Caesars to pay record £13m over ‘systematic’ VIP failings in UK

Caesars Entertainment UK (CEUK) has agreed to pay a record settlement worth £13m (€14.7m/$16.1m), after the GB Gambling Commission ruled it had breached a number of social responsibility, money laundering and customer interaction regulations related to VIP customers.

Three of the operator's senior managers also surrendered their personal management licences following the investigation, while new staff were appointed to a number of senior roles, including managing director, group compliance director and money laundering reporting officer.

The Commission’s investigation focused on activities at CEUK’s 11 land-based casinos across the country between January 2016 and December 2018, setting out numerous examples of how the operator had failed to follow licence conditions and codes of practice (LCCP).

The review found systemic failings within CEUK’s governance arrangements, resulting in a disconnect between the operator and its casinos primarily related to preventing money laundering and protecting vulnerable people.

The regulator also noted senior personal management licence (PML) holders within CEUK at the time failed to mitigate risks and provide sufficient and effective oversight of the licensed activities.

“The failings in this case are extremely serious; a culture of putting customer safety at the heart of business decisions should be set from the very top of every company and Caesars failed to do this,” the Commission’s executive director Neil McArthur said. “We will now continue to investigate the individual licence holders involved with the decisions taken in this case.

“We are absolutely clear about our expectations of operators – whatever type of gambling they offer they must know their customers. They must interact with them and check what they can afford to gamble with – stepping in when they see signs of harm. Consumer safety is non-negotiable.”

Focusing on specific failings, the Commission said that CEUK breached licence condition 12.1.1, which requires compliance with the prevention of money laundering and terrorist financing, as well as a related failure for account ordinary code provision 2.1.1 regarding anti-money laundering (AML) protocols for casinos.

CEUK accepted that during the period, its casinos failed to adhere to these licence conditions, admitting its AML controls did not address the issues presented by higher-risk customers.

According to the Commission, this included CEUK failing to review its money laundering assessment on an annual basis as required, while its AML policies were outdated and had not been updated since March 2016.

Other failings here included that key PML holders did not maintain adequate oversight and were not sufficiently curious in respect of source of funds or source of wealth, while the compliance team responsible for ensuring AML procedures were put into practice was not adequately resourced.

The Commission added that there was a disconnect of understanding between the compliance team and front-line staff operations at casinos, as well as inadequate documentation and audit trail to demonstrate decision making.

Giving examples of customer failings related to this licence condition, one player was able to spend £820,000, losing £240,000, over a 13-month period at a London casino. The customer's spending triggered several agreed financial alerts, but CEUK did not take the sufficient action to confirm source of funds. In January 2019, the player provided bank statements, which prompted immediate termination of the relationship. 

The Commission noted a similar situation with another customer, who was able to spend £800,000 and lose £795,000 during a 13-month period at a London casino, despite being flagged as a high risk individual. The regulator said CEUK did not obtain proof of source of funds or evidence of the individual's wealth, adding that the player was suspended in January 2019 after a detailed customer review.

In addition, another customer spent £3.5m and lost £1.6m at a London casino in just three months. Iit transpired that the player had, at times, been using a company business card to withdraw cash to fund his gambling. It was later ruled that the customer's play should have been terminated at an earlier stage.

CEUK was also found in breach of social responsibility code provision 3.4.1(4), related to policies and procedures for customer interaction, particular when identifying at-risk customers and to interact with customers designated as VIPs.

These policies, the Commission said, should include provisions for making use of all relevant sources of information to ensure effective decision-making, as well as to identify at risk customers who may not be displaying obvious signs of problem gambling. In addition, there should be a specific provision for VIP players.

CEUK accepted it failed to ensure its safer gambling policies and procedure were up to date, admitting that its responsible gambling policy had not been changed since March 2015, while key PML holders did not maintain adequate oversight of this area of business.

The operator said local arrangements within casinos put an over-reliance on player interactions being carried out by casino management, while policies did not always prompt effective interactions where customers may be displaying signs of problem gambling.

