Videoslots fined £650,000 after Gambling Commission investigation

Videoslots will also receive a warning and must undergo a third-party audit, while all operators have been told to report the use of digital vouchers for payment.

UK.- Videoslots Limited, the operator of videoslots.co.uk, mrvegas.com and megariches.com, will have to pay a £650,000 penalty following an investigation by the British Gambling Commission. The company will also receive a warning and will have to undergo a third-party audit after the gambling regulator found a series of anti-money laundering (AML) and social responsibility failures.

According to the Gambling Commission, Videoslots’ social responsibility failures mainly involved a reliance on systems that did not effectively monitor customer activity to identify harm or potential harm associated with gambling. The investigation determined that although the operator’s monitoring systems automatically set a monthly deposit limit for customers, the limit ran across a calendar month and did not include the customer’s initial deposit.

This resulted in one customer losing £5,000 in a month despite having a £3,000 monthly deposit limit, another customer losing £5,000 in less than 24 hours despite having a £3,000 monthly deposit limit and a further customer losing £7,500 over 18 days despite having a £2,000 monthly deposit limit.

In addition, the monitoring systems deployed by Videoslots also did not effectively identify customers who were potentially at risk of gambling harm. The Gambling Commission cited the example of one customer who did not receive any interaction from the operator despite losing £6,550 over the course of three days of gambling during a two-month period.

Videoslots’ AML failings

As for AML and counter-terrorist financing (CTF) failings, these included gaps in associated policies and procedures, record management omissions and an over-reliance on an algorithm to identify and monitor customer behaviours that appeared in some instances to be ineffective when tested.

In one example, a customer demonstrated a high level of depositing and gambling activity over the course of a 16 day period, funding their account using digital pre-payment vouchers totalling in excess of £75,000. Following gambling activity, the proceeds were transferred to four different bank accounts. The customer was also found on occasion to be accessing their account from outside of Great Britain.

Despite the presence of a number of high-risk factors, the customer’s automated AML risk score did not trigger the threshold for the operator to request source of funds information in a timely manner, leading to unacceptable delays in an account review taking place and an absence of effective customer due diligence and effective oversight.

One of the key failings was an automated scoring system that did not identify the activity as high risk, and there was a presumption that the activity was funded from recycled winnings without any supporting evidence to explain why the customer was adopting such a complex and unnecessary deposit and withdrawal pattern.

In another example, a customer’s risk profile was not appropriately escalated when the customer conducted a high level of deposits and withdrawals over the course of a month. The operator relied on the fact that the customer had significant wins and assumed that the account was funded from recycled winnings, without sufficient scrutiny or any acceptable form of interaction to validate this.]

Operators told to report use of digital vouchers for gaming payments

John Pierce, the Gambling Commission’s director of enforcement, said: “Operators are required to have effective Social Responsibility and Anti-Money Laundering policies, procedures and controls as a condition of holding an operating licence. In this case, the operator’s monthly deposit limits were found to be ineffective when tested in practice and AML controls were not applied to the standards we expect.

“The investigation identified a serious example where pre-paid digital vouchers had been used for gambling without effective oversight and early intervention. The over-reliance on an algorithm to monitor risk meant that the customer was able to carry out a high volume of deposits and transfer the proceeds of gambling to multiple different destination accounts with insufficient and timely checks or robust source of funds verification taking place.

“Alongside this, the acceptance of digital vouchers as a method of payment also requires robust controls from a safer gambling perspective, particularly where it is possible to purchase digital vouchers using credit or crypto via third party websites.”

He added: “Open-loop payment systems are high risk in nature because they could enable anonymous deposits and make it harder to trace funds. In this case, the licensee failed to implement timely customer interactions and did not conduct enhanced customer du e diligence until the customer had reached significant spend thresholds – such failings are unacceptable.

“Operators must review how open-loop payment systems such as prepaid digital vouchers are managed in a gambling environment because they are high risk and present operational challenges in terms of effective monitoring. Whilst our position on the use of open loop payment systems has not changed, we have updated our risk information on our website to reflect our concerns about digital vouchers.”

The regulator has said that any operators using similar digital card/digital payment schemes should report it to the Gambling Commission as a key event immediately if they have not already done so.