Appendix J

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Appendix J

Best practice in gambling regulation: international comparison

Introduction

  1. This appendix will review the regulation of casinos in a number of jurisdictions. Particular attention will be given to the different approaches taken to:
    • the type and role of the regulator
    • the enforcement powers conferred on the regulator
    • AML
    • junkets
    • assessing the suitability of the casino operator.

Type and role of regulator

  1. Governments regulate casino gaming through statutory authorities that have powers to enforce gaming legislation and oversee the operations of the casino.
  2. There are three categories of statutory authorities:
    • a standalone authority
    • a general gaming authority
    • a mixed licensing authority.
  3. New Jersey and Singapore have standalone casino regulators: the New Jersey Casino Control Commission (NJCCC) and the Singaporean CRA. These bodies oversee aggressive regulatory regimes.1
  4. The NJCCC has broad-ranging powers. It can hear and determine applications for a casino licence, make regulations with which a casino operator must comply and work with the Division of Gaming Enforcement (Division).2 The Division is best described as the investigatory and disciplinary arm of the casino regulatory system in New Jersey.3 It is responsible for enforcing the Casino Control Act 2021 (New Jersey) and the regulations made under it.4 The Division also conducts continuing reviews of casino operations through on-site observation and other reviews.5
  5. The rationale for New Jersey’s standalone regulator and its strict regulatory approach can be traced back to the legalisation of casinos in that state in the 1970s. In 1974, New Jersey voters rejected a ballot initiative to legalise casino gambling statewide. In 1976, voters approved a more restrictive referendum to legalise casino gaming in Atlantic City. The objective was to revitalise Atlantic City and provide economic support for older people and people with disability through taxation.6
  6. New Jersey policymakers were keen to restrict the influence of gaming and ensure tight regulations around the operation of casinos.7 This approach was described by Professor Anthony Cabot in evidence given at the Bergin Inquiry. He said:

    New Jersey—I think there was a bit of hostility towards the gaming industry at the state level when it first started and they took a position that they were going to be the most rigid regulatory agency in the world at the time. And so they came out and started regulating the industry in a fairly draconian fashion where they tried to regulate virtually everything down to, you know, the colour of the carpet.8

  7. In contrast, Nevada’s approach to casino regulation has been described as ‘hands off’.9 Nonetheless its focus, the suitability of the operator, has been credited as successfully eliminating the influence of organised crime.10
  8. Nevada has two separate regulatory agencies: the Nevada Gaming Control Board and the Nevada Gaming Commission. The Nevada Gaming Control Board is a full-time regulatory agency that oversees the gaming industry in the state.11 It has several divisions, including an investigations unit that conducts investigations related to casino licence applications and assesses suitability.12 The Nevada Gaming Commission is a part-time body that hears appeals from decisions of the Nevada Gaming Control Board and has original jurisdiction in some licensing matters.13
  9. Most other jurisdictions have a single gaming regulator with responsibility for regulating casinos, electronic and sports gaming, and lotteries. For example, in New Zealand the Gambling Commission oversees larger-scale lotteries, gaming machines and casinos.14 It determines casino licence applications as well as appeals relating to licences to operate gaming machine venues and gaming activities such as larger-scale lotteries and raffles.15 Single gaming regulators also exist in Massachusetts (the Massachusetts Gaming Commission (MGC)) and the United Kingdom (Gambling Commission).
  10. Alberta has a single mixed licensing regulator, the Alberta Gaming, Liquor and Cannabis Commission (AGLC). The AGLC administers the Gaming, Liquor and Cannabis Act 2000 (Alberta), including the licensing of the sale and distribution of liquor and cannabis.16

