As the debate continues about what constitutes a “frictionless” check, much has been made of the impact on customer and operators in situations where a punter is asked to provide “documents”. One element of the Commission’s (at the time of writing) live LCCP consultation, (the “Consultation”) that has not, in our view, received enough attention is the Commission’s proposal that employment status and job title is obtained as part of financial vulnerability screening. This may at first appear innocuous but does actually raise significant concerns that mirror those arising in numerous Commission-led compliance assessments where the obligation to obtain of such information is vigorously debated.

The issue of friction has received a lot of attention lately and the Commission’s Executive Director for Research and Policy at Gambling Commission, Tim Miller, was questioned on this in the recent DCMS Select Committee hearing by Kevin Brennan MP (see Q308-Q311).

“Tim Miller: Specifically around job titles we have asked the question: should this be included? The reason we have asked that question is that gambling operators themselves, many of whom are actually using that sort of information when accounts are being opened, have said it has been a really helpful thing to have.

Kevin Brennan: If someone gave their job title in one of these frictionless checks, would they have to supply documentation to prove that they were telling the truth?

Tim Miller: No.

Kevin Brennan: Right, so you could just invent the job title. If you were asked you could just say, “I’m an astronaut”?

Tim Miller: You could, but what we have said in the consultation is that it is a piece of information that could helpfully go alongside.

Kevin Brennan: How would it be helpful if you do not know if it is accurate?

Tim Miller: If it is not true, if you are looking at it by itself I think that would be problematic. However, what we have said is that it could be a useful addition to it. But, importantly, this is a consultation. We have asked the question. We have invited people to provide us with evidence as to whether they think that would be a helpful addition or not. I think it is very important that that we do not lose sight of the fact that this is a genuine consultation”.

The Commission states here that many gambling operators are actually using occupation information from when accounts are being opened. In our experience, some of those operators will have been pressured into doing so by the Commission asserting (in compliance assessments and subsequent enforcement actions) that an operator’s failure to do so amounts to a breach of their AML obligations (which we expand on below).

In practice, many operators do not collect occupation information on registration, but obtain it later in the customer journey and as part of ongoing risk mitigations, once the relationship has developed to a degree (i.e. not on registration and not until customer spend reaches a certain level). To mandate it be obtained once a customer loses £125 in a month or £500 in a year places a significant, additional requirement in place that cannot be met without friction, in our view.

Before considering the implications of this, its worth a reminder of how the Commission’s presentation of the requirement to obtain occupation information has evolved in recent times.

Occupation information and its role in combatting money laundering

In June 2019, the Commission published its 2018-2019 Enforcement Report. This report was presented by the-then CEO of the Commission as “providing an overview of the enforcement work …. undertaken over the past year and the lessons that operators should learn from that work.”

A worthy objective. However, once we had digested it, we became concerned that the enforcement report was actually in danger of being something of a masquerade. We saw items within it that were not representative of what we considered to be failings identified in the Commission’s case work, but more an indication of where the regulator wanted regulation to go, notwithstanding that the actual wording in the LCCP and associated guidance didn’t support that position.

Those who follow this blog will recall us citing this exact issue a year later, when the 2020 enforcement report suggested operators were falling short in meeting their regulatory requirements when “Customers wishing to spend more than the national average” were not “asked to provide information to support a higher affordability trigger such as three months’ payslips, P60s, tax returns or bank statements”. As we wrote at the time, the suggestion in an enforcement report, that an operator is in breach of a licence condition or code of practice if they don’t ascertain the legitimacy of the funding source of a player who spends more than the “national average” goes way beyond both the current regulatory requirements.
Going back to the 2018-2019 report, the author recalls being struck by the following question in the “AML Health Check”:

“Are you requiring customers to provide their occupation upon registration and then profiling their income for affordability?”

Was that an AML obligation in 2018/2019? No. Is that an AML obligation in 2023? No.

And yet we consistently hear from baffled clients that Commission Officials, within compliance assessments, are chastising them for not obtaining occupation information early in the customer journey, often as early as registration. The reasoning given can be muddled, possibly flowing from the conflation we have seen over the last few years of AML and affordability. The question above is asked in an “AML Health Check” but goes on to suggest income is profiled for affordability. Whilst such information may be relevant for both, they have quite different objectives and the information is therefore assessed in different ways. Operators resist this conflation, particularly when the Commission cite a failing for not obtaining evidence to support any form of self-certification in an affordability-driven interaction. This is a difficult regulatory position to sustain, muddling up an AML process that, by its nature, is sceptical or suspicious that funds could be tainted with a safer gambling process that doesn’t.

