Gambling business Entain Group reached a £17m settlement with the Gambling Commission on Wednesday after an investigation found numerous failings around social responsibility and anti-money laundering (AML) compliance.

A spokesperson for Entain said the group accepted that “certain legacy systems and processes supporting the operations of its British business during 2019 and 2020 were not in line with the evolving regulatory expectations of the Commission…”

No evidence of the illegal use of funds was found during the investigation. However, the case highlights the urgent need for companies subject to AML rules to adopt up-to-date and comprehensive policies and tools to mitigate the risk of money laundering.

Here’s what went wrong with Entain companies’ AML processes.

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Background

Two Entain Group entities were involved in the settlement with the Gambling Commission: 

  • LC International Limited (LCI), which settled for £14m

  • Ladbrokes Betting & Gaming Limited, which settled for £3m

Broadly speaking, the Commission found failings in two areas: social responsibility and anti-money laundering compliance. These obligations are governed by:

  • The Gambling Act 2005

  • The firms’ gambling licence conditions 

  • The Social Responsibility Code Provision (SRCP)

  • The Money Laundering Regulations 2017 

We’ll focus on the companies’ AML failings in this article.

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Lack of an Adequate Risk Assessment

In its public statement regarding LCI, the Commission noted that LCI had not undertaken an adequate money-laundering risk assessment, as required under its gambling licence. 

The Commission requires licensees to take account of its own “money laundering and terrorist financing risk assessment” when fulfilling this obligation. LCI’s risk assessment failed to refer to two specific risks:

  • Terrorist financing

  • Customer nationality or business risks

Failure to Maintain Adequate Policies and Procedures

A key reason that both LCI and Ladbrokes were sanctioned by the Commission had “weaknesses and shortcomings in relation to the adequacy and maintenance of its policies and procedures and their implementation”.

The Commission also said both firms had “failings” in their “implementation of AML “policies, procedures and controls.

Both firms were ordered to conduct an independent audit of their AML policies within 12 months.

Money Laundering Regulations

The Commission identified several provisions of the Money Laundering Regulations that had been violated by LCI, including regarding the following requirements:

  • A “relevant person” in the organisation must maintain “policies, controls and procedures” to mitigate any risks of money laundering identified during a risk assessment.

  • Organisations must continuously monitor business relationships, including checking the sources of funds where necessary

  • Organisations must conduct enhanced customer due diligence (ECDD) checks and ongoing monitoring where there is a high risk of money laundering or terrorist financing

Lack of Source of Funds Checks

The public statement on LCI provides two examples of where the company failed to conduct source of funds (SOF) checks.

  • A customer who was the director of a newly-formed company and had deposited £742,000 over a 14-month period

  • A customer living in social housing who had deposited £186,000 over the course of six months

Slow Due Diligence Checks

In some cases, the Commission found that LCI had acted too slowly in conducting ECDD checks against customers making suspicious deposits:

  • LCI requested SOF evidence from a customer after they deposited £157,698 in two months. Nearly three weeks later, this evidence was rejected, and the customer’s account was restricted. But the customer was allowed to continue gambling in the meantime.

The public statement regarding Ladbrokes detailed two customer interactions that the company accepted revealed “shortcomings” in its AML compliance:

  • A customer that loaded large amounts of cash onto a betting terminal but did not meet Ladbrokes’ threshold for AML investigation

  • A customer that staked £440,474 and lost £68,867 over a 12-month period

Ladbrokes noted to the Commission that it should have implemented “further formal AML thresholds and checkpoints” for stake levels. The company has since amended its approach.

Maintaining Up-to-Date AML Procedures and Practices

The Entain Group investigation underlines the vital importance of complying with AML rules. The two companies were criticised for failing to maintain adequate AML policies, failure to notice signs of suspicious activity, and failing to act quickly enough to restrict customer accounts.

It is vital for any company subject to AML regulation to understand the rules fully and to have the right systems and tools in place to mitigate the risk of money laundering.

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