Smarkets (Malta) Limited fined £630,000 for AML and social responsibility failings

The Gambling Commission has announced that remote betting intermediary, Smarkets (Malta) Limited has incurred the following sanctions after a review of its operating licence disclosed anti-money laundering and social responsibility failings:

  • a warning under section 117(1)(a) of the Gambling Act 2005 in respect of the breaches identified
  • an additional condition has been attached to its operating licence under section 117(1)(b) of the Act, requiring Smarkets to conduct a third-party audit within 12 months of the conclusion of the review, to examine whether it is effectively implementing its AML and social responsibility policies, procedures and controls
  • a financial penalty of £630,000 has been imposed pursuant to section 121 of the Act.

The failings identified were

  1. breach of paragraph 1, 2 and 3 of Licence Condition 12.1.1 – Anti-Money Laundering (Prevention of money laundering and terrorist financing)
  2. failure to comply with Social Responsibility Code of practice 3.4.1 – Customer Interaction
  3. failure to act in accordance with Ordinary Code provision 2.1.2 – Anti-money laundering (other than casino)

The Commission’s announcement (that you can download below) states as follows:

Smarkets handed six-figure fine by Gambling Commission

An online gambling operator will pay a financial penalty of £630,000 after an investigation by the Gambling Commission revealed a series of anti-money laundering and social responsibility failings.

Smarkets (Malta) Limited will pay the six-figure sum for the failings, which saw customers being allowed to gamble without adequate source of funds checks being carried out and failing to identify and interact with customers at risk of experiencing harm.

The operator has also received a formal warning and will undergo an audit to ensure it is effectively implementing its anti-money laundering and social responsibility policies, procedures and controls.

Examples of the failings by Smarkets include one customer being allowed to deposit £395,000 in a four-month period, without the appropriate source of funds checks being carried out by Smarkets. Another example is of an individual transferring significant levels of funds between bank accounts without scrutiny or source of funds checks occurring.

Sarah Gardner, Commission Deputy CEO, said:

“This case was identified through compliance checks and once again highlights how we will take action against gambling operators who fail their customers. Our investigation into Smarkets unearthed a variety of failures where customers were put at risk of gambling harm. It was obvious that poor systems and processes were in place which contributed to these breaches, driven by the company’s failure to effectively implement its policies and controls.”

The £630,000 Smarkets fine is the latest in a string of enforcement cases led by the Commission this year. Earlier this month online operator LeoVegas was fined £1.32million for social responsibility and anti-money laundering failings.

The Gambling Commission register entry for Smarkets (Malta) Limited adds: “The Licensee co-operated with the Commission throughout the investigation and took corrective steps to address the identified failings. The Commission’s review of the specific customers identified during the Compliance assessment found no evidence of criminal spend with the Licensee. The Licensee has co-operated with the Commission throughout the investigation and taken appropriate remedial action to address the identified failings.”

You can read here our 3 August 2022 website posting about the circumstances in which LeoVegas received its £1.32million fine, as well as imposition of a third party audit licence condition of the type that has now also been imposed on Smarkets. Operators should be aware that the requirement to conduct such audits constitutes a serious sanction of itself, not only from the perspective of the cost of conducting such an audit but also the potential concerns that can arise from the usual accompanying requirement that the operator provides a copy of the audit report to the Commission.