Giving specific examples of the failings, the Commission highlighted how a player at a London casino was allowed to buy-in for £1.1m and lose £323,000 in 12 months. The customer had displayed signs of problem gambling – including 30 sessions exceeding five hours – which should have prompted interactions, but the response from the casino was deemed inadequate.

Another player was able to spend £430,000 and lose £112,000 over 12 months, despite the casino not holding appropriate source of funds details to identify whether this level of spend was sustainable. CEUK said that the last recorded intervention with the customer was dated 2007 – 11 years previously.

In addition, a customer spent £335,000 and lost £65,000 in six months, despite the casino being aware they had previously self-excluded from gambling. The customer visited the casino 54 times in 13 months, including 14 sessions that exceeded five hours and three sessions that exceeded 10 hours. The customer interactions were deemed inadequate, particularly given the casino’s knowledge of the customer, time spent and level of spend.

Aside from these two primary failings, the Commission found that CEUK was also in breach of several other licence conditions. This included 5.1.1, which requires licence holders to implement appropriate policies and procedures concerning the usage of cash and cash equivalents.

However, the regulator said the CEUK cash desk policy document designed to give staff operational guidance had not been updated, therefore placing it in breach of the condition.

Meanwhile, the Commission noted a breach of licence condition 15.2.1, which require the licensee to notify the regulator of any key event that could have a significant impact on the nature or structure of their business. Events can include the dismissal against the holder of a personal licence, or disclosure related to the Proceeds of Crime Act 2002 or Terrorism Act 2000.

The Commission said that, during 2018, a number of key event reports subject of notification had not been submitted by CEUK, as required under condition 15.2.1.

CEUK was also found in breach of licence condition 15.3.1, which requires the holder to, when required, provide the Commission with information about their facilities. This may include the number of visitors, type of gambling taking place and the operator’s policies for problem gambling.

However, it transpired that CEUK casinos did not submit regulatory returns by the required due dates, which the Commission said indicated that this failing occurred as responsibility rested with a single point of contact who had failed to make the submission.

In addition, the Commission said CEUK failure to comply with code of practice issued under Section 24 Gambling Act 2005, treating this as a breach of licence condition Social Responsibility Code Provision 10.1.1, related to assessing local risk.

Here, licensees must assess the local risks to licensing objectives posed by the provision of gambling facilities at each of their premises, and also have policies, procedures and control measures to mitigate such risks.

Specifically, the Commission said CEUK’s London Clubs Southend facility had not carried out this local risk assessment. This should be structured to offer sufficient assurance that licensed premises have suitable controls and procedures in place.  

CEUK admitted to all of the failings listed by the Commission and agreed to pay £13m payment in lieu of a financial penalty, which be used to support the regulator’s National Strategy to Reduce Gambling Harms. CEUK will also pay £115,000 towards the Commission’s costs of investigating the case.

Since the review, CEUK has put in place an improved system of governance, including the appointment of an Independent Compliance Committee to oversee compliance risk.

The operator has also revised its regulatory policies and procedures designed to deliver compliance and appointed new senior staff in various posts, including managing director, group compliance director, money laundering reporting officer and senior compliance manager.

Other changes include increased resourcing with responsibilities for compliance, a review of high value customers and, where appropriate, suspended business relationships, as well as an external risk and governance review.

However, the Commission has added a number of conditions to CEUK’s licence in response to the review. These include that all PML holders, senior management and key control staff undertake outsourced AML training.

CEUK must also put into effect an AML and SR training programme for all staff, as well as complete an annual review of the effectiveness and implementation of the group AML and SR policies and procedures. In addition, CEUK shall instruct a firm of auditors independent of CEUK to undertake an annual audit of the reviews.

The £13m settlement eclipses the previous record payment made by Betway last month, when the operator agreed to pay £11.6m for social responsibility and money laundering failures related to high-spending customers.