UKGC Slams Paddy Power over Money Laundering, FOBT Violations

The United Kingdom Gambling Commission (UKGC) has publicly announced that it has fined Irish bookmaker Paddy Power over three different incidents regarding money laundering or problem-gambling behavior.  Collectively, Paddy has agreed to pay almost £310,000 in penalties and fines resulting from the UKGC’s investigation of the incidents, providing a resolution of sorts to what a UKGC statement referred to as “a number of serious failings on the part of Paddy Power [] in relation to keeping crime out of gambling and protecting vulnerable people from being harmed or exploited.”

The “voluntary agreement” consented to by Paddy includes six specific items:

• The commissioning of a review of Paddy Power’s AML and SR controls across its retail estate and its AML controls in its remote business to be undertaken by a third party at its expense;
• An agreement to the publication of a public statement by the Commission to share learning with the industry and the public;
• An agreement to share learning from the cases with the remote and non-remote sectors in a format to be agreed with the Commission;
• A commitment to amending policies and procedures to address the shortcomings identified in the course of the investigation;
• The payment of £280,000 in total to an agreed socially responsible cause, which represents a sum to remove any profits made from the three customers in question and a voluntary payment in lieu of a financial penalty;
• Agreement to contribute £27,250 to the Commission’s costs in investigating this matter.

The UKGC’s announcement followed its investigation into three separate, ongoing incidents in which the company profited from betting action brought its way under suspect circumstances.  One of the three cases was the widely publicized instance of former bank employee Mark Cooney, who used his position  at two different banks in the southwestern English city of Plymouth to defraud several elderly customers out of about £231,000.

Cooney, who was sentenced last year on five counts of fraud by abuse of position, is currently serving a 28-month prison term.  Most of the money he stole was gambled away on Paddy, where the UKGC alleges that the bookmaker did not take adequate steps to ensure that the source of Cooney’s gambling funds was legitimate.

The other two incidents involved Paddy clients referred to as “Customer A” and “Customer B,” neither of whom has been publicly identified.  Customer A was a Paddy regular who appears to have become addicted to one Paddy outlet’s Fixed-Odds Betting Terminals, or FOBTs, which have drawn intense heat from anti-gambling forces for their impact on certain vulnerable gamblers.

The following excerpt from the UKGC statement highlights such an example:

Customer A usually used fixed-odds betting terminals at a branch of Paddy Power. In early
2014, regional staff decided they needed to look into the source of the money customer A was
using for gambling, in order to manage the risk of money laundering. However, Paddy Power
obtained incomplete information, based only on the customer’s own account and staff’s belief
that he or his family owned a number of restaurants. Although staff noted that they needed to
obtain further information, including the names of the restaurants involved, there is no
evidence that it was obtained.

Paddy Power subsequently recorded interactions with customer A, which raised concerns that
he may be a problem gambler. In mid-May 2014, shop staff became aware that customer A
was working five jobs to fund his gambling and that he had no money. However, customer A
had indicated to shop staff that he was comfortable with his level of gambling spending. Shop
staff escalated this issue to more senior staff who decided they needed to continue monitoring
customer A.

On 20 May 2014, the manager of the shop informed a more senior member of staff that
customer A would be visiting the shop less frequently. The response from the senior staff
member advised the shop staff that steps should be taken to try to increase customer A’s
visits and time spent in the gambling premises. Paddy Power accepts that this advice, in the
circumstances, was erroneous and directly conflicted with its own policies and procedures
designed to meet their responsibility to prevent gambling being a source of harm to their
customers.

The shop manager recorded some discomfort about how to reconcile commercial and Social
Responsibility (SR) considerations, concluding that staff would monitor customer A’s spending
and provide good customer service in the hope that his spending would increase in future
once he was in a more comfortable situation.

Staff subsequently recorded further interactions with customer A, who indicated that he was
comfortable with his spending. However, a shop manager also recorded that customer A was
spending heavily and that he looked unwell and as if he had not slept for a while.

The first recorded instance on which Paddy Power signposted customer A to sources of help
with problem gambling was in August 2014 when a member of staff bumped into him off the
premises. The staff member recorded that customer A had lost all of his jobs, was homeless
and had lost access to his children. Customer A did not visit the shop again after this interaction. …

Customer B’s case perhaps wasn’t as egregious, yet nonetheless represented an alleged lapse in Paddy’s business practices.  In that instance, a Paddy shop manager brought concerns to senior company manager regarding a “longstanding” customer who was observed repeatedly laundering Scottish bank notes by inserting them into machines and immediately cashing them out.  Paddy claimed to have begun “enhanced due diligence” on the woman, who was believed to have been laundering the proceeds of some London-based organized crime, but the company did not report the matter to UK authorities, despite being unable to verify a business that the woman claimed to own.  Instead, English authorities linked the customer to Paddy three months later on their own.