The Gambling Commission has today (1 September 2021) announced that, following a licence review, it has imposed a £5.85million fine on Rank Group PLC subsidiary, Daub Alderney Limited, for social responsibility and AML failings, a “good proportion” of which occurred before Rank acquired the Stride Gaming business (including Daub Alderney) in October 2019.
As is explained below, the amount of the fine appears to have been almost doubled by the Commission’s Regulatory Panel from the originally proposed £3million fine.
Of particular note is that Rank is appealing the above fine to the First Tier Tribunal, on which we comment further below.
The Commission’s announcement states as follows:
Regulatory action against Daub Alderney
Gambling operators are being warned that they will face the full consequences of regulatory failures even if breaches occurred prior to ownership.
The warning comes as Daub Alderney is issued with a £5.85m fine after a Gambling Commission investigation revealed social responsibility and anti-money laundering failures.
Daub Alderney – which runs aspers.com, kittybingo.com, luckypantsbingo.com, luckyvip.com, magicalvegas.com, regalwins.com and spinandwin.com – has also received a formal warning for the failures which occurred between January 2019 and March 2020.
Social responsibility failings included neglecting to put into effect policies and procedures for customer interaction where it has concerns that a customer’s activity may indicate problem gambling.
- One customer was allowed to lose £43,410 in four months despite displaying problem gambling harm indicators such as using 4 different payment cards in one day and reversing £133,873 in requested withdrawals.
- During a month-long relationship a second customer lost £40,500 but the operator sent the consumer just two safer gambling messages and a pop up which were not evaluated for effectiveness.
- During a three-and-a-half month period a third customer lost £39,000 but received just one safer gambling message and two pop ups which were not evaluated for effectiveness.
Anti-money laundering failures at Daub Alderney included having inappropriate policies, procedures and controls in place to prevent money laundering and terrorist financing.
- One customer was allowed to deposit £50,000 before the operator sought source of funds evidenc
- A second customer was allowed to deposit £41,500 in a month without supplying adequate source of funds evidence
- Over an eight-month period a third customer was allowed to lose £53,000 but during that time the only source of funds evidence obtained by the operator was to establish that the customer lived in a house estimated to be worth £233k.
Helen Venn, Commission Executive Director, said: “This case was the result of 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.”
Ms Venn said that the Commission recognised that a good proportion of these failures occurred before Rank took control of the business in October 2019 and that there had been improvements since acquisition.
But she added: “The Licensee’s culpability, and the requisite penalty reflecting that culpability, cannot be affected by the fact that its shares have now passed from one set of investors to another. The Licensee does not escape or mitigate the consequences of its actions because its shares are sold.”
The warning contained in the first sentence of the Commission’s above announcement reflects the fact that Rank is appealing the above fine. Within its 19 August 2021 News Release in relation to its preliminary results for the 12 months ended 30 June 2021, Rank stated that “Regulatory action taken by the Gambling Commission on the acquired Stride business, principally relating to activities prior to its acquisition by Rank, resulted in a £5.9m fine, to be appealed by Rank”. It went on to provide more detail as follows:
In March 2020, a routine compliance assessment was carried out by the UK Gambling Commission (‘UKGC’) regarding Daub Alderney Limited (‘Daub’), Stride’s licensed entity. The UKGC identified concerns regarding Daub’s compliance arrangements in respect of its anti-money laundering and safer gambling controls principally relating to activities prior to its acquisition by Rank. As a consequence, the UKGC levied a £3.0m fine on Daub which Rank does not believe fairly reflects their findings nor takes account of the significant remedial actions taken by Rank following the acquisition. The UKGC has been clear that it is not penalising Rank or suggesting that Rank has been in any way at fault. Rather, the UKGC is merely concerned with the licensed entity, Daub, which it considers should pay a penalty for the identified regulatory breaches regardless of whether they pre-date Rank’s ownership of the business. Following an appeal on the size of the penalty to the Gambling Commission’s Regulatory Panel, the fine was increased to £5.9m. Rank considers that there are both equity and public policy issues raised by this case and will be seeking an appeal to the First-tier Tribunal.
If it proceeds to a hearing before the First-Tier Tribunal, the appeal will raise interesting questions of law, bearing in mind that it is normally the case that, on acquiring the issued share capital of an existing UK licensed company, the purchaser will take on responsibility for all liabilities of that company whether or not such liabilities were known at the time of the acquisition. In such circumstances, dependent on the terms of the acquisition in question (including in relation to any warranties and indemnities given by the vendor(s) to the purchaser), a damages claim against the vendor(s) might be possible.
Other cases exist where a purchaser in a seemingly similar position to the Rank Group (described above) has found itself liable for fines or financial penalties in relation to historic regulatory failings imposed by the Gambling Commission on a newly acquired subsidiary, as was the case for example when, in 2020, Mr Green (then a newly acquired subsidiary of William Hill) was required to pay £3million plus for historic AML and customer interaction failings.
We await with considerable interest to find out the nature of the ‘equity and public policy’ arguments that will be raised in due course by Rank in this case.
More information on the Commission’s findings in relation to Daub Alderney is contained in the regulator’s Regulatory Action register that provides the following details, including confirmation that the above-mentioned sanction (imposed by the Commission on 2 July 2021) is subject to an appeal:
After a hearing before the Regulatory Panel, and following a review of the operating licence undertaken against Daub Alderney Limited (the Licensee), the Commission found that the Licensee:
- breached Paragraphs 2 and 3 of licence condition 12.1.1 – (Anti Money Laundering – Prevention of money laundering and financing)
- breached licence Condition 12.2.12 Anti-money laundering measures of operators based in foreign jurisdictions
- failed to comply with Paragraph 1(e) of social responsibility code provision (SRCP) 3.3.1 (Customer Interaction) and from 31 October 2019 paragraphs 1 and 2 of SRCP 3.4.1
- failed to comply with SRCP 1.1.2 – responsibility for third parties (paragraphs 2(a) and (c))
- breached licence condition 16.1.1 – Responsible placement of digital adverts (paragraph 1c)
- failed to comply with SRCP 5.1.6 (Compliance with advertising codes)
In line with the Commission’s Licensing, compliance and enforcement policy statement, the Indicative sanctions guidance and the Statement of principles for determining financial penalties, the Commission has decided to:
- issue a formal warning in respect of breaches of licence conditions identified
- impose a financial penalty of £5,850,000
The Licensee has co-operated with the Commission throughout the investigation.
This decision is currently subject to appeal.
The above announcement has been made on the same day as the Commission’s announcement of sanctions imposed on Corinthian Clubs Limited, the operator of the Casino at the Corinthian Club in Glasgow, for AML and customer interaction failings, about which we have written more here.
POSTSCRIPT: In November 2018, we reported on the £7.1 million fine imposed on Daub Alderney for previous AML and social responsibility failings.