In July the Gambling Commission CEO, Andrew Rhodes, published a blog on the unacceptable delays that some operators are still imposing on customer withdrawal requests. Here we consider the Gambling Commission’s position and how operators should conduct their business to ensure they do not fall foul of the regulator’s stance.

Background

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. The Gambling Commission has indicated that, although complaints in this area have reduced overall since the CMA’s market review, operators should not add friction to their withdrawals processes whilst allowing frictionless deposits, and below we consider the particular areas of poor-practice that the Gambling Commission will expect operators to avoid. 

Transparency

Whilst operators should continue to comply with their obligations under money laundering regulation, including avoiding committing any tipping-off offences, which may mean that an operator cannot provide a full explanation for withholding funds, operators must ensure that any withdrawal restrictions are conducted transparently. This means ensuring that, except where prohibited by money laundering or proceeds of crime legislation:

1. specific reasons for requests for additional information required to process withdrawals are given to customers; and
2. the basis of any decision not to process a withdrawal is fully explained and provided to customers.

Where the withdrawal restriction is motivated by factors such as a suspected breach of the operator’s terms and conditions, the customer must be informed of the relevant breach and the operator must explain any decision not to proceed with the withdrawal. Not only will such procedures enable the operator to comply with the Gambling Commission’s requirements, but it will also be an effective means for operators defending their actions against any complaints by providing a clear audit trail of the operator’s decision-making process.

Timing

It is vital that operators request information from customers at the earliest possible time. The Gambling Commission expects operators to request Source of Wealth or Source of Funds information where the request is necessary and proportionate in line with the risk profile presented by the client, which in many instances would be where a deposit is made rather than a withdrawal request made. Particular concern has been raised with the fact that some operators have requested information after a withdrawal is made, following a period during which the customer has made several deposits and gambled their funds repeatedly. This was made clear as part of the CMA market review, but it seems the Gambling Commission believes that not all operators are being fully compliant. In no circumstances should anti-money laundering procedures be used as a means of frustrating withdrawal requests where there is no other reason to delay payouts, and conducting checks at the earliest juncture is an effective means for operators to deny any such accusation.

Third Party Payment Methods

Operators should ensure that their procedures monitor the risk of fraud posed by third party payment methods throughout the transaction flow, not just in relation to withdrawals. Where the operator’s terms and conditions prohibit the use of third party payment methods they should investigate the use of these payment methods promptly, rather than allowing the customer to deposit funds and then addressing the issue after a withdrawal request is made.

Confiscating Deposits

The Commission is concerned that some operators are seeking to confiscate the whole of a customer’s deposit balance (not just winnings) because they suspect the account is associated with criminal activity. To avoid committing a money laundering offence, it is important that operators report any money laundering activities and suspicions to the NCA and do not proceed with the withdrawal until a defence is granted by the NCA or the relevant period has elapsed. However, the obligation to report will also apply in circumstances where operators confiscate or return account funds, and failing to do so will put operators at risk of committing an offence under the Proceeds of Crime Act 2002. As confiscating funds and blocking withdrawals will not undermine any reporting obligations which operators are subject to under money laundering regulation, operators need to ensure that money laundering activity and suspicions are reported to the NCA in all circumstances and withdrawal restrictions are only implemented to the extent this is dictated by the outcome provided by the NCA. 

Operator terms

The Gambling Commission has highlighted some concern over some operator’s terms and conditions which contain significant ambiguities and afford the operator discretion as to the actions that “may” be taken and rights the operator reserves in relation to customer withdrawals. The Gambling Commission indicates that terms and conditions should be clear and unambiguous, so operators should clearly outline the circumstances in which they will implement withdrawal restrictions in their terms and conditions. This will also assist operators in complying with consumer law requirements, under which consumers must be treated in a fair, open and transparent way. Whilst the Commission seems to consider it inherently unfair to afford discretion in these areas, it feels unnecessarily restrictive to require operators to be determinative about what they ‘will’ do, when the circumstances giving rise to the right under the terms to delay withdrawal or void winnings are usually not clear cut. 

Conclusion

The Commission’s publication indicates that withdrawals will be an area which will attract significant regulatory oversight. Operators will need to ensure that their practices, and the terms and conditions that are made available to customers, are consistent and clear in addressing the scenarios that will result in withdrawal restrictions. 

Operators will need to carefully consider the scenarios in which withdrawal restrictions are applied. Notably:

• In line with the obligations under the LCCPs (specifically LCCP 17.1.1), information should be obtained from customers before the customer is permitted to gamble. Money laundering suspicions should only motivate withdrawal restrictions where these suspicions become relevant at the point of withdrawal. If these suspicions exist earlier, requests for further information should be made at that time rather delaying the checks whilst allowing further deposits to be made.
• Where withdrawals are restricted due to a breach of the operator’s terms and conditions, the operator should clearly communicate this to the customer and provide an explanation of any decision not to proceed with the withdrawal. To support the operator’s actions, the terms and conditions should be clear on the scenarios in which the operator will take this action to avoid any accusation that the issue has not been handed in a clear and transparent way.
• Whilst safer gambling concerns may be a sufficient factor in motivating an operator to freeze deposits, the Gambling Commission would not deem it fair, transparent or necessary to delay or prevent withdrawals for reasons of customer interaction alone. As such, the factors referenced above would need to contribute to any withdrawal restrictions placed on a customer’s account as well as any safer gambling concerns.