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As the U.S. gaming industry continues to evolve with the expansion of sports betting, cashless payments and eventually the widespread adoption of internet gaming, compliance executives agree there is a need for them to be involved in negotiations with third-party skin operators and partners.

The need for closer involvement is being driven by federal and state regulatory scrutiny of potential incidents of fraud, money laundering, data breaches and terrorism funding, according to senior compliance officials.

“We implemented our sportsbook late last year,” said Alexis Alvarez, regulatory compliance officer with Gila River Resorts and Casinos in Arizona. “It was one of those scenarios where compliance wasn’t really involved in the contract negotiations and when they signed the contract, they passed it over and said, ‘Here you deal with it.’”

Alvarez admitted what worried him initially was the lack of understanding of a new gaming option and the ability to do it online. He appreciated being able to open the retail sportsbooks first in partnership with BetMGM before launching BetGILA on tribal lands earlier this year.

“Once we understood the systems, we found it wasn’t able to communicate with our player tracking system,” Alvarez said. “It was a whole different platform that also didn’t communicate with our anti-money laundering software. The biggest challenge [was] trying to understand what that platform is and how it connects with your current platform and software.”

Melissa Stockdale, executive director of Title 31 Audit with MGM Resorts International, said there are three crucial anti-money laundering steps when the company is preparing to operate sports betting in a new jurisdiction.

“All of us fall under federal requirements, so the first step is knowing all of your requirements,” Stockdale said. “We all must file CRTs [currency transaction reports]. We must look for that suspicious activity. But what does your state require?”

Stockdale stressed that its critical compliance executives are well versed in what individual states require because there are certain nuances throughout each state’s regulations.

“It is very different from state to state… from what is exactly required,” she said. “But along with those regulations, who is going to be doing the filing. Make sure that it is very clear in your agreement with the operator whoever you may choose.”

“Are third-party operators going to be responsible for these filings or is your compliance team going to be responsible for it?

“And third, if you don’t have a choice, and hopefully you do, compliance is being included more and more in the conversation and I think that is very important,” Stockdale said. “Compliance should be included in the conversation if at all possible.”

“If you didn’t have a choice in your operator … having control of the reporting is important,” she added.

Stockdale advised that before allowing a third-party to launch mobile or retail sports-betting operations, casino operators need to know what reporting they are required to file and is that reporting going to satisfy your company’s requirements.

“Are you going to be able to differentiate on your reports what type of transaction was it — was it cash, chips?” Stockdale said. “Can you perform all of your suspicious activity and required CTR filings with the reports that they are giving you?”

Most important, she said, “don’t let them launch until they can give you exactly what you need to be fully compliant.”

Joining Stockdale and Alvarez for the hour-long SBC webinar entitled "Emerging AML Risks Faced by Casinos" was Justin Hardin, compliance officer at ilani Resorts in Washington State. The panel discussion on Thursday (January 19) was hosted by Sean Topchi, director of business at Kinectify.

Topchi said most companies, including FanDuel and DraftKings, probably have their own AML teams and compliance programs, which is going to help, but early on it is best to figure how their programs work and make sure they meet your standards.

He also recommended that compliance executives have “visibility and transparency,” knowing that third-party operators have their own independent audits and “you have the ability to review those audits.”

“If something goes wrong, do you have the ability and transparency in the decision making and what the remediation will look like?” he added. “And because compliance doesn’t always get a seat at the table … raise your concerns early and often.”

In terms of what keeps Alvarez and Stockdale up at night, it is sports-betting kiosks.

“You have to keep an eye out for people who may be running their own independent operation through your sportsbook by taking third-party wagers and using your system,” Hardin said.

MGM operates nine casinos in Las Vegas, making it easy to go back and forth between properties.

“We have kiosks on the floor and there is a risk with that in terms of knowing who the patron is,” Stockdale said. “I think it adds a risk if you are able to use kiosks at multiple properties.”

Stockdale said for MGM it is about the placement of kiosks and whether casino security has visibility on them.

Another risk is bill stuffing, which is not new in the gaming industry. Bill stuffing is when a patron feeds currency into a slot machine or kiosks and then requests a cash-out voucher without actually gambling.

She added that it is about eliminating risk by limiting how much a gambler can wager at kiosks and, in some cases, restricting some patrons from using kiosks or moving from property to property.

“These kiosks are very high risk,” Alvarez said. “Luckily enough for us we are required to have a camera above the kiosks to identify these activities, along with setting these limits lower to mitigate that risk.”

Alvarez added that at Gila River casinos kiosks transactions require a carded player to minimize any risk of money laundering to other illegal activity.