Regulatory action against Lindar Media Limited

On 20 September 2023, the Gambling Commission announced that Lindar Media Limited (“Lindar”), operator of the Mr Q website, would pay £690,947 as part of a regulatory settlement entered into following an investigation which revealed anti-money laundering and social responsibility failures. The Commission commenced a regulatory review of Lindar following a compliance assessment conducted in September 2022. Under section 116 of the Gambling Act 2005, the Commission has broad powers to initiate a review relating to a licence if the Commission suspects that conditions of a licence have been or are being breached.

The Gambling Commission’s Findings

The Commission found that, between July 2021 and September 2022, Lindar failed to comply with the following Licence Conditions and Codes of Practice (LCCP):

• Compliance with measures to prevent money laundering and terrorist financing
  • Licence condition (“LC”) 12.1.1(1) requires licensees to “conduct an assessment of the risks of their business being used for money laundering and terrorist financing” (“MLTF”). The Commission found that Lindar had failed to conduct an appropriate MLTF risk assessment, as it did not reference that it had adequately assessed risks relating to: customers; means of payment; additional inherent risks; and emerging risks operator control. The assessment also did not specifically address certain key risk factors set out in the Money Laundering Regulations 2017 and the Commission’s Prevention of money laundering and combating the financing of terrorism guidance.
  • LC 12.1.1(2) states that, following completion of and having regard to an MLTF risk assessment, “licensees must ensure they have appropriate policies, procedures and controls to prevent money laundering and terrorist financing”. The Commission found that Lindar’s procedures and controls were not appropriate in this regard. In particular, all customers were automatically assigned a money laundering risk rating of low at the point of registration although there was insufficient information known about the customer at the start of the business relationship to adequately profile the customer and assess the MLTF risk. Although this had  been rectified by Lindar, some financial thresholds which were intended to identify MLTF risk did not appear to be sufficiently risk-based and were set at a level which allowed customers to deposit and lose “£10,000 in a short period of time”.
  • LC 12.1.1(3) states that “licensees must ensure that their policies, procedures and controls are implemented effectively” and “remain effective”. The Commission found that, although Lindar had reviewed policies and procedures, they had not done so sufficiently frequently or in a timely manner. Again, it was acknowledged that Lindar had taken steps to address this.
• Notification of specific key events to the Commission
  • Under LC 15.2.1, licensees must notify the Commission of defined key events as soon as reasonably practicable (which includes when a person ceases to hold overall responsibility for the licensee’s anti-money laundering and/or terrorist financing compliance, and/or for the reporting of known or suspected money laundering or terrorist financing activity), and in any case within five working days of the licensee becoming aware of the event’s occurrence. Lindar was in breach between 20 June 2022 and September 2022 due to its failure to notify the Commission when the Head of Regulatory Compliance left that position on 14 June 2022.
• Compliance relating to specified management offices
  • Under LC 1.2.1(3), a licensee’s head of gambling regulatory compliance cannot occupy any other specified management office, except with the Commission’s express approval. The Commission found that between 20 June 2022 and 3 October 2022 Lindar’s Head of Regulatory Compliance also held other specified management posts without the Commission’s express approval.
• Compliance with the Commission’s guidance on Anti-Money Laundering
  • Under Ordinary Code Provision 2.1.1, licensees are required to act in accordance with the Commission guidance on anti-money laundering. Contrary to the guidance, Lindar was found to have not sufficiently assessed threats, vulnerabilities and consequences, addressed how customer risk should be managed or effectively implemented measures relating to customer due diligence and enhanced due diligence.
• Social responsibility and customer interaction
  • Social Responsibility Code provision (“SRCP”) 3.4.1(1) states that “licensees must interact with customers in a way which minimises the risk of customers experiencing harms associated with gambling”. This must include: (i) identifying customers who may be at risk of experiencing such harms, (ii) interacting with such customers, and (iii) understanding the impact of the interaction on such customers and the effectiveness of the licensee’s actions.
  • The Commission found that Lindar had failed on the basis that the financial and non-financial safer gambling triggers were not always effective. In particular, new customers were able to deposit at high velocity and some customers were able to deposit and lose up to and in excess of £10,000 with no intervention. Lindar also failed to have a process in place to identify customers at risk of gambling related harm in real time, or implement early and quick interactions.
  • Contrary to SRCP 3.4.1(2), it was also deemed that Lindar had not fully taken account of the Commission’s Formal Guidance relating to customer interaction (please note this guidance is no longer in force, as of 11 September 2022).
• Compliance with advertising codes  
  • Under SRCP 5.1.6, licensees are required to be compliant with all relevant advertising codes. An advertisement featuring an image of three cartoon Spiderman figures was posted on Reddit on behalf of Lindar by one of its agents relating to Lindar’s MrQ website. A subsequent review of MrQ.com identified cartoon imagery not in a restricted gateway. These images were deemed to be of particular appeal to children and so were not compliant with the advertising codes. It was acknowledged that once Lindar became aware of the adverts, it took immediate action to remove them.
• Annual contribution to combat problem gambling
  • Under SRCP 3.1.1(2), licensees are required to make an annual financial contribution to an organisation approved by the Commission to support research, prevention and treatment for those harmed by gambling. Lindar had failed to make such a payment for the year ending December 2021.

Regulatory Settlement

Following the investigation, the Commission and Lindar agreed a regulatory settlement which required Lindar to:

• pay £690,947 in lieu of a financial penalty to socially responsible purposes, this includes a divestment of £50,947;
• agree to the publication of a statement of facts relating to the case; and
• pay towards the Commission’s costs of investigating the case.

When considering the appropriate resolution to this investigation, the Commission had regard to mitigating factors (including Lindar’s responsiveness and co-operation) and aggravating factors (including the serious nature of the identified breaches and the similarity to previous cases where the Commission had published lessons to be learned for the wider industry).

Industry Good Practice

To ensure industry learning by other operators, the Commission’s public statement relating to the review closed with the following questions which operators should consider:

• “Do you have formal processes in place to measure the effectiveness of your AML and safer gambling policies and are findings adequately recorded?
• Do you have sufficient processes in place to ensure that all key events are notified to the Commission in a timely manner?
• Is your marketing of gambling products and services undertaken in a socially responsible manner? Do they comply with the advertising codes of practice issued by the Committee of Advertising Practice (CAP) and the Broadcast Committee of Advertising Practice (BCAP)? Have you familiarised yourself with the latest Advice from CAP on 'Gambling, betting and gaming: Appeal to children' (May 2023)?
• Do you efficiently record all compliance-related decisions and are you able to demonstrate to the Commission, on request, evidence of ongoing assessment, evaluation and improvement?
• Do lessons learned from public statements flow into your policy and processes?
• Are your customer risk profiles informed by or linked to your money laundering and terrorist financing risk assessment?
• Do you have a formalised process for analysing the effectiveness of customer interactions to ensure that reviews were adequately documented and consistent in their approach?
• Do you log the types of behaviour which have triggered a customer interaction and keep sufficient records of interactions, along with decisions not to interact especially in terms of the level of detail provided?
• Do you have out of hours arrangements in place?
• Have your staff received sufficient AML and social responsibility training?”

Co-authored by James Leek, Trainee Solicitor at CMS