On 31 July 2019, GVC Holdings PLC (“GVC”) concluded a regulatory settlement with the Gambling Commission (the “Commission”) in relation to anti-money laundering and social responsibility failings at the Ladbrokes Coral Group (the “LC Group”) prior to its acquisition by GVC in March 2018. Some of the failings also occurred prior to the creation of the LC Group in November 2016 by the merger of Ladbrokes plc and Gala Coral Group Limited (the “Merger”).
Arising from complaints by legal representatives, reports from other agencies and media reports, the failings relate to the LC Group’s handling of seven customers’ accounts between November 2014 and October 2017. The Commission found that the LC Group had breached Licence Conditions 12.1.1(1), (2) and (3) in relation to AML controls, and provision 3.4.1(1) of the Social Responsibility Code (the “SR Code”) in relation to social responsibility interactions. Richard Watson, Executive Director of the Commission, commented that the failings were “systemic”, resulting in “consumers being harmed and stolen money flowing through the business”.
Under Licence Conditions 12.1.1(1), (2) and (3), licensees are required to conduct a risk assessment of their business being used for money laundering, put in place policies and controls having regard to the outcome of the risk assessment, and ensure that such policies and controls are implemented effectively and kept under review. The Commission found that the LC Group’s AML policies and controls were not effective in mitigating the risks identified by the risk assessment, and that the teams responsible for implementing its AML procedures were not adequately resourced. This led to a delay in reviewing the accounts of ‘at risk’ customers. Further, there was a lack of adequate documentation and audit trail of account reviews that did take place. For instance, although one of the seven accounts in question involved spending by the customer of £1.5m over a period of 34 months, Coral (prior to the Merger) had not asked the customer to evidence the source of these funds.
Under provision 3.4.1(1) of the SR Code, licensees are required to put in place policies and procedures for interactions with customers where they have concerns that a customer’s behaviour may indicate problem gambling. The Commission found that its policies and procedures in this regard did not lead to effective interactions with potential problem gambling customers. In particular, the process of identifying risk was implemented in a manual format, and interactions and related decisions were not adequately preserved in some instances. Again, the system and resourcing dedicated to identifying risk and the need for social responsibility interactions were inadequate for the purposes of Licence Condition 3.4.1, as there was insufficient investment in the relevant tools and systems. For instance, Ladbrokes (prior to the Merger) did not carry out any social responsibility interactions with a customer who lost £98,000 over a period of 30 months.
As a result of the failings, GVC has agreed as part of the settlement to:
- A payment of £4.8m in lieu of a financial penalty, towards delivering the National Strategy to Reduce Gambling Harms;
- A divestment of £1.1m to victims where found, or could reasonably be suspected to be, the proceeds of crime. It appears that not all of the sums spent by the seven customers were considered to fall within this category as the divestment in relation to all seven customers (£1.1m) is less than the total of the sums identified as spent by just three of these customers (over £1.7m);
- Engage an external firm of solicitors to, among other things:
- Review five further accounts identified by the Commission;
- Review the top 50 customers for the years 2015, 2016 and 2017 to consider whether any of the above failings are evidenced; and
- Manage and oversee a review of the current processes and provide an independent analysis to the Commission.
However, the Commission has identified that GVC has fully cooperated with its investigation and has, since its acquisition of the LC Group:
- Taken steps to remedy the breaches;
- Put in place new policies and resources in relation to AML and social responsibility interactions;
- Engaged with the Commission regarding the improvements being implemented; and
- Committed to implementing its “Changing for the Bettor” strategy that comprises of various initiatives to bring about a change within the industry.
It is important to note that all the failings identified by the Commission occurred before the acquisition of the LC Group by GVC. GVC has since significantly improved AML checks and social responsibility procedures. In a statement by GVC, it says that it is now “fully compliant with its licensing obligations”. The number of compliance staff has increased fivefold and checks on customers’ funds have also been increased.
Licensees should ensure that their AML and social responsibility policies and procedures are reviewed regularly. Of particular note in this settlement is the importance attributed by the Commission to ensuring that the relevant teams within licensees are adequately resourced, and that there is no delay in identifying risk. To the extent possible, the mechanism for identifying risk should be automated and a thorough record ought to be maintained of any decisions and the reasoning behind them.
The link to the full ruling can be found here.