Canadian Casinos in Hot Water Over Source of Funds Checks

In the recent Value-For-Money-Audit completed in November of 2022, a number of concerns were brought to light about the state of Canadian casinos.

Here are some of the most important issues that the currenct Canadian gambling industry faces.

 Source of Funds?

The Auditor General has revealed that most Ontario casinos do not practise OLG procedures. The sudden neglect from the province to follow guidelines - set out twenty-two years ago to enhance economic development and practise responsible gambling - cannot be by chance. 

Ontario launched its regulated betting and iGaming market on 4 April 2022. Is this a possible reason for casinos to throw away basic AML practices or is there a bigger fish to fry?

Ontario casinos are not verifying the source of funds from players who deposit large amounts of money. Of course, without verification, this risks undetected money laundering activities. 

In June 2021, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) requested casinos to establish the source of funds for single transactions over $100,000. In May 2021, OLG implemented this as a requirement for all casinos. 

 Important Concerns

Another issue revealed by the report is that online players are not using OLG's responsible gambling tools. OLG's Internet gaming customers have grown more than eight times over the last five years. However, despite this significant growth in Internet players, new players are usually not using the tools provided. 

For example, the use of the loss-limits tool dropped from 33% of active players in June 2017 to only 11% of active players in June 2022. 

Finally, it appears that players who do not use OLG's official gaming website can still access iGaming Ontario's private operator sites. With that, the growth of OLG's Internet gaming income has slowed with the welcoming of private-sector gaming operators.

 Mass Slot Machine Reset 

As per the Audit General's Value-For-Money-Audit, neither OLG nor the Alcohol and Gaming Commission of Ontario (AGCO) ensured that slot machines connect to OLG's central monitoring system. 

According to AGCO standards, slot machines should pay out 85% in winnings over each machine's lifetime. The OLG requires casino operators to follow these standards and ensure that the slot payout is 85% or above. Therefore, AGCO should have controls to monitor adherence to the standard.

However, a mass slot machine reset may have impacted slot payouts. Slot machines are generally reset when the software is updated, the hardware replaced, or when technical problems occur. 

According to findings, several casino operators performed a mass slot machine reset between October 2021 and April 2022. OLG said operators' main reason for resetting the machines was to "specifically change the payback percentages on those games". 

Are these factors causing casino operators to be less careful with incoming money because they know that the OLG has been occupied with the launch of the iGaming market? 

OLG should ensure that casino operators comply with AML procedures, but it does appear that they are preoccupied as reporting of suspicious activity is at an all-time low of less than 1% of revenues in 19 of 27 casinos.