UKGC finds ‘increasing instances’ of AML failings in compliance report

The UK Gambling Commission (UKGC) has published its Compliance and Enforcement Report, providing an overview of its casework over the financial year and identifying areas where the industry needs to ‘raise standards’.

Throughout the 2020-2021 financial year, the UKGC revoked the licence of one operator and nine personal management licence holders, whilst also suspending the licences of five additional operators. 

Furthermore, 15 betting and gaming businesses paid a total of £32.1 million in fines and regulatory statements, more than in any previous year.

Overall, the Commission’s compliance report identified anti-money laundering failings and social responsibility failings as the main issues encountered throughout the financial year, as well as the primary reason for most enforcement actions.

Andrew Rhodes, UKGC CEO, stated: “As the Commission’s new Chief Executive, I am impressed by the amount of enforcement work carried out, but it is also disappointing that it should be necessary. 

“Looking back at enforcement in 2020/21 we see the same two weaknesses in almost every case – operators failing to adhere to social responsibility and anti-money laundering rules.”

The regulator detailed that it is finding ‘increasing instances’ of operators failing to consider how money laundering and terrorist financing can be connected to problem gambling in spite of official Commission guidance on the matter.

Common poor practices identified by the Commission with regards to AML requirements included an overreliance on third party providers to carry out due diligence checks, delayed customer identification checks and a lack of methodology in risk assessments.

Betting firms were further criticised for making ‘vague references’ in their risk assessments, such as citing KYC checks, customer monitoring or stating that crypto payments are not accepted, without providing any further information.

Additionally, the Commission underscored a trend which it claims has seen many operators prioritise commercial considerations, in particular the potential impact of adverse media coverage on corporate reputations, over meeting AMlL and social responsibility requirements. 

Delays in reporting criminal offences were also highlighted, as were perceived failures by nominated Money Laundering Reporting Officers, whilst senior management of certain firms were condemned for ‘insufficient strategic oversight’.

Lastly, the UKGC stated that some operators had not used their risk assessments to properly inform company policy, whilst maintaining that some high financial threshold trigger limits had been established with ‘no underpinning rationale’, resulting in CDD and EDD delays and financial crimes occurring.

One unnamed remote operator in particular was singled out for only carrying out EDD measures once a customer had incurred a loss of over £12,000 in one year, which the regulator stated went against its casino and non-casino AML guidelines.

“These regulations are there for two very good reasons – to protect people and ensure that gambling is crime-free,” Rhodes continued. “These rules underpin two of the three licensing objectives, without which it would be impossible for us to permit gambling as laid out in the Gambling Act 2005. So, adherence should be at the forefront of every operator’s mind.

“The reasons for these failings are almost as concerning as the failings themselves. Our casework reveals that operators are either not making suitable resources available or are simply putting commercial objectives ahead of regulatory ones. This is simply unacceptable and will be seen as such by others in the industry who work hard to achieve compliance.”

With regards to social responsibility compliance requirements, the UKGC outlined a need to ‘raise standards’ across a number of areas, stating that there had been “repeated instances of a lack of adequate documentation and audit trails” to properly inform decision making.

Moving forward, the UKGC has confirmed that it will update its guidance based on a number of ‘lessons learned’ through the Compliance and Enforcement Report, with the objective of raising standards with relation to “problem gambling vs gambling-related harms”, COVID-19 risks and responses to them and a national gambling harm reduction strategy. 

Guidance for operators in administration – a topic which has been a major talking point after BetIndex entered administration earlier this year – was also provided by the Commission, which stated that going forward it would require copies of administrators’ reports and notifications if a company is placed into liquidation.

Further requirements will include evidence of accounting records setting out customer funds held and ‘other relevant information’ to assist with customer risk assessments, such as details on bank accounts and statements as well as financial transactions.

Finally, the regulator reiterates the need for operators to apply a risk-based approach, conduct robust due diligence and enhanced due diligence checks, ensure that their ML/TF risk assessment along with their policies, procedures and controls sufficiently mitigate the risk of ML and TF and ensure that they are compliant with and stay up to date on customer interaction requirements.

Rhodes concluded: “Of course, I know that many gambling firms have had a difficult 18 months, and that the future of many companies was unclear. Hard decisions were made to save jobs and livelihoods.

“Whilst the threat of COVID-19 hasn’t gone away, the gambling sector has largely resumed operations. As Great Britain’s regulator for the gambling industry, we still see far too many breaches of regulations where everyone in the industry agrees we should not see them. The industry has the resources, skills and knowledge to change this.”

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