Heads I win, tails you lose …

A worrying business model appears to have established itself in the murkier corners of online bookmaking but there are signs that its days may be numbered

Historically, gambling debts were not legally enforceable. This meant that winning punters effectively had to rely on the bookmaker in question having the decency to honour the bets he took. Of course most bookmakers did pay out, no doubt mindful of the reputational damage they would suffer if they failed to do so. The importance of a reputation for fair play was reflected in some of the perhaps less than subtle pseudonyms employed by on course bookmakers. The idea behind trading names such as ‘Honest Joe’ was to assure punters that the last they would see of their winnings would not be through a pair of binoculars as Joe and his young clerk scarpered across Epsom Downs only to re-emerge in false-beards at Thirsk a week later under the banner ‘Trusted Terence’.

That all changed as a result of the Gambling Act 2005, section 335(1) of which effectively means that if Honest Joe does a runner, the disgruntled punter can now pursue him through the courts rather than cross country. As a result, Joe has had to tweak his modus operandi – effectively he has ditched his running shoes and false whiskers in favour of some vague ‘Terms and Conditions’ and a sudden fascination with anti-money laundering legislation.

In practice the model rarely differs a great deal from this:

A new customer wants to sign up with the bookmaker in question. Quite properly, the bookmaker asks for documents showing the punter is who he says he is (lying about your identity is understandably a red flag when it comes to money-laundering). Driving licenses and utilities bills are then sent across by the punter, the account is opened and the punter is allowed to deposit sums into it and start placing bets. It is rare that any interest is shown in his bank statements at this stage – the bookmaker doesn’t want to put up unnecessary administrative hurdles in the highly competitive race for new customers.

If the punter does what the bookmaker understandably hopes he will do and starts losing significant sums of money, he may well be upgraded to some kind of premium or VIP service with a dedicated customer service agent looking after him (although those afforded such privileges are by no means the only punters to suffer). If so this usually means he is offered free bonus bets and his maximum stake is increased. Put another way, he has been identified as a likely mug. Perhaps unsurprisingly it is rare that those bookmakers following this questionable model show more interest in where mug punters get their money from than is strictly necessary.

And it is with the introduction onto the scene of the Compliance Team that the real trouble starts.”

But if a supposed mug starts winning substantial sums (or in some cases simply demonstrates that he might be capable of winning in the future), things can change rather abruptly. The VIP account manager no longer offers free bonuses and instead informs the punter either that his account has been suspended or that his maximum stake has been reduced to practically zero. He wishes he could assist but his hands are tied by the Compliance Team who are now dealing with the matter. And it is with the introduction onto the scene of the Compliance Team that the real trouble starts.

Feeling himself to have been treated less than fairly, the punter understandably wants out. He tries to withdraw the sums in his account and finds that he is unable to do so. He contacts the bookmaker and is referred to the Compliance Team who demand to see his bank statements – apparently so that they can satisfy themselves as to the source of the money he deposited in his account in the first place. This demand is usually accompanied by vague mutterings about the regulatory duties of a responsible bookmaker.

The punter responds by pointing out that the bookmaker was perfectly content with the information he provided when he opened the account but the bookmaker simply refers to the ongoing nature of its regulatory duties. In other words, ‘we weren’t worried about where your money came from when you deposited it with us but we are worried now that you’re trying to take it out’. When asked what has triggered these concerns, it is rare that any meaningful response is forthcoming. Some bookmakers even suggest that the failure to hand over the information immediately upon request is grounds enough for suspicion. This is a hard logic to follow.

None of this is to say that the bookmaker does not have regulatory duties, nor that those duties are ongoing. Like anyone intending on holding other people’s money, online bookmakers are subject to strict rules imposed by the Proceeds of Crime Act 2002 and related legislation. These duties have been incorporated into the Gambling Commission’s licensing system and, in essence, require bookmakers to satisfy themselves that they are not being used to facilitate financial crime. In other words, they must take steps to prevent their accounts from being used to wash dirty money.

And while an organisation’s duty to take steps to avoid being used to launder money is certainly an ongoing one, that duty is plainly at its most stringent before any money has been accepted. This is why all responsible professionals carry out proper due diligence before accepting a penny. And if the bookmaker is unable to point to any significant developments between the initial due diligence (which the bookmaker obviously considered to be perfectly adequate at the time) and the point at which the punter is trying to withdraw his money, it is hard to see how any second round of due diligence can be necessary before paying out.

So, if nothing has changed since the account was opened, why is the bookmaker in question suddenly so desperate to see the punter’s bank statements at such a late stage in the relationship? Unfortunately it would appear that the punter has become the victim of what is referred to in the law as ‘a fishing expedition’. Put another way, Honest Joe intends on going through the bank statements with a fine tooth comb in the hope of finding grounds to allege a breach of a set of vague Terms and Conditions that are drafted to operate in his favour. If he is feeling particularly bullish, he might fancy his chances not only of keeping the punter’s winnings but his entire deposit too.

In a small court room on the 6th floor of the Thomas More building last week a judge gave what was perhaps the first judicial analysis of the practice of asking for bank statements only upon withdrawal.”

The more questionable Terms and Conditions tend to include a clause allowing the bookmaker to grab the entire sum in the punter’s account if the bookmaker suspects, whether reasonably or not, that there has been any impropriety. The contract provides very little guidance as to what ‘impropriety’ means but suggests it is a matter for the bookmaker to decide and that no explanation need be provided to the punter. This type of clause, which in this firm’s view an English (or Welsh) court would likely take a dim view of, is not really designed to be effective as a matter of law. Rather it would appear to be designed to take advantage of the popular misconception that if something is in a contract, nothing can be done about it.

But the more questionable Terms and Conditions rarely stop there in the bookmaker’s attempts to put punters off from seeking redress through the courts. Some have terms that suggest the only claim a punter can bring is through a specified binding arbitration service. Some suggest that a law other than English law applies to the Terms and Conditions and that the bookmaker can only be sued in some foreign jurisdiction. Again, the fact that such clauses may well prove unenforceable is for the most part neither here nor there. They are enough to put punters off from seeking to enforce their legal rights. But that is starting to change.

In a small court room on the 6th floor of the Thomas More building last week (in a case involving this firm) a judge gave what was perhaps the first judicial analysis of the practice of asking for bank statements only upon withdrawal. In what were admittedly no more than passing comments made at a relatively brief ‘house-keeping’ hearing in the early stages of the litigation, a judge described the practice of asking for personal information only once the punter has sought to withdraw funds from his account as “a bit ‘after the event’” and suggested that a reliance on a failure of disclosure in such circumstances seemed, at least in isolation, a bizarre defence [to a claim for failing to pay out]”.

These are still the very early days of punters turning to the courts in relation to what they see as their unfair treatment at the hands of a minority of online bookmakers, but there would appear to be grounds for optimism.



The content of this article does not constitute legal advice – see ‘Legal’.


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