Enforcement powers

  1. All regulators have investigative and disciplinary powers that are necessary to enforce the local gaming statutes and regulations. The powers vary in scope.
  2. Several regulators have the power to enter a casino to observe whether the operator is conducting its operations in accordance with the regulations. In Alberta, a licensed inspector from the AGLC may enter any gaming premises to ensure compliance with the Alberta Gaming, Liquor and Cannabis Act.17 The inspector is not required to give notice of an inspection. The only limitations are that the inspection must occur at a ‘reasonable time’, and the inspector must carry the required identification and present it on request to the owner or occupant of the premises being inspected.18
  3. As an adjunct to an entry power, some regulators have powers to inspect and impound the books and records of a casino as well as gaming equipment. In New Jersey, the Division can, with the approval of the Division’s director:
    • inspect, examine and impound any gaming devices and equipment
    • inspect, examine and audit any books, records and documents relating to a casino operator’s operations
    • seize, impound or take physical control of any book, record, ledger, game, device, cash box and its contents, counting room or its equipment, or casino operations.19
  4. Some jurisdictions permit the regulator to demand the production of documents or the provision of information. For example, in New Zealand, under the Gambling Act 2003 (NZ), an inspector from the Gambling Commission may serve a notice on any person requiring them to provide or produce to the inspector any information, class of information or documents requested.20
  5. Other jurisdictions impose an obligation on the casino operator to cooperate with or be candid in their dealings with the regulator. For example, the New Jersey Casino Control Act requires ‘each licensee or registrant, or applicant for a [licence] or registration … [to] cooperate with the division in the performance of its duties’.21 The Massachusetts General Laws 2020 (Massachusetts) criminalise both a lack of cooperation with, and making false statements to, the MGC. The penalty is a maximum of five years’ imprisonment or a fine of USD25,000.
  6. Cooperation and candour with the regulator are sometimes imposed through disciplinary powers. In Singapore, the CRA can take disciplinary action (which includes cancelling or suspending a licence) where the casino operator has failed to provide information that the Casino Control Act 2006 (Singapore) requires, or where the casino operator has knowingly or recklessly provided false or misleading information.22 Similarly, in the United Kingdom, the Gambling Act 2005 (UK) authorises the Gambling Commission to revoke or suspend an operating licence, if the Commission believes that the operator has failed to cooperate with a statutory review process.23
  7. Many jurisdictions in the United States of America classify their gaming or casino regulators as law enforcement agencies, and give them corresponding powers.
  8. In Massachusetts, the MGC has an Investigations and Enforcement Bureau. Its function is to maintain the integrity of the Massachusetts gaming industry.24 The Massachusetts General Laws provide that members of the gaming enforcement unit of the State Police are to be assigned to the Bureau to investigate gaming violations by a licensee or any activity at a gaming establishment.25 In order to formalise and strengthen the partnership contemplated in the Massachusetts General Laws, the MGC and the State Police have entered into a memorandum of understanding.26 This memorandum deals with various matters such as the manner in which State Police are deployed to work with the Bureau,27 and the obligation of the MGC to pay the salaries of State Police personnel who are deployed to the Bureau in certain circumstances.28
  9. The Massachusetts General Laws also enable the MGC to have a permanent presence at casinos in order to exercise ‘its oversight responsibilities with respect to gaming’.29
  10. In New Jersey, there is significant cooperation between the Division and the Casino Gaming Bureau of the New Jersey State Police.30 The Casino Investigations Unit, a division of the Casino Gaming Bureau, has authority to prosecute offences under the New Jersey Casino Control Act and has a permanent presence at all 12 casinos in Atlantic City.31
  11. Regulators may rely on notification provisions to assist in enforcement. In Alberta, the Casino Terms and Conditions and Operating Guidelines (Handbook) set out the conditions of a casino licence. One condition is that the casino operator must notify the AGLC immediately if any of its officers, shareholders, directors, owners or employees are charged with or convicted of an offence under certain nominated statutes, including the Criminal Code 1985 (Canada) and the Alberta Gaming, Liquor and Cannabis Act.32

AML

  1. There are two principal approaches to managing the risks of money laundering through casinos. One method is by enacting separate legislation that imposes reporting obligations on casinos.
  2. In the United States of America, Title 31 of the Code of Federal Regulations 2021 (USA) requires casinos to:
    • develop and implement an AML program reasonably designed to assure and monitor compliance with the requirements set out in the relevant Federal laws
    • comply with specific record-keeping requirements with respect to each deposit of funds, account opened or line of credit extended
    • comply with the special information-sharing procedures to deter money laundering and terrorist activity
    • report any suspicious transactions relevant to possible violations of law or regulation to the Financial Crimes Enforcement Network.33
  3. The other approach, which is adopted in Alberta and the United Kingdom, is to require casinos to take certain AML action as a condition of the casino licence. In Alberta, the AGLC is a reporting entity under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act 2000 (Canada).34 In order for casinos to fulfil their obligations, the Handbook sets out requirements that each casino must meet in order to combat money laundering. These include:
    • a requirement that all registered gaming workers complete an AML training course
    • an obligation to identify patrons for certain cash transactions
    • the appointment of AML administrators responsible for entering information into the AGLC AML database
    • the development and maintenance of internal facility policy and procedures relating to AML, where the AGLC’s prior approval must be obtained for certain programs and procedures
    • a prohibition on conducting denomination exchanges in excess of CAD1,000 per patron on the same gaming day
    • tracking transactions that exceed CAD3,000.35

