UK LEGAL COMMENT
The Commission’s AML guidance for casinos, which came
into force in November 2020 states that: “The information that is collected at the commencement of the business relationship with the customer will enable the operator to determine the level of risk associated with the customer and, in turn, the initial and ongoing customer due diligence and monitoring that is required. Operators will need to consider who the customer is, what they do, where they live and do business, and the nature of the product or service they require.” This implies that customers should be asked on registration to complete some sort of questionnaire including questions on what they do for a living, where they do business and what gambling products they intend to use. This seems disproportionate for customers who, as far as the operator knows, may end up spending little or no money with them. No such requirement is specified in the LCCP or Money Laundering Regulations. However, to avoid similar criticism, other casino operators should consider implementing a procedure for risk-rating customers at registration using the information that is and needs to be provided at that point, but that clearly sets out risk-based triggers for obtaining further information and re-assessing the risk rating. The Commission’s proposals for financial risk checks, if implemented as drafted, would in any event require that customers losing £125 in a month or £500 in a year are asked for details of the occupation. A joined up process with money laundering risk rating would be advisable, so that this information can also feed into the customer risk assessment. The Commission’s public statement further highlighted
issues with Lindar Media’s customer interaction processes. During the time period under consideration (July 2021 to September 2022) the former LCCP provisions and guidance on customer interaction were in force, with the majority of the current requirements for online operators coming into force in September 2022. Nevertheless, the Commission’s expectations relating to identifying customers at risk of gambling harm were broadly similar at that time. In particular, the public statement notes that “some
customers were able to deposit and lose up to and in excess of £10,000 with no controls in place to intervene until the money had been lost”. In practice, it seems unlikely that many customers were able to lose those sums, as the total divestment volunteered by the operator was just over £50,000. It is worth considering the £10,000 losses in the context of
the Commission’s ongoing consultation into proposals for new LCCP requirements for financial checks. Under the proposals, a customer depositing £10,000 would be subject to an “enhanced assessment” after losing £1,000 of those funds in 24 hours or £2,000 in 90 days, however the specific requirement on the licensee is only to “consider the results of the financial risk assessment and take any proportionate action before they allow any further deposits”. This indicates that the customer can be permitted to continue gambling with their remaining funds on deposit until the operator has the results of the assessment, in this case potentially losing the remainder of the £10,000 in a short space of time. In reality it seems likely that, as it has in relation to Lindar Media, the Commission would criticise an operator in this case for failing to take action to prevent gambling harm. This highlights that the proposed financial risk checks will be an addition to the Commission’s current expectations, rather than an alternative approach.
The Commission’s comments on disproportionate spend and consideration of financial circumstances also remain relevant to current expectations. Interestingly, the Commission states that disproportionate spend “was not considered for some customers until they had deposited and lost significant amounts of money”. I don’t think it is a mistake that the Commission didn’t specify what the triggers used by the operator were, but at least in this case operators will be able to rely on implementing the thresholds and checks specified in the new licence condition once it comes into force, to ensure they are meeting the requirements. Reading between the lines of the statement, it appears that
there were cases where Lindar Media was following good processes for AML and customer interaction but failed to keep sufficient records of decisions made and the reasons for them. The importance of good record keeping can’t be underestimated, as the Commission’s regulatory investigations are very much driven by documentary evidence.
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.
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