32Red handed hefty penalty package over social responsibility failures

News that online gambling operator 32Red has been handed a hefty penalty package over its failure to protect a vulnerable consumer from problem gambling has caught the attention of London Licensing, Gaming and Regulatory Solicitors Joelson.

Following an investigation led by the Gambling Commission, 32Red – which operates popular gambling sites such as 32Red.com, RoxyPalace.com and more – has received a penalty package of £2 million, it has emerged.

The package comes after the Commission’s investigation revealed that there were “weaknesses in 32Red’s responsible gambling and anti-money laundering controls” which enabled one particular player exhibiting problem gambling behaviour to deposit as much as £758,000 in its online accounts between November 2014 and April 2017.

The customer in question, who is referred to as ‘Customer A’ in the Commission’s public statement, reportedly displayed signs of so-called problem gambling behaviour on as many as 22 occasions. In its statement, the Commission noted that there were also many ‘incidents’ prior to this which could have indicated gambling problems and “should have fed into” 32Red’s efforts to “develop a picture of the customer.”

“The incidences should have led to a customer interaction, but instead they were each met with a bonus being applied to the account,” The Commission noted.

It added that 32Red’s social responsibility policies “did not make any reference to customer interaction, the procedure to follow or the behaviours to log.”

It also pointed out that the operator’s policies “omitted certain specific provisions required to promote socially responsible gambling.”

Due to this, 32Red was found to be in breach of two social responsibility (SR) codes, including SR Code 3.4.1 – Customer interaction and SR Code 3.1.1(1) – Combating problem gambling.

Furthermore, following recent revisions to the law, the company was also found to have breached two anti-money laundering licensing conditions.

The Gambling Commission found “operational weaknesses” in 32Red’s approach to such regulations, in part due to the fact that it did not review Customer A’s account “specifically for a source of wealth” in August 2016, by which point the player’s lifetime deposits had already exceeded £235,000.

According to reports, 32Red moved to carry out a subsequent review in January 2017, by which point lifetime deposits had reached almost £500,000.

Once source of wealth requests were made to the customer, 32Red did not receive a response for five weeks – during which time Customer A continued to use the operator’s gambling services profusely.

When documents were finally supplied by Customer A, these were insufficient to support the number and value of deposits they had made, yet 32Red “took no further action” to rectify the matter until April 2017, when the player’s account was suspended.

The Commission noted: “The material supplied – a payslip and report of commission for work – was not credible and showed volatility in receipted income. To take it at face value though would suggest a monthly net income of £13,000, yet average monthly deposits were in excess of £45,000.”

32Red was ultimately found to have breached licence condition 12.1.1 – Prevent money laundering and terrorist financing and to have failed to properly implement Parts 2 and 3 of the Money Laundering Regulations 2007.

Richard Watson, Executive Director at the Gambling Commission, said: “Instead of checking on the welfare of a customer displaying problem gambling behaviour, 32Red encouraged the customer to gamble more – this is the exact opposite of what they are supposed to be doing.

“Operators must take action when they spot signs of problem gambling and should be carefully reviewing all the customers they are having a high level of contact with.”

Richard Williams, Joint Head of the Gambling and Licensing Team at Joelson, said: “It’s clear that operators are going to have to pay far more attention to problem gamblers. Rather than encouraging high customers to spend more as VIP’s, they must ask questions, analyse disposable income and intervene far earlier. Spending or losses will need to be monitored 24 hours a day and if necessary, accounts must be closed.

“This all ties in with the Commission’s newly issued ‘Raising Standards for Consumers – Enforcement Report 2017 – 2018’ where these type of historical failings have been highlighted.

“Operators cannot say they are not aware of these issues. If problem gambling is ignored, these penalty packages will keep on rising until they are painful enough to drive the message home,” he warned.

“I’ve said before that it’s hard for operators to accept that ‘good’ customers financially are not necessarily good customers in the long run, but they are going to have to be far more proactive in identifying, intervening and preventing problem gambling going forward.”

If you require advice on any of the issues raised above, please contact the team at London gambling, gaming and betting solicitors Joelson today.

Richard Williams

Richard Williams

Partner – Joint-Head of Licensing, Gaming & Regulatory

+44 (0) 20 7307 2105

richard.w@joelsonlaw.com

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This article is for reference purposes only. It does not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking or deciding not to take any action.