When you start feeling good about your fraud policies and procedures and how tight and good your controls are, a new fraud scheme develops quickly within the industry, and you get hit with a loss.
Fraud in our industry is not going to go away, ever. A friend of mine that works in the law enforcement arena once told me, “You can find a criminal where the money is,” and what a better place than a casino? I have worked in two industries—banking and gaming—and my friend’s philosophy applies to both industries. Here are a couple of fraud schemes I have witnessed during the last two years.
Payroll Check-Cashing Fraud
This is not a new trend, but the amount of payroll check-cashing doubles every year. The technology available now simplifies the ability for crooks to duplicate a payroll check almost to perfection.
Heck, I have seen some payroll checks lately that are perfect. I have also seen a significant increase for payroll check-cashing fraud during the holiday season, and it appears that less-than-honest people like to hit the industry during this season. So, what actions will keep losses to a minimum? (I say “to a minimum” because we will never eliminate fraud—but we can control it.)
Here are two quick and efficient methods to control payroll check-cashing fraud:
I. Process your payroll check-cashing through a guaranteed check-cashing process.
The fees for these companies might appear to be pricey at the beginning, but they take all the risk, and the casino benefits as far as putting more money on the floor (fees are negotiable and vary through the nation).
For instance, you can cash a check for a guest for $1,000 and the fee is 2.5 percent (for a total of $25). The guest goes to the casino floor and loses the $1,000, and if the average hold is six percent, then the house wins $60, minus the fee, so the net for the house is $35.
I know this is basic and does not include associated costs (i.e. labor and the cost of ordering money from the bank), but if your closest competitor is doing it, you might be forced to compete.
II. Use the extremely efficient and cost effective software available on the market.
There is an internal check-cashing tracking software out there that allows you to set up a merchant, assign a check-cashing limit, and assign a payroll frequency (weekly, bi-weekly, and monthly).
For instance, if Joe’s Bar and Grill wants you to cash their payroll checks at your cage, you can do a bank rating on Joe’s Bar and Grill, and assign a limit and frequency. If Joe’s Bar and Grill’s weekly payroll is $1,500, this software package will track all of the checks cashed this week, and when the amount exceeds the limit, it will warn the cashier that the check will exceed the weekly allowable limit.
The safeguards are there, but keep in mind that we will never be able to stop this type of fraud—but we can control it. As I always tell my staff, we can never relax in this business; we have to keep an eye on trends and be pro-active instead of reactive.
Ticket Redemption Kiosks
This is a relatively new form of fraud. The ticket redemption kiosks are not 100 percent safe either. It is my experience that any equipment that dispenses money is not exempt from variations.
But the question here is: How much and how many variations are adequate? With cashiers, we have a variation policy, but do we have a variation policy for the kiosk? I doubt it….So when do we question the kiosk maintenance team, or the drop team, when a kiosk is off balance?
I know for a fact these kiosks will sometimes overpay or underpay a guest, and that’s a fact of life. Most often, when a kiosk overpays the guest, more than likely the guest will not tell us about it, but if the kiosk underpays a guest, I can assure that the guest will notify us of the short pay, immediately.
I have had ticket redemption kiosks now for over 3.5 years. It is a fact of life that kiosks will make mistakes, and we have to have a tolerance for the kiosk. If the allotted amount varies from one month to another, trust me: Investigate the variance as you would a cashier variance.
Having strong, solid internal control standards, policies, and procedures are not enough. If you have a kiosk team that works solely with the kiosk, day in and day out, sooner or later individuals become very familiar with the equipment, and they can identify equipment engineering weaknesses and how to sabotage and exploit the process. I know of a property that was exposed to several thousands of dollars worth of kiosk losses. Be aware, and be pro-active.
Let’s not kid ourselves. As long as there are humans, we will be exposed to fraud, from outside or internal sources. It seems that every year there is a new scam, and every time they get more complex and creative. But if your casino’s internal control standards, policies, and procedures are solid and evaluated frequently, you will be able to minimize your exposure to fraud.
Al Zayas is currently a Director of Cage and Credit Operations at Cache Creek Casino Resort. He has more than 27 years of experience in banking, finance and casinos. He can be reached at alzayas[at]netzero.net.
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