UK LEGAL
IMPORTANCE OF OUTCOMES Historically, many enforcement cases concentrated on the adequacy of the licensee’s documented policies and procedures. Operators were criticised for having incomplete AML risk assessments or insuffi cient customer interaction and source of funds policies. The QuinnBet case indicates that the Commission is now more interested in whether operational systems actually produce the intended outcome, demonstrating the focus is now on whether the operator can evidence that its policies and procedures operate effectively in practice.
VOLUME OF BETS AS A TRIGGER One noteworthy point is that QuinnBet was criticised for allowing a customer to place approximately 4,800 bets in a single day and around 7,000 bets on the following day without being fl agged.
The LCCP requires that remote operators use indicators including customer spend, patterns of spend, time spent gambling and gambling behaviour indicators. A key insight from this decision is that triggers created to comply with this requirement may need to include those that relate not just to the amount of money staked and the time spent gambling, but also the overall volume of bets placed.
THE IMPORTANCE OF TIMELY ACTION
As we have seen in a number of previous decisions, the Commission put a signifi cant emphasis on timeliness in this case. Another QuinnBet customer staked more than £215,000 in a day without intervention until the following day’s reporting cycle, highlighting the importance of having systems in place to either act automatically when certain triggers are hit, or to prevent gambling over certain thresholds until a review can take place. The AML failings identifi ed also included that the operator’s controls were insuffi cient to identify and mitigate risks quickly enough. One customer earning approximately £2,000 per month was able to deposit and lose around £9,000 in four days. Interestingly, this was not referenced as a social responsibility failing on the basis that the customer’s gambling was unaffordable, as it likely would have been in the past. The Commission also criticised delays in the submission of Suspicious Activity Reports once suspicious activity was identifi ed.
Historically, operators may have relied to an extent upon daily, weekly or periodic reviews, but the Commission now appears to expect controls to identify and respond to customer activity in real time where clear indicators of risk are presented. In practical terms, that means next day reviews may increasingly be viewed as inadequate where customer behaviour presents clear indicators of a risk of money laundering or gambling related harm. Instead, automated responses and backstop limits are increasingly necessary.
TECHNOLOGY CAN CREATE A REGULATORY RISK
Another noteworthy point is the Commission’s treatment of technology and platform change risk. The published statement notes that during migration to a new platform, 194 customers were able to deposit funds in excess of intended limits. The Commission clearly did not accept the system migration as an excuse for failing to adhere to the controls set out in the operator’s policies and procedures. This highlights the importance of identifying potential issues and putting suffi cient measures in place to mitigate risks before implementing signifi cant technology changes. As automated systems become an increasingly important part of an operator’s compliance processes, ensuring these systems are and remain fi t for purpose has become a crucial part of compliance controls and governance. Operators should ensure that key limits and controls will continue to operate correctly during system migrations, software updates and other technological changes.
YOUNGER ADULT PROTECTIONS ARE NOW AN EXPECTATION The Commission also highlighted failures relating to customers aged 18 to 24. According to the statement, QuinnBet had put in place lower deposit limits for customers in this age range, but before the migration to its new system these had to be applied manually, which meant there could be a
delay of several hours before the limits took effect. This meant that these younger customers could deposit over the intended limit and go on to lose those funds, even after the deposit limit was manually put in place.
There is no specifi c requirement in the LCCP to apply lower deposit limits to customers in the 18 to 24 age group, but the Commission requires licensees to “consider the factors that might make
a customer more vulnerable to experiencing gambling harms and implement systems and processes to take appropriate and timely action where indicators of vulnerability are identifi ed”. The regulator has consistently treated younger adults as a potentially vulnerable demographic. It is unclear whether QuinnBet would have been criticised had it not considered that younger adults were more vulnerable to gambling harms and not had the lower limits for this age group in the fi rst place, but given this issue was specifi cally called out in the public statement, we can conclude that having some specifi c controls for young people is Commission’s expectation.
KEY TAKEAWAY
An important lesson from QuinnBet is that the Commission’s expectations continue to move away from policy design and towards operational outcomes. This includes that controls must operate quickly enough to address risks during or immediately after they arise, and that new automated systems and IT changes must be rigorously tested before implementation.
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 raffl es, 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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