Sweden’s gambling regulator, the Spelinspektionen, has issued a penalty fee to Videoslots. According to the authority, the gambling operator failed to properly measure risk and committed anti-money laundering (AML) and counter-terrorist financing (CTF) violations.

For reference, Videoslots is a licensed operator that offers gambling in Sweden through its videoslots.com website.

As noted by the Spelinspektionen, the authority began supervising the operator’s AML protocols back in 2021 as it wanted to confirm whether the company secured sufficient knowledge of its customers. However, the review uncovered failings, confirming the regulators’ suspicions that Videoslots doesn’t properly assess its customers’ risk profiles.

The violations committed by Videoslots are considered to be very serious, the Spelinspektionen noted. According to the regulator, Videoslots has now received a warning and a penalty fee of SEK 9 million (approximately $809,300) for its breaches, which may have facilitated money laundering and terrorism financing.

This is one of the bigger fines handed by the Spelinspektionen, which noted that the maximum possible fine, as outlined in the Money Laundering Act, is EUR 1 million (approximately $1.06 million).

Sweden Is Stepping Up Its Efforts to Combat Illegal Gambling

In other news, the Spelinspektionen just published a partial report on the ongoing review of how collaboration with the Finansinspektionen (Financial Supervisory Authority) can strengthen the efforts against illegal gambling. The two regulatory bodies are currently evaluating how their efforts can benefit Sweden’s online gambling market.

As a result, the Spelinspektionen and the Finansinspektionen are exploring synergies and opportunities for payment blocking. The two regulators are also exploring opportunities for data sharing that will enhance their efforts.

An earlier proposal suggested allocating more money to the two authorities, helping them in their respective tasks. The proposal sought to allocate SEK 10.8 million (around $970,000) to the Spelinspektionen’s 2024 budget and SEK 4.5 million ($400,000) to the Finansinspektionen in 2024.

Over a month ago, Sweden proposed changes to its Money Laundering Act. Back then, the Spelinspektionen expressed its approval for most of the proposed changes but highlighted a few things that could be better.  The Swedish Trade Association for Online Gambling (BOS) also addressed the changes and similarly agreed with most of them but outlined a number of things to keep in mind.

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This settlement is the outcome of an internal review conducted by 888 subsidiary Virtual Global Digital Services earlier this year, which unveiled several deficiencies in their Know Your Customer (KYC) and Enhanced Due Diligence (EDD) practices. These shortcomings prompted the company to take corrective measures and cooperate with the regulatory authorities to address the issues.

The Operator Addressed Its Shortcomings

Virtual Global initiated its internal compliance investigation in January after 888 suspended VIP activities for select markets. The company expressed significant concerns regarding insufficient KYC and AML practices, prompting it to introduce updated policies and procedures regarding its risk assessment process. Although these efforts were successful, the Gibraltar regulator imposed a significant fine due to Virtual Global’s past failings.

According to the recent settlement, the 888 subsidiary must pay £2.9 million ($3.7 million). A portion of the settlement funds will benefit the Centre of Excellence for Responsible Gaming at the University of Gibraltar in its efforts to combat problem gambling in the region. The Gibraltar Gaming Commissioner decreed that the fine was suitable punishment and would take no further action against the offending operator. 

“888 has enhanced its policies and procedures in remediating the identified historical deficiencies. The Gambling Commissioner and Licensing Authority consider this matter closed.”

Gibraltar Gambling Commission

The Gibraltar regulator’s verdict aligns with its mission to ensure its licensees follow robust KYC and EDD practices. These measures are essential for verifying the identity of customers, preventing money laundering, and ensuring adherence to responsible gambling practices. Such fines should demonstrate the government’s ability to enforce regulations and hopefully contribute to the region’s removal from the FATF greylist.

888 Retains Its Significant Momentum

Virtual Global’s swift actions to remedy the identified shortcomings demonstrate the company’s commitment to ensuring compliance with regulatory requirements and maintaining the highest standards of responsible gambling and player protection. Despite 888’s past tensions with the Gibraltar regulator, the operator has been willing to collaborate with the authorities and rectify any issues.

The Virtual Global settlement marks the second high-profile fine 888 had to pay in recent months. Its $24 million penalty in the UK had significant repercussions, showcasing the need for more robust control over its subsidiaries. Despite these setbacks, 888 recorded impressive H1 growth, leveraging its substantial business synergies to excel in the highly competitive gambling market.

This substantial fine must remind all stakeholders in the online gambling sector about the importance of robust KYC and EDD procedures. By adhering to stringent compliance measures, companies can contribute to a safer and more transparent gambling environment for players and maintain the trust of regulatory authorities.

