Spreadex Fined £1.36 Million By UKGC For Money Laundering & Social Responsibility Failings

It may only have been a couple of months since Sunderland AFC triumphantly announced its entry into a sponsorship deal with online betting company Spreadex, but perhaps the football team won’t be so impressed with the brand at the moment. The deal with the betting brand will see its logo emblazoned on the kits of the team’s players until 2025, but the United Kingdom Gambling Commission has taken a strict stance against the company. Following an investigation into Spreadex Limited, the gambling regulatory body uncovered a few problems, leading to a £1.36 million fine being handed out.

The basis of the penalty surrounds failings in the areas of social responsibility and anti-money laundering. The fine will be paid by Spreadex Limited to socially responsible causes as part of a settlement reached with the Commission. This penalty on the company stands out as another in what seems to be a constant stream of fines being meted out by the regulatory body on UK-licensed gambling companies. It’s nothing on the recent record fine of £17 million imposed on Entain brands, but it will doubtless be an big inconvenience to Spreadex.

Spreadex Investigation Finds Multiple Failures

As it happens, a long time prior to Spreadex entering into the sponsorship deal with Sunderland AFC, the Commission had begun an investigation into the company.

Beginning back in June of 2021, the regulatory body set off conducting a standard check of its licensee, as it has done with so many others already as of late. Unfortunately, it found a series of shortcomings which breached the terms of its licence and the guidelines set out by the Commission.

In terms of social responsibility, Spreadex was found to have failed in the following areas:

• Having financial alerts in action, which were proven to be ineffective and thereby allowing players to lose significant amounts of money over a short period of time.
• Having a vast reliance on those financial alerts to identify those potentially at risk of gambling-related harm.
• Insufficiently recording and evaluating interactions with customers.
• An instance of a single customer being able to deposit £1.7 million and lose £500,000 within a one-month period. Despite customer interactions taking place between them and Spreadex, they were not sufficiently evaluated. At the same time, there was no consideration given to how effective account restrictions would be for the player.

Spreadex also failed in the area of anti-money laundering with the following issues raised:

• One customer who met a £25,000 financial deposit alert had their alert for further review increased to £100,000, and this was based on a self-declaration of income as well as an open-source check.
• Another customer was able to deposit £365,000 and lose £284,000 over a three-month period without a Source of Funds check being carried out sufficiently.
• A third customer was able to proceed with depositing after providing redacted bank statements in response to a Source of Funds check.

Detailed Licence Breaches

As a result of the findings, the Gambling Commission determined that the company’s key failings were in three areas of its licence. They are:

• Breach of licence condition 12.1.1 paragraphs 1, 2 and 3 – Prevention of Money Laundering and Terrorist Financing.
• Failure to act in accordance with Ordinary Code Provision (OCP) 2.1.1 – Anti-Money Laundering (Casino).
• Failure to comply with Social Responsibility Code Provision 3.4.1 paragraph 1 and 2 – Customer Interaction.

The investigation conducted by the Commission led to the commencement of a section 116 regulatory review of the licence held by Spreadex Limited. This came about following the concerns identified in a compliance assessment which occurred in May of 2021.

The regulatory settlement decided upon by the UKGC consists of a payment of £1,363,786 altogether, which will be directed to the socially responsible purposes in lieu of a financial penalty being handed over to the Commission. It also means that a statement of facts relating to the case could be published, while a payment of £7,831 towards the regulatory body’s costs of investigating was imposed on Spreadex Limited.

Spreadex Taking Corrective Action

Once the violations of its licence were identified, the UKGC notified Spreadex of them. It immediately took action to correct those problems, according to the Commission, and this was enough to pacify the regulatory body. Therefore, the settlement was reached, allowing it to pay a fine, which will be directed to a socially responsible organisation.

That may seem quite lenient in comparison to other penalties that have been handed out by the UKGC. However, it does fall in line with the body’s framework on regulatory compliance. While still acting as a fine on Spreadex, and thereby a form of punishment for the violations, it is also a settlement payment in lieu of a financial penalty.

Speaking on the outcome of the investigation and resulting fine, the Director of Enforcement and Intelligence for the UKGC, Leanne Oxley, said:

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

And the Gambling Commission has threatened to take a much stricter approach to the enforcement of gambling laws and licence rules. CEO of the agency, Andrew Rhodes, noted that any continued violations are a sure sign that UK-licensed operators are not taking the UKGC seriously enough.

Mr. Rhodes moved from the interim CEO of the regulatory body to full CEO in May of 2022, after the sudden resignation of Neil McArthur in March of 2021. Sarah Gardner became the interim CEO for a few months right after his resignation, but Chairman of the Commission at the time Bill Moyes introduced Rhodes to the position instead.

Marcus Boyle then took over the role of Chairman when Moyes stepped down in September, leaving Rhodes to work alongside the new head of the organisation. Fortunately, Rhodes has been present for a large portion of the process that the government is currently undertaking with regard to the reform of the country’s gambling laws.

And while there have been issues with the publication of the white paper relating to this, Rhodes also had a significant enough role in the debacle from earlier this year regarding the new National Lottery licence holder.