Combating Casino Fraud

Combating Casino Fraud

Not only are casinos beset by criminal-minded employees, the customers themselves may produce counterfeit cash, fake credit cards, bad checks and stolen identification as the basis for obtaining credit. The casino is stuck between a rock and a hard spot, as the customers’ satisfaction will determine the success of the business. Yet the verification of identification, age, cash and credit cards is an essential ingredient in the operation of a casino. Balance is the key to maintaining a high level of customer service, and at the same juncture, ensuring that the customer and his documentation are valid.

Marketing and Business Development

Casinos generally reward high play volume in the same manner as frequent flyer programs. Player points are given, and redeemed as meals, hotel stays and merchandise. Each player who accumulates points has an account that contains the data of those points. 

Various account data may be changed by employees who administer the accounts. There are often valid changes in account names due to altered marital status. Players are able to consolidate two or more accounts for the purpose of organizing their points. Other account changes can take the form of point adjustments resulting from gaming machine functional errors.

Without a proper system of checks and balances between supervisors and those who administer the account data, it is easy for account administrators to defraud casinos. Generally, gaming enterprises want to provide rapid customer service regarding player accounts. That goal is furthered by giving administrators authorized access to the accounts. Add to that access, accounts that have been inactive a year or longer, and are considered dormant. 

Closing the Open Door

The result is often a case of fraud. Unscrupulous employees, authorized to adjust accounts, are able to change the names on dormant accounts to the names of their friends and family members. Administrators can set up accounts for their friends and then consolidate the new account with a dormant account of a player with the same name. The employee looking to defraud is also capable of upwardly adjusting the points in their fictitious accounts.

Remove the fraudulent opportunity, and the fraudulent activity will have been prevented. Internal controls simply have to be tightened. If only one person has the authorization to adjust accounts, then the temptation is enormous. However, if for each and every change, a supervisor’s signature is required, and documentation of the necessity for the change must be affixed to the file, then no single employee has control over the data in any account.  With strict internal controls, the temptation is removed.

Complementary Benefits: COMPS

Casinos attract customers by giving away complementary benefits. These comps can include free meals, hotel rooms and merchandize. Casino policy requires that the casino players sign for these amenities in person. 

What happens if a marketing executive decides to give himself an illegal perk? The casino can end up paying thousands of dollars before the executive is caught. Such a situation recently arose when a marketing vice president began purchasing items for his girlfriend, using the comp number of a player, under the guise of purchasing the items for the player. The retail store cashiers allowed the executive “policy override” to prevail, even though the clerks were well aware of the requirement that the customer be present and sign their own name. Further, the casino’s accounting department, in charge of comp review, did not blink an eye at the signature of the vice president, which should have been the signature of the player.

After 24 fraudulent purchases in several stores, the theft came to light when the executive’s girlfriend tried to exchange one of the items for a different size. The girlfriend was wholly unaware of the scheme, and the executive lost his job and gaming license. The casino lost a lot of money and gained an insight into the necessity of strict adherence to the policy that is put into place to prevent fraud. If there are holes in the application of security policy, criminal intent will slip through those holes.

The Role of Internal Auditors

Gaming auditors are in place for early detection of casino fraud, and for the establishment of sound internal controls for fraud prevention. These auditors are trained to understand the vulnerabilities inherent in the casino industry. It is the job of the auditor to set up an appropriate system of checks and balances, denying employees the opportunity to steal. One of the tasks of the internal auditor is to establish a reporting system for every player account change that takes place. The report confirms the signature of a supervisor and that of the data entry administrator, as well as the documents that supported the change. 

It is the internal auditor who must ensure that the casino accounting department be properly trained to understand why specific policies exist. Without that understanding it is too easy for accounting department personnel to ignore the breach in policy created by the signature of an executive, in the place and stead of the player’s signature. Consistency of policy application is a key to successful internal control.

The system can be secured. It is up to the internal auditor to ensure that the proper checks and balances are in place, that employees have the necessary training and experience to fully understand the reasoning behind policies, and that the policies are consistently applied in every situation.

Counterfeit Money and Fake Credit Cards

Casinos are exciting. The casino atmosphere and thrill of the game draw people like magnets sticking to a refrigerator. The last thing casinos want to do is discourage customers by a harassing over-verification of identity, age and validity of cash and credit cards. 

However, some verification is necessary: The higher the stakes table, the more thorough the verification process. This leads to a “layered solution”, where the general player flows along, happily unhindered; while the big money players are carefully scrutinized for the protection of the other players as well as the casino.

HR Personnel and Immigrant Work Eligibility

Casino security depends to a great extent on the ability of the Human Relations Department to screen employment applicants for trustworthiness and diligence. Per federal law, applicants must also be screened as to their immigrant status and eligibility to work. 

Fraudulent activity in casinos can be stopped in its tracks by tight internal control policies and employees who are trained and able to fully and consistently apply those policies.