FOCUS

AGE postponed, but Australia remains in focus

The Australasian Gaming Expo was forced to take the difficult decision in mid-July to postpone this month’s event until August next year due the ongoing Covid restrictions in New South Wales.

The exhibition is now scheduled to be held from the 9-11 August, 2022. It would have been the first live gaming event in the Asia Pacific region since the onset of the Covid crisis, even if ongoing border closures meant it would not be able to welcome international guests.

Still, the focus of our magazine this month remains on Australia, where there is certainly a lot to talk about. Although various states have imposed sporadic lockdowns due to Covid clusters, the country’s casinos, pubs and clubs have been mainly open and demand has been strong.

Gaming has also been dominating the headlines in Australia for all the wrong reasons. For much of this year and many months of the last, the country’s largest operator has been the subject of multiple inquiries into its corporate governance.

Crown Resorts was found to be unsuitable to hold a license in Sydney, but counsel for a Royal Commission inquiry in Victoria, where it holds its flagship property, recommended outright cancellation for that state, suggesting its problems run too deep for restructuring.

In our first article in this section, Jamie Nettleton, a partner with law firm Addisons, examines some of the implications from the findings against Crown and the potential shake out for Australia’s regulatory scene.

We also bring you the thoughts of Paul Newson, a former New South Wales regulator, who says what’s needed is more power and funding for state regulators and the increased use of modern technologies to help avoid another Crown debacle.

On the subject of new technology, we examine Australia’s first steps into cashless gaming. A club in New South Wales will be trialling digital wallets in the final quarter of this year. It will bring the gaming industry up to speed with almost all other forms of retail and entertainment, where digital payments are widespread. The technology will also be a big step forward when it comes to responsible gaming and anti-money laundering efforts.

Problem gambling is always front and centre in Australia, where there is a strong focus on minimizing harm. Our focus section also features research from Sydney’s Gambling Treatment and Research clinic, where researchers were given unprecedented access to nearly 40,000 customers’ account data from six leading sports and race wagering sites in Australia to monitor the efficacy of online tools to prevent gambling harm.

Finally, we look at the barriers for new entrants into the Australia market. Although it’s the sixthlargest in the world in terms of installed units, it’s dominated by just a few local players.

Suppliers eager to gain access need to jump through a series of regulatory hoops as well as overcome reluctance from club managers, who prefer to stay with the tried and tested. We speak with Sloveniabased Spintec, which has managed to break in about its experiences.

Technology to empower the gaming regulator

Former NSW gaming regulator Paul Newson calls for policy makers to give back power and funding to state gaming regulators - or risk another Crown Resorts debacle.

In an interview with Asia Gaming Brief, Paul Newson, a principal at Senet Advisory and former deputy secretary of the NSW department of Liquor and Gaming said that there currently exists a rather large capability gap between the financial services regulator and the typical gaming regulator, and said that technology should be used to bridge that gap.

“For too long, regulators have not turned their lens inwards.... They haven’t started to grasp how to use regulatory technology that has been so well put to use in the financial services space,” he said. “Covid has accelerated that thinking and hopefully will see more in the coming months and years.”

Newson hoped to see such technology helping to do away with the need for in-person inspector presence at casinos, whose time is usually filled up by mundane administrative tasks.

“My view on it is that it is pedestrian, they are generally occupied with mundane administrative tasks, and it’s anything but intelligence or risk-based,” said Newson.

“An inconvenient truth is that gambling regulators have been deprioritised over the last number of years and that’s across all Australian jurisdictions. Too often the organization structure and capabilities are being meddled with through machinery of government changes. They don’t get the budget allocation for big IT spend which is really what’s necessary.”

Newson said that the unmasking of Crown Resorts’ unscrupulous practices first exposed by the 60 minute investigation may be the catalyst for change in our industry.

“That’s probably the kick in the pants that’s necessary to jockey some people’s changing to say that the dilution and de-funding of the gambling regulator has to stop. You can only siphon off adequate funding for so long.”

