Paddy Power has demonstrated “serious failings” in its procedures to protect problem gamblers from being exploited and to stop its shops being used by criminals for money laundering, a British gambling regulator report on the Irish bookmaker has found.
As the company, which merged with Betfair this year, prepares a marketing campaign ahead of the Cheltenham racing festival in two weeks, it agreed to pay £280,000 to socially responsible causes to offset the profits made from three customers in lieu of a financial penalty.
The profits were uncovered by an investigation into three cases where the company had not adhered to licensing and regulatory principles.
The Gambling Commission, the British government agency responsible for licensing bookmakers, said Paddy Power had failed in its legal responsibilities to keep crime out of gambling and to ensure vulnerable customers are not harmed by the activity.
Paddy Power cooperated with the agency and acknowledged a number of failings it had made in relation to its dealings with the three customers in 2014 and 2015.
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The report states that “the gambling industry should be on notice” that the issues are likely to form the basis of future compliance investigations.
Paddy Power accepted that it had neglected to respond appropriately to suspicions of money laundering identified by a staff member, had not taken reasonable steps to establish the source of a customer’s betting funds and had encouraged a customer who displayed signs of gambling addiction to bet more with them.
Records of a shop manager’s interactions with a man, identified in the report as Customer A, showed that staff knew he had five jobs to fund his gambling and had no money. Customer A was being monitored by staff who believed he was a problem gambler.
“On May 20, 2014, the manager of the shop informed a more senior member of staff that Customer A would be visiting the shop less frequently. The response from the senior staff member advised the shop staff that steps should be taken to try to increase Customer A’s visits and time spent in the gambling premises,” the report states.
The shop manager recorded that the customer said he was comfortable with his spending but noted that he looked unwell and as if he was not sleeping.
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It was not until August 2014, when a staff member bumped into the man outside the shop and learned he had lost access to his children, was homeless and unemployed, that there was a record of Customer A being alerted to sources of help for gambling addiction.
Initially Paddy Power told the Commission that it was satisfied that staff had followed “social responsibility procedures.”
The second investigation in the report related to “Customer B” a woman who was using gambling facilities in a London shop to launder Scottish bank notes. A manager was ordered to pay out as normal when he alerted senior staff to this.
The manager made their concerns known, on four occasions over a six month period starting in August 2014, to middle management Paddy Power employees and was told to continue allowing the customer to use the shop’s machines. No report was made to the company’s money laundering reporting officer.
In January last year Paddy Power was told Scottish notes which were the proceeds of crime were in circulation in London and undertook an “enhanced due diligence” check on Customer B. The bookmaker could not verify the customer's claim that the money was from a business she owned but no action was taken until April when the Commission began its investigation. Customer B was then barred from the shop and the National Crime Agency was alerted.
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The Commission also criticised Paddy Power’s dealings with a gambler who was subsequently jailed for 28 months for defrauding six clients at the bank he worked at for £250,000. Mark Cooney opened an account with Paddy Power in September 2014 and his high level of spending triggered staff to look into the source of his funds.
They found that his house was valued at £125,000 but made no direct enquires about where his gambling funds came from and ended their due diligence check. Cooney was deemed to be a “medium risk” but no effort was made to obtain information about the sources of his money.
Richard Watson, the programme director at the Commission, said that companies risk losing their licence if they don’t implement the procedures.
“Paddy Power failed in its dealing with three customers and is now facing the consequences of these actions in a very public way,” Mr Watson said.
Adrian Parkinson, of the Campaign for Fairer Gambling, said Paddy Power had been guilty of “neglect of social responsibility in the betting sector”.
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“Senior management at Paddy Power failed in their duty of care to a pathological problem gambler and put commercial interests above keeping crime out of gambling - despite operational staff rightly voicing concerns,” Mr Parkinson said. “We support the tough action applied by the Commission.”
A spokesman for Paddy Power said: “The historical failings outlined in this report were clearly unacceptable. Paddy Power has since significantly strengthened its internal procedures and staff have been retrained to ensure these procedures are implemented effectively.”