You can download below the fully detailed Public Statements in relation to each of:

1.  LC International Limited in relation to LCCP breaches identified by the Commission as having occurred in the period between between December 2019 and October 2020 and

2. Ladbrokes Betting & Gaming Limited also in relation to LCCP breaches identified as having occurred in the period between between December 2019 and October 2020.

The Gambling Commission’s announcement (set out in full below) contains a statement by its Chief Executive Andrew Rhodes, making it clear that “this is the second time this operator has fallen foul of rules in place to make gambling safer and crime-free …. further serious breaches will make the removal of their licence to operate a very real possibility”.

He was referring to a previous finding by the Commission of ‘systemic’ anti-money laundering and social responsibility failings by Ladbrokes Coral Group that – in July 2019 – resulted in its parent company GVC (since renamed Entain) paying £5.9million by way of a regulatory settlement with the regulator (as previously reported by us here).

Today’s announcement by the Commission states as follows:

Entain to pay £17 million for regulatory failures

A gambling business is to pay £17 million for social responsibility and anti-money laundering failures at its online and land-based businesses.

Entain Group will pay £14 million for failures at its online business LC International Limited which runs 13 websites including ladbrokes.com, coral.co.uk and foxybingo.com.

It will also pay £3 million for failures at its Ladbrokes Betting & Gaming Limited operation which runs 2,746 gambling premises across Britain.

All £17 million will be directed towards socially responsible purposes as part of a regulatory settlement.

Additional licence conditions will also be added to ensure a business board member oversees an improvement plan, and that a third-party audit to review its compliance with the Licence Conditions and Codes of Practice takes place within 12 months.

Andrew Rhodes, Gambling Commission chief executive, said: “Our investigation revealed serious failures that have resulted in the largest enforcement outcome to date.

“There were completely unacceptable anti-money laundering and safer gambling failures. Operators are reminded they must never place commercial considerations over compliance.

This is the second time this operator has fallen foul of rules in place to make gambling safer and crime free.

They should be aware that we will be monitoring them very carefully and further serious breaches will make the removal of their licence to operate a very real possibility. We expect better and consumers deserve better.”

Social responsibility failures include:

• being slow to interact with, or not interacting with, certain customers in a way which minimised their risk of experiencing harms associated with gambling – the operator conducted just one chat interaction with an online customer who spent extended periods gambling overnight during an 18-month period in which they deposited £230,845
• allowing customers subject to enquiries and restrictions to open multiple accounts with the Licensee’s other brands – one online customer who was blocked with Coral because they had spent £60,000 in 12 months and failed to provide Source of Funds (SOF) was immediately able to open an account with Ladbrokes and deposit £30,000 in a single day
• one shop customer was not escalated for a safer gambling review by either the shop or support office teams despite staking £29,372 and losing £11,345 in a single month
• overseeing the failure of local staff or area managers to escalate potential concerns with customers sooner – one shop customer was not escalated despite being known to be a delivery driver who had lost £17,000 in a year and another was not escalated despite staking £173,285 and losing £27,753 over the same time period.

Anti-money laundering failures include:

• failing to conduct an adequate risk assessment of the risks of their online business being used for money laundering and terrorist financing
• allowing online customers to deposit large amounts without carrying out sufficient SOF checks – one consumer was allowed to deposit £742,000 in 14 months without appropriate SOF checks and another, who was known to live in social housing, was allowed to deposit £186,000 in six months without sufficient SOF checks
• failing to conduct enhanced customer due diligence checks soon enough – one online customer was allowed to deposit £524,501 between December 2019 and October 2020 before the operator closed the account due to the customer failing to supply SOF evidence
• placing excessive reliance on open-source information – one online consumer was allowed to deposit £140,700 between December 2019 and October 2020 but prior to a SOF check in August 2020, the operator based its knowledge of the customer’s source of wealth on open-source searches
• allowing customers to stake large amounts of money without having been monitored or scrutinised – one betting shop customer was allowed to stake a total of £168,000 on shop terminals over eight months before the operator carried out due diligence checks.