Junkets

  1. There are two approaches to regulating junkets:
    • a regulator-centric approach
    • a casino-based approach.
  2. A regulator-centric approach places the responsibility for regulating junkets with the regulator. Here, the regulator determines whether a junket can operate by assessing the suitability of the junket operator. Singapore and New Jersey have adopted this approach.36
  3. The New Jersey approach is less aggressive. The NJCCC licenses junkets as an ‘ancillary casino service industry enterprise’ and the junket operator is required to establish its good character, honesty and integrity.37 The junket operator must also provide any financial information requested.38 The NJCCC ensures that the casino operator properly supervises the junket operator by holding the casino operator responsible for any breaches of the Casino Control Act the junket operator or representative commits.39
  4. In Singapore, the Casino Control Act strictly regulates the licensing of junket operators, which are referred to as IMAs.40 The strict approach reflects the Singaporean government’s concern about criminal influences on junkets and the opportunity to launder money through junket operations. On the introduction of the Casino Control Bill 2006 (Singapore), the Deputy Prime Minister said:

    Because of the large sums of money transacted between the junket promoters, their clients and the casinos, it is important that junket promoters are well-regulated to ensure that the junkets do not provide a cover for crime syndicates to engage in criminal activities, such as money laundering. For this reason, clause 110 of the Bill shall require junket operators to be licensed before they can work with our casinos.41

  5. The CRA must determine the suitability of an IMA.42 In its assessment, the CRA takes into account whether the applicant is of good character, is financially sound and stable, has a satisfactory ownership structure, has business associations with persons not of good repute or has a record of non-compliance with legal or regulatory requirements.43 The regulations require an IMA to keep extensive records of all players’ names and identity information and to provide this information to the CRA on request.44 The regime also requires the casino to certify that entering into an agreement with an IMA will not undermine the credibility, integrity and stability of casino operations.45
  6. The casino-based approach is applied in some jurisdictions, including Nevada. Junket operators, known as ‘independent agents’, must register with the Nevada Gaming Control Board.46 No probity assessment is required and a casino is not required to apply internal controls in engaging with the independent agent.47
  7. Nevada’s approach may be explained by the unique nature of independent agents:
    • In relation to the internal control procedures at casinos, the contractual relationship is between the player and the casino.
    • Independent agents cannot extend credit to junket players.
    • Independent agents cannot take a share or commission of junket players’ actual winnings and are paid based on a theoretical earning potential.48

Suitability

  1. All casino regulators assess the suitability of an applicant to operate a casino, along with the suitability of the applicant’s associates. Public faith and confidence in casinos will only exist if those who are licensed to operate them, as well as their associates, are of good moral character.49
  2. The requirement that a casino operator be a suitable person can be traced back to the decision of the Nevada Gaming Commission to adopt a suitability requirement in response to the rising influence of organised crime in the state.50 The requirement was introduced in 1975 to ensure that a person could not operate a casino unless they:
    • are of good character and reputation
    • have adequate business competence and experience.51
  3. Most jurisdictions have suitability requirements that address three characteristics:
    • character and integrity
    • financial ability
    • management ability.
  4. The character and integrity requirement takes a number of forms, but generally demands that an applicant (or an associate) be of good character. This is often regarded as someone who acts honestly and with integrity. Some jurisdictions, such as Alberta and Nevada, require the assessment to take into account previous criminal activity.52
  5. The financial ability assessment examines the operator’s soundness and the stability of its financial position. If a casino does not have sufficient financial support, it may turn to organised crime to help it operate.53
  6. The rationale for the management ability requirement is the same as for financial stability. A casino operator and its associates should be capable of managing and operating a casino to avoid nefarious organisations infiltrating it due to financial or managerial incompetence.
  7. The standard of proof required to meet the suitability requirement differs between jurisdictions. In Massachusetts, an applicant has the burden of proving suitability by clear and convincing evidence.54

