On 28 March 2023, the UK Gambling Commission (the Commission) announced that three gambling businesses owned by William Hill Group would pay a total financial penalty of £19.2 million for social responsibility and anti-money laundering (AML) failures; the largest penalty imposed by the Commission. The William Hill outcome follows the separate imposition of total financial penalties of £7.2 million by the Commission against two licenced operators on 23 March 2023, also for social responsibility and AML failures.
Whilst the Serious Fraud Office, the Financial Conduct Authority and His Majesty’s Revenue & Customs tend to dominate the headlines for UK law enforcement activity, this record fine is a timely reminder that the Commission continues to be one of the UK’s most vigorous and assertive AML enforcement authorities.
This post summarises the Commission’s criminal and regulatory powers and explores some of the key learnings for companies in the gambling sector from recent enforcement actions in relation to compliance failures.
The Commission is a sector specific regulator responsible for regulating the provision of facilities for gambling to persons in the UK. Deriving its powers from the Gambling Act 2005 (the Act), the Commission licences and issues advice and guidance to its licenced operators, namely the companies and individuals that offer gambling services.
The Commission has both criminal and regulatory powers. Under the Act, it is a criminal offence to provide facilities for gambling without a licence or applicable exemption (amongst other offences) and the Commission has the power to investigate whether an offence has been committed and may institute criminal proceedings in England and Wales against anyone found to be in breach. Per the Commission’s enforcement policy1, it will generally not pursue a criminal investigation into a licensed operator, as in most cases the matter under investigation is likely to be capable of being dealt with by the exercise of the Commission’s regulatory powers. The Commission takes a robust and assertive approach in exercising its regulatory powers and it conducts regular compliance assessments and licence reviews of licenced operators. Since the start of 2021, the Commission has imposed fines totalling more than £100 million for regulatory failures.
Licence reviews and compliance assessments
The Commission has extremely broad discretion to commence a licence review. Section 116 of the Act provides for two different types of review.
- Under section 116(1) of the Act the Commission may review matters relating to a class or type of operating licence and, in particular, arrangements made to ensure compliance with the conditions attached to the relevant class of operating licence.
- Section 116(2) of the Act gives the Commission the power to review any matter relating to a licence if the Commission:
- suspects that conditions of a licence have been or are being breached; or
- believes that the licence holder or any person connected with the licensed activities, has been convicted of a relevant offence; or
- the licensed activities or thinks that a review would be appropriate.
A review can therefore be carried out even if there is no suspicion as to the licence holder's activities. That the Commission considers a review would be appropriate is sufficient grounds. Letters sent to licenced operators by the Commission when a review is being initiated will explain the grounds for the review.
It is a criminal offence for a licenced operator to fail without reasonable excuse to comply with the Commission’s request to produce written or electronic records or information about its licensed activities2 or to provide the Commission with information in connection with a licence review which is false or misleading without reasonable excuse.3
In addition to licence reviews, the Commission also undertakes frequent compliance assessments to ensure that licenced operators remain suitable to hold licences and that they conduct themselves in a way which is consistent, in letter and spirit, with the licensing objectives, the requirements of the Act, their licence conditions and related codes of practice.
The steps taken by the Commission during licence reviews and compliance assessments will vary according to the nature of the assessment but will typically include a review of sample customer accounts, a review of policies, procedures and controls (including those related to AML and social responsibility) and their implementation, interviews with key personnel, a website review and a marketing and advertising review. The Commission’s expectation is that licenced operators demonstrate how their business is compliant by providing evidence of how procedures work in practice, rather than simply providing verbal explanations.
The Commission’s section 116 reviews of the William Hill companies each followed an initial compliance assessment.
Following a licence review, the Commission may decide to take no further action, give the licensee advice as to conduct or exercise its enforcement powers under section 117 of the Act. Section 117 provides that the Commission may give the licensee a warning; add, remove, or amend a condition to the licence; suspend a licence; revoke a licence; impose a financial penalty; or impose some combination of these sanctions, if appropriate. Alternatively, the Commission may agree to reach a regulatory settlement with the licensee, which involves a payment in lieu of the financial penalty the Commission might otherwise impose for breach of a licence condition. There may also be occasions when information gathered during the review leads the Commission to commence a criminal investigation or refer the matter to the police or another regulatory body for consideration by them.
What steps can licenced operators take now?
The William Hill financial penalty sends a clear signal to the UK gambling industry that the Commission is willing and able to take significant regulatory enforcement action and forms part of a continuum of robust enforcement activity by the Commission over recent years. Licenced operators should use the action as a prompt, if not already doing so, to take practical steps now to mitigate the risk of AML and social responsibility failings occurring and to prepare for future compliance assessments and licence reviews. These include the following key steps, in respect of each of which a clear documentary record should be collated and maintained with a view to ultimately being shared with the Commission:
- Conducting an updated risk assessment appropriately tailored to the size and nature of the business.
- Reviewing and updating existing policies, procedures and controls and their implementation, incorporating recent Commission enforcement outcomes, regulatory changes (including the much-anticipated Gambling Act Review White Paper due in the spring) and any new or updated Commission guidance.
- Internal audit or third party led testing of the existing compliance and control framework.
- Reviewing, updating and appropriately tailoring staff training on a risk weighted basis, considering real world case studies, including from recent published Commission outcomes.
- Reviewing and enhancing existing corporate governance and board reporting (on compliance issues, remediation steps and resourcing assessment), including nominating a board member with responsibility for compliance.
2Section 122 of the Act
3Section 342 of the Act