Daub Alderney, a subsidiary of online bingo operator Stride Gaming, has been fined £7.1m (€8.2m/$9.2m) by the UK Gambling Commission for breaching regulations on money laundering and failing to protect vulnerable consumers.
The Commission first launched its investigation into the business in 2017, when a corporate evaluation found that “appropriate risk assessment was not in place”. Daub Alderney, the owner of Kitty Bingo and Lucky Pants Bingo, was made aware of the issue in October of the same year and later accepted it had breached its licence conditions.
In January, the Commission began a review before referring it to its regulatory panel in April for a decision. The regulator eventually ruled that Daub Alderney had not adhered to anti-money laundering measures and also failed to comply with its social responsibility codes of practice.
The ruling comes after Stride in September announced that it was expecting a “significant financial penalty” after reviewing how one of its brands – unidentified at the time – “historically carried out its licensed activities”.
Stride confirmed in a trading update in September that its board had made a provision of £4m for the fine, but the final penalty is almost double that amount. Following today’s announcement Stride’s share price fell by 6% but has since rallied.
Gambling Commission executive director Richard Watson described the action as part of an ongoing investigation into online casino operators' business practices.
“The operator’s standards did not match the protections required, and this fine reflects the seriousness of these lapses,” Watson explained.
After the Commission’s initial evaluation Daub Alderney conducted an audit of all customers who had deposited £50,000 over the time they had held accounts with the business, and found that it did not have sufficient and acceptable information on the source of the funds for some 742 accounts. It closed all accounts where the required data could not be obtained.
Even when it tightened the parameters to deposits of £50,000 in 12 months, there were still 63 customers from whom satisfactory information on the source of their funds. The Commission said Daub Alderney has “ceased transacting with those customers and accounts have been blocked to prevent deposits or withdrawal”.
The commission also found that there were “significant limitations” in the Daub Alderney's ability to “proactively identify and mitigate risk”.
In its ruling, the Commission said this manifested itself in terms of resource, systems, and controls such as the Social Responsibility policy and procedure not being sufficient, only giving examples to staff of potential issues as opposed to outlining detailed action to be taken to mitigate risk. There were also no specific policies for VIP customers/
The regulator also said there had been “insufficient resources for identifying and mitigating SR risk”, while “adequate systems and controls to proactively identify potential problem gambling were not in place”.
Officials alo noted that issues related to the identification of anti money-laundering risk, such as payment details not matching the customer and duplicate accounts, were not used to identify customers with potential gambling problems, like previously self-excluded individuals attempting to gamble using a payment card belonging to a relative.
Commission officials saw evidence of customers “being offered free spins or Amazon vouchers to retain their business, but it was not clear that this was appropriate”.
In addition to the fine, Daub Alderney will now have extra conditions placed on its licence to provide gambling to consumers in the UK.
These include a requirement to appoint a qualified money laundering reporting officer who holds a Personal Management Licence, as well as ensure that all of its personal management licence holders, senior management and key control staff undertake outsourced anti money laundering training.
Daub Alderney must also continue its review of both the effectiveness and implementation of its anti-money laundering and social responsibility policies and procedures, engaging with external auditors appointed by the Commission.
Stride is due to report its results for the year to August 31 on November 21. In September the company said it excepted net gaming revenue for the financial year of no less than £85m, up from £82m, and adjusted EBITDA of no less than £16m, compared to £20m last year.
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