Mikhail Ben Rabah, CFE
Government Auditing Manager
Presidency of the Government
If you ask any internet search engine to execute a query about “gambling” and “fraud,” almost all information returned will be addressing the fact that gamblers are typical potential fraudsters. Indeed, gambling addiction generates pressure to commit fraud and is considered a high fraud risk factor. Gamblers will try anything to continue feeding their excessive gambling habits. Most fraud examiners are aware of this risk, and organizations should be attentive to their employees’ conduct. If a gambling problem rises, the organization should assist the employee through adequate employee support programs.
However, rarely do we see anyone raise the matter that gamblers could be defrauded too. Subconsciously, we might act as if gamblers are wrongdoers and therefore have no rights to claim. And if they are victims of a fraud scheme, they deserve it. It’s a punishment “morally” deserved. This bias would prevent us from admitting that gamblers are consumers and should be considered so.
As a matter of fact, gamblers, like the elderly, are a vulnerable population who get defrauded for many reasons:
Gambling, especially when it becomes out of control, is considered socially unacceptable. Thus, gamblers often feel alone in their ordeal. Moreover, they try to hide their addiction and fear that their families, friends or employers will uncover their “misconduct.” Because of these fears, they are less likely to claim their rights or sue a casino or a gambling company.
Addicted gamblers are used to losing money. Hence, getting defrauded will not change their financial situation. They are more concerned about recovering losses by more gambling rather than suing the fraudsters.
The gambling and gaming industry seem to be less transparent than other sectors. Those companies give the impression that they are untouchable fortresses.
Defrauded gamblers seem to be abandoned victims. The following scenario demonstrates how difficult it can be for gamblers to claim their rights.
“Y” is a public betting company specializing in sports betting. The rules governing the company’s betting games stipulate that a percentage of the total prize pool for each betting consent is allocated to a special account. Also, the prizes not claimed by the bettors are allocated to this account. The funds collected are redeployed in the prize pool of future betting contests as an “incentive jackpot.” An ad-hoc commission chaired by the company’s CEO decides when and how much to allocate to the upcoming consents. The decision is recorded in the meeting minutes.
The company “Y” is reluctant to communicate to its clients these decisions and what criteria are used in funds allocation. Furthermore, bettors know little about the amount of money feeding this mysterious account. When the company suddenly stops allocating “incentive jackpots” to betting consents for many weeks, bettors start to suspect something is wrong. Many bettors raise the issue by protesting on the company’s Facebook page. No response is given. Bettors seem to have accepted a fait accompli and believe there is nothing to do about it. In the absence of a reasonable explanation, they have every reason to think that they are being defrauded by the company and the money deducted from pot bets is gone.
Such issues and other similar cases would be adequately addressed and resolved if:
The regulation is more demanding regarding reporting transparency and bettors’ rights.
The Government Auditing Agencies are both independent and reactive to such issues.
The company’s Internal Audit Department is independent and effective.
The Board of Directors and the Audit Committee are functioning as intended.
There is an effective fraud prevention and detection program.
Potentially, company “Y” could lose customers and suffer reputational damage due to lack of transparency and a disregarding attitude toward bettors. The point to remember is, gamblers are not only potential fraudsters. They can be victims of fraud too.
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