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  • Glitnor Group hit with €237k penalty as Malta’s FIAU exposes AML failures

Malta’s Financial Intelligence Analysis Unit (FIAU) has imposed an administrative penalty of €236,789 on Malta-based Glitnor Group following significant operational deficiencies.

During a compliance review carried out in 2019, the FIAU found that Glitnor Services – the firm’s B2C division that holds various MGA licences – failed to verify the income sources of a significant number of players.

Risk assessments

Upon reviewing Glitnor’s operations, the FIAU discovered that the company had not conducted the necessary risk assessments related to its activities.

The FIAU pointed out that Glitnor did not provide risk assessment reports when client transfers exceeded a threshold of €2,000.

Glitnor also admitted to neglecting to obtain proof of identity and residence for three clients within a legally mandated 30-day period.

The FIAU noted that although the number of cases was “low and surely not indicative of a systemic issue”, it could not ignore the fact that the company failed to obtain proof of identity and residential address documents within the legal timeframes.

However, the FIAU stated that the company had committed to preventing such failures from recurring and implemented automatic notifications for client deposits or withdrawals amounting to €2,000.

Source of funds

However, the FIAU also found that Glitnor managed eight medium-risk players without obtaining the necessary source of wealth/source of funds information.

Furthermore, the company did not scrutinise seven other players and failed to ensure the legality of the funds they deposited.

In one case, a new client deposited over €3,000 through 38 transactions within nine days, including depositing €800 on two consecutive days.

Despite the potentially suspicious nature of this activity, Glitnor did not monitor the client for the following six months, during which the client deposited €35,000, withdrew €25,000, and incurred a loss of €10,000 over a total period of eight months.

Another client deposited €61,942 over a 13-month period and suffered losses of €12,040. However, Glitnor did not investigate the source of this client’s funds.

Similarly, another client deposited €12,100 using pre-paid cards over three months without withdrawing any winnings, yet the company did not conduct an assessment.

Further, one player from a non-EU country deposited €18,867 over two months using pre-paid cards and an e-wallet. Despite the player’s location and substantial losses of €9,923, no analysis of their income source was performed.

PEP checks

The FIAU pointed out that Glitnor failed to verify if players were politically exposed persons (PEPs) in 80% of cases.

Additionally, although Glitnor claimed to have conducted PEP screening during the compliance examination, it was revealed that they still did not perform PEP screening on five of those players, despite the 30-day timeframe requirement.

The FIAU said Glitnor’s high level of cooperation during the supervisory process was taken into account, along with the company’s commitment to addressing its shortcomings and its indication of already initiating some corrective actions.

However, the FIAU couldn’t help but acknowledge that based on the observed failures until the compliance review, Glitnor had not adequately fulfilled its AML/CFT obligations.

Glitnor plans to appeal

In response to the FIAU decision, the Glitnor Group announced its intention to challenge the decision.

The company stressed that the inspection that led to the penalty took place approximately four years ago, shortly after Glitnor had secured its licence from the MGA and expanded its platform and player base.

Glitnor strongly disagrees with the findings and will exercise its right to appeal.

Australia’s Northern Territory Racing Commission (NTRC) has fined Ladbrokes almost A$80,000 (€49,750) for failing to identify and prevent a consumer’s problem gambling behaviour while plying him with bonuses. 

However, the Entain-owned brand has been allowed to keep the A$758,510 lost by the gambler, who Guardian Australia has identified as disgraced financial planner Gavin Fineff.

Fineff has pleaded guilty to defrauding his own clients in an Australian court and is awaiting sentencing.

No checks

According to the NTRC ruling, Ladbrokes contacted Fineff in 2018 and urged him to open an account after a Ladbrokes staff member became aware of Fineff’s gambling history at a rival bookmaker.

The NTRC, which oversees almost all online betting companies in Australia, discovered that Ladbrokes neglected to investigate whether Fineff could afford his substantial bets or the origin of his funds.

The verdict, from 27 February 2023, stated that “right from the earliest moments of its first interaction with the gambler, Ladbrokes appears to have not given due attention to whether the gambler could afford to gamble to the levels that he was.”

The NTRC found that Fineff turned over A$17.5m over a 21-month period. He deposited just over A$2.2m and withdrew just under A$1.5m, making an overall loss of A$758,510 in that time.