Corporate structure

  1. While suitability is a key requirement in granting a licence, some jurisdictions either require the applicant to have a specific corporate structure or impose limits on the ownership structure.
  2. In Alberta, the Gaming, Liquor and Cannabis Regulation 1996 (Alberta) provides that only a charitable or religious organisation can apply for certain gaming licences, and then only if the proceeds from gaming will be used for an approved charitable or religious purpose.55 This reflects the history of gambling in Canada, where churches and other community organisations raised funds through raffles or lotteries.56
  3. In Singapore, the Casino Control Act places various restrictions on share ownership. For example, it prevents substantial changes in shareholding within the first 10 years from the date on which a second site for a casino is designated under the Act.57 Thus, the principal shareholder in a casino operator cannot, without approval of the CRA, reduce its shareholding to below 20 per cent of the issued capital during that period.58 In addition, a person cannot, on or after the date a casino licence commences, acquire or enter into an arrangement to control more than 5 per cent of the issued shares in the casino operator without the Minister for Home Affairs’ approval.59 Additional approvals are required if a person seeks to control between 12 per cent and 20 per cent, or 20 per cent or more, of the issued shares.60
  4. The reason for these restrictions was explained by the then Deputy Prime Minister of Singapore upon the introduction of the Singapore Casino Control Bill. He said that these restrictions were required so that the regulator and the Minister would be aware of significant shareholdings and could ensure that criminals could not infiltrate the operation of a casino by controlling an interest in a casino operator.61

Associates and key personnel

  1. Most jurisdictions assess the suitability of those who are associated with a casino operator. This sometimes includes certain employees.
  2. An associate is usually defined as a person who is able to influence or control the casino operator. For example, the Gaming Control Act 2021 (Nevada) describes an affiliate as someone who is ‘directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with, [the licensee]’.62
  3. Under the New Zealand Gambling Act, a person is deemed to have ‘significant influence in a casino’ in circumstances that include if they:
    • are a director of the company that holds the casino licence; or
    • own shares (with certain voting rights), directly or indirectly, in the licence holder.63
  4. Another way in which the suitability criterion is applied to those associated with a casino operator is by reference to the position they hold. In Alberta, the Handbook describes the ‘key employees’ who are subject to the suitability requirement.64 They include senior management (such as the CEO or CFO), security management personnel and any person holding a position specified by the AGLC.65
  5. The United Kingdom has a more generalist approach. In its Licensing and Policy Statement, the Gambling Commission simply notes that it will, through the process of determining licence applications, assess the suitability of those persons ‘considered relevant to the application’.66 That will include persons exercising a function in connection with, or having an interest in, the licensed activities.67

Endnotes

1 The Singapore Government announced in 2020 that the Casino Regulatory Authority of Singapore will be regulated by a new generalist gaming agency, the Gambling Regulatory Authority. See ‘Establishment of Gambling Regulatory Authority and Review of Gambling Laws’, Ministry of Home Affairs (Web Page, 3 April 2020) < https://www.mha.gov.sg/mediaroom/press-releases/establishment-of-gambli…External Link >.

2 Casino Control Act, NJ Stat Ann §§ 5:12-63(1), 5:12-69 (2021).

3 ‘Division of Gaming Enforcement’, State of New Jersey Department of Law & Public Safety (Web Page) < https://www.njoag.gov/about/divisions-and-offices/division-of-gaming-en…External Link >.

4 Casino Control Act, NJ Stat Ann § 5:12-76a (2021).

5 Casino Control Act, NJ Stat Ann § 5:12-76k (2021).

6 Exhibit RC1618 Article: The Legalization and Control of Casino Gambling, 1980, 247 (n 14), 278 (n 174), 285.

7 Melissa Rorie, ‘Regulation of the Gaming Industry across Time and Place’ (Research Paper, Center for Crime and Justice Policy, University of Nevada, Las Vegas, September 2017) 2.

8 Bergin Inquiry Transcript (Cabot), 25 February 2020, 115.

9 Melissa Rorie, ‘Regulation of the Gaming Industry Across Time and Place’ (Research Paper, Center for Crime and Justice Policy, University of Nevada, Las Vegas, September 2017) 3.

