To clergy and parishioners, senior church official Martin Sargeant seemed to have a gift for financial enterprise, forging new links with business and helping to breathe new life into historic buildings.

Sargeant, a former head of operations at the Diocese of London, part of the Church of England, helped spearhead projects to help churches in the City of London which had tiny congregations and were badly in need of money and revitalisation.

Richard Chartres, the former Bishop of London, once praised the influential church administrator for his knack of “turning ideas into profitable ventures”.

But as Sargeant crisscrossed the Square Mile, distributing funds and negotiating agreements with City financiers, developers and the church, he was hiding a secret that would end up unravelling his life and draining parishes of money.

Sargeant was a gambling addict, and had been hooked on fruit machines since he was a teenager. He fuelled his addiction with stolen Church of England funds.

On 19 December, at Southwark crown court in central London, Sargeant, 53, was sentenced to five years in jail for the offence of fraud by abuse of his position. He had stolen £5.21m in charitable church funds between January 2009 and December 2019.

Giorgina Venturella of the Crown Prosecution Service said: “Sargeant completely abused his position of trust and power to satisfy his own selfish purposes. He took money to fund an expensive lifestyle, including flying around the world and bankrolling a gambling habit.”

The conclusion to Sargeant’s case came as police consider the wider rollout of a project to identify suspects with gambling addictions. While there have been various estimates of the cost of crime linked to drink and drug addiction – which is put in excess of £24bn a year – there is limited data on the extent of gambling-fuelled crime.

In Sargeant’s case, the judge, Michael Grieve KC, heard how betting firms had plied the accused with gifts, including watches, food hampers and travel vouchers. The judge concluded the gambling did offer “some form of mitigation” in the case.

Documents obtained by the Observer reveal that over 12 years Sargeant staked more than £12.2m with just one betting brand.

The industry is now facing calls for stricter affordability checks.

The prosecution said the church administrator had been motivated mainly by greed, but Mark Ruffell, defending Sargeant, said gambling was at the core of the crime. “It’s the poor cousin of addiction and it is being understood more recently,” he said.

The court was read a statement from Professor Henrietta Bowden-Jones, Royal College of Psychiatrists lead on behavioural addictions, which said “we must acknowledge gambling disorder as a mental illness”. While on bail, Sargeant had been receiving residential treatment for gambling addiction from the Gordon Moody charity.

Sargeant, originally from Bournemouth, had a troubled childhood and started playing fruit machines as a teenager. He turned to crime to fund the habit, and was given a community order in 1992 for stealing from an employer. In 1995 he was jailed for 21 months for theft and other offences.

On his release from prison he embarked on a successful career with the Church of England, but the hidden addiction plagued his life. He maintained that he had told his employer about his convictions in the 1990s, but the diocese said last week that it learned of the offences from the police during their investigation.

Sargeant would travel to meetings in taxis so he could maintain phone reception and ensure the virtual fruit machine reels would keep on spinning. On some days, he would play for up to 18 hours and lose up to £20,000.

As his losses mounted, he diverted funds intended for restoring the fortunes of London’s churches into his personal bank accounts. Over a 11-year period, he betted millions with more than 100 gambling websites while diverting grants from the City Church Fund for his sprees.

Ruffell said there was no excuse for fraud, but the crimes had been “elevated” by the gambling addiction.

Documents obtained by the Observer from one betting brand, Jackpotjoy, shows that between 2004 and 2016 Sargeant deposited £983,250 and withdrew £513,143, which meant he lost £470,107.

His total wagers were £12.27m, which is many times higher than his deposits, because he would repeatedly gamble away his winnings and bonuses offered during games, effectively staking the money again many times over, with mounting losses.

Sargeant, who earned £86,000 a year, was made a “VIP” player by the betting company. He met his “VIP agent” at top hotels in the capital, including the Soho Hotel and the London Marriott Canary Wharf.

He was given several gifts by the betting outlet, including an Omega watch that retails at £7,597. He was also given Louis Vuitton luggage, Apple computers and electronics including an iPhone 7, Ray-Ban sunglasses and a Montblanc watch.

In May 2016, as Sargeant travelled the world on stolen funds, his VIP manager emailed him, saying: “How was Las Vegas? I was going to propose sourcing the [Porte-Documents] bag from Louis Vuitton and the Microsoft surface pro 4 (with pencil)?”

At this time, Sargeant was gambling across multiple accounts with many of the major betting brands, but the illicit funds flowing through his accounts do not appear to have raised any red flags with the authorities. All gambling businesses are required to report suspicious activity under the Proceeds of Crime Act 2002.

In 2019 Sargeant left his job and two years later irregularities in the allocation of funds were discovered at one of the parishes, Saint Stephen Walbrook, and he was arrested. He confessed in his first police interview to the fraud, telling the officers he was a gambling addict. He pleaded guilty to the fraud offence.

During his case, a small group of observers sat quietly at the back of the court for each hearing. They were reformed gambling addicts who had come to support him.

Several police forces are working on projects to help establish the scale of gambling-linked crime and provide early support for those who need it.

Brian Faint, a former police officer who works for the charity Beacon Counselling Trust, helped develop the screening initiative after he discovered in 2015 that half of the major financial crimes under investigation by his team at Cheshire Constabulary were linked to gambling.

He said: “I was not only surprised but also concerned that Cheshire had so many. I didn’t think it was unique to Cheshire, but it was much more widespread. It’s a very hidden addiction.”

