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Spreadex will pay £1.4 million for "ineffective" checks on players who have suffered six-figure loss

Spreadex, a financial spread betting and sports wagering operator, was ordered by the UK Gambling Commission to pay £1.4m (€1.6m/$1.6m) after it was found to have violated social responsibility and anti-money laundering (AML) requirements.

As part of a settlement with the Commission reached after an assessment of its company, the operator of the website would donate the money to socially responsible groups.

Spreadex was found to have violated the Licence Conditions and Codes of Practice (LCCP) and the Social Responsibility Code between January 2020 and May 2021.

The Commission cited social responsibility breaches at Spreadex, such as poor financial alerts that allowed users to lose considerable amounts in a short period of time.

The operator was also found to have over-relied on financial notifications to identify customers at danger of harm, while failing to adequately document and assess its customer contacts.

In one occasion, a customer was able to deposit £1.7 million and lose £500,000 in a single month. The Commission observed that, while customer interactions occurred, they were not adequately evaluated and did not take into account the effectiveness of restricting the account.

In reviewing the Commission's anti-money laundering shortcomings, the review identified one client who fulfilled a £25,000 financial deposit alert and had the alert for further review elevated to £100,000 based on a self-declaration of income and an open-source check.

Another customer was able to deposit £365,000 and lose £284,000 in three months without providing sufficient evidence of their source of funds, whereas one player was able to continue depositing after presenting censored bank statements in response to a request for verification of their source of funds.

“Whilst it is disappointing to see anti-money laundering and social responsibility breaches occur despite our extensive published cases highlighting similar failures, we note the swift and robust action the licensee took to bring itself back to compliance,” Commission director of enforcement and intelligence Leanne Oxley said.

“We expect similar commitment and engagement across the gambling sector.”

The Commission stated in its judgement that Spreadex failed to evaluate and update its risk assessment on an annual basis, as required, and also failed to take into consideration and consider information on the risks of money laundering and terrorism financing made accessible by the Commission. Spreadex, according to the regulator, did not examine all relevant customer, product, and regional risk factors.

Spreadex was also found in violation of paragraph 2 of licence condition 12.1.1, which states that licensees must have adequate policies, processes, and controls in place to prevent money laundering and terrorist funding.

In this case, the Commission noted deficiencies and shortcomings in the adequacy and maintenance of AML rules, procedures, and controls, noting that some customers were able to deposit large sums of money without triggering sufficient engagement.

Spreadex also failed to critically analyse Source of Funds documents and was overly reliant on automated checks, while it lacked sufficient people to respond to financial triggers in a timely manner and appropriately mitigate risk, according to the regulator.

Finally, the Commission stated that Spreadex failed to comply with Social Responsibility Code 3.4.1, paragraphs 1 and 2, which specify that licensees must communicate with clients in a way that minimises the possibility of their experiencing gambling harms.

In summarising its findings, the Commission noted a number of aggravating factors, including the serious nature of the breaches, the impact on licencing objectives, and the fact that some breaches occurred in circumstances similar to previous cases, resulting in the publication of lessons to be learned for the wider industry.

However, the regulator took into account certain mitigating elements, such as how Spreadex shown insight into the gravity of the violations and self-suspended its casino operations for five months to limit risk.

Spreadex also produced an immediate action plan and took steps to grow and improve its compliance capability, according to the regulator, while the operator and its senior management collaborated with the Commission. Spreadex also made an early offer of a regulatory settlement.

Following this, the Commission ordered a £1.4m payment in lieu of a pecuniary penalty, as well as an additional payment of £7,831 towards the Commission's investigation costs.

The new judgement comes after the Commission ordered Entain to pay a record £17.0m last week after identifying a variety of social responsibility and anti-money laundering failures across its online and offline companies.

According to Commission CEO Andrew Rhodes, Entain could lose its licence in the United Kingdom if it continues to violate market laws and regulations.

Also this month, the Commission penalised LeoVegas £1.3 million after discovering a number of flaws, many of which were related to setting triggers too high.


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