Throughout this period, Ladbrokes provided him with A$528,890 in bonuses, consisting of A$416,390 in bonus bets and A$112,500 in bonus cash.

When questioned by the NTRC, Fineff admitted that his betting activity was intense, frequent, uncommon, uncontrolled, and desperate.

He had no sophisticated betting strategy and frequently abandoned his betting plans, losing any winnings in the process.

No police investigation

Moreover, Fineff urged the NTRC to refer the case to the police for investigation, alleging that Ladbrokes may have committed offences under Proceeds of Crime legislation.

The NTRC found that while Ladbrokes failed to initiate sufficient levels of inquiry into Fineff’s source of wealth when his betting account was opened and when he made significant deposits and incurred large losses, it did not believe that Ladbrokes had reasonable suspicion that some of the funds used by Fineff to bet may have been proceeds from a criminal offence.

As a result, the NTRC did not refer the case to the police for investigation, nor did it deem the bets to be unlawful. In the latter case, the company may have been required to refund the losses.

According to Guardian Australia, Entain has accepted the ruling, while stressing that it has invested significantly to strengthen its approach to consumer protection since 2019.

Flaw in self-exclusion register

In unrelated news, the NTRC has been forced to acknowledge a significant shortcoming of its own following a scoop by Guardian Australia.

The Commission notified several companies of a flaw in the territory’s self-exclusion register, which allows individuals to ban themselves from receiving gambling advertisements.

The NTRC wrote a letter on 28 February, which indicated that individuals who signed the voluntary self-exclusion form before 2018 did not give the regulator the authority to share their information with newly established wagering companies.

The letter, as seen by Guardian Australia, stated: “There are approximately 48 persons that requested exclusion prior to this date, or have used the old self-exclusion notice, and whose details may not have been shared with operators since then.”

Since 2018, several new online bookmakers, including Betr, backed by News Corp, have launched.

Betr was recently fined by the NTRC for contacting people on the self-exclusion register and encouraging them to open new accounts.

Malta’s iGaming sector was responsible for 67% of all suspicious transaction and activity reports filed with the country’s Financial Intelligence Analysis Unit (FIAU) in 2021.

The island’s online gambling companies lodged 4,822 of the 7,218 reports received by the financial crimes agency last year, according to its annual report.

Malta’s land-based casinos were responsible for 138 of the reports, meanwhile, corresponding to an annual increase of 146%.

The FIAU’s annual report shows a general uptick in the reporting of suspicious transactions and financial activity across all business sectors, with more than 2,000 additional reports filed in 2021 when compared to 2020.

Reports submitted specifically by gaming companies also more than doubled in 2021 compared to the prior year as the industry once again topped the charts for sending in the most suspicious reports, ahead of all other business sectors.

In 2019, gaming companies filed 51% (1,445 reports) of all suspicious transactions reports, while in 2020 they accounted for 47.8% (2,485 reports).

The FIAU stated that 2021 was a challenging year as the country worked hard to get off the grey list of the Financial Action Task Force.

The FIAU further revealed it carried out 14 compliance examinations on gaming companies, significantly fewer than the 58 it did in 2020.

However, the Malta Gaming Authority (MGA) and the Malta Financial Services Authority (MFSA) also carried out a combined total of 72 examinations on behalf of the FIAU in 2021.

The MFSA and MGA adopt the same process and methodology used by the FIAU when carrying out these examinations on the FIAU’s behalf.

Moreover, last year, the FIAU imposed administrative penalties following a compliance examination to the tune of €863,394 on gaming operators, as well as penalties for failure to carry out periodic reporting or late submissions amounting to €52,040.

In 38% of all reports, the primary reason for suspicion was an unknown source of wealth or funding, or a refusal on the person’s side to provide information or documentation on their source of wealth.

At 28%, the second most common reason for suspicion was unexplained or inconsistent transaction activity in a customer profile, such as a sudden large volume of deposits which did not add up with the customer’s known profile.

The top three suspected predicate offences highlighted in 2021 were fraud (mostly debit and credit card fraud), tax crimes (mainly corporate and personal income tax evasion) and chip dumping.

Finally, the FIAU announced that it shared 8,443 intelligence reports with both national and international authorities in 2021, an increase of 86% on the previous year.

You can read the report in full here.