The UK Gambling Commission imposed a £600,000 penalty and costs of £34,300 on FSB Technology UK Limited for failing to ensure its third-party websites complied with regulations. An investigation found FSB did not have sufficient oversight of third parties and their own anti-money laundering and social responsibility policies were insufficient. Key failings included breaches of anti-money laundering requirements and social responsibility obligations to protect problem gamblers. The case highlights the need for operators to properly manage third party responsibilities.
2. 2Premiseslicences.co.uk
£600,000+ UK Gambling
Commission regulatory
settlement highlights the
importance of appropriately
managing all third-party
websites that a licensed
operator may be responsible
for under ‘white-label’
agreements.
3. Premiseslicences.co.uk
A regulatory review by the
UK Gambling Commission
resulted in a £600,000+
regulatory settlement.
Gambling businesses who allow others to use their
technology via a different brand, should contact our
specialist gambling lawyers for advice to ensure their
systems and processes properly comply with the
Gambling Commission’s requirements and with UK law.
Our gambling solicitors can be reached via 0800 170 1538.
4. 4Premiseslicences.co.uk
01 / Gambling Operators Warned Over Third
Party Responsibility
02 / Breaches of AML Requirements
03 / Social Responsibility Failings
04 / Inadequate due diligence on third parties
05 / Good Practice
Contents
6. Premiseslicences.co.uk
Gambling operators warned over
third-party responsibilities
The UK Gambling Commission
announced via its website on 6 May
2020 that following the
commencement of a review of its
operating licence under section 116 in
August 2019, FSB Technology UK
Limited has been required to pay a
financial penalty of £600,000 and the
Commission’s costs of £34,300 for its
failure to ensure that several of
its third-party websites complied with
licence conditions and codes of
practice.
It has also had additional conditions
imposed on its licence to ensure it
conducts risk-based due diligence on
new and current third-party partners it
runs websites on behalf of.
FSB’s business model is based on a
‘white labelling’ arrangement including
the contracting of provisions of its
licensed activities to third parties. This
arrangement places responsibility on
the licensee to ensure that its third-
party partners comply
with the Gambling Act and the
requirements imposed by the
Licence Conditions and Codes of
Practice (LCCP).
However, the Gambling
Commission’s investigation
discovered that FSB did not have
sufficient oversight of several third-
party websites and did not itself
have effective anti-money money
laundering and social responsibility
policies and procedures in place. It
also failed to comply with LCCP on
numerous occasions including failings
within FSB’s processes aimed at
preventing money laundering and
protecting vulnerable people.
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7. Premiseslicences.co.uk
The three key failings included: a breach of the Licence
Condition 12.11(2),(3) which require measures to be in
place to prevent money laundering and terrorist financing,
Gambling operators warned
over third party responsibilities
a failure to comply with Social Responsibility Code 3.4.1
in respect of customer interactions, and due diligence and
control failings relating to the white-labelling
arrangement & supervision.
9. Premiseslicences.co.uk
Breaches of AML Requirements
The anti-money laundering failings included a situation
where a customer had not been required to provide
adequate source of funds evidence and had gambled
and lost circa £282,000 over a period of some 18 months.
Another situation involved one of the third-party
websites operating without sufficient oversight of
VIPs and with a VIP team manager employed by the third-
party website acting without adequate oversight
and without sufficient AML training.
The Commission also found that FSB’s own AML controls
did not adequately address the risks posed by higher risk
customers. These included, failing to establish and maintain
appropriate risk-sensitive policies, procedures and controls
relating to the management of its third party partners, a lack
of adequate documentation and audit trail to demonstrate
decision making, and inadequately resourced and trained
compliance team and a failure to undertake account
reviews to monitor the re-opening of accounts by third-party
partners.
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11. Premiseslicences.co.uk
Social Responsibility Failings
The social responsibility failings included failures to protect
problem gamblers. Commission officials found that FSB
were failing to carry out customer interactions in
compliance with Social Responsibility Code 3.4.1. FSB
were permitting staff employed by third-party partners to
carry out customer interactions with insufficient oversight
and training as a result FSB was not ensuring that
appropriate and meaningful customer interactions took
place or were properly recorded.
Additionally, FSB failed to comply with Social Responsibility
Code 3.5.3 in preventing one of its third-party partners from
sending a marketing email to 2,324 customers who had
previously self-excluded. This was compounded by FSB
then emailing the affected customers with an apology rather
than ensuring that no further contact emails were issued
given that there should have been no contact with the self-
excluded customers.
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13. Premiseslicences.co.uk
Inadequate due diligence on third parties
A further failing included a breach of
Licence Condition 16.11 in permitting
one of its third-party partners to use an
inappropriate banner advertisement
containing cartoon nudity which
proved to be the unauthorised use of
copyrighted material. The Commission
found that FSB had failed to take
reasonable steps in undertaking due
diligence prior to entering into a
contractual relationship with a third
party. Had it done so, FSB would have
identified obvious concerns that there
was a risk the third-party could use
such advertisements given its clear
association to an unlicensed website
with questionable repute.
FSB accepted that it did not carry out
sufficient due diligence which would
have identified concerns with regard to
the international operator of the brand
name which included the fact that the
ultimate ownership of the company
was unclear and the relationship
between the company and the
ownership of the brand name used
was also unclear. In one of the other
cases, FSB failed to assess the risks
of entering into third-party contractual
arrangements where there were links
to an individual who was a Politically
Exposed Person (PEP).
As a result of these failings, a
condition has been added to FSB’s
operating licence requiring it to
conduct risk-based due diligence
before entering into a relationship with
a third-party partner, manage and
evaluate its existing third-party
relationships and carry out risk-based
due diligence on all its third-party
partners at least annually.
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15. Premiseslicences.co.uk
Good Practice
• Is your governance, due diligence, contractual and audit
arrangements effective and are you refreshing existing due
diligence at least annually?
• Are your policies and procedures for identifying high risk
customers for AML and SR customer accounts effective?
• Have you adequately resourced your AML and SR departments,
so your staff are always able to put your policies and processes in
place for all customers?
• Have your staff and your third-party partners received sufficient
AML and SR training?
• Are you recording all customer interactions, including decisions not
to interact with customers, and are these records available for
colleagues to refer to when making decisions?
• Are your customers providing documentation to support their level
of spend and loss, and not simply giving assurances? 15
The Commission has
highlighted that gambling
operators should take account
of the failings identified in
their investigation and review
the following matters and has
warned businesses that they
will face regulatory action if
they do not properly manage
all third-party websites they
are responsible for:
16. Premiseslicences.co.uk
This case highlights the importance
for gambling businesses of engaging
fully with specialist gambling lawyers
such as our team to avoid compliance
breaches.
Any gambling business that faces a compliance
assessment or receives notice of the commencement of a
section 116 review by the Gambling Commission should
contact our specialist lawyers.
17. Premiseslicences.co.uk
Our specialist gambling
lawyers have detailed
knowledge of these
provisions and can assist if
you have concerns or face a
review of a gambling
licence, including a section
116 review. We can be
reached via 0800 170 1538.
18. Premiseslicences.co.uk
Thank you,
in any case
Andrew Cotton Office
Ince Gordon Dadds LLP
Aldgate Tower, 2 Leman Street, London E1 8QN
DX 1070 London City
T 0800 170 1538
licensing@incelaw.com
Director of Betting and Gaming
