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The Swedish Gambling Authority (SGA) has issued a warning and a SEK9m (€760,527) fine to Videoslots for failing to adequately assess money laundering risks within the business.

SGA investigation

In order to carry out an investigation, the SGA requested information from Videoslots on the 30 customers who made the largest number of deposits between January and March 2020 and January and March 2021, as well as the 50 customers who deposited the largest total amounts during the same period.

It randomly selected 10 customers from the combined lists and made several findings which led it to conclude that money laundering risks had not been adequately taken into account by the operator.

Eight out of 10 of the audited customers made deposits totalling between SEK1m and SEK5.5m during the reviewed time periods, while the other two made deposits totalling between SEK570,000 and SEK620,000.

Unusually high levels of depositing such as these are one of several indicators that a customer’s transaction pattern may present a risk of money laundering, the SGA said.

Videoslots should therefore have taken better action to more quickly ascertain the source of funds and income levels of those customers, it added.

For several of the audited customers, income information was not requested by Videoslots until at least 18 months after they were registered as customers, after which time they had each been able to deposit between SEK570,000 and SEK4.4m.

One customer, for example, deposited around SEK2.9m in just under four months after registration, without Videoslots checking their source of funds or income level.

Even when income levels were assessed, many of the audited customers were found to have deposited amounts which exceeded their annual income several times over in short periods of time.

For example, one customer was able to deposit around SEK620,000 – almost three times their stated annual income of SEK215,000 – in the space of just two weeks.

Two other customers had stated annual incomes between SEK500,000 and SEK600,000 in 2020, and were able to make deposits totalling SEK1.8m and SEK2.2m over the course of the year.

Further, three of the audited customers were flagged by Videoslots as not being able to finance their level of deposits through their stated incomes, but were still allowed to continue depositing money.

Many of the audited customers were also found to have made several thousands deposits and regular withdrawals over the periods analysed.

The checks and balances put in place by the operator were therefore found to be seriously and systematically inadequate by the regulator.

Full details of the findings from all 10 audited customers can be found on the SGA’s website.

Videoslots response

In response to the SGA’s findings, Videoslots said that the 10 audited customers “do not represent the high level of regulatory compliance that Videoslots works to achieve.”

Despite that statement, it added that the measures it took in relation to the customers were sufficient to meet KYC requirements as set out in Swedish regulations.

It added that deposits do not necessarily need to be comparable with a customer’s annual income, as deposits often consist of previous gambling winnings.

Further, it said, “an increasing number of mistakes were discovered by the team performing customer awareness measures” in the quoted periods, namely 2020 and 2021, as a result of changed working conditions during the Covid-19 pandemic as well as technical failures within the business.

Also, customers whose source of funds or level of income could not be ascertained were previously more likely to be dealt with in terms of responsible gambling team rather than AML, it added, as “helping a customer reduce excessive gambling takes time and cannot be done if a customer’s account is closed as an AML measure.”

When the source of funds could not be verified, therefore, customers were monitored and contacted by the responsible gambling department with a view to reducing gambling.

Since then, the operator has changed its approach, it said, and in cases where it has requested but not received source of funds documentation, accounts are now closed.

The company’s department responsible for AML is now three times larger than when Videoslots was granted its Swedish licence, it added. 

The company has also implemented changes within the department including through a change of its manager and supervisor.

“Videoslots now requests more extensive documentation from its high-risk customers,” it added, and “a significantly higher proportion of accounts belonging to high-risk customers have had their accounts closed when they did not meet requirements for additional financial documentation.”

Finally, the operator said it has taken additional steps to limit customer spending, including mandatory loss limits at registration and a net deposit limit of SEK200,000 per month for each customer.

That limit can only be changed if the customer provides Videoslots wth evidence of their source of funds.

Penalty calculation

Despite the actions taken by Videoslots to remedy the situation, the SGA still deemed it necessary to issue a warning and a penalty fee.

Without knowing how much was earned by the company as a result of the violations, the penalty fee amount may not exceed €1m (approximately SEK11.8m).

Given Videoslots’ GGR of approximately SEK401m for the financial year 2020, combined with the “serious and systematic” nature of the violations, the SGA settled on SEK9m as the appropriate figure for the penalty.

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