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Checking Compliance – the Benefit of Independent Third Party Audits

Jeremy Phillips QC
Michael Fry

Two recent decisions of the UK Gambling Commission have reinforced how seriously operators in regulated industries now have to take compliance.

On 5 September 2019, the Gambling Commission suspended the operating licence of EveryMatrix. Notably, EveryMatrix itself notes that the suspension “is based on a general evaluation of EveryMatrix procedures rather than specific cases of player complaints”.  On 11 September 2019, the Gambling Commission fined the operator of the Park Lane Club £1.8m, imposed an operator licence warning and added additional conditions to its licence for social responsibility and money laundering failings. One of the additional licence conditions is to maintain an independent chairperson to the casino’s Compliance Committee to “independently asses its internal controls and systems on at least an annual basis”.

Jeremy Phillips QC comments: “The EveryMatrix suspension shows the critical and increasing importance of ensuing that operators comply with social responsibility and AML obligations. Perhaps unsurprisingly, I would advise operators to be proactive in meeting their regulatory obligations. There are a number of ways operators can keep on top of the regulatory framework, but an independent third party compliance audit has become an indicator of best practice. A compliance audit provides operators with the necessary information to support strategic decision-making and risk analysis. A good compliance audit tests historic compliance, informs boards of future regulatory developments and provides valuable evidence to regulators of a real commitment to meet regulatory obligations.

In its Enforcement Report 2018/19 the Commission noted that Gambling Behaviour in Great Britain in 2016 had suggested there were around two million adults who might be experiencing at least moderate negative consequences from their gambling, including 340,000 people who were classified as problem gamblers. Consequently, its Business Plan 2019 – 2020 stated that it would continue to push the industry to raise its consumer protection standards and demonstrate that it knew its customers and used that knowledge to protect them.

The new National Strategy to Reduce Gambling Harms launched in April 2019 is also intended to have a lasting impact on reducing gambling harms. The Commission repeated that as part of the new strategy, it would continue to take "a firm regulatory enforcement approach.”

Michael Fry notes: “For any business, it is better to be on the front foot when it comes to compliance. The financial and reputation costs of failing to meet regulatory obligations are now so significant that I’m afraid operators ought to be looking to independently review compliance as a necessary business function. As the Park Lane decision shows, if operators are not proactive, where the Commission finds failings it will impose independent annual reviews in any event.”

For more information on the EveryMatrix suspension please see:

https://www.gamblingcommission.gov.uk/news-action-and-statistics/news/2019/Suspension-of-operating-licence-EveryMatrix-Software-Limited.aspx

https://www.igamingbusiness.com/news/everymatrix-aims-boost-compliance-after-uk-licence-suspension

For more information on the Park Lane Club fine please see:

https://www.gamblingcommission.gov.uk/news-action-and-statistics/news/2019/1.8m-fine-for-Silverbond-Enterprises.aspx  

Jeremy Phillips QC and Michael Fry are currently instructed to assess the regulatory compliance of a major international casino.