Spreadex Fined £2 Million for AML and Social Responsibility Failures

_{The UK Gambling Commission has fined Spreadex £2 million. (Image: PA Images / Alamy)}

A gambling operator will pay a £2,022,000 penalty after a Gambling Commission investigation uncovered anti-money laundering (AML) and social responsibility failings, issues that continue to be scrutinised across the online casino industry.

Spreadex Limited, which operates Spreadex.com, will also undergo a third-party audit to ensure it effectively implements its AML and safer gambling policies, procedures, and controls.

Gambling Commission Uncovers Compliance Breaches and AML Failures

The failings were revealed during a compliance assessment in July 2023 and relate to the operator’s Gambling Commission license to offer casino and fixed-odds betting.

The licensee’s money laundering and terrorist financing (ML/TF) risk assessment did not adequately consider key customer, product, geographic, and payment risks, as outlined in the commission’s guidance. Consequently, it failed to adopt a sufficiently risk-based approach to AML measures. 

Additionally, the AML policies, procedures, and controls were not appropriate to effectively prevent ML/TF activities.

The Gambling Commission found the licensee relied too heavily on customers’ self-reported financial information. Customers were able to continue depositing substantial amounts without providing source of funds (SOF) documentation, despite the risks involved. 

For example, a customer opened an account and deposited approximately £64,000 within a short period, yet the licensee did not request SOF information. The customer subsequently lost £50,000 within a month.

Furthermore, the licensee applied the same level of checks to all customers regardless of increased risk, such as larger deposits or gambling activity, without escalating scrutiny accordingly.

Social Responsibility Failures

The licensee also failed its social responsibility obligations. Despite a customer hitting the daily deposit limit of £3,340 twelve times over 14 days, a potential indicator of gambling-related harm, the licensee’s response was inadequate. 

The operator’s intervention was limited to four pop-up messages and did not include more in-depth human interaction to assess the customer’s wellbeing.

These combined failures in AML controls and social responsibility measures led to a substantial regulatory penalty for Spreadex.

AML Failures Lead to Hefty Penalty for Spreadex

This is the second time Spreadex has faced enforcement action. In 2022, the operator paid a £1.36 million regulatory settlement for social responsibility and AML failures.

John Pierce, commission head of enforcement, said: “The conclusion of this case marks the second time Spreadex Limited has been subject to enforcement action. Its failure to uphold anti-money laundering standards, delays in necessary interventions, and weaknesses in social responsibility measures were unacceptable.

“The operator placed undue reliance on customer assurances about the source of funds rather than obtaining evidence from independent and verifiable sources, as we would expect. Operators must not only implement and maintain robust anti-money laundering policies, procedures, and controls but also act swiftly in response to any indicators of suspicious activity.

Social Responsibility Shortcomings Highlighted

“During the review, it was found that one customer, showing markers of harm, was using products across areas overseen by two different regulators. As the gambling regulator, we stress the importance of licensees understanding and managing cross-channel usage in their anti-money laundering and social responsibility policies.

“We work closely with the Financial Conduct Authority to ensure a coordinated approach. This is particularly critical when there are concerns about a customer’s gambling activity from an AML or social responsibility perspective. The ability to assess customer risk holistically is essential for effective risk management and is an expected practice.

“Effective social responsibility measures must be in place at all times to ensure that consumers identified as being at risk receive timely and proportionate interventions.

“Operators should be in no doubt: repeated regulatory failings will result in escalating enforcement action.”

The breaches occurred between September 2022 and November 2023.