Managing Governance, Risk and Compliance for Electronic Gaming Machines

by Alan Rampersadh - Key Account Manager, GRIPP Advisory. Alan has over 20 years of experience in the Gaming industry which includes both Consulting and in-house functions and holds qualifications and certifications in Internal Audit.

Generally, there are three types of Electronic Gaming Machines (EGMs) used in land-based gambling that operate on the same premise but are regulated differently according to the requirements of its location. The requirements of Gambling laws in Africa can range from some of the strictest in the world to being rather lenient, depending on your location. The Regulatory environment around EGMs include Gambling Boards, Financial Intelligence Centres (anti-money laundering), Responsible Gambling Programmes, Consumer Protection Acts. The Gauteng Gambling Board Rules and Regulations are generally used as a guideline for compliance in certain African countries.

Slot Machines

Casinos

Slot machines have evolved from having manual reels, using coins/ tokens and operation through levers/ arms to now fully being electronic, interactive, and coinless. Casinos can have a varying number of slot machines determined by the licence stipulations. There is generally no limit on the maximum bet or pay-out for slot machines in casinos.

The casino industry is dominated by the major casino operators in Africa. There are various suppliers of slot machines, who can tailor the machines to individual operator needs. Due to the costs associated with machines, operators generally purchase machines from the various suppliers for their larger operations and move the old machines to smaller and outlying operations. All areas of casino operations are generally regulated, and various departments monitor compliance, including Surveillance, Compliance, and Internal Audit.

Limited Payout Machines (LPMs)

Pubs, Taverns, Sports bars. (sites)

LPMs are slot machines with a restricted bet and pay-out. The main role players in the LPM sector are route, independent and site operators. The maximum number of LPMs which may be operated from a site is five, however, this could increase to forty depending on location and license conditions. LPMs must be a secondary offering to the main business of the site.

Due to the extent of the LPM operations, which can have a large number of sites, a large element of responsibility for compliance sits with the Route Operators. Compliance levels at sites are largely dependant on the site owner/ operator with oversight from the Route Operator. Non-compliance issues are usually as a result of a lack of commitment and enforcement from site owners/ operators. Centralised functions at the Route Operator such as systems, warehousing, call centre, technical support, administration, and licencing provide support for site operators.

Electronic Bingo Terminals (EBTs)

Bingo Halls/ operators

Bingo operations were based on manual bingo games played in Bingo halls at restaurants. Bingo has evolved over the years from being a game played with cards to a game being played using EBTs. EBTs are an improvised version of slot machines. Instead of using a pen and paper cards, EBTs offer an electronic touchscreen that automatically plays the game. Maximum bet and pay-outs are dependant on location and operator.

Some countries prohibit slot machines but allow bingo games. Operators have introduced EBTs in these areas to provide an experience similar to that of slot machines. Regulations around EBT operations are very inconsistent as certain regulators are yet to update Bingo regulations to incorporate EBTs in areas where the operations are similar to casinos. Gaming Rules and Regulations around Technical Standards, Surveillance, Security and Cash Desk need strengthening in the area of EBTs as current gaming Rules and Regulations focus on manual bingo games and bingo halls.

Governance, risk, and compliance (GRC)

Operators face an ever changing and multifaceted business climate coupled with numerous risks and challenges with integrating governance, risk, and compliance (GRC). Bringing people together to share resources and co-ordinate plans, will improve decision making, ensure alignment in working towards common strategies and processes, and reduce costs associated with compliance. Some of the risks and challenges faced include: • Ever-changing regulatory landscape • Stakeholder expectations for performance and growth • Costs of addressing compliance requirements and managing risk • Non-compliance resulting in the following: • Potential fines and penalties • Potential imprisonment • Potential loss of existing licences • Extended/ recurring EGM downtime • Increased cost of EGMs • Sub-standard customer services • Inability to attract and retain talented staff • Disgruntled customers • Reputational damage • Financial Loss • Potential legal consequences

What you can do (Lines of Defence)

By implementing an organised, integrated, and coordinated approach, operators can align governance, risk management and compliance roles and responsibilities. The following lines of defence model illustrates how each line plays an important role within the operator’s risk and control framework.

1. Management Oversight

• Training of staff • Implementation of Standard Operating Procedures (SOPs) • Establishing Internal Controls Standards (ICSs) • Performing Self assessments/ audits

2. Management of Governance, Risk and Compliance

• Compliance functions • Risk Management • Centralised Services (Call Centres, Procurement, Human Resources, Marketing)

3. Internal Audit, which is an independent and holistic service provider in terms of assurance.

4. Independent external assurance

•External audit • Regulators and governing bodies

HOW WE CAN HELP YOU

GRIPP is a focused governance, risk, and internal control (GRC) advisory and business solutions organisation. We provide a holistic and end-to-end GRC suite of services to our clients. These services are core to what we do, and our focus is without distraction of other peripheral advisory and audit services.

GRiPP Advisory service offerings are continued on page 17