From 31 October 2020 gambling operators in the UK must adhere to strict guidance relating to High Value Customer or “VIP” schemes.
This Guidance underpins LCCP Social responsibility code 5.1.1 which requires operators to ensure that such schemes are offered in a manner which is consistent with the licensing objectives. We would advise operators at the outset that whilst the Commission has not prohibited under 25’s from being able to join such schemes, trade representatives had suggested such schemes should be closed to under 25’s unless signed off specifically by a PML Holder.
1. Have you correctly identified who is a VIP?
- There is no hard and fast definition of a VIP and thus you may still have “grey” areas of your customer base where some customers may, or may not be classified as VIP’s
- The greater the enhanced customer service you give to a customer, over and above what normal customers receive, the more likely it is they are a VIP
- If you offer a customer any of the following, this may suggest they are VIPs:
- Invitation to hospitality, events, dinners, or other enhanced services
- Personal account management/dedicated point of contact with you
- Individualised bonuses, benefits, or gifts
Ad hoc non-personalised bonus offers or promotions made available to large numbers of customers do not trigger VIP status
- As you will be required to train staff on handling VIP schemes, you will have to adopt a suitable test/threshold at which point a customer has to be treated as a VIP and be subject to the associated protections required by the Commission
- In light of the strict guidance issued and the underlying need to protect vulnerable gamblers, the Commission may place a wider definition on which customers should be treated as VIPs’ than you do
- Licensees must be able to explain to the Commission how VIP’s are defined and how the guidance has been applied.
2. Assessing and Mitigating Risk
As VIP’s pose a heightened risk you must be able to demonstrate how you have assessed and mitigated the risk at the outset of the relationship and on an on-going basis
Before making any customer a VIP you will have to document and be satisfied that
- you Know Your Customer. You have undertaken Enhanced Due Diligence and have up to date evidence of the customer’s identity, occupation and source of funds. Specifically you need to know that the actual source of funds used to gamble is lawfully obtained. Checks must be undertaken in a thorough and objective manner and there should be appropriate separation between those with responsibility for checks and managing day to day customer relationships and those involved in the incentivisation of VIP’s
- you have systems in place to ensure that you can identify all accounts a customer has with your company and with other group related companies
- the level of spending is affordable and sustainable as part of the customer’s leisure spend before making them a VIP (affordability).
- following a full assessment of the customer, that there is no evidence of gambling related harm, or heightened risk linked to vulnerability (safer gambling).
- Caution should be exercised when considering funds from an unplanned financial windfall from gambling and events such as redundancy and inheritance
- You should ensure that evidence held on the customer’s source of funds is regularly refreshed and kept up to date
- You should consider whether specific additional controls should be applied to a VIP’s activity. Such controls should only be reviewed provided the decisions are documented and subject to sign-off by a senior executive in accordance with your governance arrangements
- Where a customer has previously self-excluded the circumstances in which it would be appropriate to incentivise that person as a VIP will be limited. A PML holder is expected to review the risk and sign-off any decision to incentivise a former self-excluded customer, which must as a minimum include the imposition of mandatory deposit/spend limits.
3. On-going monitoring
The following types of vulnerability should be reviewed in undertaking ongoing checks as part of a safer gambling risk assessment:
- Personal – is the individual experiencing poor physical or mental health, physical or cognitive impairment, suffering side effects from injury, medication or addiction;
- Situational – where an individual is experiencing financial difficulties, is suffering from domestic or financial abuse, has caring responsibilities, experiences a life change or sudden change in circumstances;
- Behavioural – where an individual has a higher than standard level of trust or appetite for risk.
You must undertake a review of a VIP’s account at least quarterly where there are no changes to a VIP risk assessment
Where a VIP fails any of these checks their status must be suspended immediately until the risk has been fully reviewed, including customer interaction, applying limits on the VIP’s account, submitting a suspicious activity report or discontinuing the customer relationship.
4. Incentive Schemes
The Gambling Commission expects such schemes to address the following:
- Incentivisation methods are not applied in a blanket fashion, but are considered and linked to a customer’s profile to ensure that gambling remains at an affordable level. This includes the timing and frequency of such schemes and that they are not linked to periods or excessive play/significant losses having regard to the customer’s affordability of spend
- Incentives are proportionate to a customer’s spending pattern and consistent with the licensee’s affordability and vulnerability assessment.
- Tiered or structured incentive schemes are not promoted to VIPs in a manner which results in individuals gambling excessively to obtain (or retain) a grade or status of VIP which is unsustainable.
5. Oversight and accountability
- The scheme must be overseen by a PML Holder and the named individual shall be accountable for the scheme’s compliance
- Effective policies and procedures for the operation and governance of VIP schemes must be implemented, including authority levels for key decision making, which must be communicated to staff
- Compliance should be reported to the Board who should be responsible for overseeing the governance arrangements for VIP schemes and keeping them under review
- A full audit trail should be maintained detailing the management of individual VIP’s, including all notable events at all stages of the customer relationship, instances where the customer has attempted to make contact without response along with a record of decisions made and all customer contacts
- Where a VIP has participated in a self-exclusion scheme the audit trail must include details of why VIP status is deemed appropriate and details of the steps taken to mitigate the risk of harm
6. Relationship management
- Staff should receive enhanced training on safer gambling and AML risks specific to VIP management
- Staff understand that customer welfare and regulatory considerations must outweigh commercial pressures
- Training should be refreshed and documented
- There should be a regular review of the VIP’s suitability to receiving incentives
- Staff should not be incentivised or remunerated based on a customer’s loss, spend or activity
- Staff should be able to escalate regulatory concerns regarding VIP’s
- There should be a full audit trail to ensure ongoing compliance with the management of individual VIP’s
- Customers should be given regular and enhanced information on gambling management tools and safer gambling resources
- Proactive monitoring of customer accounts including immediately auctioning requests to be removed from a VIP scheme
- Arrangements between VIP teams and other teams must work collaboratively to ensure objective decision making and review. Where possible VIP account managers should be rotated to ensure objectivity in decision making
7. Compliance Checklist
- Criteria established and risk based approach to determine which customers must be treated as VIP’s
- VIP status to be reviewed at least quarterly if there are no changes
- Policy adopted and dated. Annually reviewed
- PML Holder appointed to take charge of VIP scheme
- Enhanced training of staff which should be refreshed and documented
- Enhanced due diligence “KYC” checks on customers kept up to date
- Auditing of customer accounts, including Group companies to ensure customer accounts are cross-referenced
- Auditing to ensure compliance with SR Code 5.1.1
- Board level reporting