The UK Gambling Commission has reminded operators of the the importance of being able to demonstrate legitimate sources of funds when acquiring or investing in gambling businesses.

The note cites the example of the license revocation of online casino operator MaxEnt in June 2019, which saw the operator lose its licence to provide gambling facilities to consumers in Great Britain following concerns raised in regards to its change of corporate control and source of funds.

In this instance, MaxEnt applied for a continuation of its licence following a change of corporate control. The application revealed a previously undisclosed change of corporate control, which resulted in the regulator being dissatisfied with the source of funds used to finance the business – both prior to the undisclosed change of corporate control and during the later disclosed change of corporate control. 

Regarding the case against MaxEnt, Commission officials were initially concerned that the funds used posed a risk to the licensing objectives, notably, in preventing gambling from being a source of crime or disorder, with further concerns being raised regarding the operator’s suitability to hold a licence following the submission of evidence to a regulatory panel. 

The key findings of the panel were:

  1. Officials were satisfied as to the adequacy of resources now available to the applicant to fund the business in the future but not as to the source of funds used to acquire and support the business at the time of, and following, the changes of corporate control; 
  2. The Commission had no adequate evidence of the source of funds used to acquire and finance the business in 2017 and through 2018; 
  3. In a declaration form to another gambling regulator, the applicant failed to identify their previous ownership and management of a casino. This was also omitted from the applicant’s CV provided to the Commission; 
  4. Despite a protracted period of correspondence and discussion between the applicant and Commission officials prior to the panel hearing, further material was produced to the Commission shortly before the hearing; 
  5. New, previously undisclosed information was identified during the hearing which required the applicant to provide further material; and 
  6. After the provision of this further material, evidence of source of funds remained outstanding. This meant that neither the licensee nor the applicant had a proper appreciation for the need to be full and frank with the Commission, nor for what the Commission requires to process an application of this kind.  

Discussing its regulatory decision at the time, the UKGC explained: “After a hearing before the regulatory panel, the commission has decided to revoke the operating licence under section 102(4)(b) of the Gambling Act 2005.

“This is because the Commission is not satisfied that it would have been granted the operating licence to the licensee had the new controller been a controller of the company when the application for the operating licence was made.

“In particular, the Commission is not satisfied as to the source of funds used to acquire and support the licensee at the time of, and following, the change of corporate control.

“The Commission also identified concerns relating to the new controller’s suitability, in that it appeared that he had provided conflicting information and had failed to be full and frank in his dealings with the Commission.”