NIGA
CERTI Fl ED SEMINAR INSTITUTE COMMISSIONER CERTIFICATION TRAINING LEVEL Ill
Sept. 15 - 17 , 202 1 Temecula, CA
Commissioner Certification Training Level III AGENDA November 15 - 17, 2021 Pechanga, Calif PST time
Monday, November 15
8:00 AM 9:00 AM
Breakfast to be provided Avoiding and Detecting Fraud: Active Investigation & Forensic Audits Josh Peukert, CFE & CIA Gaming MICS Compliance, Blue Bird CPA's Break Title 31/OFAC Josh Peukert, CFE & CIA Gaming MICS Compliance , Blue Bird CPA's Lunch Break
9:00 AM 10:30 AM
10:30 AM 10:45 AM
10:45 AM 12:30 PM
12:30 PM 2:00 PM
Effective Regulation of Gaming Elizabeth Homer, Homer Law CHTD Break Hearing and Appeals Elizabeth Homer, Homer Law CHTD Tuesday, November 16
2:00 PM 3:15 PM
3:15 PM
3:30 PM
3:30 PM 5:00 PM
8:00 AM 9:00 AM
Breakfast to be provide d
Conflict Management Elizabeth Homer, Homer Law CHTD
9:00 AM 10:30 AM
10:30 AM 10:45 AM
Break
Employment Issues for Gaming Regulators Charlene Jackson, Jackson Law
10:45 AM 12:30 PM
12:30 PM 2:00 PM
Lunch Break
Network Risk Assessment Peter Nikiper, BMM Test Labs
2:00 PM 3:15 PM
3:15 PM
3:30 PM
Break
Managing a Tribal Gaming Regulatory Agency Billy David, Be-Co-Pa & Associates Wednesday, November 18
3:30 PM 5:00 PM
8:00 AM 9:00 AM
Breakfast to be provided
Surveillance Frauds, Threats & Vulnerabilities, PT 1 Billy David, Be-Co-Pa & Associates
9:00 AM 10:30 AM
10:30 AM 10:45 AM
Break
Surveillance Frauds, Threats & Vulnerabilities, PT 1 Billy David, Be-Co-Pa & Associates
10:45 AM 12:15 PM
Please plan to stay for the entire class on each day to get your certificate of completion. Please be on time for sessions
9/15/20
Avoiding and Detecting Frauds Sheryl L. Ashley, CIA, CFE, FCPA, CPA Partner BlueBird, CPAs
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Definition of Fraud Black’s Law Dictionary:
“…all multifarious means which human ingenuity can devise, and which are resorted to by one individual to get an advantage over another by false suggestions or suppression of the truth. It includes all surprise, trick, cunning, or dissembling, and any unfair way by which another is cheated.”
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Common Law 4 Elements of Fraud
• A material false statement. • Knowledge that the statement was false when it was uttered. • Reliance of the victim on the false statement. • Damages resulting from the victim’s reliance on the false statement.
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Abbreviated Definition of Fraud Fraud includes any intentional or deliberate act to deprive another of property or money by guile, deception or other unfair means.
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AICPA Definition of Fraud “An intentional act that results in material misstatement in financial statements that are subject to audit…There are two types of fraud: • Misstatements from fraudulent financial reporting & • Misstatements frommisappropriation of assets”
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Principal Categories of White Collar Crime
Misrepresentation of material facts Concealment of material facts
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Bribery
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Conflicts of interest
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Theft of money or property
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• Theft of trade secrets or intellectual property • Breach of fiduciary duty • Statutory offenses
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Predication • Predication is the totality of circumstances that would lead a reasonable, professionally trained, prudent person to believe that a fraud has occurred, is occurring, or will occur. • All fraud investigations must be based on proper predication; without it, a fraud investigation should not begin.
