The Gambling Commission has warned gambling businesses that they must carefully manage any third party websites for which they are responsible. If they do not, the Gambling Commission has warned it will take regulatory action against them.
The warning follows regulatory action taken against a company called FSB Technology.
The Commission says that FSB will have to change the way it operates, and will have additional licence conditions imposed on it. In addition, it must pay £600,000 for advertising, money laundering and social responsibility failings.
FSB’s business model includes contracting provisions of its licensed activities to third parties on a white label basis. This type of arrangement places responsibility on the licensee (in this case FSB) to ensure that its third-party partners comply with rules aiming to keep gambling fair, safe and crime-free. However, a Gambling Commission investigation discovered FSB did not have sufficient oversight of three third-party websites. Neither did FSB have effective anti-money money laundering (AML) and social responsibility (SR) policies and procedures in place between January 2017 and August 2019.
For example:
- There were ineffective customer interactions with, and source of funds checks on, a customer who displayed indicators of problem gambling and spent £282,000 over an 18-month period;
- A marketing email was sent to 2,324 customers who had previously self-excluded;
- A VIP team manager acted without adequate oversight and did not receive sufficient AML training; and
- An inappropriate banner advertisement was placed on a Great Britain-facing website which was providing unauthorised access to content subject to copyright. The banner contained cartoon nudity.
In addition to paying £600,000 towards delivering the National Strategy to Reduce Gambling Harms, FSB will also have additional conditions imposed on its licence to ensure it conducts risk-based due diligence on new and current third party partners on behalf of whom it runs websites.
The Commission has provided guidance to operators as a result of this case. It says that gambling operators should take account of the failings identified in the investigation to ensure industry learning. Operators should consider the following questions:
- Is your governance, due diligence, contractual and audit arrangements effective and are you refreshing existing due diligence at least annually?
- Are your policies and procedures for identifying high risk customers for AML and SR customer accounts effective?
- Have you adequately resourced your AML and SR departments, so your staff are always able to put your policies and processes in place for all customers?
- Have your staff and your third-party partners received sufficient AML and SR training?
- Are you recording all customer interactions, including decisions not to interact with customers, and are these records available for colleagues to refer to when making decisions?
- Are your customers providing documentation to support their level of spend and loss, and not simply giving assurances?
"All operators should pay close attention to this case as it shows that we hold all licensees fully responsible for third party relationships - and we will act against any of our licensees that do not manage third parties appropriately. These were blatant breaches of rules we have put in place to ensure gambling is fair, safe and crime-free”. - Richard Watson, Gambling Commission Executive Director