“To be penny pinching with the gambling regulator, and to be constantly meddling in their organizational structures, capability and leadership - well you can see what’s spilling out of the Western Australia royal commission, I think that’s what it is when it’s at its worst.

Newson was referring to the March royal commission into the effectiveness of the Western Australia gaming regulator, which found that both the regulator’s chair and chief casino officer lacked experience and training necessary for effective casino regulation, and also uncovered that the culture of the regulator was one in which the directions and decisions made by senior figures were not questioned.

Newson expects the results of the Western Australia royal commission and the Victorian royal commission will spark debate on public policy which could see more power given back to the Australian gaming regulator.

Covid curbs not as-bad-as-expected for floor yields

It has been over twelve months since casino properties around the world began reemerging from their Covid-19 related lockdowns. No doubt, limits on customer numbers and distancing has hurt gaming revenue, but gaming industry executive David Croft says the increased spacing hasn’t hurt yields as much as one would expect.

Croft, having most recently served as General Manager – Product & Strategy at The Star Entertainment Group has been observing the performance of gaming floors in relation to distancing restrictions over the past 12 months.

“Differing jurisdictions have responded in their own unique way to the challenges of keeping staff and customers safe, but for the most part, it is safe to say that gaming floors around the world have become more sparsely populated than before.”

Older-style thinking would dictate that table game and slot machines yield should have waned as a result of the reduced capacity, but in fact, quite the opposite has occurred, he says.

“Covid-19 restrictions meant that most properties could not run the gaming floor as they historically have done with the key change being the number of customers allowed at a table,” said Croft.

The science of optimizing table games yields revolves mainly around achieving and maintaining an optimum number of customers to a table to maximize profit. We’ve learned that having more customers on a table isn’t always better, especially if it means other tables are left empty.

The silver lining of Covid-19 restrictions is that customers have been forced to spread themselves out to other tables that may have otherwise been ignored.

“Covid-19 protocols have inadvertently given the operators the opportunity to enforce limits on the number of customers on tables – as a result many operators are reporting higher hold and increased profit per open hour as a result of productivity gains (less customers per table) and increased pricing (supply vs demand pushing prices up),” notes Croft.

Post pandemic, the dilemma facing operators will be how to continue encouraging customers to occupy other tables, whilst ensuring that their freedoms have been impacted.

Another interesting trend from this has been seen in electronic table games (ETGs). Customers that haven’t been able to find a seat at a gaming table (or have been priced out) are now finding themselves playing ETGs instead – helping to drive up occupancy and revenue at greater margins than of traditional tables.

Research into why people play ETGs (over table games) leads to five key reasons: Price, capacity, learning to play, speed and privacy. Thus, Covid-19’s impact on traditional tables has certainly boosted interest in ETGs for customers, particularly on the price and capacity front.

As properties reopen, operators will need to have a rethink about the ETG’s place on their casino floor. Will ETGs improve the profitability of the casino, given a reduction of average bet but more frequent games? Is there a risk of customer loss as a result of their preference to play traditional tables? And what is the optimum price gap between traditional tables and ETGs to ensure we have the right customers in the right place at any given time?

Like tables and ETGs, gaming machines have not escaped government restrictions, which have required either a separation of gaming machines physically, or having every second machine turned off. Either way, the same distancing outcome was created.

However, despite the constraints placed on machines, properties have not seen the decline in revenue that was predicted 12 months ago, said Croft.

Australia continues to prove tough nut for suppliers to crack

Australia has more than 8,000 bars, pubs and clubs, with many licensed to offer some kind of gaming product, over and above its regulated casinos, which should on the face of it provide an interesting opportunity for global suppliers.

According to figures from IBIS World, the annual revenue generated by these premises is about $15 billion. The country is in sixth position globally in terms of slot machine installations at 192,800, despite only having a population of 25.3 million people.

However, both Australia’s clubs and casino market are dominated by a handful of major players - Aristocrat Entertainment and Ainsworth - with high barriers to entrance hindering the introduction of new and innovative product choices.

