Escalating Fines an Early Warning Sign for Gambling Regulators

In March of 2023, the UK Gambling Commission fined the William Hill Group (WH International Ltd.) £19.2m, the largest ever fine levied by a gambling regulator, following an investigation uncovering numerous social responsibility and anti-money laundering violations. In 2023 alone, the UK Gambling Commission collected a total of £214.2 million in fines, consistent with the growing trend in fine escalation amongst gaming regulators worldwide.

The global rise in regulatory infractions supports concerns from gambling experts in both the US and Canada that existing regulatory resources are struggling to keep pace with the exponential growth in online gambling. With more bettors than ever transacting online AND the evolution of AI and Deep Fake technology increasing the threat potential for identity fraud, match fixing, and money laundering, modern regulators are finding their compliance resources stretched to the limit. While the escalation in fines indicates that non-compliance actions are being detected and appropriately penalized, some pundits regard the penalties levied as relatively toothless, with the record fine for the William Hill Group for example representing less than four days of revenue for parent company, 888, which won £1.8bn from gamblers in 2022.

Examined in detail, the significant social responsibility and anti-money laundering (AML) violations uncovered by the UK Gambling Commission in the WHG investigation serve as both a cautionary tale and an investigative roadmap for other gambling regulators seeking to prevent similar infringements within their current licensee portfolio.

Social Responsibility Violations

The social responsibility violations cited within the William Hill Group investigation include the following infractions:

• Insufficient controls to protect both new and returning customers, specifically at-risk gamblers, as follows:
  • Failure to consider high velocity of spend and play duration while the customer may have been exposed to substantial losses in a short period.
  • Failure to carry out checks during early stages of the customer journey.
  • Failure to identify changes in customer transactions consistent with ‘at risk’ behavior.
  • Failure to prevent customers gambling despite their self-exclusion from other sites within the WHG umbrella.
  • Failure to apply a 24-hour delay between a requested increase in credit limit and its subsequent approval.

Some of the most egregious social responsibility examples cited from the investigation include:

• Allowing one customer to open a new account and spend £23,000 in 20 minutes.
• Allowing one customer to deposit and lose £36,000 in four days, another £70,134 in a month, and a third £38,000 in five weeks, without conducting appropriate checks.
• Allowing one customer to immediately place a £100,000 bet when his credit limit had been set at £70,000.
  
  

Anti-Money Laundering (AML) Violations

The AML violations cited within the William Hill Group investigation included the following infractions:

• Allowing several customers to deposit large amounts without appropriate checks.
• Allowing customers to stake large amounts of money without sufficient monitoring and/or Source of Funds (SoF) scrutiny.
• Insufficient ‘hard stop’ procedures and controls to mitigate money laundering risks before sufficient customer risk profiling was completed.
• Insufficient policies and guidance on appropriate actions to take based on the findings of customer profiling procedures.
• Insufficient risk management training for AML staff.

Some of the most flagrant anti-money laundering examples cited from the investigation include:

• Failure to obtain documentation from a customer who staked £39,324 and lost £20,360 in 12 days.
• Failure to obtain SoF evidence from a customer who staked £276,942 and lost £24,395 over two months.
• One customer able to spend and lose £70,134 in a month, another to lose £38,000 in five weeks, and another to lose £36,000 in four days.

To proactively identify and prevent similar violations occurring within their regulatory environment, gambling regulators are increasingly turning to intelligent automation to facilitate a multi-pronged approach to compliance monitoring, detection, and mitigation. Combining the complimentary disciplines of Anti-Money Laundering (AML) and Know-Your-Customer (KYC) within seamless, efficient workflows, such solutions equip agencies to facilitate efficient and sustainable best practices for regulatory compliance. Software solutions leveraging true data accessibility empower today’s gaming agencies (including those who operate their own regulated offerings) to stay two steps ahead of unscrupulous gamblers and/or non-compliant operators.

Anti-Money Laundering Best Practices

• Implementing systems to track transactions and detect unusual activity.
• Conducting ongoing risk assessments and continual customer due diligence.
• Conducting independent tests to ensure the effectiveness of operational processes.
• Implementing security enhancements, including AI and machine learning algorithms.
• Staying fluent with current AML laws and regulations.
• Training staff and stakeholders to effectively administer AML regulations and procedures.
• Ensuring sufficient compliance resources exist.

Know-Your-Customer Best Practices

• Authenticating customer identities
• Understanding customer relationships
• Developing risk profiles
• Authorizing the source of funds (SoF)
• Tracking transactions
• Identifying and reporting unusual transactions

Data Accessibility: The Key to Effective Compliance

When efforts to achieve a truly robust KYC & AML model fall short, it’s typically because insufficient data-accessibility is impeding the operator’s ability to access operational data in the expedient manner required to facilitate both timely fraud prevention and proactive bettor safeguards via the following measures:

• Authenticating customer identities.
• Building and maintaining coherent customer risk profiles.
• Sharing and comparing internal and external betting and transaction patterns to flag potential collusion, match fixing, and money laundering efforts worldwide.
• Confirming source of funds and administering appropriate deposit limits.
• Identifying emergent ‘at risk’ behavior(s) and mitigating accordingly.
• Maintaining and monitoring self-exclusion and new account bans (e.g. for professional athletes).

Maximizing the Upsides & Minimizing the Downsides

The record number of fines levied within the gambling industry in 2023 is an early warning sign for modern gambling regulators that the considerable upside of new tax revenues from regulated online gambling is accompanied by the considerable downsides that accompany the heightened risk of addiction, fraud, and money laundering, that occurs when existing regulatory technology is insufficient to meet the demands of this rapidly growing marketplace.

A sufficiently equipped Gaming Control Software platform is the firm foundation required to capitalize on the opportunities of the former while minimizing the risks of the latter.

To learn more about POSSE GCS, our streamlined regulatory and compliance solution for the government gaming enterprise, visit our POSSE Gaming Control Software page for more information OR contact us today to schedule a no-obligation demo.