On 16 October 2018, it was publicised that the bookmaker, Paddy Power Betfair (“PPB”), had agreed a regulatory settlement of £2.2 million with the Gambling Commission, after an investigation by the Commission. The Gambling Commission’s official statement is available here.

The Facts

The regulatory settlement related to two key failures on the part PPB, which were set out by the Gambling Commission after an investigation into PPB’s conduct and procedures. Firstly, the Gambling Commission held that PPB failed to appropriately interact with customers who were demonstrating signs of “problem gambling.” Problem gambling is defined as “gambling to a degree that compromises, disrupts or damages family, personal or recreational pursuits”. Secondly, they failed to implement adequate anti-money laundering checks. This case concerned five customers of PPB, one of whom was using money stolen from his employer, Birmingham Dogs Home (a charity), in order to use PPB’s betting exchange “Betfair.”

Problem Gambling

The Gambling Commission found and PPB admitted to breaching the Social Responsibility Code provision 3.4.1(1). PPB are required to comply with this Code by virtue of holding a licence with the Gambling Commission. This provision obliges those holding such a licence to implement “policies and procedures for customer interaction where they have concerns that a customer’s behaviour may indicate problem gambling.”

This provision was breached because PPB permitted five of its customers to “gamble extensively” despite there being clear signs of “problem gambling.”

In particular, there were failings in relation to three of the five customers who were retail and online customers. The Gambling Commission’s investigation revealed problems in respect of PPB’s source of wealth and social responsibility checks.

A further two customers were permitted to participate on PPB’s betting exchange “Betfair” despite frequently showing visible signs of “problem gambling.”

Anti-money laundering

The Gambling Commission found and PBB admitted to breaching the Commission’s guidance on anti-money laundering, specifically ordinary code provision 2.1.1, which obliges PPB to act in accordance with the Gambling Commission’s guidance on anti-money laundering.

This was because PPB had not complied with the Gambling Commissions anti-money laundering guidance. As a result, two customers were allowed to gamble using stolen funds on “Betfair” including a customer who had stolen money from his employer, Birmingham Dogs Home.

As a result, stolen money was used on “Betfair.” The Gambling Commission Executive Director, Richard Watson, has stated that “operators have a duty to all of their customers to seek to prevent the proceeds of crime from being used in gambling.” Therefore, in this respect, PPB were in breach of their duty as they allowed the proceeds of crime to be used on “Betfair”. Further, innocent individuals using the “Betfair” exchange inadvertently received stolen funds, and so this had a negative effect on the Gambling Commission’s licensing objective of “keep(ing) crime out of gambling.”

The settlement

The settlement obliges PPB to pay the following:

• £1,717,121 in lieu of a financial penalty, which is to be donated towards work which assists in the delivery of the National Responsible Gambling Strategy;
• £498,508 divestment of the monies received; and
• £50,045 towards the investigative costs of the Gambling Commission.

This settlement includes the return of the money stolen from Birmingham Dogs Home by a customer of PPB.

Practical significance

This settlement is highly significant for a number of reasons. Firstly, it emphasises the importance to organisations within the betting industry of having systems in place to identify problem gamblers. It also emphasises the importance of carrying out thorough anti-money laundering checks and ensuring that the policies in place are adequate.

The settlement also demonstrates the fact that the Gambling Commission are taking a strict approach towards social responsibility. This case is part of a pattern of action taken against organisations within betting industry. In 2017, the online gambling firm 888 was issued with a £7.8 million fine due to social responsibility failures. Further, earlier this year, the Gambling Commission fined William Hill £6.2 million for failing to identify clear signs of “problem gambling” and to prevent money laundering.

For organisations within the betting industry, it would be advisable to take the following action:
1. implement procedures to assist in identifying customers with gambling problems;
2. offer training to staff to assist them in identifying problem gamblers and in reporting concerns;
3. ensure that you know your customer and that you scrutinise any assurances that you receive concerning source of funds; and
4. ensure that anti-money laundering polices and guidance are easily accessible, clear and up to date.