28 September, 2022

Gambling with compliance?

SmartSearch Managing Director Martin Cheek explores the ever-important issue of anti-money laundering amid the growing number of fines for gambling companies.

Like many industries in the current climate, the gambling sector is feeling the heavy burden of anti-money laundering (AML) compliance.

You only have to look at the growing number of companies named and shamed by the Gambling Commission to see the problem. In August alone, Entain and its brands Ladbrokes, Coral and Foxy Bingo were fined a record £17m ($20m) for social responsibility and AML breaches. 

In the same month, we saw LeoVegas fined £1.3m and Smarkets fined £630,000. That’s not forgetting betting giant 888 receiving a hefty £9.4m fine in March for the same offences.

The reality is that the large number of rapid, potentially high-value transactions has long made the sector an easy target for criminals to launder ‘dirty money.’ However, as technology has advanced and customers have moved online, the opportunities for financial crime have only increased.

The problem is exacerbated by those firms who, according to the regulator, ignore both financial and threshold triggers, and lack adequate control and checks on both their customers and their source of income.

It therefore feels like a pivotal time for the industry, especially as the size and volume of fines increase and the regulator promises stricter penalties as part of its crackdown. In truth, the only thing slowing down the pace of reforms is a skeleton UK Government and an ongoing leadership battle.

On top of sizeable fines, there’s the very real threat of licences being suspended or withdrawn entirely. There’s also reputational damage of being named and shamed, and the intensive audits and far-reaching inspections that will weigh heavily on businesses.  

Without question, this should all serve as an urgent call to action to businesses: to step up their due diligence, and take advantage of digital advancements to modernise onboarding and strengthen client monitoring.

One of the biggest advancements has been electronic verification (EV), which supersedes open-source searches and removes the need for manual checks on hard documents such as passports, IDs and driving licences.

With real certainty, EV allows firms to weed out the bad actors and truly verify a customer’s identity – a key component of the Know Your Customer (KYC) procedure.

Using EV as part of cloud-based software, or integrated into an existing system, means thousands of in-depth checks can be completed in seconds. By utilising automation, AI and facial recognition to streamline onboarding, compliance can start to feel like competitive advantage rather than hardship.

Of course, compliance doesn’t begin and end at registration. Regulators are looking for firms to show consistent checks throughout the customer’s journey.

That’s especially true as the war in Ukraine rages on. Since the conflict began, an unprecedented 7,200 individuals and 1,250 entities have been added to the thousands of global sanctions in place.

Even customers with no discernible link to Russia or the Kremlin may now be subject to sanctions. Without appropriate checks, firms could be seen as an enabler for evasion and liable to further fines or criminal prosecution.

Caesars Entertainment’s then-record fine of £13m in 2020 serves as an important warning in this respect. Among its failures, the company allowed a politically exposed person (PEP) – someone who is at higher risk of bribery or corruption thanks to their position – to lose £795,000 in just over a year.

Digital-led daily monitoring is absolutely vital, allowing firms to account for changing global sanctions and immediately identify those who are now subject to tighter rules. This includes designated persons (DPs), PEPs or relatives and close associates (RCAs).

With the business-never-sleeps mentality of the sector, firms can implement 24-hour monitoring without manual intervention. This means any positive customer matches automatically trigger enhanced due diligence, showing the proactiveness regulators are searching for.

There’s no question that the industry is facing a monumental task. But thanks to continued innovation and global digitalisation, the technology is available to remove the gamble and ease the compliance burden. It’s now up to firms to make it a priority.

Going digital with access to high quality, robust data allows firms to protect their business, speed up and modernise processes and keep their competitive advantage; all while demonstrating consistent checks and controls to regulators.