The bookmaker Gala Coral has agreed with the gambling regulator to pay out nearly £880,000 after taking hundreds of thousands of pounds from a “VIP” problem gambler who was using the proceeds of theft to feed his habit.

The Gambling Commission said Gala Coral had failed in its duty to prevent money laundering and problem gambling, adding that its safeguards against both were inadequate.

It said the bookmaker had failed to make sufficient inquiries into the source of the wealth of one of its VIP customers, who gambled away nearly £850,000 of stolen cash in its shops and online.

This was due to “systemic faults” in the company’s approach to problem gambling and money laundering, the commission said.

The regulator added that Gala Coral acknowledged the “serious shortcomings” at an early stage and proposed the settlement, pre-empting the need for a review of its gambling licence.

Gala Coral initially flagged up the fact that the customer’s spending was higher than his likely income internally, deeming him a ”red” customer of potential concern.

But the bookmaker relied on “uncorroborated” suggestions that the man was independently wealthy, when in fact he had stolen £800,000 from a vulnerable person.

The commission said staff based their belief in the man’s wealth on explanations given by family and friends at two hospitality events organised by the bookmaker.

The company “did not challenge these assertions, nor did it seek any further corroboration”, the commission said.

“Gala Coral Group failed to conduct adequate inquires about the source of funds the customer used to gamble in store and online, and placed over-reliance on the fact that the relevant payments were all made through one UK clearing bank account,” it added.

Gala Coral was also criticised for failing to spot signs that the man, an electrician, was a gambling addict.

“There were indicators in the customer’s online and in-store play which could have been used to identify him as problem gambler,” the commission said.

The gambler, who was a customer of Gala Coral between 2012 and 2015, was jailed for three years over the theft.

The bookmaker will pay £846,664 to the victim of the theft and his family, as well as making a £30,000 payment to “reflect the cost” of the commission’s investigation.

The money paid to the victim’s family equates to less than a day’s worth of Gala Coral’s takings last year.

The bookmaker also promised to take steps to improve its anti-money laundering and social responsibility processes.

The settlement is part of a continuing effort by the commission to crack down on bookmakers that turn a blind eye to money laundering and problem gambling.

Earlier this year, Paddy Power was forced to pay out £280,000 after the commission found that it had encouraged a problem gambler to keep betting until he lost five jobs, his home and access to his children.

The commission is understood to be taking a tougher line under its new chief executive, Sarah Harrison. On Wednesday, it warned gambling firms to learn the lessons from the Paddy Power and Gala Coral settlements. “The gambling industry should be on notice that the issues identified in this statement are likely to form the basis for future commission compliance activity,” a statement said.

Richard Watson, a programme director at the commission, said: “We expect the industry will learn the lessons from this case, as it is their responsibility to keep crime out of gambling and protect vulnerable people from harm.”

“We know that Gala Coral have reflected heavily on this case and have assured us of actions they have taken to address the failings. Operators must proactively monitor customers to keep gambling safe and free from crime.”

Gala Coral said it had stopped doing business with the man before it was aware of any police investigation, adding that failures in its controls had “for the most part” already been addressed last year.

The bookmaker said it had beefed up its anti-money laundering team, improved training and introduced new tools to tighten up customer checks.

“Due to the unique circumstances of this case and the impact upon the family of the amount stolen by the customer, we have agreed with the family to make an ex gratia payment to them equal to the customer’s losses of £846,664,” the company said.

But campaigners for further measures to combat problem gambling said the settlement was evidence that Gala Coral had not learned from previous failings. “We were told three years ago by the Gambling Commission that Coral have learned their lesson after a customer laundered nearly £1m through their fixed odds betting terminals (FOBTs),” said Matt Zarb-Cousin, a reformed gambling addict and spokesman for the Campaign for Fairer Gambling.

“It is not surprising to hear of another case when nothing has changed since then. The regulator appears to be doing the same thing over and over and expecting a different result.

“If Coral are serious about preventing money laundering, why are they lobbying against their inclusion in the EU’s fourth money laundering directive, which would merely require players staking more than £1,500 to identify themselves?

“Bookmakers have become a target for criminals as roulette is offered on FOBTs at £100 a spin, which is the perfect game for money laundering, as it can be played with minimal risk.”