Details of the failings can be read in the public statements.

It is always instructive to read the Commission’s list of (a) aggravating and mitigating factors that it has taken into account and (b) ‘good practice’ measures that it recommends other operators should take into account “to ensure industry learning”. In each of these cases, they are listed by the Commission as follows:

Aggravating factors

• the serious nature of the breaches identified
• the impact on the licensing objectives
• there has been a repeated breach or failure by the operator or other group companies
• the breach 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
• the nature of the breaches may mean other customers were affected that the Commission has not reviewed
• senior management should have been aware of governance issues that lead to the breaches, given their significance.

Mitigating factors

• the extent of steps taken to remedy the breach – the Licensee implemented an early action plan to remedy its failings
• the Licensee procedurally met the Commission’s timetable in respect of providing material and, where such material could not be provided within the expected time period, sought an extension.

Good practice

Gambling operators should take account of the failings identified in this investigation to ensure industry learning. Operators should consider the following questions:

• do you have formal processes in place to measure the effectiveness of your AML and safer gambling policies and procedures, and are findings adequately recorded?
• do you efficiently record all compliance decisions and are you able to demonstrate to the Commission, on request, evidence of ongoing assessment, evaluation and improvement?
• do lessons learned from public statements flow into your policy and processes?
• do you have a formalised process for analysing the effectiveness of customer interactions to ensure that reviews were adequately documented and consistent in their approach?
• do you log the types of behaviour which have triggered a customer interaction and keep sufficient records of interactions, along with decisions not to interact, especially the level of detail provided?
• have your staff received sufficient AML and SR training?

In the case of LC International limited, an additional ‘good practice’ measure is added, namely: ‘Are your customer risk profiles formed by or linked to your money laundering and terrorist financing risk assessment?’

Points of note arising from the above

Some points of note arising from today’s news:

1. Operators should note that, in relation to LC International Limited, the Commission:
   • regarded as a breach of Licence Condition 12.1.1 the fact that its risk assessment did not:
     • refer to terrorist financing or
     • make specific reference to customer nationality or business risks in its geographical risk section
   • considered it:
     • as having failed to update its policies in a timely fashion to reflect the introduction of the Commission’s October 2019 Social Responsibility Code provision 3.4.1
     • should have kept better records of its evaluations of the adequacy of its customer interaction processes as a whole
     • was not fully in compliance with Social Responsibility Code provision 3.9.1 as there was an ability for customers subject to AML enquiries and restrictions to open multiple accounts with the Licensee’s other brands
   • identified in relation to certain customers that LC International:
     • enabled them to deposit large amounts of money without an interaction being triggered (in particular, a Source of Funds check
     • placed an overreliance on recycled winnings
     • should have conducted Enhanced Customer Due Diligence checks sooner than it did
     • placed excessive reliance on open-source information
     • was slow to interact, or did not interact in a way which minimised the risk of customers experiencing harms associated with gambling
     • should have considered affordability sooner
2. Operators should note that, in relation to Ladbrokes Betting & Gaming Limited, the Commission found:
   • failings in its implementation of Anti-Money Laundering policies, procedures and controls, in relation to:
     • certain customers being able to stake large amounts of money without having been monitored or scrutinised to the standard expected by the Commission
     • over-reliance being placed on recycled winnings in relation to certain customers
     • particular cases where, despite training, local staff or area managers could have escalated potential concerns sooner
   • deficiencies in its responsible gambling policies, procedures, controls and practices, including weaknesses in implementation, namely:
     • being slow to interact or not interacting, with certain customers in a way that minimised their risk of experiencing harms associated with gambling
     • particular cases where, despite training, local staff or area managers could have escalated potential concerns sooner
     • whilst it was evaluating the adequacy of certain individual customer interactions, it should have conducted such evaluation to a higher standard and recorded the same more clearly:
     • affordability ought to have been considered sooner in its interactions with certain customers
     • instances where interactions were not specifically adapted depending on the extent of potential harm to a customer.
   • weaknesses in its reporting arrangement.

