Fraud Awareness: Do You know where all the money is going?

Published August 2, 2011 - Indian Gaming Magazine

By Ken Wilson, CFE, CSAR

Fraud awareness is akin to sex education.  The more employees and management know about the subject, the better prepared they are to recognize and deal with it.  Knowing what to look for as “red flags” or “badges of fraud,” and then knowing what to do after suspicions have been raised should be part of every fraud awareness training program and included in every fraud policy manual.  For example, employees in the count room are aware that another employee frequents gaming establishments on a regular basis.  The employee often complains about loosing money and having financial difficulties.  The employee also complains about his/her salary, and generally has a bad attitude.  In addition, the employee is very protective about his/her work and does not want help from other employees.  After a time, the other employees notice a change in the dress and amount of jewelry the employee is wearing, and notice the employee is driving a brand new expensive car.  Questions and jokes about “hitting it big” go unanswered or only vague responses are received.  Although the employee may have been lucky at a gaming establishment, there are sufficient “red flags” to raise the question where did the money come from for the new purchases and lifestyle changes, and are there any unexplained or unresolved shortages in the count room or any other areas of the casino where the employee may work?

Fraud against the casino is not limited to the conduct of employees.  Although employees account for the loss of approximately 6% of business revenue, an equal threat exists from contractors and vendors.  They may work in conjunction with employees, they may conspire between themselves, or they may act alone to fix or inflate prices or “double invoice.”  A vendor or contractor may be related to someone in the purchasing or accounts payable departments, or the contractor may exist only on paper and no actual services are being provided.  Such an arrangement would suggest collusion between someone familiar with the casino’s contracting procedure and another person.

Customers and guests are another source of fraud against the casino.  They may work alone, in groups or in cooperation with an employee.  Casino employees are most adapt at recognizing cheaters at the gaming tables and machines, but may not recognize fraud elsewhere.  The casino must maintain a constant vigil against fraud, both from within and from without.

One of the most effective techniques for protecting the assets of the casino is by empowering the employees to be the eyes and ears of management.  This is accomplished through training to recognize the “badges of fraud” and by providing a system by which the employees may safely and confidentially report their suspicions without fear of retaliation.  A 1-800 fraud hotline, answered by professionals twenty-four hours a day, seven days a week, is such a system.  These professionals are trained to ask relevant questions, accurately document the information, and then promptly report the information to a designated individual.  These businesses also provide promotional material, including posters for the break-room and envelope stuffers to accompany paychecks.

Casinos must demonstrate their awareness of fraud and train their employees to do the same in order to deter and detect fraud.  The vast majority of employees are honest and want to work in an environment that promotes honesty and integrity.  Dishonest employees will seek employment where they may work without detection.