The Gambling Commission has found “systemic” failings within processes of WHG (International) Limited that were aimed at preventing money laundering and harm being caused to problem gamblers, as a result of which it has to pay a penalty package of at least £6.2million and appoint external auditors to review the effectiveness and implementation of its anti-money laundering and social responsibility policies and procedures in order to share learning with the wider industry. That figure could increase if further incidents of failures relating to this case emerge.
In a public statement published this morning (that can be downloaded below) these failings are described as including “senior management failure to mitigate risks and failing to have a sufficient number of staff to ensure the processes were effective between November 2014 and August 2016”. This resulted in WHG repeatedly breaching its licence condition requiring compliance with the Money Laundering Regulations 2007 (that were in force at the material time) and LCCP social responsibility code provision 3.4.1 (customer interaction) in its dealings with at least ten customers who used stolen money, or money that may be the proceeds of crime, to gamble.
The public statement poses the following questions that operators should ask themselves in order to avoid making similar mistakes:
- Are you ensuring you have effective anti-money laundering and social responsibility procedures and are your staff following these procedures?
- Are you sure you have adequate staff numbers to carry out these procedures?
- Are you checking that you know higher risk customers’ source of wealth?
- Are you using all information (including customer spend levels) to identify potential instances of problem gambling?
- Are you keeping accurate records of these interactions?
We would add the following question to the above list:
- Having identified that a customer may be experiencing problems with their gambling, do you intervene in a proactive and effective manner to reduce the risk of gambling-related harm?
The Commission has provided the following examples of WHG’s failures (all figures are approximate):
- A customer was allowed to deposit £654,000 over nine months without source of funds checks being carried out. The customer lived in rented accommodation and was employed within the accounts department of a business earning around £30,000 per annum.
- A customer was allowed to deposit £541,000 over 14 months after the operator made the assumption that the customer’s potential income could be £365,000 per annum based on a verbal conversation and without further probing. The reality was that the customer was earning around £30,000 a year and was funding his gambling habit by stealing from his employer.
- A customer who was allowed to deposit £653,000 in an 18 month period activated a financial alert at WHG. The alert resulted in a grading of ‘amber risk’ which required, in accordance with the licensee’s anti-money laundering policy, a customer profile to be reviewed. The file was marked as passed to managers for review but this did not occur due to a systems failure. The customer was able to continue gambling for a further six months despite continuing to activate financial alerts.
- A customer was identified by WHG as having an escalating gambling spend with deposit levels exceeding £100,000. WHG interacted with the customer seeking assurance that the customer was ‘comfortable with their level of spend’. After receiving verbal assurance and without investigating the wider circumstances the operator continued to allow the customer to gamble. In the Commission’s view, that interaction was inadequate and did not review the customer’s behaviour sufficiently to identify if their behaviour was indicative of problem gambling.
- A customer exceeded deposits of £147,000 in an 18 month period with an escalating spend and losses of £112,000. WHG systems identified the issue but its only response over a 12 month period was to send two automated social responsibility emails. The Commission’s view is that this action alone was not sufficient, given the customer’s gambling behaviour coupled with the severity of the losses.
Neil McArthur (General Counsel to, and Executive Director of, the Commission) is quoted as saying: “We will use the full range of our enforcement powers to make gambling fairer and safer. This was a systemic failing at William Hill which went on for nearly two years and today’s penalty package – which could exceed £6.2m – reflects the seriousness of the breaches. Gambling businesses have a responsibility to ensure that they keep crime out of gambling and tackle problem gambling – and as part of that they must be constantly curious about where the money they are taking is coming from.”