GB Gambling Commission: affordability and KYC checks still lacking

These findings came in the regulator’s 2019-20 compliance and enforcement report, as well as a new strategic assessment document that is intended to serve as the foundation for future regulatory policy.

The Commission noted that its last report mentioned that operators should reassess how affordability checks are triggered “to ensure vulnerable customers were identified as early as possible”. 

However, it said it continued to find a number of cases where operators have allowed individuals to continue to gamble without significant affordability checks despite showing signs of harm.

It noted examples such as one operator permitting a customer to deposit and lose £187,000 in two days despite no regular source of income and a customer who lost £18,000 in a year despite telling staff she had spent her savings and was playing with borrowed money.

The Commission also pointed out that the average full-time UK employee earns around £30,500 per year before tax and the average manager, director or senior official – the highest-earning employment category – earns less than £45,000. It said operators should keep these numbers in mind when assessing affordability.

The regulator added that operators should ask a number of questions about their affordability processes, such as “Do you have policies and procedures in place to identify customers who may be experiencing or at risk of developing problems with their gambling?” and “Do you have systems in place to identify potential problem gamblers?”

While the document was based on data for up to March 2020, the Commission said that the novel coronavirus (Covid-19) lockdown had increased affordability concerns in the time since the year measured ended, as 40% of people saw a decrease in their disposable income while 20% of the population reported a decrease to their mental health which it said may increase levels of play.

In terms of anti-money laundering checks, the Commission said that risk assessments were often lacking, while operators rarely seemed to learn from the regulator’spast enforcement activity.

It asked operators to consider a number of questions to ensure their AML practices were up to its standards, including “Are you confident commercial considerations do not outweigh your

regulatory responsibilities and compliance with the conditions of your licence?”

The regulator also said it would scrutinise those who hold personal management licences to a greater extent going forward. It said many of these licence-holders had committed failings due to inadequate efforts to ensure decisions made at the executive level were being implemented fully and “overly complicated lines of decision making and accountability”.

As well as this, the Commission said it was “particularly focused” on preventing illegal online gambling. These, it said were of particular concern as many of their customers may be especially vulnerable and may have self-excluded from licensed websites due to tools such as Gamstop, while many customers also contact the Commission about these websites after finding they cannot withdraw funds.

The regulator also noted that white label agreements have become more popular of late, but said it was concerned that unlicensed operators “who would potentially not pass the Commission’s initial licensing suitability checks”, may use the model to provide gambling services in Great Britain.

It reminded licensees that they hold responsibility for their white label partners’ activity and so they must conduct “appropriate due diligence checks” or they may lose their licence.

Finally, the Commission said that it had increased regulatory activity relating to betting exchanges during the year, and in light of Matchbook operator Triplebet’s licence suspension, “exchanges must apply critical risk-based thinking in advance” as they increase their betting markets or jurisdictions from which they draw their customers.

During the year, the Commission suspended five operating licences and revoked 11, while also issuing 12 penalty packages worth more than £30m.

The Commission completed 234 security audits, 33 website reviews and 350 compliance assessments.

The regulator reiterated many of these points in a new National Strategic Assessment document. Chief executive Neil McArthur said the document would be the “foundation for prioritising action over the coming months and years”.

The Gambling Commission noted a number of major areas of risk within four categories: the person gambling, the place where gambling occurs, the products used and the provider of gambling services.

The risks related to the person included that “licensees do not know enough about their customers including how much a customer can afford to gamble”, as well as the risks from engaged gamblers spending money with several operators and the risk of underage gambling.

It said that because of this, knowing customers was extremely important and that this included “understanding affordability and a customer’s personal circumstances, how they react to products, play patterns and behaviours.”

It said it had taken a number of steps to mitigate these risks, including stricter age verification checks, the creation of an “Experts by Experience” group to gain a greater picture of gambling-related harm than just the number of problem gamblers and an upcoming review of its approach of tracking participation in gambling and the prevalence of at-risk and problem gambling.

In terms of the place where gambling occurs, it said risks included the accessibility of online gambling, prevalence of advertising and anonymity at retail locations.

In terms of online gambling, it said it was important for operators to assess risks at every stage of the process, including before a customer decides to play, when they sign up, during play and after.

In terms of products, the commission said that game design, gambling machines, higher-risk products and product innovation are all areas of risk. It noted that online slots generate the most gambling revenue among all products, and thus it was important to ensure that safe design was an area of focus.

“No single policy change can make gambling products safe,” the regulator said. Addressing the risks associated with the products people play – such as stake limits or speed of play – should

be considered alongside a package of complementary initiatives which impact each stage of a customer’s interaction with a given product.” 

It added that it would soon publish the results of its consultation into safer game design, which proposed measures such as a ban on auto-play and celebrating “losses disguised as wins”.

For the provider, the Commission said one area of risk was a lack of transparency around ownership, while illegal operators and tackling suspicious activity were also areas of risk.

“Any entity or individual wishing to operate in the British market must be prepared to be transparent and co-operative with us,” it said.