AML and Social Responsibility failings lead to severe consequences for operators of five British land-based casinos

The Gambling Commission has announced the outcome of regulatory action taken against the operators of five land-based British casinos for historic anti-money laundering and social responsibility failings. In general terms, failings established amongst these cases were of the same type that have previously occurred in relation to other casino operators, namely:

  1. inappropriate money laundering and terrorist financing risk assessments, inadequate AML policies & procedures and implementation of the same, including in relation to verification of source of customer funds and maintaining adequate record-keeping of decision-making (and rationale for decisions) and
  2. inadequate safer gambling policies & procedures, including in relation to specific provision for making use of all relevant sources of information to ensure effective decision-making, and to guide and deliver effective customer interactions.

However, points to note arising from the Commission’s more detailed findings of note in these cases include the dangers associated with operators:

  • not undertaking PEPs and financial sanctions checks (including against a customer from a high-risk jurisdiction)
  • allowing a customer to continue gambling for a period of  20 months after they were asked (but subsequently failed) to provide source of funds evidence
  • not conducting checks to establish if any links exist between a international student customer’s parents and a company in circumstances where, in response to a verification of source of funds request, the customer claims that payments from that company are payments from their parents
  • accepting assurances from a customer sustaining high losses that they are “comfortable with their level of play” or that their business is “in relatives’ names” in order to prevent that customer “losing the business through gambling”
  • agreeing to increase a customer’s debit card limit “without any assessment of affordability”, but instead solely on the basis that the customer (whose demeanour was “calm and not intoxicated”) confirmed that they had no money problems and were financially stable
  • assuming (in the absence of any recorded customer interaction, record of reviewing the customer profile, checks on the company or potential wage drawn from the company) that a customer can afford their level of losses because they have been verified as being a company director
  • not undertaking any responsible gambling interaction with a VIP customer who lost more than £205,000 in a two year period

1. Clockfair Limited, Shaftesbury Casino Limited, Les Croupiers Casino Limited and Double Diamond Gaming Limited

In relation to the four casino operators mentioned above, issues that had come to light during regulatory compliance assessments led to commencement by the Gambling Commission of operating licence reviews, in relation to which regulatory settlements were concluded between each of those operators and the Commission.

Regulatory settlements may take place where the licence holder has been open and transparent with the Commission and has shown a willingness to suggest actions that prevent the need for a more formal sanction. In this respect, in each of the above four cases the operators in question admitted their respective failings and committed to an ongoing programme of improvements to ensure its policies, procedures and controls are appropriate and implemented effectively, including (but not limited to) the following specific remedial action:

  1. In the case of Clockfair Limited and Shaftesbury Casino Limited:
    • Reviewing and updating its policies and procedures for AML and social responsibility.
    • Incorporating within its social responsibility policy properly defined indicators of risk for the identification of problem gambling
    • Assessing its internal and external reporting processes.
    • Reviewing and updating its record keeping procedures.
    • Undertaking a significant staff training exercise to ensure understanding of its policies and procedures.
  2. In the case of  Les Croupiers Casino Limited:
    • Implementation of proactive and behavioural-based safer gambling triggers
    • Introduction of the recording of all customer interactions regardless of outcome
    • Introduction of audits to ensure customer interactions are taking place as and when required and being evaluated
    • Safer gambling refresher training to all of its employees
    • Investment in a new case management system to ensure that all relevant information for customers is stored in a single location
    • Introduction of a new customer due diligence process
    • Taken steps to ensure that the level of gambling spend is proactively considered against the level of income evidence when determining whether the extent of EDD completed is adequate.
  3. In the case of Double Diamond Gaming Limited:
    • Undertaking a review of its the top active customers at each of its premises, as well as those identified by the Commission, to ensure that adequate EDD is held, that risk assessments have been completed, and that clear justification for the decisions taken is recorded
    • Conducting an extensive review of its AML Policy and Safer Gambling Policy and related procedures
    • Moving to a ‘members only’ policy
    • Appointing a Deputy MLRO
    • Revising its safer gambling training programme to take into account revisions to its Safer Gambling Policy and procedures

In each of the above four cases, it was agreed that the following payments in lieu of a financial penalty (that will be directed towards delivering the National Strategy to Reduce Gambling Harms) should be made by the operators in question, namely:

  • Clockfair Limited: £260,000 (plus £11,690.41 costs)
  • Shaftesbury Casino Limited: £260,000 (plus £11,690.41 costs)
  • Les Croupiers Casino Limited: £202,500 (plus £14,794.62 costs)
  • Double Diamond Gaming Limited: £247,000 (plus £24,530.81 costs)

In each of the above cases, the Public Statements published by the Commission (that you can download below) revealed that the following ‘aggravating factors’ and ‘mitigating factors’ had been taken into account by the Commission when agreeing to reach a regulatory settlement:

Aggravating factors

  1. In all four cases mentioned above:
    • The Licensee should have been aware of the breaches
    • Many of the breaches were serious and had an impact on the licensing objectives
    • The breaches arose in circumstances that were similar to previous cases the Commission has dealt with which resulted in the publication of lessons to be learned for the wider industry
    • The need to encourage compliance among other operators
  2. Additionally, in the cases of Clockfair, Shaftesbury and Double Diamond
    • The duration of the breaches
  3. Additionally, in the cases of Clockfair and Shaftesbury:
    • There were repeated breaches of licence conditions as a result of the absence of internal controls and procedures.

