You are in:
The Standardised Way for Regulators to Remote Audit
ComTrade’s Director of Gaming Ales Gornjec discusses remote auditing for the gaming industry
Regulation in the gaming industry has always been a key part and played a vital role in providing control and traceability of all gaming operations. Regulation, regardless of origin, applies for every single operator whether online or land based and who must comply with requirements of regulation authority.
For online gaming, which is the most dynamic and fastest growing gaming sector, several regulatory gaming commissions have been set up under the Gambling Acts issued by the governments. Although many exist around the world, white listed European licensed jurisdictions such as UK and Malta provide a higher degree of trust over those that are based in the Caribbean.
More than trust, risk assessment is used for tailoring regulations in order to meet their goals which in most cases include: keeping crime out of gambling, ensuring gambling is conducted fairly and openly, protecting minors and vulnerable people from being harmed or exploited by gambling and adequate taxation – a highly regulated environment.
One issue that has arisen is that every European gaming commission has developed different, non-standard methodologies and procedures to regulate the online gaming operations in their countries. As many online operators cover multiple markets they have to comply with the local market jurisdiction for example, Italy and France. This requires additional time and cost in complying with local regulation and obtaining a license. At the same time this strains submission of information to each of the local commissions about gaming activities and players as each jurisdiction requires a different format of reports, information or even integration with the regulation authority. On top of that gaming taxations are different from country to country.
There are also a set of differences from the players perspective such as how they limit their online play. UK remote gambling and software standards require limits in the form of deposits, spend or lost limit for the periods no less than one day, Belgium commission introduced hourly lost limit for A+ and B+ licenses, while Maltese jurisdiction requests that players can limit wager or lost amount within a specific period of time, or limit the amount wagered in a single session.
Standardization in monitoring online gaming operations across multiple gambling commissions would definitely ease the integration or the reporting process and data collection from the operator’s standpoint in order to increase transparency.
The same issues presented above apply to the land based gaming segment.
The land based gaming operation supervision has a long standing history. Operators are usually obligated to submit a certain amount of periodic reports like end of month performance reports and bi-weekly cash flow reports. Some of the jurisdictions also require dozen of forms and others less.
In the past these reports were produced based on hand reading of every electro-mechanical counter of each gaming machine. Gaming table operations and cash flow reports are based on counting performed by committees which are formed from staff and supervisors. In both cases a lot of manual work increases the possibility to make mistakes. With adding some advanced functionalities like progressives and bonusing, this situation becomes even worse.
Casino management systems were primarily introduced to help operators, operate their venues and better track activity on the gaming floors. These systems also served as infrastructure for implementing several advanced functionalities such as Ticket in Ticket out and cashless. Once the operator has had all relevant data inputted in to the information system, filing or rather preparing and printing reports was just a small step forward and a timely affair. Today it is hard to imagine casino floors without a Casino Management System in place although from time to time we still hear that such operations exist.
Regulators or supervisory agencies always performed onsite audits of gaming operations. It is not expected that this will ever cease. However, effectiveness of such audits depends on data quality they get from operators beforehand. When auditors see both performance and cash-flow reports, they may look for known patterns of discrepancies or known fraudulent cases. During on site visits auditors may focus on problematic areas such as gaming machine hopper fills, cashbox clearance counting’s and discrepancies between soft counts and table closings.
When there is no quality data available before the audit takes place, the auditors approach is by verifying both the already known problematic areas and randomly selected gaming machines, table or two and all of cashiers to perform add-hoc verification of how business was conducted. These checks require a significant amount of time and prevent auditors from verifying all of gaming floor relevant stations. Such a semi random approach may also discover problems to late or fail to detect them at all.
This is where Central Monitoring comes into play. In order to reduce possible errors and hand work with data-re-entry into supervisory systems, regulators or supervisory agencies already accept reports in electronic form. Some of them have gone even further by requiring operators to grant them limited access to data collected by Casino Management Systems. By having access to all of the performance and cash flow meters, together with cabinet events and money in/out transactions, extensive multi-level verifications may be performed optimally.
