The GB Gambling Commission has ordered financial spread betting and sports betting operator Spreadex to pay £1.4m for breaching social responsibility and anti-money laundering (AML) regulations. The operator of the Spreadex.com website will pass the money on to socially responsible causes as part of an agreement with the entity.
Between January 2020 and May 2021, it was found that Spreadex violated the License Conditions and Codes of Conduct (LCCP), while failing to comply with the Social Responsibility Code.
The social responsibility flaws identified by the Commission included Spreadex having in place financial alerts that were ineffective and allowed clients to lose significant amounts in a short period of time.
The operator was also found to rely too heavily on financial alerts to identify customers at potential risk of harm, while not sufficiently recording and evaluating their interactions with customers.
In one case, a customer was able to deposit £1.7 million and lose £500,000 over a period of one month. The organization noted that while customer interactions did occur, they were not sufficiently evaluated and did not include consideration of the effectiveness of the account restriction.
Assessing the anti-money laundering flaws highlighted by the Gambling Commission, the analysis chose a client who responded to a £25,000 cash deposit alert and underwent further review increasing to £100,000 based on a self-declaration of income.
Another customer managed to deposit £365,000 and lose £284,000 in three months without a sufficiently established source of funds, while a player was able to continue depositing after providing edited bank statements in response to a request for proof of their source of income.
“While it is disappointing to see CSR and money laundering violations occur, despite our extensive published cases highlighting similar flaws, we note the swift and robust action the licensee took to return to compliance,” said Leanne, Director of Enforcement and Intelligence at Gambling Commission.
Entity claimed that Spreadex did not update its risk assessment
In its decision, the Commission said that Spreadex did not update its risk assessment annually as necessary, nor did it take into account available information on money laundering and terrorist financing risks. The regulator also stressed that Spreadex has not evaluated all relevant risk factors for customers, products and services.
Spreadex was also found to be in violation of paragraph 2 of license condition 12.1.1, which refers to how licensees must ensure that they have appropriate policies, procedures and controls in place to prevent money laundering and terrorist financing.
At this point, the Gambling Commission identified shortcomings regarding the adequacy and maintenance of policies, procedures and controls, noting that some customers were able to deposit large amounts of money without triggering a proper interaction.
The regulator added that Spreadex did not critically review the Source of Funds documentation and relied heavily on electronic checks, although it did not have enough staff to respond to financial triggers in a timely manner and adequately mitigate risk.
Finally, the Commission noted that Spreadex did not comply with the Social Responsibility Code 3.4.1, paragraphs 1 and 2 of which state that licensees must interact with customers in a way that minimizes the risk of suffering harm associated with gambling.
In summary, the organization noted a number of aggravating factors, including the severity of the infringements, the impact on licensing objectives and that some infringements arose in circumstances similar to previous cases and subsequently resulted in lessons to be learned by the industry.
Mitigating actions promoted by Spreadex
However, the regulator also considered some mitigating factors, such as how Spreadex showed the severity of the violations and self-suspended its casino activities for five months to lessen the risk.
The regulator noted that Spreadex provided an immediate action plan and took steps to expand and improve its compliance capability, while the operator and its senior managers cooperated with the Gambling Commission.
Other penalties imposed by the Gambling Commission
After considering this, the Commission ordered a payment of £1.4m in lieu of a financial fine, with an additional payment of £7,831 to cover the costs of the investigation. That decision comes after the Commission last week ordered Entain to pay £17m after identifying a series of social responsibility failures in its online and land-based businesses.
Commission Chief Executive Andrew Rhodes said Entain could lose its license in Britain if the group continued to violate market rules and regulations. Also this month, the Gambling Commission fined LeoVegas £1.3 million after identifying a series of flaws, many related to setting triggers too high.
