The Gambling Commission has fined Spreadex after finding anti-money laundering and social responsibility failings, marking its second such enforcement action against the company in recent years.
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- Gambling Commission targets Spreadex's casino and fixed-odd betting service - not its spread betting service
- Latest of a string of Gambling Commission AML and social responsibility penalties
- Automated pop-up messages may be inadequate measures for dealing with customers repeatedly depositing large amounts
The regulator announced yesterday that it had fined Spreadex Limited, which operates Spreadex.com, a total of £2,022,000 after an investigation revealed extensive anti-money laundering (AML) and social responsibility shortcomings between September 2022 and November 2023.
The compliance failures, revealed in the commission’s compliance assessment in July 2023, relate to Spreadex’s licence to offer casino and fixed odds betting. The Financial Conduct Authority (FCA) regulates its provision of financial trading and spread betting products. Dual regulation of gambling services has caused confusion and controversy in the UK, as the Football Index scandal revealed. The FCA declined to confirm whether it was conducting a separate investigation.
The commission said Spreadex’s AML failures included inadequate risk assessments which did not follow its guidelines, that its policies were insufficient to prevent money laundering and terrorist financing by relying too heavily on customers’ self-reported financial positions, and that the operator did not conduct checks on higher value deposits with enhanced scrutiny.
Customers were able to continue depositing substantial funds without providing Source of Funds information, with one customer depositing £64,000 in a short period of time and subsequently losing £50,000 in one month, the Commission said.
It also failed in its social responsibility requirements by not engaging with customers. One customer deposited the daily £3,340 limit 12 times within 14 days but Spreadex limited its interactions to automated pop-up messages with no human interaction, meaning the company could not ensure the customer was not suffering gambling-related harm.
Social responsibility requirements mandate gambling providers to prevent crime, conduct gambling services in a fair and open way, and protect children and vulnerable persons from harm or exploitation.
The company will undergo a third-party audit to ensure it is implementing appropriate AML and safer gambling policies on top of paying the fine.
Spreadex’s “failure to uphold anti-money laundering standards, delays in necessary interventions, and weaknesses in social responsibility measures were unacceptable,” John Pierce, the Gambling Commission’s enforcement lead, said.
"The operator placed undue reliance on customer assurances about the source of funds, rather than obtaining evidence from independent and verifiable sources, as we would expect. Operators must not only implement and maintain robust anti-money laundering policies, procedures, and controls, but also act swiftly in response to any indicators of suspicious activity,” he added.
A spokesperson for Spreadex told Lexology PRO the company acknowledged the Commission’s findings and “since the review [we] have undergone a significant number of operational, procedural and technical improvements”.
“Spreadex’s Senior Management Team have been working closely with the Gambling Commission since the review took place and remain committed to providing our products and services in a fair and open way, which protects vulnerable people from harm and prevents gambling from being a source of crime or disorder, and we note the positive comments the Commission have made in relation to the swift and robust action we have undertaken since the review,” they added.
In an almost identical enforcement action, Spreadex paid the Gambling Commission £1.36 million in a regulatory settlement over similar AML and social responsibility failures in 2022.
Lexology PRO recently analysed five years of Gambling Commission enforcement trends, revealing the vast majority of enforcement action related to AML and social responsibility failures. Enforcement action peaked over the period in 2022, with over £47 million in fines slapped on firms.