Raising Standards for consumers - Compliance and Enforcement report 2019 to 2020
7 - White Label Partnerships
The white label operating model continues to be popular within the GB market with there being over 700 white label partners within the industry at present. One of the reasons this model is becoming increasingly popular is that this type of arrangement can bring global exposure to an operator’s products, via the arrangements their white label partners have in place with sports teams for example. However, there is a concern that unlicensed operators who would potentially not pass the Commissions’ initial licensing suitability checks, are looking to use the white label model to provide gambling services in Great Britain.
Therefore, it is essential that UKGC licence holders conduct appropriate due diligence checks on their prospective white label partners before entering into a business relationship. Responsibility for compliance will always sit with the licence holder so they should satisfy themselves appropriate safeguarding measures and controls are in place before committing to contractual obligations to ensure compliance with LCCP SR Code provision 1.1.20 Responsibilities for Third Parties. Failure to do this may bring into question the suitability of an operator to hold a licence.
In the last year the Commission has conducted compliance and enforcement work focused on this speciﬁc area. That work revealed licensees were failing to appropriately mitigate the risks to the licensing objectives. A failure to properly scrutinise ownership of the white label partners, address money laundering and politically exposed person’s (PEP) risks and general poor oversight of activities completed by such partners led to the Commission producing revised guidance to remind operators of their obligations. Areas where operators fell down were:
- Passing responsibility for customer interactions to their partners with a lack of effective oversight.
- Operators not having live access to customer interaction records leaving them unable to ensure their partners are upholding the licensing objectives and that customer risk is being managed effectively.
- Being unable to monitor customer spend, length of play and behaviour across all partners in their domain preventing a holistic single customer view.
- Ineffective AML controls in place with individual partners or when viewed across the entire domain for customer activity.
- Little, or no control over marketing and promotional offers published by their partners leaving customers exposed to potentially unfair or unclear material. Some promotional material may have appeared on copyright infringing websites
- Insufficient due diligence being conducted on partners who had links to criminal activity.
- Conduct risk-based due diligence with a view to mitigate risk to the Licensing Objectives before entering a relationship with a white label partner.
- Continually manage and evaluate its white label partner relationships.
- Ensure service agreements between the licensee and white label partner explicitly articulate where overall responsibly for regulatory functions lie.
- Ensure white label partnership contracts contain a clause permitting the licensed operator to terminate the business relationship promptly where the partner is suspected to place the Licensing Objectives, as set out in the Gambling Act 2005, at risk or fails to comply with the requirements contained in the LCCP.
- Provide training to their partners and conduct ongoing oversight of the activities which should be clearly documented and retained for the life of the business relationship.
- Ensure that any system the licence holder has in place to manage or detect multiple accounts for individual customers works across all white label partners so they will have a holistic view of customer activity.
- Ensure that source of funds, affordability or markers of harm triggers are based upon this holistic view and not solely on an individual domain basis. Failure to do so conﬂicts with the licensing objectives to keep crime out of gambling and to ensure vulnerable people are protected. A single customer view will always be desirable.
Notable Enforcement Cases
Licensees with white label partnerships:
- Conducted ineffective customer interactions and source of funds checks on a customer displaying signs of problem gambling. That customer was able to spend £282,000 over 18 months.
- Sent marketing material to over 2,000 previously self-excluded customers.
- Had a VIP team manager in place who had neither effective oversight nor sufficient AML training.
- Allowed an affiliate to place inappropriate banner advertisements on a Great Britain facing website which provided unauthorised access to copyrighted content.
- Enabled a customer to create 14 accounts across the operators domain before being detected. This customer lost £209,000 without checks taking place.
As a reminder to all online operators, it is important that you inform the Commission of any white label agreements you enter into as part of the key event reporting process. Operators are encouraged to read our advice and guidance (opens in new tab) advice and guidance on white labels.
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