Mitigating factors

In all four cases mentioned above:

    • There was timely co-operation with the investigation undertaken by the Commission and no attempt to conceal the extent of the breaches
    • An ongoing programme of remedial action was commenced in response to the breaches being brought to the Licensee’s attention
    • The Licensee has shown insight into the seriousness of the breaches.

2. A&S Leisure Group Limited

In the one remaining case, a review of the operating licence held by A&S Leisure Group Limited was undertaken, in which the Commission found anti-money laundering and social responsibility failings, with the consequence that (on 1 February 2021, but only announced now) a financial penalty of £377,340 was imposed and a formal warning issued.

Although this constitutes a more serious sanction than a regulatory settlement, the Commission has not issued such detailed information as appears within the Public Statements for the four casino operators with whom regulatory settlements were concluded. Instead, the only publicly available information is that set out within the Commission’s Regulatory Sanctions Register which lists the following reasons for the Commission’s decision to impose on A&S Leisure the above financial penalty and issue a warning:

The Licensee failed to:

  • establish and maintain appropriate risk-sensitive policies, procedures and controls to prevent money laundering and terrorist financing
  • ensure such policies, procedures and controls were implemented effectively, kept under review, revised appropriately to ensure they remain effective and take into account any applicable learning or guidelines published by the Gambling Commission from time to time
  • promptly interact with customers who may have experience significant harm and losses on the Licensee’s casino products
  • record sufficient information on customer interactions to demonstrate whether the customer should be identified as high risk for the potential of problem gambling.

The Commission has added that “The Licensee co-operated with the investigation and made no attempt to conceal the failure or breach following the Commission’s engagement”.

3. Gambling Commission press release

The Gambling Commission’s press release in relation to the above reads as follows:

Land-based casinos face regulatory action

FIVE casinos have faced enforcement action following Gambling Commission assessments of their businesses.

All of the casinos were found to have failed to follow social responsibility and anti-money laundering rules set by the Commission and therefore the Commission put their operating licences under review.

Clockfair Limited and Shaftesbury Casino Limited will both pay a £260,000 regulatory settlement, Les Croupiers Casino Limited will pay a £202,500 regulatory settlement, Double Diamond Gaming Limited will pay a £247,000 regulatory settlement, and A&S Leisure Group Limited will receive a warning and pay a £377,340 fine.

Read regulatory settlement for Clockfair Limited

Read regulatory settlement for Shaftesbury Casino Limited

Read regulatory settlement for Les Croupiers Casino Limited

Read regulatory settlement for Double Diamond Gaming Limited

Read sanctions register update for further details of A&S Leisure Group Limited failings (PDF).

Richard Watson, Commission Executive Director, said:

“These failings were identified as part of our ongoing drive to raise standards across the whole gambling industry. Every single operator must ensure they are following rules that are in place to make gambling safer and prevent it being a source of crime.”

4. Future challenge

As British land-based casino operators plan for re-opening their businesses no earlier than 17 May 2021, they may wish to bear in mind the following comment made by the Gambling Commission in its first ever National Strategic Assessment, published on 6 November 2020:

COVID-19 has had a severe impact on premises-based gambling and the full impact of this on consumer behaviour is not yet known. As premises reopen and adapt to the new environment, there is an opportunity for land-based gambling to make a case for creative solutions to enhance their products and services in a way which goes hand in hand with enhanced consumer protections.

The background to that comment is also worth taking into account. The Commission acknowledges within that same ‘National Strategic Assessment’ that “most land based gambling is conducted without identification of customers limiting the scope for player-centric controls”. Under the heading “Anonymity within premises-based gambling” , it goes on to state:

Premises-based gambling presents different challenges and opportunities to online gambling. Offering gambling in person provides the opportunity to observe and engage with customers face to face. However, where gambling is not account-based it is more difficult to track consumer behaviour and provide gambling management tools to players. Most premises-based gambling can be undertaken anonymously.

Anonymity within premises-based gambling combined with the use of cash poses inherent challenges to identifying and acting on suspicious gambling activity. Even when identity is not a factor, we still see the challenge that premises-based environments such as casinos encounter, in delivering regulatory requirements when interacting with customers who are primarily engrossed in a social leisure activity. Operators must implement successful methods to engage to prevent harm and comply with preventative money laundering measures required in legislation.

The risk of harm in premises-based environments is linked to the number of staff working in those premises, as that determines the type and level of interaction that can take place with consumers.