A few regulators are performing data collection from gaming venues for some years and have learned the hard way, with the big problems they faced collecting almost incompatible data from several operators and system versions when there was no prescribed format or standardized way of data transfer.
Without a strictly prescribed interface every vendor has the freedom to define its own interface and data structures. From there, the extraction, transformation and loading (ETL) process on the regulators side must convert and normalize data, before it becomes usable for analysis and internal reporting. This system maintenance became very costly and involved a lot of manual work which included repetitive hard-to-fix problems. They also needed to maintain several interfaces per operator, as operators are known to use different systems for different areas of their venues.
Most of the regulators still avoid mass collection of gaming data due to two main reasons: there was no standardized way to communicate all required data and regulators needed dedicated information system in order to process the data, and to give the auditors constructive conclusions.
The first obstacle was removed a few years ago by the Gaming Standards Association (GSA) with the introduction of System-to-System (S2S) protocol, which gave the ability to transfer meters, events and transactions of various types. From time to time the protocol is amended to support even more needed for effective auditing. At the moment GSA is working on Central Monitoring S2S extension targeting regulators and supervisory agencies. These extensions will allow regulators to operate in a mixed online and offline environment with guaranteed data delivery and data consistency. Beside the data transport options, operators will also be able to limit their data exposure to exactly what is required by regulator.
The second obstacle was removed at the end of 2010, when the Central Monitoring system based on S2S was developed and deployed in premises of “Ministry of finance of Republika Srpska” in Bosnia and Herzegovina. The aim of application was to establish the transition path from fixed fee per machine taxation system, to one based on Gross Gaming Revenue (GGR). For such a transition, the first step was to start collecting data and then based on the data collection, assess what taxation system and rates were most appropriate in terms of state revenue and market development. Several gaming areas were targeted by the system: casino, betting shops and internet gaming for now are supported to be monitored – all through a single interface – S2S protocol.
The introduction of renewed S2S protocol and evolution of the first central monitoring systems based on S2S is providing regulators with a consistent route to an automated path of data collection and normalization. Once such system collects and processes metering and transaction data automatically, regulators may focus on post analysis and are able to detect if irregular behaviour has taken place or to detect potential frauds and criminal activity such as money laundry and other gaming process misconducts.
Through the standardization of data communication to regulators, operators will benefit in reduction of the work that is carried out on their side including the preparation of reports and duty to fill them on time. The regulators will then carefully collect the data they require to produce metering data validation and deduce the taxation amount. The standardized interface should also remove the operator’s fear of exposing the entire data from the Casino Management System(s) to regulators by knowing what is configured on their system to be transported to the regulators system.
This in turn, will see the gaming systems vendor benefit and will show in the implementation of one interface for all jurisdictions and thus reducing costs of implementation and maintenance.
In the end field audits performed by regulators or the supervisory agencies may be reduced once trust in automatically collected data grows and this will benefit both operators and regulators due to reduced auditing costs.
Certainly land based casino operations need a boost in what is offered to players. From better knowing what the players need in order to enhance playing experience and which games they like to play. Game download and configuration, bonusing, mystery progressives, media display applications and similar are ready to be deployed but frequently delayed by regulators due to lack of data related to such operations. We can expect that new functionalities may be approved faster by regulators if they know that accounting and data used for verifications will be delivered to them when requested.
By implementing Central Monitoring paradigm the gaming arena beyond the casino operation may be covered successfully.
The latest additions of S2S protocol will cover various types of gaming from (sports) betting and pari-mutuel games to games offered over internet or mobile channels. In the end these additions could also greatly benefit in the standardization of the online gaming monitoring. Standardization is gaining in importance across the casino floor so why are regulators falling so behind when it comes to remote auditing of gaming operations?
