On 16th October 2018, the Gambling Commission (“Commission”) announced it had reached a regulatory settlement of £2,200,000 with Paddy Power Betfair (“PPB”) over failure adequately to interact with customers who were displaying signs of problem gambling and failure adequately to carry out anti-money laundering checks and prevent stolen money being gambled. These failings affected five customers across its online betting exchange, betting online and betting retail services. The Commission’s full statement can be found here.

The Commission’s findings

The Commission found that PPB breached a provision of the Commission’s standard Licence Conditions and Codes of Practice (the “LCCP”) and a section of the Social Responsibility Code (“SRC”), which are incorporated into the LCCP that mandatorily applies to all gambling licence holders.

Anti-money laundering (Ordinary code provision 2.1.1): the Commission found, and PPB accepted, that PPB failed to act in accordance with the Commission’s guidance on anti-money laundering. Richard Watson, Gambling Commission Executive Director, said: “As a result of Paddy Power Betfair’s failings significant amounts of stolen money flowed through their exchange and this is simply not acceptable. Operators have a duty to all of their customers to seek to prevent the proceeds of crime from being used in gambling”. During 2016 two customers were allowed to gamble significant sums of stolen money on PPB’s betting exchange Betfair. The Commission cited PPB’s lack of robust anti-money laundering checks in respect of both customers. One of the customer’s stole a significant amount from his employer, Birmingham Dogs Home, and as part of the settlement deal this money will be returned to the charity.

Customer Interaction (SRC Code 3.4.1): the Commission found, and PPB accepted, that it failed in allowing five customers to gamble extensively despite indicators of problem gambling. During 2016 social responsibility failings were identified in relation to the two aforementioned customers who were able to bet on PPB’s betting exchange Betfair without PPB recognising signs of problem gambling on numerous occasions. Failings were also identified involving three retail and online customers including weaknesses in source of wealth and social responsibility checks.

As part of the settlement PPB will pay £1,717,121 in lieu of financial penalty, £498,508 divestment of the monies received and a payment of £50,045 towards the Commission’s investigative costs. In determining the appropriate settlement figure, the Commission took into account the entire value of stolen money that flowed through the exchange, not just the profit earned, and the fact that PPB cooperated in an open and transparent manner including full and timely disclosure of material facts during the investigation.

Conclusions

The investigation into PPB is another clear signal from the Commission that it will take a tough stance on social responsibility and comes days after it fined The Rank Group £500,000 for failing to protect a problem gambler and a day after it fined Mark Jarvis £94,000 and told the independent bookmaker to overhaul its social responsibility procedures. These penalties serve as continuing reminders to gambling operators of the need to have appropriate and adequate policies in place to identify potential problem gamblers as well as the need to remain vigilant with anti-money laundering checks and ensure that policies and procedures are fit for purpose, informed by the Commission’s guidance.