a relationship.
Where identity is verified manually, there is a risk that this will either not be undertaken correctly, or that incorrect identity information will be approved. I can only see this benefitting automated identity verification companies, who in a large number of cases will be able to confirm identity electronically.
Casino operators should also be looking at their SAR submission records. This does not mean that SAR’s should be made as part of a box ticking exercise, but it would be unusual for a volume gambling business never to have suspicious transactions and these should be reported to the NCA and as a key event.
In relation to customer interaction, operators are going to have to be far more proactive to interact, ask questions and intervene, where they suspect problem gambling behaviour.
Intervening to stop good profit generators (e.g. VIP customers) gambling is going to be difficult, but it’s a legal requirement and cannot be ignored. There is no doubt that operators will have to toe the line or they will face revocation of their licences.
In recent days, we are seeing a number of operators publicising their adoption and use of responsible gambling tools. This may include asking customers at the outset what would be an affordable level of gambling spend (or loss for them) and setting limits accordingly, or delving deeper into their financial affairs, by interviewing customers if necessary, to establish if their gambling spending is affordable and sustainable.
I have no doubt that software developments will become more advanced and will pick up on problem gambling behaviour – even facial recognition of problem gambling has been talked about in the press.
Doing the job properly to intervene to prevent problem gambling will hit profits for sure, but in these days of tightening regulation and a media witch hunt against gambling operators, having a business is far better than having no business at all.
Richard Williams, partner at Joelson