“New entrants into the gaming machine market in Australia face many significant barriers in their efforts to get their products onto a gaming floor and in front of customers,” said Neil Spencer, managing director of Australia-based Gaming Consultants International. “They must convince a gaming manager that their product is worth buying (or in many cases, worth trying).”

“In today’s capital constrained market, exacerbated even more so as a result of COVID lockdowns and restrictions, the choice between a whole new machine and game versus a game conversion into an existing box is overwhelmingly in favour of conversions.”

Spencer says gaming managers will also be looking for guarantees of performance and typically need to justify purchases on the strength of expected upside – something which cannot be easily assessed for a new product. The market leading games have an entrenched position in the eyes of customers and gaming managers and competition between existing suppliers is intense.

These companies typically have significant R&D resources and also the financial capacity to offer very attractive terms. A new entrant to the market generally has a weaker financial footing compared to the established vendors, and thus is often not able to compete without extreme pricing discounts. The battle is not over even if a sale (or trial) is settled – maximising exposure to customers is vital to giving a new product the best chance to succeed and this means securing prime gaming floor real estate.

“The pressure on gaming managers to produce maximum floor yield, means that ‘taking a chance’ on a new product versus a tried and true performer often results in new products, particularly new machines, having less than ideal floor positions and this may result in earning constraints,” Spencer says.

These are some of the operational barriers suppliers will face, but first they have to overcome the regulatory hurdles to enter the market, which are seen as some of the toughest in the world. Variances from state to state, also push up regulatory compliance costs for businesses.

One supplier deciding it was worth it to take the plunge was Slovenia-based Spintec Gaming Technology, which specializes inElectronic Table Games. At just under eleven years old, it’s a relative newcomer to the industry and has made significant inroads into markets in Asia, including Macau.

It recognized the potential of Australia’s club market and the lack of any similar product offering to its own and began the process of certification in 2017. It first went live in Sydney’s Epping Club and now has products in four of New South Wales’ more than 1,000 clubs.

It has installed its Aura playing stations offering Virtual Baccarat, Virtual Roulette and Virtual Sic Bo in the Epping Club and won approval for an Automated Roulette Wheel at the beginning of July. It also got approval for our compact Karma 6-, 8- and , 10- and 12- seater machines.

“We are the only ones with Automated Roulette Wheel in New South Wales clubs,” said Mitja Dornik, Spintec’s regional sales manager, who joined last year to help spearhead the company’s expansion in Asia and Australasia.

“Now that we have all these products we can start to sell them but it was really difficult to obtain the certification. I’ve worked in Asean and other territories and this is one of the toughest,” he said.

“Australia was the only continent where we were not present. We saw that it was possible to enter with excellent products, but quite frankly, we did not realise it was quite as difficult.”

Spintec worked with Independent Gaming to enter the market and Dornik says having a local distributor to help navigate the maze of legislation is essential.

Some of the difficulties include the use of different communication protocols in each of the jurisdictions, with four different protocols operating across Australia - X-Series, QCOM, ASP and SAS. The company said there is an Australian and New Zealand national standard, but each state has an appendix with different requirements. And then there is a different set of rules again to enter the country’s casinos.

I’ve worked in Asean and other territories and this is one of the toughest.

Spintec’s next step will be to get through the certification process for entering Australian casinos.

While player preferences appear deeply entrenched in Australia, Dornik said that feedback so far has been positive.

“Our distributor says that players welcomed our solutions with great enthusiasm. You have players that prefer virtual and players that prefer automated games. With our solution, they now have both in one product. So far, the response is very good,” he said.

With the stringent regulation, market fragmentation and entrenched positions, the market has not been viewed with as much enthusiasm as some of Asia’s other emerging jurisdictions. However, Covid has highlighted the resilience of Australia’s domestic market, with pubs and casinos reporting a strong snapback once they were allowed to reopen, even with its borders closed.

Australia takes step towards cashless gaming

Digital gaming wallets are finally making their first inroads in Australia after years of stakeholder debate, with Australia’s first digital gaming wallet trial set to take place in an NSW club in the final quarter of 2021.

