On 11 September 2019, the Gambling Commission (“the Commission”) issued Silverbond Enterprises Limited (“Silverbond”) a £1.8 million fine, an operator licence warning and additional conditions added to its licence following an investigation into the operation of Silverbond’s Park Lane Club.

Background

On 26 February 2016, the Commission commenced a review of the licence held by Silverbond trading as the Park Lane Club (“the Licensee”) under section 116 of the Gambling Act 2005 (“the Act”). This initial investigation resulted in a decision notice being published and the addition of further licence conditions to address failings relating to money laundering. The additional licence conditions required the Licensee to ensure compliance with regulations 7 and 8 of the Money Laundering Regulations (“MLR”) to ensure that those who represent a high risk of money laundering are identified and properly scrutinised. The Licensee was also instructed to undertake a regular training needs analysis for all staff relating to the MLR.

In particular, the decision notice established that the Commission had found that the Licensee had failed to apply enhanced due diligence (“EDD”) to their top 250 customers. As a result, the Commission imposed a condition for the Licensee to complete full EDD on its top 250 customers within 6 months of the notice being published.

Following the outcome of the 2016 licence review, the Commission conducted further inspections of the Licensee in January and March 2018 and further failings relating to money laundering and social responsibility were identified.

Money Laundering:

Following the 2018 inspections, the Commission ruled that Silverbond had failed to comply with Licence Condition 12.1.1 relating to anti-money laundering. Licence Condition 12.1.1 sets out that:

  1. Licensees must conduct an assessment of the risks of their business being used for money laundering and terrorist financing. Such risk assessments must be appropriate and must be reviewed as necessary in the light of any changes of circumstances, including the introduction of new products or technology, new methods of payment by customers, changes in the customer demographic or any other material changes, and in any event reviewed at least annually.
  2. Following completion of and having regard to the risk assessment, and any review of the assessment, licensees must ensure they have appropriate policies, procedures and controls to prevent money laundering and terrorist financing.
  3. Licensees must ensure that such policies, procedures and controls are implemented effectively, kept under review, revised appropriately to ensure they remain effective, and take into account any applicable learning or guidelines published by the Gambling Commission from time to time.

The Commission established that the Licensee’s anti-money laundering procedure mirrored the Commission’s advice, however it did not provide details as to how the policies and procedures were to be implemented or who was responsible for parts of the process. Moreover, several breaches of the MLR were identified. One example was the failure to identify a customer as a Politically Exposed Person (“PEP”), which constitutes, amongst others, a breach of Licence Condition 12.1.1.3 and regulation 35 of the MLR.

On analysis of the customer accounts held by the casino there were a number of undated entries made by the Money Laundering Reporting Officer (“MLRO”) on customer profiles. This contravened the requirement under the MLR for the MLRO to retain accurate records.

The Commission also found that the Licensee had failed to conduct the EDD on its top 250 customers, in accordance with the specific licence condition imposed following the 2016 licence review.

Failure to adhere to the Social Responsibility Code: 3.4.1 - Customer interaction

The Social Responsibility Code (“the Code”) sets out requirements (compliance with which is a condition of licences) in respects of identifying behaviours that may indicate problem gambling. A review of the Licensee’s customer accounts showed a record of incidents where customer interactions took place, but the operator failed to recognise the indicators of potential problem gambling. Examples included a customer displaying violent behaviour, a customer asking for winnings to be transferred to his personal bank account to prevent him playing further, and a customer of the casino asking to increase the maximum amount that can be deposited by cheque. The Commission also found there was insufficient detail or rationale setting out why interactions had taken place.

Decisions and reasons

The Commission states that it considered all available information gathered as part of the licence review, together with the Licensee’s offers of a financial settlement. However, the Commission considered the breaches were so serious that it was minded not to accept the Licensee’s proposal for a regulatory settlement. Therefore, the final outcome of the review was:

  • Imposition of a £1.8 million financial penalty under section 121 of the Act in respect of the Commission's findings;
  • Issuing a warning under section 117(1)(b) of the Act in respect of breaches set out above;
  • Imposition of additional licence conditions on the Licensee’s operating licence under section 117(1)(b) of the Act requiring the Licensee to:
    • Have and put into effect a regular training needs analysis of all staff and tailor and provide training dependent on the role of individual staff members on an annual basis.
    • Ensure that all personal management licence holders, senior management, and key control staff undertake outsourced anti-money laundering training. All such staff must undertake outsourced refresher training annually thereafter. Arrangements to be made within three months.
    • Ensure the MLRO must undertake annual refresher training in AML and be able to evidence this to the Commission. Arrangements to be made within three months.
    • Maintain full EDD on its top 250 customers within its customer profiling system.
    • Complete and maintain EDD on its top five suppliers.
    • Maintain an independent chairperson to the Licensee’s Compliance Committee to independently assess its internal controls and systems on at least an annual basis.
    • Ensure that within six months an independent audit of the current top 250 customers is carried out by external auditors. The external auditors, and the terms of reference, must be agreed with the Commission before appointment. The review must include a full review of the operator’s current top 250 customers and ensure full compliance in respect of EDD, Statement of Funds and Source of Wealth. A summary of the review and subsequent action plan, with timescales, to implement any recommendations must be reported to the Commission within one month of the audit.

Comment:

This Commission decision and fine reflects the need for Licensees to ensure that their anti-money laundering policies and social responsibility procedures are sufficient to meet their obligations under the MLR and the Code. In particular, the decision was critical of Silverbond’s failure to outline their procedures clearly and focused on their lack of well maintained records detailing internal processes followed. It also highlights the need for licensees to have properly resourced anti-money laundering and social responsibility departments.

The Commission was critical particularly of the Licensees failure to comply with the conditions imposed by the 2016 licence review and further failings in relation to the same matters. As set out by the 'Statement of principles for determining financial penalties’, the Commission considers repeated failures by Licensees when determining the appropriate financial penalty. Therefore, in this case, it is likely that the Licensees non-compliance with previous decision notice was a significant factor in determining to size of the appropriate fine.