Announcement of Casumo’s £6million fine raises AML & Safer Gambling points to note

The Gambling Commission has today (25 March 2021)  announced that, following matters discovered during a compliance assessment that led to an operating licence review, a fine of £6million has been imposed on remote gambling operator Casumo Services Limited for the following social responsibility and anti-money laundering failings, which we understand occurred during 2019:

  • breach of Licence Condition 12.1.1, paragraphs 2 and 3 (i.e. relating to appropriate AML/CTF policies, procedures and controls and effective implementation, review and revision of the same)
  • breach of Licence Condition 12.1.2 (i.e. Anti-money laundering measures for operators based in foreign jurisdictions)
  • failure to comply with paragraph 1(e) of social responsibility code provision 3.4.1 (i.e. an element of the customer interaction requirements that were in force prior to 31 October 2019)
  • failure to comply with paragraphs 1 and 2 of social responsibility code provision 3.4.1 (i.e. the customer interaction requirements that have been in force with effect from 31 October 2019)

In addition, pursuant to section 117(1) of the Gambling Act 2005, the Commission has issued a warning and added an ‘independent audit’ condition to Casumo’s operating licence.

The Commission’s regulatory sanctions register makes clear that Casumo “has co-operated with the Commission throughout the investigation”.

Today’s announcement by the Commission (that you can download below) reads as follows:

Regulatory action against Casumo

A gambling business will pay a £6m fine and undergo extensive auditing after a Gambling Commission assessment revealed social responsibility and anti-money laundering failures.

Casumo – which runs – will also receive an official warning as a result of the Commission investigation.

Social responsibility failings included:

  • Not putting into effect policies and procedures for customer interaction where it has concerns that a customer’s activity may indicate problem gambling, and this resulted in:
    • One customer losing £1.1m over three years without being subject to a responsible gambling interaction.
    • A second customer losing £65,000 in one month without being subject to a responsible gambling interaction.
    • A third customer losing £76,000 over seven months without being subject to a responsible gambling interaction.
  • Not taking into account the Commission’s guidance on customer interaction, and this resulted in:
    • The operator not carrying out a responsible gambling interaction on a customer who lost £89,000 in a five hour period.
    • The operator not carrying out a responsible gambling interaction on a customer who lost £59,000 in a 90 minute period.

Anti-money laundering failings included:

  • Customers were allowed to deposit significant sums of money without sufficient AML checks being conducted.
  • Source of Funds (SOF) checks were insufficient. Payslips and invoices presented as evidence of SOF were not corroborated with bank statements (or other evidence).
  • Bank statements produced were not assessed appropriately. Examples include incomplete bank statements which only showed credits into the customer’s account. The balance figures on a customer’s bank statement had been redacted.
  • Inadequate checks of documentation for authenticity.
  • No assessment or limit of how much a customer should be allowed to spend based on known income, wealth or any other risk factors.
  • Winnings from other gambling operators were accepted as SOF, without further investigation.
  • Not ensuring that its policies, procedures and controls were implemented effectively, kept under review, revised appropriately to ensure that they remain effective and take into account any applicable learning or guidelines published by the Commission from time to time.

As part of a new licence condition, Casumo must, at its own expense, instruct a firm of independent auditors to carry out an audit to examine transactions that have taken place post 1 July 2020 to ensure that it has effectively implemented its new policies, procedures and controls, and is compliant with the Licence Conditions and Codes of Practice.

Richard Watson, Commission Executive Director, said:

“This case was brought about through planned compliance activity and every operator out there should be aware that we will continue to take firm action against those who fail to raise standards.”

One of the factors that particularly stands out to us from the above list of failings is reference by the Commission to the need from an AML/CTF perspective for an “assessment or limit of how much a customer should be allowed to spend based on known income, wealth or any other risk factors“, the implication being that such an assessment must be conducted, and consequential limit imposed, on all customers regardless of their ML/TF risk rating. No specific such requirement is included within either:

We also believe that, from a safer gambling perspective and pending the outcome of the Commission’s Remote Customer Interaction Consultation and Call for Evidence, a mandatory need to conduct such an assessment would be setting the present regulatory bar higher than is indicated within the “Affordability and a customer’s personal circumstances” section of the Commission’s current “Customer interaction – formal guidance for remote gambling operators” and the Commission’s additional customer interaction guidance first published in May 2020.

Having said the above, operators conducting a review of their AML/CTF controls or facing a forthcoming Gambling Commission compliance assessment would nevertheless be well-advised to bear the above in mind, together with each of the Commission’s further criticisms of Casumo listed above including, for example, that “payslips and invoices presented as evidence of SOF were not corroborated with bank statements (or other evidence)”.

With compliance assessments in mind, readers are reminded that David Clifton’s February 2021 ‘Licensing Expert’ article for SBC News entitled “Gambling Commission dominates early 2021 headlines”:

  • sets out what the Gambling Commission will:
    • ask to see in advance of a compliance assessment commencing,
    • expect to see and hear about during the compliance assessment and
    • be looking for in terms of typical regulatory failings (of a similar type to those found in the case of Casumo);
  • explains how to avoid common pitfalls; and
  • suggests how operators can set about improving their corporate governance frameworks (including in relation to internal controls).

UPDATE: Casumo CEO, Shelly Suter-Hadad, who has held operational control of the company since January 2020, has been reported as saying:

Since joining Casumo last year, my focus has been on putting in place a new senior leadership team and Personal Management Licence holders with extremely strong industry experience and the knowledge and expertise to ensure we are a compliance-led business. In addition, recognising that key processes fell short in the past, I took immediate action to implement fundamental operational changes so that Casumo is now a gaming group with compliance and responsible gambling at the heart of its business and culture. These efforts, together with our full collaboration, have been formally recognised multiple times by the Commission.