On the surface, it’s a technology that could bring Australia’s gaming sector in line with virtually all other sectors, allowing customers to use their digital wallets to supplement cash and cashless technologies. Until now, players have been required to bring physical cash into gaming venues, or onto player cards or tickets which are then loaded onto the machine.

On a deeper level, this cashless technology is set to bring responsible gaming and anti-money laundering (AML) capabilities out of the dark ages.

Nevada, which rivals NSW as the world’s biggest state-wide EGM market, finally made this step last year during the pandemic by approving the use of cashless wagering technology in casinos. The Covid-19 pandemic generated real concerns about physical bills being a vector for the virus.

On the other hand, Australia’s gaming industry push for cashless appears to come from a responsible gaming and AML front, issues that have become the centerpiece of discussion amid ongoing inquiries into Crown Resorts’ practices across the country.

Craig Butler, director of commercial strategy at Aristocrat Australia has been chosen to lead the digital wallet trial, which will take place at Wests Group New Lambton venue, in Newcastle NSW. Trial preparations will commence in August and the trial itself will occur in the final quarter of 2021.

“This is an exciting development for the industry. As you know, consumers are rapidly moving toward cashless and mobile payments. This is a global frictionless trend that has only been accelerated by the Covid-19 pandemic with patrons seeking cleaner, contactless payment solutions,” according to Butler in an interview with Asia Gaming Brief.

“We know that governments and regulators are increasingly expecting cashless gaming to support industry integrity and stamp out any illegal activity, as well as offer new responsible gameplay functionality to patrons. Aristocrat believes that facilitating cashless payments is a key pillar that will underpin the ongoing sustainability of our industry.”

One of the key questions that will be answered by the trial is around digital wallets’ impact on a patron’s gambling behavior. Specifically, whether there is any exacerbation of gambling harm among other considerations.

“While a trial research scope is yet to be determined, we believe this will be a factor considered by the regulator in making its decision on whether the digital payment solution is suitable for approval in NSW,” Butler explains.

The cornerstone of the digital wallet technology used in the trial is Aristocrat’s PRIME Mobile system, which allows players to set up gaming limits and determine the venue response for when limits are reached.

Thresholds can also be established for session length, frequency of play, the amount spent or won, total bets, bet size, and staff intervention can be enabled.

Messages and push notifications are sent to the patron via the venue’s gaming management system. Credit cannot be used, there are limits on funds transfers to the player’s digital wallet, and toppingup on the gaming floor is not permitted. Players can also self-exclude using the app. Additionally, PRIME Mobile structure provides a quarantine wallet to allow players to prevent funds from being used for EGM play for a period of 24 hours.

One of the key questions that will be answered by the trial is around digital wallets’ impact on a patron’s gambling behavior.

It is a technology that gaming futurist Earle Hall, CEO of AxesNetwork says is imperative for responsible gaming.

“Responsible gaming is a fallacy without Know Your Client (KYC) empowerment. Anonymous responsible gaming policies only lock the barn door once the horse has been stolen,” said Hall in an interview with AGB. “With KYC, responsible gaming is real, quantifiable, and traceable. Think cashless smart cards. There are a number of modern jurisdictions that already require players to be verified against some form of national identification. Once the player or patron has been identified, they are issued a player’s card and then can play. Then the fun starts.”

Thus a clear question remains. Why has it taken so long for Australia and other jurisdictions like it to take on digital wallets in gaming venues?

Crown case highlights lack of regulatory communication

By Jamie Nettleton* & Brodie Campbell*

In early June 2021, the Australian Transaction Reports and Analysis Centre (AUSTRAC) announced that it had stepped up its investigations into possible breaches of Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) laws by a number of the leading Australian casinos, including Crown Perth, The Star Sydney and SkyCity Adelaide. This followed an earlier investigation commenced by AUSTRAC in October 2020 into potential non-compliance by Crown Melbourne.

