Money Laundering in the Gambling Sector

With William Hill being fined millions for money laundering failings, Niall Hearty of financial crime specialists Rahman Ravelli assesses gambling’s dirty money problem.

When it comes to betting on the horses, most gamblers would spend some time looking at the form to identify possible winners. But William Hill, the favourite company for many of those that like a bet, is on a losing streak all of its own making.

Three gambling businesses owned by the company have been ordered to pay a total of £19.2 million for what the Gambling Commission called widespread and alarming social responsibility and anti-money laundering failures.

The amount that William Hill is having to pay is the largest ever settlement in the Gambling Commission’s history. WHG (International) Limited, which runs williamhill.com, will pay £12.5 million; Mr Green Limited, which runs mrgreen.com, will pay £3.7 million; and William Hill Organisation Limited, which operates 1,344 gambling premises across Britain, will pay £3 million.

The penalties are the result of failings that, according to Gambling Commission chief executive Andrew Rhodes, were so bad that the regulator considered suspending William Hill’s licence to operate. This did not happen because, according to the regulator, William Hill “immediately recognised their failings and worked with us to swiftly implement improvements’’.

It should be emphasised that William Hill’s failings did not relate to obscure rules and regulations. Its social responsibility failures included allowing a customer to open an account and spend £23,000 in 20 minutes. And that was not an isolated case. Its failures to tackle money laundering saw it allowing customers to deposit large amounts without making the appropriate checks. One customer spent and lost more than £70,000 in a month, another lost £38,000 in five weeks, while one took just four days to lose £36,000.

The people who bet with William Hill and its associated companies are, quite obviously, looking to win big or at least enjoy a bit of excitement while they lose. Even the most fervent gambler is aware of the risk of betting money on the outcome of a sporting event. Yet they choose to do so, and in doing so they swell the sizeable coffers of William Hill. William Hill, however, seems unaware – or not bothered by – the risks it takes. It has certainly shown few signs of being alert to the dangers of being used by money launderers. And now it has paid a price for taking a gamble that even its most diehard, addicted customers may consider foolhardy.

Probably only the money men at William Hill will know quite how big a dent the fine will make in the company’s finances. But it can be seen as a warning to the rest of the gambling sector of the need to have strong anti-money laundering processes in place – and in use. In fairness, William Hill is far from the only gambling company to have fallen short when it comes to its obligations to identify and prevent money laundering.

Like any other company that provides financial services, gambling firms are subject to the Proceeds of Crime Act (POCA). In simple terms, they are regulated, must comply with the directives and regulations of the global money laundering and terrorist financing watchdog, the Financial Action Task Force (FATF), and have to ensure they are doing everything possible to prevent their business being used by those looking to launder their proceeds of crime. This does not mean having a vague idea of what money laundering is or the best of intentions to prevent it. Regulated companies, such as those involved in gambling, are required to devise and run carefully-planned programmes to assess whether any money coming into the business may be the proceeds of crime. They are also expected to have procedures in place to ensure any money laundering suspicions are reported to both the appropriate member of staff and the relevant authorities.

These obligations are clearly defined and, as William Hill has found to its cost, carry heavy penalties if they are not met. Gambling companies cannot afford to treat anti-money laundering procedures as an each-way bet – a half-hearted, box-ticking exercise that may come good if they are lucky. Such procedures need to be run by trained staff who know the company’s legal obligations. They also need to be revised if and when necessary to meet the changing nature of money laundering risks.

Gambling companies have had those risks spelt out to them. They accept cash payments, are vulnerable to identity fraud and are often seen by the criminal fraternity as the most convenient high street or online money laundering facility. Yet many such firms appear to have the blinkers on when to comes to the risks and the associated financial and reputational harm that can follow.

William Hill’s failings are not unique. Anyone who takes the time to check out the gambling sector’s form will see that this is just the latest example of a betting firm being found guilty of money laundering’s equivalent of falling at the first hurdle. It remains to be seen whether the sector can prove itself capable of tackling money laundering or whether – like so many of its customers – it risks everything on some vague, optimistic notion that everything will work out for the better.