The UK Gaming Authority has once more cautioned white label suppliers that they are accountable for the actions of their customers. This follows a review of FSB Technology’s permit, which revealed that the supplier had to pay a penalty of £634,300 to the regulatory body.

The review, which began in August, uncovered issues with companies operating websites under FSB’s UK gaming license. These issues included problems with marketing, anti-money laundering procedures, and social responsibility.

The Authority discovered that the supplier wasn’t adequately monitoring the actions of its white label partners.

“We determined that although FSB had agreements with its white label partners, they hadn’t taken sufficient steps to ensure they were adhering to the licensing conditions and code of conduct,” the Authority clarified.

Moreover, the Federal Security Agency did not carry out sufficient due diligence prior to entering into and executing these contractual agreements with third-party associates to ascertain if they were appropriate.

Consequently, the supplier has reached a settlement with the Commission, agreeing to contribute £600,000 to the National Strategy to Reduce Gambling Harms Fund and an extra £34,300 to cover the regulator’s inquiry expenses.

In addition to the settlement, the Federal Security Agency must “conduct risk-based due diligence on all white-label partners to mitigate risks to licensed objectives” and perform such checks at least annually.

The examination was initiated after a newspaper claimed that one of the Federal Security Agency’s partners had committed several offenses, including advertising through websites offering pirated content, leading to the partner being taken offline.

The Commission’s investigation discovered that several LCCPs were violated, including breaches of sections 12.1.1 (2) and (3), which require “compliance with anti-money laundering and counter-terrorism financing.”

The license holder acknowledged that it failed to establish and maintain “appropriate risk-sensitive policies, procedures, and controls relating to the management of its third-party partners and customers.” Additionally, the Federal Security Agency admitted that its anti-money laundering (AML) documentation and audit trail were insufficient, and its compliance and AML team training was inadequate.

Moreover, the report recognized a deficiency in “thorough account assessments” to monitor the reactivation of client accounts by white label operators.

The investigation uncovered that one client had wagered and lost roughly £282,000 over a period of 18 months, but had not provided sufficient documentation regarding the origin of funds used for gambling. Additionally, a white label platform failed to adequately oversee high-value clients, with its VIP manager lacking any anti-money laundering training.

The commission also concluded that the FSB had violated the Social Responsibility Code clause 3.4.1, which mandates “effective client interaction policies and procedures,” noting that it had neglected to examine the circumstances of a client who had lost £282,000, merely inquiring if they were “content” with their spending habits.

Furthermore, the FSB was determined to have breached license condition 16.1.1, which pertains to the responsible placement of digital advertising, including advertising by affiliates. The commission discovered an “inappropriate” banner advertisement, featuring cartoon nudity, utilized on a website operating under the FSB license. This advertisement was situated on a website that “seemed to offer unauthorized access to copyrighted material.”

The commission also determined that the FSB had violated the Social Responsibility Code clause 3.5.3, which requires operators to “take measures to remove the names and details of self-excluded individuals from any marketing databases.”

A betting firm, FSB, inadvertently dispatched promotional messages to 2,324 clients who had previously opted out of receiving such communications.

FSB alerted the gambling authority about the error and assured them that if customers responded to the emails, they would be unable to wager as usual because the self-exclusion mechanisms were still in place.

The authority censured FSB for not conducting sufficient due diligence on its associates. They discovered that FSB had entered into a white label arrangement with a firm that was providing gambling services under the name of an unauthorized international operator in the UK. This likely refers to 1xBet, which was attempting to obtain a license from regulators at the time.

The authority declared that even though the ownership and relationship of the company FSB partnered with were ambiguous, FSB still signed the agreement.

FSB asserted that the intricate international structure of the company made it too costly to thoroughly investigate them. The authority acknowledged that this wasn’t a valid justification for partnering with the company and proposed exploring alternative arrangements like business licensing agreements.

The authority confirmed that the white label agreement has been terminated.

Furthermore, the oversight body discovered that FSB had not performed proper background checks on another associate, whose ownership “was connected to individuals deemed politically influential.” The commission stated that although FSB was aware of this individual running for public office, they had not confirmed if they were elected.

The oversight body did acknowledge that FSB had implemented “enhanced due diligence and supervision systems,” recruited new senior compliance personnel, and reviewed its white-label partners, including ending relationships when necessary.

However, they also emphasized the “gravity” of the violations, and the need to encourage other licensees to take full responsibility for third-party partners like white labels.

“Following the investigation, FSB has made a number of significant improvements to its anti-money laundering, customer interaction, safe gambling and due diligence procedures,” the provider told iGB. “As a result of these changes, FSB is able to meet the Gambling Commission’s high standards across all aspects of its operations.”

The oversight body stated that the decision should serve as a cautionary tale for other white-label suppliers, echoing a similar statement issued in September 2019.

The UK Gaming Authority has cautioned all operators to pay close attention to a recent case involving a third-party service provider. The authority stressed its dedication to guaranteeing fair, secure, and crime-free gambling, stating that it will take action against any permit holder who fails to properly manage external partnerships.

The authority has encouraged third-party service providers to examine their due diligence procedures, ensure their anti-money laundering divisions are adequately staffed, and provide documentation to support their expenditures and loss levels. They should not simply rely on assurances.

In September 2019, the authority suspended the operating license of EveryMatrix, a third-party service provider, and initiated a review of the online gaming software supplier. Later that month, EveryMatrix decided to relinquish its B2C operating licenses for remote betting and casinos in the UK, focusing on its B2B business.

In March 2020, Viral Interactive, a subsidiary of Finnplay group, declared that it would stop providing its third-party service solutions to regulated markets, including Sweden and the UK. Viral CEO Martin Plantner attributed this decision to the increasing regulatory oversight in these regions.