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Social responsibility failures and AML violations motivated the UK Gambling Commission (UKGC) to issue Videoslots a substantial £2 million ($2.53 million) fine. The penalty reflects Videoslots’ repeated misconduct and the AML’s commitment to enforcing stringent regulations and upholding responsible gambling practices. The operator acknowledged its shortcomings, vowing to implement urgent updates and bring its player protection mechanisms to the industry standard.

The Operator Ignored Repeated Warnings

According to the UKGC’s investigation, Videoslots failed in several vital areas. Between November 2021 and January 2022, a customer lost nearly half of his deposited £112,225. Signs like long gambling streaks continuing into the early hours and losses exceeding safe thresholds should have triggered several fail safes, but the operator let such behavior continue for months.

The problem case also revealed significant AML deficiencies. The operator’s systems and controls to detect and prevent money laundering activities were inadequate, as Videoslots had insufficient analysts to manage the substantial volume of data. The UKGC noted that the issues were also present with other customers, indicating an endemic problem.

AML analysts failed to properly implement all actions required by the licensee’s AML policies and procedures.

UKGC report

In 2019 Videoslots received a £1 million fine for KYC violations. According to the regulator, the company’s most recent failings directly followed multiple warnings about insufficient due diligence and AML safeguards, thus exposing customers to potential gambling harm. The £2 million penalty reflects the severity of these breaches and should provide sufficient incentive for change.

Regulator Vigilance Remains Paramount for a Safe Market

Videoslots’ UK failings mark the company’s second clash with regulators in recent months. March saw the company enter a dispute with the Dutch regulator for allegedly allowing unauthorized access to its services. The operator hotly contested the mammoth €9.9 million ($10.5 million) fine, denying all allegations.

Despite its objections in the Netherlands, Videoslots has acknowledged its UK shortcomings and committed to implementing remedial measures to rectify the identified issues. The operator recognized the importance of stricter adherence to licensing obligations, improving customer due diligence processes, and bolstering player protection mechanisms. Videoslots’ future actions will be crucial in rebuilding trust and demonstrating a genuine commitment to responsible gambling practices.

The £2 million penalty sends a clear message to operators that non-compliance will not be tolerated. The UKGC’s efficiency in pursuing regulatory breaches is commendable, as it fosters a safer gambling environment that puts player well-being at the forefront. It highlights the need for the industry as a whole to prioritize responsible gambling, robust player protections, and effective AML measures.

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FIAU conducted an investigation that uncovered a serious need for an overhaul in Casino Malta’s internal procedures, especially ones concerning risk assessment, but other administrative shortcomings were also heavily outlined in the resulting report.

Multiple Breaches Established in FIAU Investigation

According to information from Malta Today, FIAU’s investigation found that the Eden Leisure Gaming-owned St Julian’s casino systematically failed in enhanced due diligence processes, especially with identifiable high-risk players. The report has it that this was evident in around 28% of the cases that FIAU reviewed during its investigation.

Another reason for the substantial €229,000 (approximately $242,500) fine was that Casino Malta breached several other laws, in addition to established regulations on risk assessments. This means that FIAU’s investigation and administrative fee will most likely be followed by multiple follow-up directives, which can also have consequences for the establishment.

FIAU’s investigation also uncovered that in around 20% of the profiles reviewed, the players were assigned a low or medium risk rating. This was despite their exhibiting behavior that can be a flag for high risk of money laundering, such as the size of the transactions, for example. 10% of the reviewed profiles didn’t have a permanent address, and 6% had given incorrect foreign addresses.

Another serious deficiency was that the casino often relied on self-reported information about its customers’ occupation details, with around 12% of the profiles providing only basic information. The same approach was extended to establishing the source of funds checks, without which a casino’s risk assessment practices can’t be adequate.

Examples of the Casino’s Risk Assessment Deficiencies

Multiple examples of the casino’s breaches were made public. A Turkish company chief executive was allowed to gamble more than €1 million (more than $1.06 million) all in cash from eight different banks and was assigned a low-risk status. Another player gambled more than €2 million ($2.12 million) and lost almost half of that and his SOF check consisted of establishing that his funds were coming from a reputable bank.

FIAU said that this was not sufficient for establishing the source of funds and only served as information about the flow of funds. This is a drastically insufficient approach to the risk assessment process, and there were multiple other instances where the casino’s risk assessment and due diligence came up short of what is legally required.

A former politically exposed person (PEP) was allocated a low-risk rating, which is incorrect. The PEP registered in 2015 and after the casino identified that he was allegedly involved in tax evasion and bribery in 2019, he was still allowed to gamble with large amounts of cash. FIAU added that the casino also failed to submit a Suspicious Transaction Report (STR) for the case.

Another STR-related failing was with a business owner who owed €500,000 in unpaid taxes – a fact the casino was aware of – and was still assigned the low-risk rating by the casino in 2019. Such a large sum owed in back taxes can be indicative of possible tax evasion – another well-known fact. However, because of the casino’s insufficient customer risk assessment (CRA), an STR was not submitted.

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