Kevin Brennan MP, in the Select Committee, questioned whether information was helpful if unverified. Tim Miller’s response echoed the wording in the Consultation, which states “such information could only be used as an indicator of potential financial vulnerability, which could be misleading if relied upon to provide assurance of limited risk and would need to be considered together with all of the other information the operator knows about the customer. This suggests that once the operator has the information, a proper assessment is needed. More on this below.

The next surprise came in early 2020, when the Commission published the 5th edition of its guidance for remote and non-remote casinos (the “AML Guidance”), following the amendments to the Money Laundering Regulations. Those amendments did not mandate any changes to CDD processes and yet the Commission took the opportunity to provide a “general update to CDD requirements”.

Paragraph 6.2 of the AML Guidance says:

“the information that is collected at the commencement of the business relationship with the customer will enable the operator to determine the level of risk associated with the customer and, in turn, the initial and ongoing customer due diligence and monitoring that is required. Operators will need to consider who the customer is, what they do, where they live and do business, and the nature of the product or service they require”.

We are aware that the Commission’s compliance personnel continue to suggest operators are in breach of LCCP 12 if they don’t capture and assess players’ occupations at registration. This is part of a long-standing, ongoing debate around the way the MLRs (and POCA) each build in the concepts of a risk-based approach. In keeping with the risk-based concepts enshrined therein, the level of diligence applied to a particular customer should be determined by the risk presented. This is consistent with the design of the MLRs, which seek to focus the efforts and resources of operators on where it is most needed and will have most impact. It may surprise some to be told that, for many operators, the majority of customers never actually transact with them, despite registering. And of those that do deposit, the vast majority will only ever deposit and spend modest sums of money (i.e. lifetime losses will never exceed, say, £100). It is our view that a suggestion an operator not only obtain occupation information on all customers at registration and do something with that information is unwarranted and unsupported by current law or regulation.

It is not unusual for a Commission Official, within an assessment, to query why information was not obtained earlier in the journey. “If only you’d obtained that information earlier. If only you knew earlier that this customer was [insert occupation here], you’d never have allowed them to play in this way”. Such an approach ignores the risk-based nature of AML processes. The Proceeds of Crime Act builds in the concepts of knowledge and suspicion. The legislature knew that trying to remove criminal money entirely from the British economy is unrealistic. The Commission’s POCA Guidance actually reflects this, in paragraph 18.10, where is says:

“No system of checks will detect and prevent all money laundering activity. A risk-based approach will, however, serve to balance the burden placed on operators and their customers with a realistic assessment of the threat of the operator being involved, albeit unintentionally, in money laundering. It focuses the effort where it is most needed and will have the most impact. It is not a blanket, one size fits all approach, and therefore operators have a degree of flexibility in the methods they employ.”

That said, operators do need to assess the risk that customers pose if they do certain jobs. Some occupations, with access to other people’s money, present a higher risk. However, operators may not consider it appropriate or necessary to implement mitigation strategies to guard against the risk of disproportionate as early as registration. This is consistent with other sections of the Commission’s AML Guidance, which encourages operators to consider collecting “additional information” such as “occupation, source of funds, business interests, credit checks, etc” when customers present a “high risk”.

It is, therefore, right that operators have resisted the suggestion that AML obligations require them to obtain occupation information on every customer at registration, i.e. before they have even commenced transacting with the operator.

Occupation information and its role in combatting gambling-related harm

This focus on obtaining occupation information on all customers at registration by citing AML regulations is, in our view, difficult to sustain. However, this information can also have a broader use. By mandating the capture of this information to help mitigate money laundering risk, operators are then pregnant with it and need to use it to discharge wider regulatory obligations including affordability.

The Consultation could be considered as an attempt by the Commission to plug a hole. As mentioned above, we consider an obligation on a customer to provide occupation information as introducing friction into a process the Government has mandated the Commission to ensure it frictionless.

A wider point, though, is the impact this has on operators. The Commission’s suggestion is that operators would obtain this information as part of the financial vulnerability checks and use it, alongside “other information” they have on the customer. What other information are they meant to have? They will have identified the customer and so have basic identification information. But are they required to “assess” it at the £125/£500 stage?

To what end? Its worth remembering the White Paper called for:

“operators [to] conduct a financial vulnerability check, considering the types of open source indicators which many already routinely assess such as County Court Judgements, average postcode affluence, and declared bankruptcies.”

Much is being made, in the media, of the impact in punters. But we cannot lose sight of the impact on operators. A requirement to obtain and assess occupation information at what the Government calls “modest” level of spend goes far beyond what the Commission are being asked to do and needs to be factored into the industry’s response to the Consultation to avoid a disproportionate regulatory burden.

The Consultation can be accessed here.