These investigations follow the highly publicised inquiry into Crown Resorts conducted in 2020 by the New South Wales casino regulator, the Independent Liquor and Gaming Authority (ILGA) (the Crown Inquiry). The report of this inquiry, handed down by former Supreme Court judge Patricia Bergin in February 2021, highlighted (among other things) severe deficiencies in Crown’s compliance with AML/CTF laws and found that Crown had effectively “enabled or facilitated” money laundering in respect of transactions through its casinos. Separate Royal Commissions into Crown have since been convened (and are in progress) in Western Australia and Victoria.

It is therefore unsurprising that the effectiveness of Australia’s AML/CTF laws are being examined closely by the Federal Parliament. AML/CTF laws are being reviewed by the Legal and Constitutional Affairs Committee of the Australian Senate, who are investigating the adequacy and efficacy of Australia’s AML/CTF regime. The Committee’s terms of reference include reviewing ways in which Australia’s AML/CTF regime can be strengthened, the responsiveness of AUSTRAC and the effectiveness of legislation outside the banking sector.

This inquiry, which is expected to consider the introduction of additional AML/CTF obligations for reporting entities (such as casinos), has the potential to have major implications for the Australian gambling sector.

Despite the increased scrutiny recently of Australia’s AML/CTF laws, the recent announcement of investigations into land-based casinos highlights the difficulties that regulators face when it comes to monitoring AML/CTF compliance and enforcing breaches. For example, the Bergin Report noted that, in many respects, casinos function in a manner similar to banks. However, unlike customers of banks, casino patrons are not required to disclose their business or professional activities prior to making a transaction. As a result, there is often limited capability to distinguish between patrons who are laundering funds and other patrons.

Further difficulties arise in relation to junket operations, which are often opaque and may involve a number of anonymous participants. As noted in the Bergin Report, casino operators often do not have proper visibility over dealings between junket operators and casino patrons, nor are casino operators necessarily aware who is behind the corporate entity of a junket. As the Crown Inquiry demonstrates, investigations into junkets are therefore difficult from a regulatory perspective given the lack of transparency and, consequently, regulators face difficulty in obtaining fulsome and accurate documents and records.

Some of the problems involved in monitoring compliance with AML/CTF laws may also be likely attributable to the apparently limited cooperation to date between AUSTRAC and casino regulators (which are appointed at the Australian State/Territory level). In 2017, after undertaking a review of junket operations in Australia, AUSTRAC released a report which outlined steps (including changes to the law) that could be taken to mitigate money laundering risks arising from junket operations and recommended a greater degree of collaboration and information sharing between AUSTRAC and casino regulators. However, the 2017 report was not provided to casino regulators, and the report itself was only made public following a Senate production request in late 2020.

Following the release of a further, more comprehensive report by AUSTRAC in December 2020, the CEO of AUSTRAC sought to distance AUSTRAC from the 2017 report on the grounds that it is not completely accurate. These reports demonstrate that even AUSTRAC, as the Federal regulator primarily responsible for AML/CTF intelligencegathering, has difficulties in analysing and understanding the operation of junkets.

The degree of information sharing between AUSTRAC and casino regulators was referred to unfavourably in the Bergin Report, which noted that “thirty years of recommendations and reports” regarding the advantages of inter-agency information sharing have not “jettisoned the ever-present attribute of turf protection”. Further, the Bergin Report highlighted that some of the secrecy provisions in AML/CTF legislation have entrenched this attribute.

Difficulties regarding the enforcement of AML/CTF laws have also been highlighted in the Victorian Royal Commission into Crown Melbourne. In closing submissions on 20 July 2021, it was noted that any shortcomings associated with the investigation of the casino regulator are partly attributable to the failure of Crown to provide accurate information. In the words of Counsel Assisting, the Victorian regulator “issued notices for the production of documents which were either not responded to, partially responded to or responded to late or delayed.”

Regardless of any changes to Australia’s AML/CTF laws which are introduced following the current review by the Committee, effective enforcement will require a greater degree of cooperation between AUSTRAC and casino regulators and will require casino operators to actively foster a greater culture of compliance. As noted in the Bergin Report, there is a pressing need for casino regulators to have far better access to information concerning suspect transactions before any meaningful change is likely to occur.

*Jamie Nettleton is a partner with Australian law firm, Addisons and Brodie Campbell is a solicitor with the same company.

Do online responsible gambling tools work?By

Sally Gainsbury* & Robert Heirene*

Findings from a recent study into the use of responsible gambling tools in Australia’s online gambling space will likely have researchers and regulators questioning the effectiveness of current policy.

Researchers from Sydney’s Gambling Treatment and Research Clinic were recently granted unprecedented access to nearly 40,000 customers’ account data from six leading sports and race wagering sites in Australia. With this data on hand, they sought to find out several key questions.

How many online gamblers actually use the responsible gambling tools available to them, such as deposit limits and ‘timeouts’ or ‘take-a-breaks’? And once someone sets a limit, do they alter or remove it? And lastly, are players who use these tools different to those who don’t — are they older or younger, male or female, do they wager often or infrequently?

How many online gamblers actually use responsible gambling tools?

Unsurprisingly, the study found that the majority of customers (83 percent) did not use any responsible gambling tools available to them such as deposit limits, timeouts, and self-exclusion. For those that did, deposit limits were the most commonly used tool at 16 percent, but the study also showed that many customers (25 percent) using limits ended up increasing their limit amount, making it less restrictive than before, whilst a small percentage (3 percent) removed their limits altogether.

These findings will likely have researchers and regulators questioning the effectiveness of current responsible gambling tools and policy.

How do those who use responsible gambling tools differ from those who don’t?

The study made another interesting find.

Customers who didn’t use any responsible gambling tools, and those who only used deposit limits were similar in almost every way. Whilst those who used timeouts and self-exclusion (and potentially also deposit limits) were more likely to be younger, male, placed more bets, bet more money on average, deposited more money on average, won less, had fewer days without gambling, and had more variability in how much they gambled and won day-to-day.

This painted a clear picture: timeout/selfexclusion users appear to gamble in a more problematic way than other customers.

What other findings were interesting?

However, perhaps one of the most interesting findings from the study was something the researchers didn’t intend to look at when they first obtained the data, and that was the impact of a new Australian Government policy that required all online gambling sites to make their customers either set a deposit limit or actively opt out of setting one.

What the authors found was striking—in May of 2019 (the month when the policy came into effect), the number of limits set rose to 187 from an average of 5 limits per month in the preceding 10 months.

What do all these findings tell us about the state of consumer protection for online gambling? Well, it’s clear that many online customers aren’t utilising the protection measures currently offered. This could be for several reasons, including the perception that they’re only for “problem gamblers” or a lack of awareness of the tools, but regardless of the reason more needs to be done by sites to promote these tools.

The study shines a light on a key limiting factor of existing tools: the ability to easily change and remove self-set limits. At the time of the study, all six sites ensured a two-week lag period between requesting a limit increase or removal and the change coming into effect, but clearly this wasn’t a sufficiently large hurdle to prevent customers from making these changes.

What are the limits?

This finding begs several questions (the answers to which are beyond the scope of this article): are site-level limits the answer? Or should banks step in to allow people to set limits on their gambling expenditure that will apply across all sites?

The marked effect of the ‘opt-out’ limit setting policy demonstrated in this study has important implications. If such a minor, inexpensive change can result in a dramatic uptick in the adoption of limits, then the use of this strategy should be trialled for encouraging other responsible gambling behaviors, such as opting to ban gambling on one’s credit card(s).

Overall, this new study provides a comprehensive overview of how Australian customers are using the protection measures available to them. It’s clear there is much to be done to improve online gambling consumer protection, but this study points regulators and industry in the right direction.

* Associate Professor Sally Gainsbury is a leader in gambling psychology research at the Gambling Treatment and Research Clinic. Dr. Robert Heirene is a Postdoctoral Researcher at the Gambling Treatment & Research Clinic, based within the Brain & Mind Centre, University of Sydney.