Compliance

Audit Your Rewards Program

Marketing can bring them in the door, but are your controls in place for an effective audit?

In today’s casino industry, keeping a competitive edge is virtually impossible without utilizing a marketing strategy.  Marketing departments have been forced to think outside the box in recent years in an effort to grab the attention of potential new players, as well as keep the loyalty of their current guests.  Promotional offers give players the opportunity to win four-wheelers, cars, or even small houses.  Attempts to promote the casino’s players club suggest you can receive a few crisp $100 bills if you join.  All these efforts are carefully designed and executed so the casino can rival not only other casinos, but even other entertainment opportunities in a property’s surrounding area.

Casino Management should give diligent attention to this promotional activity.  While evaluating the return on investment from a financial standpoint is critical, a thorough audit is a crucial element of ensuring the tribe’s assets are protected and the integrity of gaming stays unharmed.  This audit process requires experience and practice to establish the best approach, but there are a few general principles that can be applied to help institute an effective audit.

Principle #1 Clarify Written Policies

It is important to ensure that all elements of marketing activity are clearly defined.  The NIGC’S Minimum Internal Control Standards (MICS) offer the following definitions on promotions, points, and player tracking systems.

MICS 542.2

This defines promotional payouts as merchandise or awards given to players by the gaming operation based on wagering activity. 

Simply put – promotional payouts can only be awarded when wagering activity takes place.  This concept seems straight-forward until the idea of complimentary items is considered.

MICS 543.2

This defines complimentary services and items as those that are provided to a patron at the discretion of an agent on behalf of the gaming operation.

Simply put – you do not have to wager – or do anything else – to “earn” complimentary items.  Again, not a difficult concept.  The problem is many properties “comp” their patrons based on how much they play.

Example

A pit boss may choose to “comp” a player’s dinner because how much he played at the table that day.  Since he would not have used his discretion to give the player dinner had he not wagered a significant amount, is this a complimentary item or a promotional payout?

Discuss and document these definitions and train staff to ensure they can implement, execute, and audit instances associated with each.  When you supply clarification in written policies you are taking the first step to offering reasonable assurance that a proper audit is taking place.

Principle #2 Avoid Common Pitfalls

An Old Zen proverb says, “It takes a wise man to learn form his mistakes, but an even wiser man to learn from others.”  These words of wisdom seem especially true in the casino industry.  Every day, criminals are working to find new way to take advantage of vulnerable situations.  Even with the regulations in place for the casino industry, the constant advances in technology and creative incentives require casinos not only to learn from their own mistakes, but often even learn from others.  The execution of marketing strategies is no different.  As casino use the various approaches that have proven to be successful at other properties, it is critical to also consider the pitfalls that may have created costs that outweighed the benefits.  There are countless examples that can be found where the vulnerabilities of these strategies are exposed.

Example

Wrongfully obtained or duplicated players club cards or players that are rated at the table games as “valuable” players that should earn points, but never actually take part at a level that calls for that rating.  They then ride their inaccurate assessment to awards and prizes that they did not rightfully earn.

It simply does not take long to do some simple Internet research to discover recent, relevant examples of these activities taking place.

Principle #3 Maintain Control

Some would argue that fraudulent behavior is impossible to eliminate.  While that may be the case, there are ways to help deter such activity.  Using the “fraud triangle” as a reference, it is said that for fraud to take place, one of the three elements much be present: pressure, rationalization, and /or opportunity.  Often more than one has a significant impact on a situation.  Internal controls are in place to help control these factors as much as possible.

The audit process itself is a control mechanism.

The purpose of the audit is to:

  • Protect the assets of the tribe
  • Safeguard the integrity of gaming activity
  • Meet any established requirements to stay in compliance

But again, the audit helps maintain control of the marketing activities.  Points and promotions have monetary value, therefore they should be considered and treated as an asset.  Combine that with the already established vulnerabilities and threats, and it is clear to recognize the risks associated with these activities.  In order to protect our assets, the audit is not only a good idea, it is a necessity.

Principle #4 Do Your Research

To effectively complete an audit, start by doing research.  Here are the top items you should know:

  • Requirements by the NIGC and/or by the established internal controls
  • Study case studies where vulnerabilities have been exposed and criminal activity has taken place through these activities
  • Investigate systems and interview staff to create an expectation of what “normal” is, to help identify abnormal behavior
  • Combine this research to create a checklist that can help generate a consistent audit
  • Complete the audits as often as necessary, so that no activity goes undocumented
  • Monitor the findings moving forward and search for trends or outliers that may point to specific issues as the audits are completed
  • When these irregularities are recognized, escalate them through the proper channels to ensure issues are appropriately addressed
Control is the key

Marketing is more than just “a good idea” in today’s industry.  It is an absolute necessity.  As the latest and greatest tactics are introduced and implemented, you can use these principals to ensure control of marketing activities and the audit process.

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