How UK compliance expectations around AML/CTF and withdrawal delays impact Australian wagering operators.
At the Australian wagering and racing industry conference, Backing The Punt 2023, I spoke about customer complaints frameworks and the necessary legal and regulatory requirements to provide consistent responses and treatment of customer complaints. Poorly drafted and unfair contract terms and conditions can exacerbate the level of customer complaints received by operators and in turn regulatory bodies, particularly where a gambling operator delays payment of a withdrawal citing reliance on their terms and conditions and/or their AML/CTF program. When triggered, sometimes operators seek additional Know You Customer information requests (KYC) at the time of withdrawal, which delays payment and often confuses the customer, especially if not handled with high levels of customer service.
Author: Alex Hoskins, Principal
Operators are required to fulfil their AML/CTF obligations which can include ascertaining a customer’s source of wealth and source of funds. Conversely, there are obviously customers that seek out ways to try and exploit operator processes. For example, operating a bowler account (where the customer is not the beneficial owner of the account) or customers seeking to exploit bonuses or use automated or robotic betting techniques to place bets.
Operator terms and conditions need to be clear, unambiguous and detail the types of additional information that may be requested as well as the circumstances that warrant an operator to request additional identification. Information requests can include, but not limited to, unredacted bank statements, payslips, additional photographic identification, statutory declarations etc.
The UK Gambling Commission recently reported that the work undertaken by their compliance and enforcement team has led to operators amending their terms and conditions so that appropriate identity verification is conducted “before” someone deposits funds to start to gamble, rather than delaying identity verification until a customer seeks to withdraw funds. As such there was a reduction in complaints by operators who had previously generated the most customer complaints in relation to delays in customer withdrawals.
With over 2,000 complaints being made to the Gambling Commission each year regarding withdrawal delays, this area has become “the number one subject of complaints” and an area which the Gambling Commission intends to continue monitoring. Whilst customer complaints were reported to remain low in proportion to the total amount of completed withdrawals across the industry, however, even where a small percentage of withdrawal requests result in a delay, this represents a significant number of individual instances that take up regulatory resources to resolve disputes. Despite the progress made with some operators, withdrawal delays remain the number one subject of complaints the UK Gambling Commission receives, and also features prominently in cases raised with Alternative Dispute Resolution providers.
Complaints to the UK Gambling Commission concern small, medium and larger remote operators alike, so, they are not confined to any subset of the online gambling industry in Britain. In Australia, complaints of this nature tend to concern operators with less sophisticated compliance frameworks and transaction monitoring capability.
The UK Gambling Commission stated in a blog that it is not acceptable for operators to introduce friction when a customer tries to withdraw from their account rather than when they deposit into the account, or to place the operator’s commercial interests over those of their customers.
As part of the Commissions’ compliance activity, they reviewed some operator’s terms and conditions and investigated how specific customer accounts have been managed, where customers experienced delayed withdrawals.
Some of the issues the Commission identified include the following and has resulted in them setting their expectations to the industry.
Timing of withdrawal requests and lack of detailed reasons for delaying withdrawal or requesting additional KYC information
Generally speaking, operators often do not provide their customers with detailed reason as to why they are requesting additional information from them. They sometimes advise customers that information is being requested “for regulatory purposes”, but the specific purposes are not made clear, including in relation to KYC obligations. Operators often do not fully explain to the customer the basis for their decision not to process a withdrawal, for example the reason why they have instead voided the customer’s winnings or closed their account.
For example, as a requirement before lifting restrictions on an account, an operator may ask a customer to provide proof of address (to be sent either in Portable Document Format (PDF) or as a selfie photo with the customer holding the document up against their face) and a bank statement showing all the transactions made by the customer with that operator. In making these requests, the operator is relying on one of its terms and conditions, enabling them to undertake identity verification checks, but may not provide an explanation to the customer as to why those documents were necessary or why such information had to be verified as a condition of restrictions to their account being lifted.
In the UK, operators are subject to Licence Conditions and Codes of Practice which sets out that:
licensees must obtain and verify information in order to establish the identity of a customer before that customer is permitted to gamble. Information must include, but is not restricted to, the customer’s name, address and date of birth;
a request made by a customer to withdraw funds from their account must not result in a requirement for additional information to be supplied as a condition of withdrawal if the licensee could have reasonably requested that information earlier. This UK requirement does not prevent a licensee from seeking information on the customer which they must obtain at that time due to any other legal obligation;
before permitting a customer to deposit funds, UK licensees are required to inform customers of the types of identity documents or other information the licensee may need the customer to provide, the circumstances in which such information might be required, and the form and manner in which such information should be provided.