The following timescale in relation to the Gambling Commission’s regulatory action is also worthy of note:

1. 1. On 16 July 2020, Kenny Alexander announced his intention to step down as CEO of GVC Holdings with immediate effect, described by The Times at the time as a surprise to investors, bearing in mind that this came less than a year after he told The Times that he would be staying on “at the very least for another three years”
   2. The Gambling Commission’s Public Statement in relation to LC International Limited states that its regulatory review of LC International Limited commenced on 11 November 2020, following on from an earlier Gambling Commission compliance assessment
   3. On 11 January 2021, Alexander’s successor as CEO Shay Segev (the Group’s former COO) announced his intention to resign
   4. The Commission’s Public Statement in relation to Ladbrokes Betting & Gaming Limited states that its regulatory review of that company commenced on 18 January 2021 following on from an earlier compliance assessment.

UPDATE: Entain has published on its website the following ‘Statement regarding regulatory settlement’ which we note talks in terms of “alleged historical licensing breaches”, although – as is always anticipated in the event of a regulatory settlement – the two Public Statements refer to Entain having accepted Gambling Commission findings set out within those statements:

Entain plc (“Entain” or the “Group”)

Statement regarding regulatory settlement

Entain, the global sports betting, gaming and interactive entertainment Group, can confirm that it has agreed a regulatory settlement with the British Gambling Commission (the “Commission”) in respect of alleged historical licensing breaches. The regulatory settlement amounts to £14m in respect of Entain’s digital business, and £3m in respect of its retail business.

Entain has entered into the regulatory settlement with the Commission in order to bring the matter to a close and avoid further costly and protracted legal proceedings. Entain accepts that certain legacy systems and processes supporting the operations of its British business during 2019 and 2020 were not in line with the evolving regulatory expectations of the Commission in respect to aspects of social responsibility and anti-money laundering (“AML”) safeguards. However, the Group also notes the Commission’s statement that it found no evidence whatsoever of criminal spend within Entain’s operations.

The issues raised by the Commission relate to the period between December 2019 and October 2020, which predates the many changes in the area of safer gambling and AML that Entain has introduced. For instance, in 2021 Entain launched its Advanced Responsibility and Care™ (“ARC™”) programme which, using revolutionary AI technology, operates in real-time and is individually tailored for each customer. The initial trials of ARC™ in the UK have shown a risk assessment accuracy of over 80%, a 120% uplift in the use of safer gambling tools by those most at risk, and a 30% overall reduction in customers increasing their risk levels.

Furthermore, in May of this year Entain was awarded the Advanced Safer Gambling Standard by GamCare, having evidenced the highest standards of player protection and social responsibility for its online and land-based gambling businesses in Great Britain.

As part of the settlement, Entain has also agreed to appoint a Board sponsor to oversee the implementation of any further improvements identified by the original 2020 compliance assessments and to undertake an independent audit of the relevant policies and procedures at a future date.

The £17m settlement amount was already provided for in the Group’s financial statements.

Eagle-eyed readers will have noted Entain’s above comment that it “entered into the regulatory settlement with the Commission in order to bring the matter to a close and avoid further costly and protracted legal proceedings”, from which it could be inferred that a fairly major difference of opinions has existed between (a) the regulator and (b) the regulated in relation to this matter and possibly also the financial repercussions flowing from that.

UPDATE: As subsequently reported by us here, David Clifton is quoted in an 18 August 2022 EGR Compliance article entitled ‘Industry reaction to Entain paying £17m to the UKGC over social responsibility and AML failures’, carrying the sub-heading ‘As the UK’s gambling watchdog enforces its largest ever censure of an operator, how was the news greeted around the sector?’. That article is behind a paywall, as a result of which it is available only to EGR subscribers, but David’s comments within that article are set out below: