How Are Gambling Fines Calculated?

UK Law FlagYou may have become aware of the massive number of fines handed out by the Gambling Commission. In recent years, not only the number of fines, but the amount in GBP, have both increased and this has been the case, in general, since 2017.

On June 1 of that year, the UKGC unveiled its strengthened Enforcement Act and that still operates today under the Gambling Act 2005. Through this, the regulatory body said it would tighten up the licensing rules and this meant that it would enforce the rules in a sterner way.

As such, it gave itself a bit more free will to impose restrictions and fines on its licensees. Therefore, if any of them underwent investigation and failures came to light, it could take action and it is due to this that so many more companies have received fines since 2017. Not just fines either, but fines that stand out as being much higher in amount.

Companies like Betway, Entain, 888 Holdings and more have all been victims of this. But the fines issued are not of the same value, different companies have had to pay penalties of differing amounts.

This leads us to question why some companies have higher fines than others and not only that, but how does the Gambling Commission calculate those penalties? What is it that contributes to a higher fine for one operator over another?

The Official Gambling Commission Process

fine penalty notice illustrationTo find out more about the calculating of fines, we need to go back to 2017. At that time, the UK Gambling Commission published its official framework on this. This had the title of the ‘Statement of Principles for Determining Financial Penalties’.

Published on June 1 of that year, it laid down the groundwork for determining penalty values and it is still in use to this day, although has gone through minor updates since then. The last of those came about on February 9, 2021.

The information contained within the statement works in two instances –

  1. When the Commission exercises its powers to impose a financial penalty under the Gambling Act 2005
  2. When the Commission is considering the matter of a payment in lieu of a financial penalty

Information surrounding the reasons for imposing a penalty are included, too. This, the Commission states, is to protect the interests of consumers and the public. Further to this, fines exist to uphold the licensing objectives. Primary aims of imposing penalties are to:

  • Change the behaviour of a licensee
  • Eliminate any financial gain or benefit from licence non-compliance
  • Be proportionate to the nature of the breach of licence condition and the harm caused
  • Look to deter any future non-compliance, relating to both licensee and other operators

For the Commission to consider imposing a penalty, it needs to have regard to various things. This includes the seriousness of the breach of the rules. Also, whether the licensee knew or should have known about the breach and finally, the nature of the licensee (such as their financial resources).

It may be appropriate for the UKGC to impose a penalty in any of the following situations:

  • When a licensee commits a breach of regulations intentionally
  • Where the licensee could have prevented the regulations breach
  • If the licensee was aware of, or should have been aware of, a breach
  • Any repeated breach of licensing conditions
  • A systematic failure in complying with one or more licence conditions
  • If a breach gave rise to any financial gain for the licensee
  • If a licence condition breach had an impact on consumers
  • If a breach of licensing conditions could have damaged confidence in the gambling industry
  • Where a licensee did not report any breach of regulations
  • When a lack of effective remedial action following the breach occurs
  • If a financial penalty is necessary to deter future breaches or failures

There are certain circumstances where the Commission won’t consider a financial penalty. This includes if it was a minor rule breach or if the Commission believes alternative action is better and if the breach would not have been likely to be clear to the licensee.

The Rules Determining Fine Amount

sweating man handed penalty fine notice cartoonAnyone reading about the various fines of late might find them to be awry. One company could receive a fine of £100k while another gets a £15 million penalty. The Commission has been guilty of such odd figures throughout the years. What does the UKGC use to determine the sum of the fine for each licensee?

First of all, it is important to note that the Gambling Act does not set a limit for fines. In this respect, the Commission could fine a company £1 billion, if it wanted. But that would be a silly amount to impose. The UKGC has to consider a fine that is proportionate to the breach(es) of the rules. And it will also consider the financial status of a company when determining this.

Two elements are usually used to figure out the level of a financial penalty. Those elements are:

  • An amount that reflects any detrimental experience suffered by customers and/or an amount that removes financial gain made by the licensee as a result of rule breaches.
  • An amount to reflect the seriousness of the failure or breach and the impact on the licensing objectives. The need for deterrence is also focused on.

When calculating the penalty, the Commission undertakes a specific routine. This sees it look at the following things in order:

  1. The detriment to consumers and/or the gain to the licensee.
  2. The seriousness of the breach.
  3. Consideration of any mitigating or aggravating factors. These may increase or decrease the penal element.
  4. Consideration of the need for a deterrence uplift to the penal element. This is concerning the idea that non-compliance should be more costly than compliance. Also, enforcement should work as a strong deterrent against any future non-compliance.
  5. If a case settles early, then a discount to the penal element may be appropriate.
  6. The total amount payable from the licensee is the sum of the figures determined in steps 1 and 4. If the case settles early, step 5 comes into play. This is all subject to any further adjustments and this ensures that the financial liability from a penalty is reasonable.