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The Fraud Triangle (Cressey)
OPPORTUNITY
FINANCIAL PRESSURE
RATIONALIZATION
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Top Ten Personal Characteristics for Fraud • Living beyond their means • Overwhelming desire for personal gain • High personal debt • Close association with customers/vendors • Wheeler-dealer attitude
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Top Ten Personal Characteristics for Fraud • Undue family/peer pressure • Compulsive gambling habits or other addiction • Feeling not commensurate with responsibility • Challenge to beat the system • No recognition for job performance
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Behavioral Red Flags Displayed by Perpetrators
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Top Ten Organizational Characteristics for Fraud • Placing too much trust in employees • Lack of proper authorization procedures • Inadequate disclosure of personal investments/income • Lack – custody/authorization by same person • Lack of independent checks on performance
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Top Ten Organizational Characteristics for Fraud • Inadequate attention to details
• Lack – custody/recording by same person • Lack – separation of duties in accounting • Lack – clear lines of authority and responsibility • No independent review by internal audit
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Employee (Misconduct or Abuse) • Use equipment for personal use • Use internet for personal use at work • Conduct personal business while at work • Long breaks without approval • Late to work/leave early • Slow or sloppy work • Use sick leave when not sick • WWUI (working while under the influence…)
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Perpetrator’s Education Level
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Perpetrator’s Age
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Perpetrator’s Gender
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Common Schemes
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Duration of Fraud Schemes
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Initial Detection of Occupational Frauds
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Source of Tips
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What To Do When We Get Home • How Do We Identify a Perpetrator Before He/She Strikes? • Tackle all three sides of the Fraud Triangle • Raise the overall fraud awareness • Robust anonymous tip reporting process • Develop/enhance policies and procedures • Real pre-employment personality testing for key positions • Also have exit screening with personnel that terminate employment
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Forensic Audits
Sheryl L. Ashley, CIA, CFE, FCPA, CPA, Partner BlueBird, CPAs
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Definitions – External Audit This is an audit performed by an auditor engaged in public practice, leading to the expression of a professional opinion that lends credibility to the assertion under examination. (Materiality, professional skepticism) Forensic accountants can be engaged in public practice or employed by insurance companies, banks, police forces, government agencies, and other organizations. • Litigation (preparing documents & expert testimony) • Investigative
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Definitions – Forensic Accounting The forensic accountant or accounting comprises two distinctly different fields. • Forensic generally is defined as “belonging to the courts of justice.” • An accountant generally is identified as an “expert in the field of accounting.” • Accounting is described as a methodology for organizing, preserving, and reporting on business transactions.
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Definitions – Forensic Audit While a regular audit focuses on errors, omissions, assertions, and misstatements, a forensic audit focuses on suspicious activity, exceptions, and irregularities.
Typical areas of focus include payables, payroll, profits, and revenues.
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Definition – Forensic Investigation • While a forensic investigation can be found in any discipline, including accounting, medicine, DNA analysis, or engineering, the general definition applies in any case. • The forensic investigation involves using special investigative skills in order to carry out an inquiry so that the outcome may be used in a court of law.
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Definition – Internal Audit This is an audit performed by an employee who examines operational evidence to determine whether prescribed operating procedures have been followed.
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Types of Forensic Accountant Investigations
• Employee fraud and criminal fraud • Business economic losses • Shareholder and partnership disputes • Insurance claims • Personal injury and wrongful termination claims • Matrimonial disputes • Mediation and arbitration 29 Forensic Investigator Should Have Knowledge of: • Constraints of legal system • Rights of suspects • Skills in interview techniques • Attorney-client work product privilege • Criminal rules of evidence and procedure
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Useful Websites:
www.acfe.com
Certified Fraud Examiner
www.acfei.com
Certified Forensic Consultant
www.aicpa.org
Certified in Financial Forensics
www.fcpas.org
Forensic Certified Public Accountant
www.imanet.org
Certified Management Accountant
www.isaca.org
Certified Information Systems Auditor
www.nacva.com
Certified Forensic Financial Analyst
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Active Investigations
Sheryl L. Ashley, CIA, CFE, FCPA, CPA, Partner BlueBird, CPAs
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Quiz Question 1
• How early can children lie as successfully as adults?
a) 5 b) 8 c)
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Quiz Question 2
• What percentage of adults say it’s okay to lie to avoid hurt feelings?
a) 44% b) 65% c) 77%
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Quiz Question 3
• What percentage of adults lie to make themselves sound cool?
a) 25% b) 33% c) 44%
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Quiz Question 4
• What percentage of teens think downloading illegal music is more justified than stealing from
a store? a) 26% b) 47% c) 78%
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Quiz Question 5
• What percentage of adults 18 to 24 would not admit to having STDs to their partner? a) 7% b) 17% c) 37%
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Quiz Question 6
• What percentage of teens admit to lying to their parents?
a) 97% b) 98% c) 99%
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Quiz Question 7
• What percentage of men approve of cheating if their partner loses interest?
a) 14% b) 26% c) 56%
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Facts About Lies On Average: • A person lies 3 times during 10 minutes of conversation • 42% of adults think its okay to lie • 54% of lies are accurately detected • 98% of teenagers lie to their parents
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Facts About Lies • Generational differences: o 1922-1945 •
Bernie Madoff, Bernie Ebbers, Ken Lay
o 1946-1964 o 1965-1980 o 1980-1994 • On average the older the generation, the higher the loss!
