Posted by Woods Whur | Uncategorised

In this article, Andy Woods reports on the recent Public Statement issued by the Gambling Commission in respect of Paddy Power.

In February 2016 the Gambling Commission issued a Public Statement, having identified a number of serious failings on the part of Paddy Power in relation to keeping crime out of gambling and protecting vulnerable people from being harmed or exploited.

The Gambling Commission Statement in particular centred upon the way in which Paddy Power dealt with two customers in their shops and one of their online customers who was later convicted of serious criminal offences. The Gambling Commission accepted that Paddy Power had social responsibility and anti-money laundering policies and procedures in place and had delivered training to staff and also that it had systems for monitoring internal compliance. The Gambling Commission identified that those procedures were not fully in line with its guidance, not all staff fully understood their own policies and the internal compliance monitoring had failed to identify the issues relating to the customer. The Gambling Commission noted there had been full cooperation from Paddy Power.

The Public Statement confirms that Paddy Power acknowledged the following:

  1. A failure to have and apply a customer interaction policy which complied with social responsibility code provision 3.4.1(1)(c). The policy did not include “circumstances in which consideration should be given to refusing service to customers and/or barring them from the operator’s gambling premises”.
  2. The duty to be socially responsible should have extended to refusing service as apposed to being limited to monitoring and interacting with customers.
  3. Paddy Power had asked a customer, despite displaying signs of having a serious gambling problem, to continue to visit and to spend. This was described as being “grossly at odds with the licensing objective of preventing vulnerable people from being exploited by gambling”.
  4. The anti-money laundering policy was inadequate. It did not include a reference to the spending of the proceeds of crime and failed to take into account published advice and guidance.
  5. Paddy Power failed to respond to suspicions of money laundering.
  6. Paddy Power failed to take reasonable steps to establish sources of funds.

The Public Statement then sets out the following case studies.

Customer A

Customer A was a regular user of fixed odds betting terminals and regional staff decided that they needed to look at the source of Customer A’s money. It would appear that Paddy Power accepted the customer’s own account and their own staff’s belief relating to the source of money, although staff noted that they needed to obtain further information. Some interactions were recorded although staff became aware that Customer A had five jobs to fund his gambling and that he had no money. The manager of the shop informed a more senior member of staff whose response was to try and increase Customer A’s visits and time spent in the premises. The manager recorded some discomfort about how to reconcile commercial and social responsibility considerations and staff subsequently recorded further interactions with the customer who kept on indicating that he was comfortable with his gambling. It was noted that Customer A looked unwell.

The first recorded instance of trying to help Customer A was when a staff member bumped into him off the premises and was informed that he had lost all his jobs, was homeless and had lost access to his children. It seems to me that this raises an issue which the gambling industry may well need to look at across the board in greater detail and address the issue as to whether staff can actually understand and implement policies, even if the policies are sufficient. Managers and senior shop staff must be able to have full support from senior management and record and deal with concerns as they deem appropriate, without any concerns about commercial influences or pressure from above.

Customer B

This is another case of a shop manager having some suspicions and in this case the shop manager suspected that Customer B was laundering Scottish bank notes and placing them into the machines and then requesting a pay out on a debit card. Over six months this concern was escalated to more senior members of management on at least four occasions and on every occasion the shop manager was told that as the notes were British currency it was unlikely that the money was being laundered. Suspicions were repeatedly overruled by middle management.

It was only on the 12 January 2015, when Paddy Power became aware that police had concerns about Scottish notes that enhanced due diligence checks were undertaken, and when it was not ultimately possible to validate the customer’s ownership of a business that she claimed to run, that the customer on the 21 of April 2015 was barred from the business and the matter reported to the National Crime Agency.

Customer C

The Gambling Commission became aware in September 2015 that Customer C had pleaded guilty to fraud offences relating to the theft of over £250,000 from six customers at two banks where he worked, and that he had been sentenced to 28 months’ imprisonment. The police confirmed that Paddy Power had provided them with information indicating that Customer C had spent a significant amount on its remote gambling facilities during the same period. It was confirmed that Customer C opened an account with them on the 21 of April 2014 and that his level of spending triggered a need to undertake enhanced due diligence. The due diligence confirmed that there was no negative open source media coverage relating to Customer C, that he’d recently bought a house valued at £125,000 and that he was not listed on any sanctions registers. No enquiry was made with the customer about the source of funds he was gambling with, and Customer C was deemed to be a medium risk.

Paddy Power acknowledged that it had clearly failed to follow policies and procedures it had in place for undertaking due diligence checks on customers of its online business.

The Gambling Commission accepted a voluntary settlement from Paddy Power, which included the payment of £280,000 to an agreed socially responsible cause and £27,250 towards the Gambling Commission’s costs. Paddy Power also agreed to commission a review into its anti-money laundering and social responsibility controls across its estate, which was to be undertaken by a third party at its expense and an agreement was further reached to issue a Public Statement and to share learning from the above cases.

The Paddy Power situation is similar to a few other situations that we have come across recently, which highlight the need in 2016 for the following:

  1. Effective systems in place for staff at all levels to ensure that commercial considerations do not outweigh the need to comply with the licensing objectives.
  2. The need for policies and procedures to fully meet the requirements set out in the Licence Conditions and Codes of Practice (LCCP), including social responsibility Code 3.4.1.
  3. The need for staff to be very clear on the indicators of problem gambling and to consider refusing service.
  4. The need for policies and procedures relating to anti-money laundering to adequately meet ordinary code provision 2.1.
  5. It is a must that all relevant members of staff undertake their duties in relation to the licensing objective of keeping crime out of gambling and have sufficient up to date knowledge.
  6. The requirement to be able to undertake full checks to obtain information about customers’ sources of funds.

There have been other similar investigations, there are still further ongoing investigations, and operators need to watch out.