The gambling watchdog has slapped online firm 32Red with a £2m fine for failing to protect a vulnerable customer and carry out proper money laundering checks.
It follows an investigation by the Gambling Commission over the firm's treatment of a customer who was allowed to deposit £758,000 between 2014 and 2017 without being subject to social responsibility or money laundering controls.
The Commission found that there were at least 22 incidents that would have indicated that the customer was a problem gambler, including having admitted to staff that they had spent too much and were chasing losses.
But rather than checking whether the customer needed help, 32Red gave the customer free bonuses and failed to check that the customer could afford their spending.
Operators must take action when they spot signs of problem gambling and should be carefully reviewing all the customers they are having a high level of contact with
Gambling Commission executive director Richard Watson said: "Instead of checking on the welfare of a customer displaying problem gambling behaviour, 32Red encouraged the customer to gamble more: this is the exact opposite of what they are supposed to be doing.
"Operators must take action when they spot signs of problem gambling and should be carefully reviewing all the customers they are having a high level of contact with.
"Protecting consumers from gambling-related harm is a priority for us and where we see operators failing in their responsibility to keep their customers safe we will take tough action."
Maltese-licensed firm Kindred - which last year snapped up 32Red in a £175.6m deal - said it accepts the penalty and "recognises the raised standards required by the GBGC".
It highlighted initiatives including the use of behaviour monitoring systems but admitted that "in a changing and complex landscape work remains to be done".
"As a company putting sustainability at the very core of its business strategy, Kindred remains committed to ensuring customers can enjoy gambling in a safe and secure environment," it said.
The fine comes after the government earlier this year announced plans to cut the maximum stake for fixed-odds betting terminals (FOBTs) to £2 in a move meant to protect vulnerable consumers.
That was alongside plans to toughen up online protections, such as introducing stronger age verification rules and affordability checks.