Daub Alderney will have to pay £7.1m fine for AML and social responsibility failures

Daub Alderney will pay a £7.1m fine for failing to follow UK Gambling Commission rules aimed at preventing money laundering and protecting vulnerable consumers.

Daub Alderney will also have extra conditions placed on its licence to provide gambling to consumers in Britain.

Richard Watson, Gambling Commission Executive Director, said: “This action is part of an ongoing investigation into the online casino sector. The operator’s standards did not match the protections required, and this fine reflects the seriousness of these lapses.”

Summary of Regulatory Panel decision
Findings of facts

Commission Officials found that the Licensee did not:

• conduct appropriate ongoing monitoring of a business relationship (Regulation 14 of the 2007 Regulations).
• apply, on a risk-sensitive basis, sufficient enhanced customer due diligence measures and enhanced ongoing monitoring in situations which by their nature present a higher risk of money laundering (Regulation 14 of the 2007 Regulations).
• keep full records of the evidence and supporting documents it considered as part of its customer due diligence checks and business relationship with the customer (Regulation 19 of the 2007 Regulations).
• establish and maintain appropriate and risk-sensitive policies and procedures relating to specified matters in order to prevent activities related to money laundering and terrorist financing (Regulation 20 of the 2007 Regulations).
• provide relevant staff with regular training in how to recognise and deal with transactions and other activities which may relate to money laundering or terrorist financing (Regulation 21 of the 2007 Regulations).

The Licensee accepted that at the time of the corporate evaluation, it had not been compliant with the 2007 Regulations and was not compliant with the 2017 Regulations. It agreed that it had failed to document in adequate detail its risk-sensitive policies and procedures relating to anti-money laundering (AML) and terrorist financing.

In addition, the Licensee accepted that whilst it was subject to the 2007 Regulations, improvements could have been made to the training provided to staff in how to recognise and deal with transactions and other activities which may relate to money laundering or terrorist financing. The Licensee stated that at the time of the corporate evaluation it had recognised the need for a training program which it had put in place and that by September 2017 appropriate additional training was in place.

The Licensee indicated that it had taken a number of actions to address the Commission’s preliminary findings including:

• a Risk and Regulatory Compliance Committee (Committee) was now in place to provide oversight of compliance issues and link to its parent company Stride putting compliance firmly at the heart of its business;
• it had improved its management structure appointing a Director of Compliance and MLRO, a deputy MLRO and increasing staffing within its compliance team. The Licensee was in addition to recruiting a new MLRO;
• with the assistance of external support, the Licensee had improved its written policies and procedures to ensure full compliance with the 2017 Regulations. The Licensee provided its updated Anti Money Laundering Policies approved by the board on 27 March 2018 and asserted that it was exploring options of further support from third-party providers to identify a more detailed assessment of overall AML risk of players;
• the appointment of a Fraud & Risk Training and QA Manager responsible for compliance with training requirements.
• Code of practice issued under Section 24 Gambling Act 2005- Social Responsibility Code 3.4.1 Customer Interaction. Compliance with a social responsibility code provision (SRCP) is a condition of the Licence by virtue of Section 82(1) of the Act.

Commission officials found that at the time of the corporate evaluation that there were significant limitations in the Licensee’s ability to proactively identify and mitigate risk. This manifested itself in terms of resource, systems, and controls for example:

• the Social Responsibility policy and procedure was not sufficient - it only gave examples to staff of potential issues as opposed to outlining detailed action to be taken to mitigate risk, and there were no specific policies for VIP customers;
• there had been insufficient resources for identifying and mitigating SR risk.
• while examples were seen of action taken in respect of complaints relating to problem gambling, adequate systems and controls to proactively identify potential problem gambling were not in place. Officials saw no evidence to show that daily reports from the Licensee’s systems were used appropriately to identify patterns of play which may point to customers potentially having gambling problems which would require a proactive customer interaction. Officials noted that issues which related to the identification of AML risk, such as payment details not matching the customer and duplicate accounts, were not used to identify customers with potential gambling problems such as previously self-excluded individuals attempting to gamble using a relative’s payment card.
• customer bases were not joined up and the whole of the Licensee’s customer base could only be searched using a manual process involving an ad hoc report.
  
  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.
  
  

Declarations by Daub Alderney

In a statement on their website, the firm expressed: "After careful consideration, the Group has concluded that whilst it believes the UKGC fine to be excessive and disproportionate, it is not in the interests of the Group's stakeholders to appeal the UKGC's finding or penalty. The Board, having taken advice, remains of the belief that a penalty of no more than £4 million would be appropriate, particularly as the failings identified by the UKGC were procedural in nature and did not involve any incidence of identifiable money laundering."

"Subsequent to the UKGC’s initial findings, the failings identified by the UKGC have been
addressed in full. Furthermore, the controls framework required to meet its licence conditions and
codes of practice have been assessed by Daub and the Company to be effective. This has been
achieved through a comprehensive evaluation of that framework, supported by an independent
review carried out by Deloitte LLP. In order to provide further assurance of the robustness of
Daub’s existing and ongoing controls and to ensure that Daub is protecting vulnerable players,
Daub has commissioned Deloitte LLP to carry out biennial control audits in order to independently
assess the operating effectiveness of those controls."

Nigel Payne, Non-Executive Chairman of the Company commented: “Stride Gaming considers that robust anti-money laundering and social responsibility controls are extremely important. It acknowledges and entirely supports the more robust steps taken by the UKGC in recent years to drive improvements across the industry. We remain disappointed with the particular circumstances of this case and with certain factual inaccuracies which were presented by UKGC to the Regulatory Panel in the course of the proceedings, which we believe coloured the size of the fine that has been imposed."
“We are of the view that both the industry and its regulator must be as one in its combined attempt
to better regulate the industry and accordingly, we will be seeking to engage with the UKGC to
improve the robustness of the process that we have just been through."

Decision

Approaching the decision as to what sanction(s), if any, should be imposed under section 117 of the Act the Panel referred to the Indicative sanctions guide (June 2017) and the Statement of principles for licensing and regulation (June 2017).

The Panel agreed that given the seriousness of the licence breaches it was appropriate to impose a financial penalty of £7,100,000 under section 121 of the Act.