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Micro-Expressions • A micro-expression is a very brief facial expression shown on the face of humans when one is trying to conceal an emotion. o A micro-expression can not be faked. o It usually is only less than 1/25th of second.
• (Dr. Paul Ekman)
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Micro-Expressions
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7 Universal Facial Expressions of Emotion
Happiness
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Surprise Sadness
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Fear
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Anger
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Contempt
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Disgust
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Happiness
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Happiness & Fake Smiles
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Surprise
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Surprise
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Sadness
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Sadness
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Fear
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Fear
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Anger
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Anger
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Contempt
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Contempt
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Disgust
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Disgust
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What Does This Look Like to You?
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Other Things to Think About…
The face often contains two messages: • What the liar wants to show and • What the liar wants to conceal. False, but convincing, expressions may occur one moment and concealed expressions the very next moment. The true, felt expressions of emotions occur because facial actions can be produced involuntarily, without thought or intention.
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Other Things to Consider:
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Do I Need an Attorney? • Attorney-client privilege prohibits the disclosure of communications between the attorney and the client for the purpose of rendering legal advice • Work product doctrine protects Attorney’s notes and certain other materials the Attorney prepares in anticipation of litigation. • If your investigation is under the direction of an Attorney it may also be protected by the Attorney-client privilege and the work product doctrine.
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Investigative Techniques – Interviewing
• Before embarking on an interview, the auditor should review the case file to ensure that it does not contain important information that has been overlooked.
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Investigative Techniques – Interviewing • Interview Basics: o Only interview one person at time o In a private place o Get a commitment for assistance from the interviewee before the interview begins
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Investigative Techniques – Interviewing • Types of questions in an interview:
o Introductory Questions o Informational Questions o Closing Questions o Assessment Questions o Admission-Seeking Questions
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Investigative Techniques – Interviewing • Introductory Questions: o Provide the Introduction o Establish Rapport o Establish the Interview Theme o Observe Reactions
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Investigative Techniques – Interviewing • Introductory Questions: o Provide the Introduction •
Avoid using titles, (name and department is fine) • Try to be informal
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Investigative Techniques – Interviewing • Introductory Questions: o Establish Rapport • Limit small talk to only a few minutes
o Make sure to get a verbal commitment before the interview begins. Encourage the interviewee to say ”yes” even if it takes several ways of asking.
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Investigative Techniques – Interviewing • Introductory Questions: o Establish the Interview Theme •
State a basic purpose of the meeting, “I need help understanding the jackpot process. It would be helpful if I could start by asking you to basically tell me about your job, okay?”
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Investigative Techniques – Interviewing • Introductory Questions: o Observe reactions: •
Seek continuous agreement - try to ask questions that will have a “yes” answer • Do not invade body space - make sure you can see the interviewee head to toe • Make sure the door is not locked and do not block the exit
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Investigative Techniques – Interviewing • Informational Questions: o Conducting an interview to gain an understanding of internal control systems o Interviews concerning documents o Gathering information regarding business operations or systems
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Investigative Techniques – Interviewing • Types of Informational Questions: o Open Questions (best) o Closed Questions (avoid at this point) o Leading Questions (confirm facts already known) o Double-Negative Questions (avoid!)
