AML and Vulnerable Customer Management breaches – What next for the Gambling industry?

In 2017, 888, one of the UK’s biggest gambling companies, was fined a record £7.8m. This was for allowing 7,000 vulnerable customers who had taken a ‘time out’ to continue playing.

An investigation by the Gambling Commission found that a failure in 888’s systems allowed players who had ‘self-excluded’ from the company’s casino, poker and sport games to continue to access their accounts on the bingo platform.

The oversight continued for 13 months, allowing those customers to deposit up to £3.5m in their accounts.

“While 888 did have self-exclusion procedures in place, they were not robust enough and failed to protect potentially vulnerable customers,” the Commission said.

888 also failed to “recognise visible signs of problem gambling behaviour” in one individual, who staked £1.3m in repeated bets over the course of 13 months. At least £55,000 of this money had been stolen from the player’s employer, the Commission found.

Now, less than one year later, similar lapse systems and controls have resulted in William Hill being fined £6.2m.

The regulator has criticised William Hill for having ineffective prevention measures in place. They were unable to verify customer’s source of wealth and source of funds, nor to identify and assist vulnerable customers who may have a gambling problem.

In a statement, the Gambling Commission said William Hill’s senior management “failed to mitigate risks and have sufficient numbers of staff to ensure their anti-money-laundering and social responsibility processes were effective”.

Neil McArthur, executive director at the Commission, added, “This was a systemic failing at William Hill which went on for nearly two years and today’s penalty package … reflects the seriousness of the breaches.”

The commission gave the following examples of where the firm were in breach of regulations;

  • One customer deposited about £541,000 over a 14-month period after William Hill assumed his potential income was £365,000 a year, “based on a verbal conversation and without further probing”. In fact, the customer was earning about £30,000 a year and was funding his gambling habit by stealing from his employer.
  • Another customer exceeded deposits of £147,000 over 18 months with an escalating spend and losses of £112,000. William Hill’s systems identified the issue, “but its only response over a 12-month period was to send two automated social responsibility emails. Our view is that this action alone was not sufficient, given the customer’s gambling behaviour, coupled with the severity of the losses.”
  • A customer was allowed to deposit £653,000 in an 18-month period which activated a financial alert at William Hill. The alert resulted in a grading of “amber risk”, which meant the customer’s profile should have been reviewed under the company’s anti-money-laundering policy. The file was marked as passed to managers for review, but that did not happen because of a systems failure. The customer was able to continue gambling for a further six months, despite continuing to activate financial alerts.

The company must now appoint external auditors to review the effectiveness of its anti-money laundering and social responsibility policies and procedures. Customer onboarding, ID&V, KYC, SoF and SoW procedures will all be tested as well as assessing how effectively William Hill identify and handle vulnerable customers and their accounts. The effectiveness of training, corporate governance and ‘tone from the top’ are also likely to be scrutinised.

These actions clearly demonstrate the commitment to anti-money laundering and vulnerable customer management and is the second action from two different regulators on the same topics in a week. It serves as sage caution, to the gambling industry, who will undoubtedly now be very much under the spotlight, and to FCA regulated companies. Clearly regulators from all divisions, are prepared to act to enforce the UK’s anti money laundering laws and regulations, and to protect those not always able to protect themselves.