On 20 February 2018 the UK Gambling Commission (the “Commission”) issued a statement regarding a regulatory settlement entered into with William Hill. The Commission found ‘systemic failings’ in processes and procedures, leading to breach of two elements of the Commission’s Licence Conditions and Codes of Practice (the “LCCP”), specifically, licence condition 12.1.1 (condition to comply with the Money Laundering Regulations 2007) and social responsibility code provision 3.4.1 (customer interaction). As a result, the settlement provides that William Hill will pay a penalty package of more than £6.2m (including a fine of £5m, the largest ever imposed by the Commission in the context of a voluntary settlement) as well as being subjected to an external audit.
The Commission reports that William Hill’s failure to implement adequate processes led to at least ten customers being able to use stolen money, or money that may be the proceeds of crime, to gamble in various periods between November 2014 and June 2017. In relation to anti-money laundering procedures, William Hill’s failures are stated to include: (i) allowing a customer to deposit over £600k without source of funds checks being carried out; (ii) allowing a customer to deposit over £500k based only on verbal reassurances from the customer regarding salary; and (iii) a customer triggering a financial alert but not being subjected to further consideration as a result of a systems failure. In relation to social responsibility, the Commission indicated that in the cases concerned (where deposit levels exceeded £100k and £147k respectively) it was insufficient customer interaction to have done no more than obtain verbal reassurance from the customer that they were happy with the level of spend (in the first case) or to send two automated social responsibility emails (in the second case).
What does this mean for the industry moving forward?
Although this case involves the largest fine imposed on an operator under a voluntary settlement to date, it is consistent with the Commission’s particular and increasing focus on anti-money laundering and social responsibility issues. In the report’s accompanying press release, Neil McArthur, the Interim Chief Executive of the Commission, echoed this sentiment by stating “gambling businesses have a responsibility to ensure that they keep crime out of gambling and tackle problem gambling – and as part of that they must be constantly curious about where the money they are taking is coming from.” Separately, the Commission’s ‘2017 Gambling Participation and Perceptions Report’ dated 27 February 2018 indicated that only 33% of those questioned consider gambling to be fair and and 41% of people asked think gambling is associated with crime.
It is apparent that the Commission does not intend to lose momentum on enforcing anti-money laundering and social responsibility issues and the industry should be braced for further scrutiny and high penalties in relation to deemed failings. It is likely that William Hill will not be the last operator to face a heavy investigation and fine in relation to anti-money laundering and social responsibility.
For operators looking to avoid a similar investigation or outcome, the Commission’s published statement includes “good practice” guidance. Unfortunately, this guidance does not provide any significant additional guidance over and above the content of the LCCP and previous regulatory settlements. Operators are simply reminded to ensure they:
(i) have effective anti-money laundering and social responsibility procedures and that their staff are following them;
(ii) have adequate staff numbers to carry out these procedures;
(iii) check they know higher risk customers’ source of funds;
(iv) use all information (including customer spend levels) to identify problem gambling: and
(v) keep accurate records of customer interactions.
Operators would be well-advised to give serious and thorough consideration to anti-money laundering and social responsibility procedures at the highest level within the business (and to record such consideration). It is clear that a key factor in the high level of fine imposed on William Hill was that the Commission considered that failings were systemic rather than isolated incidents. It was found that there had been a failure by senior management to mitigate the fact that due diligence systems were failing and that the anti-money laundering and social responsibility teams at William Hill were (by William Hill’s own admission) under staffed for a period of almost two years.
The principal focus of many of the recent regulatory settlements has been the use of proceeds of crime in circumstances where source of funds checks were not carried out or were inadequate. Social responsibility is often considered in this context, but it can be tempting to see this as a subsidiary issue in the Commission’s enforcement actions to date. The Commission’s recent statements about social responsibility and the publication of the Commission’s “Customer interaction guidance for remote gambling operators” in February 2018 indicate that social responsibility may now come centre stage. The William Hill settlement is an important reminder in this context that operators may be expected to have taken positive steps to prevent a problem gambler from gambling.