Videoslots has been fined £650,000 for failing to effectively monitor customer activity for signs of potential harm and money laundering.

The penalty issued by the Gambling Commission also includes a warning and requires the company to undergo a third-party audit to ensure that it is effectively implementing its anti-money laundering (AML) and safer gambling policies and procedures.

This follows an investigation by the Commission which found that Videoslots’ monitoring systems automatically set a monthly deposit limit for customers across a calendar month but did not include the customer’s initial deposit.

This resulted in one customer losing £5,000 in a month despite having a £3,000 monthly deposit limit. Another customer was found to have lost £5,000 in less than 24 hours despite having a £3,000 monthly deposit limit, while a third customer lost £7,500 over 18 days despite having a £2,000 monthly deposit limit.

The Commission investigation also found that the operator’s monitoring systems did not effectively identify customers who were potentially at risk of gambling harm, and that its automated AML system failed to trigger source of funds checks in a timely manner.

“Operators are required to have effective Social Responsibility and Anti-Money Laundering policies, procedures and controls as a condition of holding an operating licence. In this case, the operator’s monthly deposit limits were found to be ineffective when tested in practice and AML controls were not applied to the standards we expect,” said John Pierce, Commission director of enforcement.

“The investigation identified a serious example where pre-paid digital vouchers had been used for gambling without effective oversight and early intervention. The over-reliance on an algorithm to monitor risk meant that the customer was able to carry out a high volume of deposits and transfer the proceeds of gambling to multiple different destination accounts with insufficient and timely checks or robust source of funds verification taking place.

“Alongside this, the acceptance of digital vouchers as a method of payment also requires robust controls from a safer gambling perspective, particularly where it is possible to purchase digital vouchers using credit or crypto via third party websites,” added Pierce.

“Open-loop payment systems are high risk in nature because they could enable anonymous deposits and make it harder to trace funds. In this case, the licensee failed to implement timely customer interactions and did not conduct enhanced customer due diligence until the customer had reached significant spend thresholds – such failings are unacceptable.”

Pierce concluded: “Operators must review how open-loop payment systems such as prepaid digital vouchers are managed in a gambling environment because they are high risk and present operational challenges in terms of effective monitoring. Whilst our position on the use of open loop payment systems has not changed, we have updated our risk information on our website to reflect our concerns about digital vouchers.” 

The Gambling Commission is urging all licensees to review how open-loop payment systems are managed and has published updated risk information to reflect its concerns about digital vouchers.

Any operators using similar digital card/digital payment schemes are required to report this to the Commission as a key event immediately.

Videoslots Limited operates videoslots.co.uk, mrvegas.com and megariches.com under its licence from the Gambling Commission.

The Commission noted that Videoslots was cooperative throughout the investigation and took immediate steps to remedy the issues identified.