UK LEGAL COMMENT


Inadequate due diligence


Threats relating to organised crime and customers from high risk third countries are highlighted by the Commission. It notes that “it is becoming increasingly important for operators to carry out sufficient due diligence checks as the threat of serious and organised crime increases globally”. The Commission has continued to identify operators failing to apply sufficient scrutiny to the source of customers’ funds. Rather than relying on the European Commission’s list, high risk third countries are now specified in UK Regulations. A list of countries came into force in March 2021, which specifies 21 jurisdictions: Albania, Barbados, Botswana, Burkina Faso, Cambodia, Cayman Islands, Democratic People’s Republic of Korea, Ghana, Iran, Jamaica, Mauritius, Morocco, Myanmar, Nicaragua, Pakistan, Panama, Senegal, Syria, Uganda, Yemen and Zimbabwe. Customers “established in” any of these jurisdictions, with whom a casino forms a business relationship or engages in a relevant transaction, must be subject to enhanced due diligence.


Financial vulnerability


Following Acting Joint Chief Executive Sarah Gardner’s attendance at the Shard Financial Vulnerability Summit, the new watchword “financial vulnerability” found its way into an update on the customer interaction and affordability consultation exercise. In considering its approach following the consultation, the Commission is prioritising for action situations “where information is available that shows when customers are particularly financially vulnerable and likely to be harmed by their level of gambling”. Sarah Gardner stated that “we will act to prevent harm to those who are financially vulnerable”. Gambling operators may well be asking what “financial


vulnerability” actually means. The Financial Conduct Authority defines a “vulnerable customer” as “someone who, due to their personal circumstances, is especially susceptible to harm”. From Sarah Gardner’s speech at the Summit we know that the Commission has reflected this definition in its own approach. The FCA considers that characteristics of vulnerability “could be poor health, such as cognitive impairment, life events such as new caring responsibilities, low resilience to cope with financial or emotional shocks and low capability, such as poor literacy or numeracy skills”. Whilst this reasonably describes circumstances when a


customer might be vulnerable to gambling harm, more specifically “financial vulnerability” typically refers to the ability of an individual to recover from a financial crisis, such as the sudden loss of income or a sudden increase in expenditure. How can financial vulnerability be assessed by a gambling operator? To get an accurate understanding of this, an operator would likely need some awareness of the customer’s assets and savings, along with potentially the income of their spouse, partner or other family members. The former would require an intrusive request for detailed evidence of the customer’s financial position and latter is


unlikely to be something a gambling operator can reasonably enquire about. So, would it be reasonable for operators to assume all


customers are not financially vulnerable, unless they volunteer evidence such as that they have lost their job, spent their savings or have new financial responsibilities? Not necessarily. Operators could potentially assess all customers using a financial vulnerability score for the area where the customer resides – such indexes have been created by various companies / bodies. More individual information, such as whether a customer has large amounts of debt and/or is missing payments, could be obtained from a credit report. However, what steps the Commission will expect its licensees to take to assess financial vulnerability, and when such steps should be taken, remain unclear.


Melanie is a gambling regulatory lawyer with 13 years’ experience in the sector. Melanie advises on all aspects of gambling law including licence applications, compliance, advertising, licence reviews and changes of control. She has acted for a wide range of gambling operators including major online and land-based bookmakers and casinos, B2B game and software suppliers and start-ups. She also frequently advises operators of raffles, prize competitions, free draws and social gaming products. Melanie has a particular interest in the use of


new technology for gambling products and novel product ideas.


JUNE 2021 21


Ocskay Bence/Adobe Stock


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