In-Depth Legal & Regulatory 25 March 2022
Questions and answers from experts: What actions should operators take to combat Russian sanctions
Gambling Insider
The UK placed sanctions against various Russian entities and figures after Russia invaded Ukraine late February. As the conflict continues, the UK is adding names to its sanctions list. Businesses that have any contact with the region are advised to keep an eye on the situation.
Shortly after the conflict began, the Gambling Commission issued a reminder that operators must, “apply a risk-based approach in any third-party or business relationships they conduct, or customer relationships which are associated with Russia and any of the sanctioned individuals, banks or entities named.”
David Inzani, Associate Solicitor at Poppleston Allen, explains what’s expected of operators in the current environment and provides some advice on staying on the right side of both government legislation and the regulator.
What are gambling operators’ main responsibilities in terms of complying with government sanctions and how do they differ from the obligations placed on companies in other industries?
Businesses must adhere to all government laws. The most important being the Sanctions and Anti-Money Laundering Act 2018. Gambling operators must also comply with the Gambling Commission’s Licence Conditions and Codes of Practice.
This could lead to them not only being in contravention of the law but possibly also of the terms and conditions of their gambling licence. The Gambling Commission could take enforcement action and they may lose their ability to continue trading if the licence is up for review.
What are the main requirements for the LCCP here?
The LCCP requires gambling operators to perform a risk assessment to determine if their business is being used for terrorist financing or money laundering.
The risk assessment and policies, procedures and controls have to be reviewed on an ongoing basis – they must be reviewed at least once annually, but also in the event of any change in circumstance. A change in circumstances could refer to the introduction of a new product, technology change, or new payment methods. The war in Ukraine, however, is another example of a change of circumstance.
Is there a way to anticipate fast-moving events such as this current situation, in which people are constantly added to the sanctions list?
The government continues to update primary legislation by adding new sanctions, anti-money laundering regulations and other relevant information about Russia. Recent additions of Russian exports, businesses and products to the list by the government are a recent example. It can sometimes be hard for businesses to keep up with changes at the speed they occur, but it is a legal requirement.
We recommend that operators do enhanced due diligence when interacting with potential customers and business partners. To ensure that funds are not transferred or frozen from sanctioned sources, they must screen all existing customers and business relations.
How would an operator respond if they violated any sanctions?
It would be reported to OFSI and the Gambling Commission. It is important that they do this as quickly as possible and within five days of becoming aware.
What are the probable consequences of such a move?
It is illegal to operate in violation of the license conditions. However, the Gambling Commission usually exercises regulatory power rather than criminal authority when investigating a violation of conditions. It would inspect the operating licence and conduct an investigation into the matter. Most often, it would interview the operators concerned and review any policies, procedures or management controls in place. It would then have the power to take action – it could give the operator a warning, it could put conditions on the operating licence, issue unlimited fines or, in the worst cases, it could revoke an operator’s licence.
There is no one-size-fits-all solution to preventing money laundering and it isn’t something operators can automate; generic risk assessments and policies just aren’t going to cut itDavid Inzani
The degree of severity of any violation of conditions would affect the Commission’s enforcement level and the actions it takes. The Commission will consider factors like the nature and degree of knowledge of licensees. If an operator’s risk assessment and policies and procedures for money laundering and terrorist financing are strong and regularly reviewed, this reduces the risk of a breach.
If a breach does occur, if an operator can demonstrate that it has been diligent and the possibility of a breach would not have been likely, then this can help mitigate the extent of any enforcement action by the Commission. It’s worth noting that we have seen the Commission impose some pretty significant fines on gambling operators for money laundering failings in recent years.
Yes. In this particular area, large fines continue to be handed out to operators. Why are some operators still doing it wrong?
A lot can be expected from the gambling industry. Because it is so regulated, it’s a major task for operators to comply with AML regulations. Although it can be challenging, they still have to do it. There is no one-size-fits-all solution to preventing money laundering and it isn’t something operators can automate; generic risk assessments and policies just aren’t going to cut it. The current geopolitical context shows that preventing money laundering takes a constant effort and requires high levels of diligence.
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