10 Jennifer Roberts, Brett Abarbanel and Bo Bernhard, ‘Practical Perspectives on Gambling Regulatory Processes for Study by Japan: Eliminating Organized Crime in Nevada Casinos’ (Research Report, International Gaming Institute, University of Nevada, Las Vegas, 25 August 2017) 14–15.

11 ‘About Us’, Nevada Gaming Control Board (Web Page) < https://gaming.nv.gov/index.aspx?page=2External Link >. This includes gaming machines, casinos and other types of wagering: see, eg, Gaming Control Act, Nev Rev Stat § 462.130 (2021).

12 ‘About Us’, Nevada Gaming Control Board (Web Page) < https://gaming.nv.gov/index.aspx?page=2External Link >.

13 ‘Gaming Commission’, Nevada Gaming Control Board (Web Page) < https://gaming.nv.gov/index.aspx?page=3External Link >.

14 Gambling Act 2003 (NZ) s 224.

15 Gambling Act 2003 (NZ) s 224. Section 10 of the Gambling Act 2003 (NZ) prohibits the licensing of any new casino venues.

16 Gaming, Liquor and Cannabis Act, RSA 2000, c G-1, s 3.

17 Gaming, Liquor and Cannabis Act, RSA 2000, c G-1, s 103(1).

18 Gaming, Liquor and Cannabis Act, RSA 2000, c G-1, ss 103(1), (3).

19 Casino Control Act, NJ Stat Ann § 5:12-79 (2021).

20 Gambling Act 2003 (NZ) s 333(1). This power is similar to the power conferred by s 10.4.10(1) of the Gambling Regulation Act 2003 (Vic).

21 Casino Control Act, NJ Stat Ann § 5:12-78 (2021).

22 Casino Control Act (Singapore, cap 33A, 2007 rev ed) s 54(1).

23 Gambling Act 2005 (UK) ss 119(1), 120(1)(c).

24 ‘Investigations and Enforcement Bureau’, MGC (Web Page) < https://massgaming.com/the-commission/inside-mgc/investigations-and-enf…External Link >.

25 Mass Gen Laws ch 22C §70, ch 23K § 6(c) (2020).

26 ‘2018 Community Mitigation Fund Specific Impact Grant Application’, MGC (29 January 2018) < https://massgaming.com/wp-content/uploads/Massachusetts-State-Police-20…External Link >.

27 Memorandum of Understanding by and between the MGC and the Massachusetts Department of State Police, dated 5 March 2014, cls 1–5 < https://massgaming.com/wp-content/uploads/Massachusetts-State-Police-20…External Link >.

28 Memorandum of Understanding by and between the MGC and the Massachusetts Department of State Police, dated 5 March 2014, cls 8c, 12 < https://massgaming.com/wp-content/uploads/Massachusetts-State-Police-20…External Link >.

29 Mass Gen Laws ch 23K § 4(20) (2020).

30 The website of the New Jersey State Police states that members of the Casino Investigations Unit (a division of the Casino Gaming Bureau) work in conjunction with the investigators from the Division. See ‘Casino Investigations Unit’, New Jersey State Police (Web Page) < https://www.njsp.org/division/investigations/casino-investigations.shtmlExternal Link >.

31 ‘Casino Investigations Unit’, New Jersey State Police (Web Page) < https://www.njsp.org/division/investigations/casino-investigations.shtmlExternal Link >.

32 AGLC, Casino Terms & Conditions and Operating Guidelines (22 June 2021) ss 4.11.2–4.11.3.

33 31 CFR §§ 1021.200–1021.210, 1021.320, 1021.400–1021.410, 1021.500–1021.540 (2021).

34 Proceeds of Crime (Money Laundering) and Terrorist Financing Act, RSC 2000, c 17; AGLC, Casino Terms & Conditions and Operating Guidelines (22 June 2021) s 18.2.1.

35 AGLC, Casino Terms & Conditions and Operating Guidelines (22 June 2021) ss 18.4.3–18.4.4, 18.4.8–18.4.9, 18.4.12, 18.5, 18.7–18.8.

