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32Red pays £2m penalty after anti-money laundering failings

An online gambling provider has paid a penalty of more than £2 million after it failed to meet its obligations on social responsibility and on addressing the risk of money laundering.20 Jun 2018

The penalty was applied as part of a regulatory settlement between the Gambling Commission in Great Britain and 32Red. The settlement re-enforces the Commission's "drive to protect consumers", said gambling regulation expert Christopher Rees-Gay of Pinsent Masons, the law firm behind Out-Law.com.

According to the regulator, 32Red failed to identify that one of its 'VIP' customers may have had a gambling problem and to pick up on signs of potential money laundering.

"Enforcement action by Gambling Commission in recent years has increasingly focused on the money laundering controls and it expects casino operators to learn from the cases that it publishes," said Stacy Keen, an expert in anti money laundering regulation at Pinsent Masons. "The Gambling Commission noted in respect of 32Red that simple open source checks such as 'searching typical salaries for the occupation, searching Google maps on the home address' could have been carried out to verify the information that was being provided by the customer."

In its statement, the Commission said that the customer deposited £758,000 into their online account with 32Red between November 2014 and April 2017 without the company carrying out social responsibility or anti-money laundering checks, despite 22 incidents occurring during that period which should have prompted action.

"Indications of harm included admissions to 32Red staff that they had spent too much, displaying frustration and chasing losses," the Commission said.

However, instead of following up those incidents, 32Red provided the customer with free bonuses which "encouraged the customer to gamble more", Richard Watson, Commission executive director, said.

The Commission found fault with the social responsibility and anti-money laundering policies and procedures in place at 32Red, which it said included failings in relation to checking the customer's "source of wealth".

The customer was "deemed low risk and deprioritised" because of their "existing relationship" with the business in August 2016, despite having deposited more than £235,000 since November 2014, and the company allowed the customer to continue playing despite failing to disclose information for five weeks following the review of their account, the Commission said.

The Commission said: "Following the review, a disclosure was made to the nominated officer and source of wealth requests were made of [the customer], but information was not received for a further five weeks despite continued play. The documentation supplied did not support the level of deposits but 32Red took no further action until the account was suspended in April 2017, by which life time deposits (from November 2014) were £758,000."

"The material supplied – a payslip and report of commission for work – was not credible and showed volatility in receipted income. To take it at face value though would suggest a monthly net income of £13,000, yet average monthly deposits were in excess of £45,000. Simple open source checks which could have been indicators of the customer’s source of wealth were not performed – eg searching typical salaries for the occupation, searching Google maps on the home address. In fact, the customer’s average monthly net salary was £2,150," it said.

32Red admitted to breaching the Commission's licensing conditions and codes of practice (LCCP) and has updated its policies and procedures, including by implementing recommendations made from a third party audit of its anti-money laundering AML policies, procedures and controls, the regulator said.

Rees-Gay said: "The issues this cases raises are specifically covered in the 'good practice' element of the regulatory settlement that provide essential learning for all operators. A further central point to be drawn from this settlement is that operators should ensure that their responsible gambling polices meet the code provisions set out in the LCCP."