There are certain other things that the UKGC may consider when determining the penalty. This can include things like:

  • The seriousness of the regulatory breach
  • The impact on the licensing objectives
  • Whether a repeated breach has occurred
  • Whether the breach occurred in situations like previous cases dealt with
  • The need to encourage compliance amongst all licensees
  • Whether the breach continued after the operator became aware of it
  • The scale of the breach of any licence conditions
  • How much middle and senior management got involved
  • The level of financial gain from the breach, if any
  • The extent of any attempt to conceal failures or regulation breaches
  • The impact on customers and the general public
  • How present internal controls or procedures are
  • The awareness and involvement of company boards
  • How long the breach went on for
  • The extent of steps taken, if any, to remedy the breach
  • Early and voluntary reporting of any breaches to the Commission
  • The timeliness of the co-operation with any investigation undertaken

It is also the case that the Commission may consider discounting the penalty. If a company offers voluntary admissions in a timely fashion, this can help. It will always be in the best interests of an operator to be full, frank and open with the UKGC. Credit may thus come into play in the form of a discount in these situations. Such discounts apply to the penal element of the fine, rather than to any gain/detriment.

Further Procedural Steps

gambling commission signThe Commission must also consider further rules in Section 121 of the Act. There are several procedural steps in place before a financial penalty is possible. This includes the fact that a licensee should receive notification of the following:

  • That the Commission intends to impose a penalty that it needs to pay
  • The amount of the penalty itself
  • The reasons why the UKGC is imposing this penalty
  • The period of time within which a licensee can make any representations

The Commission usually provides 14 days for licensees to make representations. One final point is that the Commission may not give a notice about the breaches. But only if a period of two years has passed since the day on which the breach occurred.

You may also have heard of brands being able to make payments instead a financial penalty. This is what happened to Entain recently. The record £17 million charge was a settlement reached, rather than a penalty imposed. This type of fine does not need to go into the Consolidated Fund like penalties do. Instead, there is more flexibility on how to use the money. The Entain settlement all went towards socially responsible purposes.

These payments are not something that are usable all the time, though. Certain principles come into play when approaching such agreements. These are as follows:

  • The Commission reserves the power to approve the destination of monies paid.
  • Operators cannot generate positive publicity from the settlement.
  • Payments should be over and above standard RET contributions.
  • The operator should return money to any identified victims, if practicable.
  • If there aren’t any victims, then any monies should go to charity for social responsibility.
  • Social responsibility purposes include those that address gambling-related harm. The presumption for this is that the money would go to GambleAware.
  • Operators should not have an interest in organisations where divested funds are going.
  • There should be meaningful evaluation when it comes to the effectiveness of projects funded by such settlements.
  • Research findings should be public to help raise standards.
  • There should be a clear timeframe when it comes to payment of such monies.

Breaking Down the Protocol and Increasing Fines

close up pen graph charts finance moneyAnyone aware of gambling news of late will know of the vast fines from the UKGC. The companies mentioned earlier have all suffered through high penalties in recent times. The top three companies for fines are Entain, 888 Holdings and Caesars Entertainment.

Together, they have had to pay £53.5 million in fines since 2016 and the £11.6 million from next-in-line Betway, pushes that up to £65.1 million.

But Entain and 888 Holdings are repeat offenders and so is Betway. It makes more sense that they sit at the top of the pile. Especially when you look into their respective failings. Various customers have suffered as a result of the operators’ negligence and in a bid to try and act as a deterrent, the Commission has imposed bigger penalties.

If you compare those with the recent fine on Petfre, you’ll see a difference. Only a few days ago, Petfre received a fine of £2.87 million from the UKGC. But this stands out as the first fine for the Betfred owner and in comparison to the findings of companies like Entain, there were less issues.

That’s not to diminish the failings of Petfre. It allowed one customer to lose £70,000 in a 10-hour timeframe and that occurred only a day after the player had opened their online account. Flaws were also discovered in the company’s controls to prevent money laundering. But Petfre worked in full cooperation with the Commission from the start and it rectified all problems as soon as it could. Therefore, with everything considered, Petfre received the £2.87 million fine.

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