Gambling Commission says affordability and KYC checks still lack in new report

The UK Gambling Commission has published its 2019-20 compliance and enforcement report where it said that operators “do not know enough about their customers.”

The UK Gambling Commission has published its 2019-20 compliance and enforcement report, revealing that licensees do not know their customers well enough and for several operators, their affordability checks continue to lack.

These findings, along with a new strategic assessment document which is intended to act as the foundation for future regulatory policies,  were presented in the regulator’s 2019-20 compliance and enforcement report.

Licensees “do not know enough about their customers”

In its last report, the Commission said that operators should reassess how affordability checks are triggered to ensure “vulnerable customers were identified as early as possible”.  However, the regulator said it has continued to find several cases where operators have allowed customers gambling without adequate affordability checks, even when showing signs of harm.

The Commission made reference to one example where an operator allowed a customer to deposit £187,000 in two days who had no regular source of income. Another example was a customer who lost £18,000 in a year, despite telling staff members that they had spent their savings when they were actually playing with borrowed money.

In its report, the Commission said that operators should bear in mind how much the average UK worker earns. The regulator pointed out that the average full-time UK employee earns roughly £35,000 a year before tax and the typical manager, director or senior official earns less than £45,000.

The Commission also said that operators should ask questions about their affordability processes, for example, “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?”

Although the report was based on data collected up to March 2020, the regulator said that the coronavirus pandemic and lockdown had increased affordability concerns. The regulator noted that 40% of people saw a drop in their disposable income while 20% of the population saw a drop in their mental health, which could lead to an increase in playtime.

The report also asks operators to consider asking new questions to ensure their anti-money laundering (AML) practices were up to scratch. One of these questions includes “Are you confident commercial considerations do not outweigh your regulatory responsibilities and compliance with the conditions of your licence?”

The Commission also said it will scrutinise those who are in possession of a personal management licence to a greater extent in the future. In its report, the Commission noted that many of the licence holders had committed failing due to inadequate measures to ensure decisions made at the executive level were being implemented.

On top of this, the regulator said it is focused on preventing illegal online gambling. This, it said, was of particular concern as several customers may be vulnerable if they have been excluded from licensed operators due to tools such as Gamstop. The Commission noted that some customers from unlicensed sites contact the Commission after finding out they cannot withdraw funds.

The Commission touched on white label agreements and noted that they are becoming more popular, but said it was concerned that unlicensed operators who “could potentially not pass the Commission’s initial licensing suitability checks” may use the model to offer gambling services in the UK.

In its report, the regulator reminded licensees that they hold full responsibility for their white label partners.

Regulatory activity

The report also noted that it had increased its regulatory activity relating to betting exchanges and in light of Triplebet’s licence suspension, “exchanges must apply critical risk-based thinking in advance” as they increase their betting markets or areas where they serve customers.

During the year, the Commission suspended five operating licences and revoked 11. The regulatory body also issued 12 penalty packages worth more than £30m combined.

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

Areas of risk

In the report, Chief executive Neil McArthur said the document would be the “foundation for prioritising action over the coming months and years”.

The regulator highlighted several areas of risk across four categories: the person gambling, the place where they are gambling, the products used and the gambling services provider.

The main risk for the person gambling includes that “licensees do not know enough about their customers including how much a customer can afford to gamble” along with the risk of high spending across various operators and the risk of underage gambling.

Because of this, they reiterated the importance of knowing customers and said that this includes “understanding affordability and a customer’s personal circumstances, how they react to products, play patterns and behaviours.”

When it comes to where gambling occurs, the Commission said risks include the accessibility of online gambling, advertising and anonymity at physical locations. With online gambling, the regulator said it was important for operators to assess the risk at every stage of the process, including before a customer decides to play, when they sign up, play and afterwards.

Looking at products, the Commission said that game design, gambling machines, high-risk products and product innovation are all areas of risk. The regulator noted that online slots generate the most revenue out of all products and therefore it is important to ensure safe design is an area of focus.

When it comes to the provider, the regulator said one area of risk is a lack of transparency around ownership, while illegal operators and tackling suspicious activity are also areas of risk.

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