Preparing Gambling Operators for ECCTA 2023 Compliance

A new provision of the Economic Crime and Corporate Transparency Act 2023 (ECCTA) introduces a significant corporate criminal offence known as ‘failure to prevent fraud.’ This change carries important implications for both land-based gambling and iGaming operators. To comply with the new law, large organisations must adopt effective fraud prevention measures well before the enforcement date of 1 September 2025.

What This Means for Gambling Operators

Under the new provision of the ECCTA, gambling operators can now face criminal liability if an employee, agent, or any individual associated with the organisation commits fraud for the benefit of the company.

This shift in responsibility requires gambling businesses to implement robust fraud prevention measures. They must put in place ‘reasonable’ procedures designed to actively prevent fraudulent activity, ensuring that the steps taken are appropriate and tailored to the unique nature of their operations.

An important change is that it’s no longer necessary for the prosecution to prove that company leadership was aware of or directly involved in the fraudulent activity. This means that the onus is now on the entire organisation to maintain strong oversight and enforce preventative practices across all levels.

Preparing for Compliance: Take A Holistic Approach

To mitigate the risks associated with the ECCTA, gambling operators must adopt a comprehensive fraud prevention framework. This includes conducting robust fraud risk assessments, formulating actionable strategies, and implementing policies and procedures that are underpinned by anti-fraud training and operational guidance. Crucially, fostering a positive fraud-prevention culture is central to ensuring compliance and safeguarding businesses from corporate liability.

While some gambling operators may have documented fraud controls within broader Anti-Money Laundering (AML) or Anti-Financial Crime (AFC) compliance policies, relying on these alone is insufficient. Operators must create a holistic fraud framework that identifies, evaluates and addresses specific vulnerabilities, going beyond merely extracting elements from existing controls. This framework must integrate seamlessly with broader AML efforts but remain distinct in its focus on fraud prevention.

Operators must move beyond tick-box compliance and take a critical, in-depth approach to identifying weaknesses in their internal systems, controls, and processes. A comprehensive evaluation of vulnerabilities ensures that operators do not inadvertently benefit from fraudulent schemes, whether orchestrated by external associates or internal employees.

The Interconnection of Fraud and Money Laundering Risks

Although the UK Gambling Commission’s focus has traditionally been directed towards operator compliance with AML and Safer Gambling requirements under the MLR 2017, POCA 2002, and the LCCP, the fraud prevention provisions of the ECCTA will almost certainly now throw a spotlight upon gambling operator’s fraud prevention measures.

Fraud and money laundering risks often overlap, necessitating a dual focus on both areas. For instance, money laundering schemes frequently involve the use of fraudulent identification to circumvent Customer Due Diligence (CDD) measures at registration. Should a money laundering scheme result in losses, or significant criminal lifestyle spending, this may expose the operator to commission of the corporate fraud offence.

Internal and Third-Party Risks

The ECCTA requires gambling operators to address the risks posed by internal staff and third-party associates, such as agents, junkets, or affiliates involved in customer acquisition. Incentives like revenue-sharing arrangements or employee bonus schemes tied to customer spend can unintentionally encourage fraudulent activity. For example, a high-value customer acquired through fraudulent means by an agent or employee could result in significant losses for the customer while benefiting the operator financially.

Proactively managing these risks requires rigorous oversight of third-party activities and internal operations. Operators must ensure that all affiliates and employees adhere to strict anti-fraud guidelines and operate transparently.

Embedding a Proactive Anti-Fraud Culture

Effective fraud prevention starts with employee training. Role-specific programs should empower frontline staff, gaming floor employees, and compliance teams to identify and respond to fraud risks. Continuous education on evolving fraud typologies, clear pathways for reporting suspicious activity, and cultivating a culture of vigilance across all organisational levels are critical for creating a robust defence against fraud.

How AJC Can Help

Navigating the complexities of the ECCTA can be challenging, but AJC offers expert support to help gambling operators prepare for compliance. Our services include:

• Comprehensive fraud risk assessments tailored to your operations.
• Development and implementation of fraud prevention strategies and frameworks.
• Training programs designed to embed fraud awareness across all organisational levels.
• Detailed reviews of internal controls, policies, and third-party relationships to ensure your business is fully protected against fraud risks.

With AJC’s guidance, your organisation can take proactive steps to meet the ECCTA’s requirements, safeguarding your business from liability and strengthening its overall resilience against fraud.

Conclusion

The ECCTA 2023 represents a significant shift in corporate accountability, with far-reaching implications for the gambling industry. By adopting a proactive approach to fraud prevention, operators can not only comply with the act but also safeguard their businesses and customers from harm. With robust frameworks, continuous training, and expert support, gambling operators can turn the challenge of compliance into an opportunity to reinforce trust and integrity in their operations.

For more information about how AJC can help gambling operators prepare for compliance, please contact us at 020 7101 4861.

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