UKGC finds numerous failures in Caesars' responsible gambling & AML checks

UK Gambling Regulator Slaps Caesars With Record £13 Million Fine For ‘Systemic Failures’

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The United Kingdom Gambling Commission (UKGC) has issued yet another record-breaking fine, this one to Caesars Entertainment. The country’s regulator slapped the company with a £13 million (approximately $16 million) penalty for systemic failures tied to responsible gambling and anti-money laundering practices.

Caesars is a US company, most closely associated with its flagship Caesars Palace in Las Vegas. It also runs numerous casinos internationally, however, including 11 in the UK.

The UKGC doesn’t publicize every fine it issues, but often comments on larger ones like this. Here’s Chief Executive Neil McArthur:

“We have published this case at this time because it’s vitally important that the lessons are factored into the work the industry is currently doing to address poor practices of VIP management […] A culture of putting customer safety at the heart of business decisions should be set from the very top of every company and Caesars failed to do this.”

Caesars’ pattern of negligence on two fronts

The fine was not for one particular action, but rather a pattern of careless behavior from Caesars.

As is often the case with these large fines, the problem relates to its handling of VIP customers. Most if not all gambling companies make a disproportionate amount of their revenue from a tiny segment of their customers. This axiom holds true across both land-based and online gambling.

Some VIP customers are in fact well-heeled recreational gamblers who enjoy the thrill of high-stakes play. Many, however, are not. And companies are required to monitor such customers on two fronts:

  1. For signs of compulsive gambling
  2. To ensure that they are gambling within their means and funds come from legitimate channels

The UKGC found that Caesars management had failed in numerous instances on both fronts. The failings often involved lack of communication between branches of the company or blind trust in third-party information. Caesars did eventually take appropriate action in most cases, but only after allowing a customer to lose far more than they should have.

In addition to the fine, the UKGC has mandated that the company implement measures to prevent a repeat occurrence. It also forced three of its senior managers to surrender their personal licenses, meaning that they will no longer be allowed to work in the casino industry in the UK.

UKGC report paints a troubling picture

The UKGC supplied eight examples of Caesars failings in its public announcement of the fine, with amounts ranging between tens of thousands and millions of pounds.

Some were straightforward cases involving the casinos allowing financially vulnerable people to lose clearly more than they could afford. A self-employed nanny, a waitress, and a retired postman each lost between £15,000 and £20,000 within a year for instance. In the case of the nanny, the player even told staff that she was gambling using borrowed money and an overdraft on her bank account. They allowed her to keep playing.

Other cases involved larger amounts of money and possible criminal activity. One customer lost £1.6 million with only minimal scrutiny; most of it came from a business account. Another customer, one flagged as “politically exposed” and high risk, was nonetheless allowed to lose £795,000 in just over a year.

Gambling fines continue to escalate

Caesars is far from the only company guilty of such failings. Because VIP customers are so important to companies’ bottom line, there’s a strong financial incentive for companies to act slowly on troubling information. That might be especially true for high-level managers whose bonuses depend on their division’s performance.

The UKGC has been ramping up its efforts at combating this and other problems for several years. Its previous record for largest fine dates back only as far as March 12, less than a month before the Caesars case. That one, levied against Betway for similar reasons, was to the tune of £11.6 million.

The escalation of fines is likely to continue. Already in 2020, the UKGC has issued the equivalent of nearly $33 million in fines, which is more than the $24 million it issued in all of 2019. That, in turn, is almost as much as it issued in the previous five years put together.

Fine barely registers for investors amidst pandemic

It goes almost without saying that this is a particularly bad time for a gambling company to be facing a massive financial penalty. The COVID-19 pandemic has forced the closure of casinos around the world, while the suspension of most professional sports will surely cause betting revenues to plummet — even those from online channels.

That said, investors seem to be treating the fine as the least of the company’s worries at this juncture. Caesars stock (NASDAQ: CZR) plummeted from a five-year high of around $14.50 in late February to a low of around $3.50 in mid-March. That’s a drop of 75%, though shares have since rebounded to $7.40.

Amidst those large-scale fluctuations, it’s hard to discern any investor reaction to the news of the fine. Shares did drop a further 5% in the 48 hours following the announcement. That, however, has been dwarfed by the overall rally of markets to start this week.

Eldorado merger moving forward

It isn’t all bad news for Caesars these days, however.

Last year, Eldorado Resorts announced that it had struck a deal with Caesars to acquire it and merge the two companies. It originally expected to complete the acquisition around this point in the calendar.

Circumstances have complicated that deal, but it doesn’t look as if they’ll stop it from going through. The latest news is that the finalization date has simply been pushed back until June.

Both companies indicate that they remain committed to the deal as-is. The delay is simply due to the postponement of hearings by regulators in Indiana, New Jersey and Nevada, along with the Federal Trade Commission. Further delays are possible, depending on how things play out with the virus and continued attempts to slow its spread.

The terms the two companies agreed upon include a so-called “ticking fee.” That means that the price Eldorado will pay increases at a rate of $2.3 million per day of delay. That said, the original price tag was $17.3 billion. Thus, even two months of this ticking fee will barely register to stakeholders in either company.

- Alex is a journalist from Dartmouth, Nova Scotia, Canada. Now site runner for Online Poker Report, he has been writing about poker and the online gambling industry in various capacities since 2014.
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