There may be circumstances where an operator needs to verify further information from the customer, where it could not reasonably have requested that information earlier.
In a speech at the Betting and Gaming Council AGM in February 2024, UK Gambling Commission CEO, Mr Andrew Rhodes, explained that the Commission want transparency for consumers on restrictions on play or withdrawals, which means operators should make proper efforts to explain to customers what the checks and restrictions are. Where there is, for example, knowledge or suspicion of money laundering offences being committed, there is a statutory obligation to make sure that customers are not “tipped-off” as that is a criminal offence.
But otherwise, customers should be informed of the reasons why their withdrawal has been delayed. For example, if the operator wants to investigate an account because its own terms and conditions may have been breached, the customer should be told this. Equally, where an operator has decided not to process a withdrawal, it should provide the customer with a full explanation including the basis on which it has made that decision. Where there is evidence that an operator has deliberately misled a customer in its communications with them, the regulator will consider disciplinary action options.
Timing of requests for additional information
The UK Gambling Commission has seen cases where information has been requested from a customer, such as evidence of their Source of Wealth (SOW) or Source of Funds (SOF), and the request is made as part of the operator’s Anti-Money Laundering risk procedures. However, in some instances, such information has only been asked for after a withdrawal request has been made, and where the absence of that evidence did not prevent the customer from being allowed to make several deposits and gamble their funds.
Example
An operator asked a customer to provide information dating back almost four years concerning the source of their income and account deposits over that period, and made this request after the customer had asked to withdraw their winnings. The operator allowed a certain amount to be withdrawn but sought to withhold the majority of the account balance until its source of funds requests had been fulfilled.
The operator eventually paid out all winnings when it obtained a Defence Against Money Laundering (DAML) from the National Crime Agency (NCA), but it does not appear that suspicions were triggered by any of the customer’s depositing behaviour over the four years before the withdrawal request was made, nor had there been any change in the customer’s betting behaviour at the time they asked to withdraw funds. The operator seemingly only sought to query the source of the customer’s deposits over that entire period when the request to withdraw funds was made.
Key takeaways for wagering operators in Australia
Operators in Australia are obliged to undertaking ongoing transaction monitoring as part of their AML/CTF obligations. Their Transaction Monitoring Program must set out how the operator will monitor transactions, the different triggers, actions to take, different roles people in the organisation will play, the nature of any reporting and whether any Suspicious Matter Reports have been submitted to the relevant regulator being AUSTRAC.
If an operator has concerns about a customer from an AML/CTF perspective, then these concerns should be set out in the Transaction Monitoring Program as different types of suspicious transaction triggers. Operators should not, however, continue to accept customer deposits indefinitely and then seek to rely on their AML/CTF procedures when they receive a withdrawal request. Other triggers set out in the Transaction Monitoring Program should provide for the operator the ability to seek this information earlier, for example at time of deposit.
If an operator does not have any regulatory concerns about a customer and no suspicions of money laundering or any other risks, and there are no suspicions that the customer has otherwise breached the operator’s terms and conditions, then there is often no valid reason to delay the payout of the withdrawal.
If an operator has formed a suspicion on reasonable ground then they must submit a Suspicious Matter Report (SMR) to AUSTRAC.
To avoid committing offences under Anti-Money Laundering and Counter Terrorism Act (2006), operators should report instances of known or suspected money laundering by customers to AUSTRAC. Operators can also refer to guidance provided by AUSTRAC or seek independent advice.
Operators should not have terms and conditions that give them complete discretions, as to when and how those terms are applied as such terms could be deemed to be unfair contract terms. Consumers are entitled to know what action the operator would take, and in which circumstances.
In the meantime, it is imperative that operators review their terms and conditions and Transaction Monitoring Program as part of their AML/CTF program including the different red flag triggers or indicators that would warrant the operator taking investigative action; not simply when a request for withdrawal occurs. If suspicious transaction triggers are limited to simply withdrawals, then it is possible that the AML/CTF program and Transaction Monitoring Program are deficient and/or not considering the full extent of the risks the business reasonably faces.