36 Bergin Inquiry Transcript (Bromberg), 24 February 2020, 97.

37 Casino Control Act, NJ Stat Ann §§ 5:12-92a(3), c(4) (2021).

38 Casino Control Act, NJ Stat Ann § 5:12-92c(4) (2021).

39 Casino Control Act, NJ Stat Ann § 5:12-102g (2021).

40 Casino Control Act (Singapore, cap 33A, 2007 rev ed) s 110A.

41 Singapore, Parliamentary Debates, Legislature, 13 February 2006, 2323 (Mr Wong Kan Seng).

42 Casino Control Act (Singapore, cap 33A, 2007 rev ed) s 110B(2); Casino Control (Casino Marketing Arrangements) Regulations 2013 (Singapore) pt II.

43 Casino Control (Casino Marketing Arrangements) Regulations 2013 (Singapore) reg 13(1).

44 Casino Control (Casino Marketing Arrangements) Regulations 2013 (Singapore) reg 29.

45 Casino Control (Casino Marketing Arrangements) Regulations 2013 (Singapore) reg 7(1)(d)(i).

46 Regulations of the Nevada Gaming Commission and Nevada Gaming Control Board, current as of 21 August 2021, reg 25.020 https://gaming.nv.gov/modules/showdocument.aspx?documentid=15042External Link

47 Regulations of the Nevada Gaming Commission and Nevada Gaming Control Board, current as of 21 August 2021, reg 25.020 https://gaming.nv.gov/modules/showdocument.aspx?documentid=15042External Link

48 Bergin Inquiry Transcript (Cabot), 25 February 2020, 125–7.

49 See, eg, In the Matter of Wynn MA, LLC (MGC, 30 April 2019) 14; Bergin Inquiry Transcript (Rose), 25 February 2020, 170–1.

50 Jennifer Roberts, Brett Abarbanel and Bo Bernhard, ‘Practical Perspectives on Gambling Regulatory Processes for Study by Japan: Eliminating Organized Crime in Nevada Casinos’ (Research Report, International Gaming Institute, University of Nevada, Las Vegas, 25 August 2017) 7–10.

51 Jennifer Roberts, Brett Abarbanel and Bo Bernhard, ‘Practical Perspectives on Gambling Regulatory Processes for Study by Japan: Eliminating Organized Crime in Nevada Casinos’ (Research Report, International Gaming Institute, University of Nevada, Las Vegas, 25 August 2017) 10–11.

52 AGLC, Casino Terms & Conditions and Operating Guidelines (22 June 2021) s 4.9.10; Gaming Control Act, Nev Rev Stat § 463.170 (2021).

53 Bergin Inquiry Transcript (Rose), 25 February 2020, 175–6.

54 See discussion in In the Matter of Wynn MA, LLC (MGC, 30 April 2019) 14–16.

55 Gaming, Liquor and Cannabis Regulation (Alta Reg 143/1996) s 20(1).

56 Jason Azmier and Robert Roach, ‘The Ethics of Charitable Gambling: A Survey’ (Research Report No 10, Canada West Foundation, December 2000) 3.

57 Casino Control Act (Singapore, cap 33A, 2007 rev ed) s 42(1).

58 Casino Control Act (Singapore, cap 33A, 2007 rev ed) s 42(1)(a)(i).

59 Casino Control Act (Singapore, cap 33A, 2007 rev ed) s 65(1)(b).

60 Casino Control Act (Singapore, cap 33A, 2007 rev ed) ss 66(1)(a)–(b), 66(3).

61 Singapore, Parliamentary Debates, Legislature, 13 February 2006, 2323 (Mr Wong Kan Seng).

62 Gaming Control Act, Nev Rev Stat § 463.0133 (2021).

63 Gambling Act 2003 (NZ) s 7.

64 AGLC, Casino Terms & Conditions and Operating Guidelines (22 June 2021) s 4.9.10.

65 AGLC, Casino Terms & Conditions and Operating Guidelines (22 June 2021) s 4.9.3.

66 Gambling Commission, Licensing, Compliance and Enforcement under the Gambling Act 2005: Policy Statement (June 2017) 8 [3.10].

67 Gambling Commission, Licensing, Compliance and Enforcement under the Gambling Act 2005: Policy Statement (June 2017) 8 [3.10].

Reviewed 25 October 2021

Appendices