Spreadex Fined $1.6M Over AML, Social Responsibility Breaches

Spreadex was the second company in the last two weeks to be fined by the Gambling Commission in the UK after a series of AML and social responsibility breaches were again discovered following an investigation.

$1.6M Towards Socially Responsible Causes

The Gambling Commission (GC) is responsible for issuing licenses and regulations to gambling operators in Great Britain, as well as the UK National Lottery, and it just announced the results of the investigation into Spreadex Limited – the operator behind spreadex.com.

In a news release it was confirmed that Spreadex will be mandated to pay £1.36 million (approx. US$ 1.6 million) to “socially responsible causes”, as defined by the Gambling Commission on its own website under the “Statement of Principles for Determining Financial Penalties.” The settlement was made after the investigation uncovered serious anti-money laundering breaches, as well as social responsibility failures.

Examples that the Gambling Commission gave in its Spreadex Limited Public Statement document, published August 25 on the GC website include failures to comply with the regulatory body’s requirements for source of funds (SOF) checks when depositing large sums of money, as well as non-compliant Money Laundering and Terrorist Financing Risk Assessment (ML and TF RA) mechanisms.

Could Have Been Worse

SOF checks are considered standard when depositing large amounts of money and according to the publicly available statement document, a customer was identified to have deposited £365,000 (approx. US$432,000) and lost £284,000 (approx. US$336,300) over a 3-month period without an established SOF. What’s even more worrying is that a customer was faced with an alert after depositing £25,000 (close to US$ 26,000) and it took only self-declaration of income and an open-source check to have their next alert be at £100,000 (a smidge over US$118 thousand).

Both instances are clear violations of License condition 12.1.1, Paragraph 2. Paragraph 1 of the same condition was also breached because Spreadex’s ML and TF RA were neither up-to-date nor took into consideration geographical risk factors or customer or product risk factors. These, alongside other shortcomings, were all at least partially based upon a general lack of sufficient compliance to Ordinary Code Provision (OCP) 2.1.1 – the Commission’s AML guidelines document.

As for Spreadex’s social responsibility shortcomings, the statement document clarified that the worst offenses occurred in breaches of the Social Responsibility Code Practice (SRCP 3.4.1) document in paragraphs 1 and 2. These paragraphs describe conditions and responsibilities to reduce gambling harm, and Spreadex has apparently let a player deposit £1.7 million and lose £500,000 within a month’s gambling. Records of Spreadex’s interaction with this customer, as well as account restrictions were both found extremely lacking.

However, the regulatory settlement seems to have been rather favorable for Spreadex, as there was also a good list of mitigating factors that have probably brought down the sum to the £1.4 million level. Namely, Spreadex made an early offer of a regulatory settlement, self-suspending its casino activities for 5 months in order to mitigate further risks, as well as fully cooperating with the GC on multiple levels.

It does seem that Spreadex could have had it much worse, like in Entain’s case. Entain was fined £17 million (US$20.12 million) over AML and social responsibility breaches and shortcomings just last week. The record sum was imposed after discovering multiple issues with the company’s online and land-based business operations, with SOF and due-diligence checks again finding a place in the list of broken rules.