Faint helped develop the first pilot project in 2017 with Beacon Counselling Trust and Cheshire police. This has since been rolled out to nine other forces. At least seven more forces hope to launch similar screening policies. The Association of Police and Crime Commissioners has said it would like to see a national rollout of such schemes.

The commission on crime and gambling-related harms, launched by the Howard League for Penal Reform, says: “Despite problem gambling being a recognised mental health disorder, the criminal justice system is not responding to related offending in an appropriate way.”

In a statement released after Sargeant was jailed, the Diocese of London said it had reported concerns in 2021 after a parish had raised questions about funds it had been expecting. The statement said: “With the legal proceedings now concluded, we are continuing to work with the police to secure the defrauded funds.”

A spokesperson for Gamesys Group, which owns the Jackpotjoy brand, said: “While we can’t comment on the activity of individual accounts, we have been part of a sustained and committed industry effort to improve player protection. The industry continually makes investments in responsible play and anti-money-laundering systems, tools and processes.”

A spokesperson for the Betting and Gaming Council (BGC), said a stricter code of conduct for VIP schemes has seen the number of players enrolled in them reduced by 70%. It said its members also devoted a fifth of television advertising to safer gambling messages.

They added: “The UK sector is one of the best regulated in the world, with problem gambling rates among the lowest in Europe at 0.3%, according to the independent regulator.”

Criminal suspects will be routinely screened for gambling addiction by a number of police forces across England and Wales because of growing concerns that high-stakes betting is fuelling crime in a similar way to drugs and alcohol.

Ten police forces are now routinely questioning suspects in custody over their gambling habits, in addition to questions over alcohol and drug abuse. The Observer has confirmed that another seven forces are drawing up plans to implement similar policies in 2023.

Police and crime commissioners are also calling for better safeguards to prevent the proceeds of crime being used for gambling. In a recent case, Martin Sargeant, a former head of operations at the Church of England, defrauded the church of more than £5.2m and staked millions of pounds on online fruit machines while being offered VIP status, bonuses, food hampers and luxury watches by betting firms.

A government white paper on gambling which has been repeatedly delayed is due to be published this year. It is examining whether tighter requirements for operators are required to protect customers, including affordability checks and more interventions to prevent problem gambling.

Joy Allen, the police and crime commissioner for Durham and joint lead for addictions and substance misuse at the Association of Police and Crime Commissioners, said the association would like to see screening carried out by all police forces.

Cost of gambling harms

“This is a real opportunity for a better understanding of the causes of crime and early treatment,” she said. “We need to raise awareness that this is a disorder like alcohol and drugs and it should be looked at in the same way.”

The government has estimated the annual cost of crimes linked to alcohol at £11bn and class A drug-related crimes at £13.9bn, but there is limited data on the cost of crime linked to gambling.

The first pilot to screen suspects for gambling addiction was launched by Cheshire police in 2017. Under the project, suspects were questioned about their betting habits and problem gamblers were offered suitable treatment: 13% of those surveyed were at some risk of a gambling problem, according to the initial results.

Matt Burton, former assistant chief constable of Cheshire police, who oversaw the pilot now taken up by nine other forces, said gambling addiction needed to be taken more seriously in the criminal justice system, with more training to spot problem gamblers. “This is an addiction that is really hard to escape from and it’s so accessible,” he said.

In June 2019, the Howard League for Penal Reform launched its commission on crime and gambling related harms, examining the links between the two. It found “a lack of understanding of gambling addiction” across the criminal justice system. Witnesses who gave evidence to the commission described “a near total lack of support available for gambling addiction in prison”.

Andrew Neilson, director of campaigns at the charity, said: “We have a criminal justice system which has interventions which target alcohol and drug-related crime, but there is limited focus on gambling.”

Freedom of information requests by the charity found more than 2,800 crimes linked to gambling between 1 January 2019 and 31 December 2020. These included fraud, theft, burglary and violent crime, but are only a proportion of the total number of crimes linked to problem gambling.

Gambling revenue by country

Betting firms are under pressure from the Gambling Commission, the regulator, to improve their procedures to identify money-laundering, irresponsible gambling or the proceeds of crime. The commission has taken action against several firms over failures, including a regulatory settlement in August 2022 of £17m with the gambling giant Entain over “unacceptable” anti-money laundering and safer gambling failures.

Matt Zarb-Cousin, director of the campaign group Clean Up Gambling, said there had been repeated failures by the industry to halt betting sprees linked to illicit funds and problem gambling.

He said: “These failures illustrate why affordability cannot be entrusted to the discretion of gambling firms which derive the vast majority of their profits from those losing more than they can afford.”

Police Scotland also started a six-month pilot in October in two areas of the west of Scotland to train officers to recognise gambling addiction and, where appropriate, to screen people in custody.

Chief constable Steve Jupp, the National Police Chiefs’ Council lead for serious and organised crime, said: “Gambling addiction has a devastating effect on those with the condition and their families. We will continue working closely with partners to change perceptions on gambling so that it is viewed in line with other addictions.”

A government spokesperson said new support services were being provided for gambling addicts. “We understand the costs of gambling addiction to society, which is why we are building specialist NHS gambling addiction treatment clinics across the country as part of our £2.3bn expansion of mental health services.”

The Betting and Gaming Council said its members had introduced a package of safer betting measures, including the removal of features from some games which encourage problematic play. The council said the UK sector was the “best regulated in the world” with problem gambling rates of 0.3% among the lowest in Europe.