o Complex Questions (avoid!) o Attitude Questions (at times)
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Investigative Techniques – Interviewing • Investigative Question Techniques: o Easy questions first o Develop the facts in a systematic order o Ask only one question at a time - frame questions so only one answer is required
o Be straightforward o Do not rush answers o Do not suggest answers
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Investigative Techniques – Interviewing
• Investigative Question Techniques: o Repeat or rephrase to get desired facts o Make sure you understand the answers provided, ask for clarification at that time instead of later o Let interviewee qualify answers o Let interviewee give comparisons to ascertain accuracy o Get all the facts
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Investigative Techniques – Interviewing • Investigative Question Techniques: o After the interviewee has give a long narrative, ask questions about items discussed o At the conclusion of questioning summarize facts as you understand them and have interviewee verify that your conclusions are correct
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Investigative Techniques – Interviewing • Investigative Question Techniques for Note Taking: o Only pertinent facts o If a quote is particularly relevant try to write it verbatim & use “quotes” o Only jot down key words or phrases & then go back over details at the end of the interview o No opinions or impressions of interviewee
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Investigative Techniques – Interviewing • Assessment Question Techniques: • Verbal cues are also possible such as: o Changes in speech o Repeating your question o Timing of responses (delays) o Can not remember o Making excuses Investigative Techniques – Interviewing • Assessment Question Techniques: • Verbal cues are also possible such as: o Emphasis on certain words o Oaths o Offering character witnesses o Answering with questions o Overuse of respect o Weaker denial of facts or failure to deny
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Investigative Techniques – Interviewing • Closing Question Techniques: o Reconfirm facts o Gather additional facts o Conclude, maintain goodwill, provide a business card or contact number o Attempt to obtain commitment for confidentiality o Of course, shake hands and thank them
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Investigative Techniques – Interviewing
Assessment Question Techniques:
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• Non-verbal cues are also possible such as: o Moving away from interviewer o Perspiration, breathing, etc. o Excessive hand movements o Hands over the mouth o Crossing of the arms o Fake smiles o Keen interest in the evidence presented
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Investigative Techniques – Interviewing • Assessment Question Techniques (and the person is guilty): o Direct Accusation o Observe Reaction o Repeat Accusation o Interrupt Denials o Delays o Interruptions o Reasoning o Establish Rationalization
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Investigative Techniques – Interviewing • Assessment Question Techniques (and the person is guilty): o Diffuse Alibis o Display Physical Evidence
o Discuss Witnesses o Discuss Deceptions o Present Alternative o Benchmark Admission
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Investigative Techniques – Interviewing • Assessment Question Techniques (and the person is guilty): o Reinforce Rationalization
o Verbal Confession o Motive for Offense o Others Involved o Physical Evidence
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Investigative Techniques – Interviewing • Interviewing Techniques: • At end of interview: o Best if summarized immediately after interview in a memorandum o Keep abbreviated notes taken during interview just in case, but if they are kept someone else may be able to see
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9/15/20
Sheryl L. Ashley, Partner sashley@bluebirdcpas.com Thank you!
5585 Kietzke Lane | Reno, NV 89511 Phone: 775.827.5999 | Fax: 775.827.2104 info@bluebirdcpas.com | www.bluebirdcpas.com
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Preparing Your Property for a Title 31/AML IRS Compliance Examination
5/3/2016
Title 31 and OFAC
Josh Peukert, CPA Gaming & MICS Compliance AUP, Junior Partner BlueBird, CPAs
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About Our Firm • Founded in 1996 • Leadership has over 125 years of experience • 15 States o 60 Casinos
o 24 Title 31 engagements in 2017 • 10% of Tribal gaming revenue
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BlueBird, CPAs
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Preparing Your Property for a Title 31/AML IRS Compliance Examination
5/3/2016
Outline • Changes in Expectations and Updates in BSA • Know Your Customer and Source of Funds o Including OFAC
• CTR Red Flags • SAR Reporting • Top 10 Common Findings • IRS Audit Prep
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Most Recent Updates • Cole Memo:
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BlueBird, CPAs
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Preparing Your Property for a Title 31/AML IRS Compliance Examination
5/3/2016
Most Recent Updates
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BlueBird, CPAs
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Preparing Your Property for a Title 31/AML IRS Compliance Examination
5/3/2016
Most Recent Updates • Jeff Sessions o “Rescinded” the Cole Memo •
Cole Memo provided updated guidance to US Attorneys related to prosecuting marijuana crimes. • FinCEN then provided a path for Casino’s to do business with Marijuana Based Businesses (FIN-2014-G001)
o Calls federal law “Supreme law of the land”
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What to Do • Marijuana based businesses (if legal in your state) MUST be identified as a risk in your compliance program. • Based solely on Jeff Sessions’ comments, two choices: o Do nothing and risk a FinCEN fine; or o File a SAR
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BlueBird, CPAs
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Preparing Your Property for a Title 31/AML IRS Compliance Examination
5/3/2016
What to Do If you are a Tribe currently operating in the marijuana industry: • Prohibit those employees from gambling in the Casino. o We typically do this already with slots, table games, finance, etc. • This is most extreme reaction, but protects the Casino from AML ramifications.
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Recent Updates
Enforcement Actions o
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Trump Taj Mahal – 3/6/15 • $10 Million
o Trinian Dynasty Hotel & Casino – 6/3/15 • $75,000,000 • George Que, VIP Services Manager – Barred from Gaming Industry in August 2014 o Caesar’s Entertainment – 9/8/15 • $8 Million – FinCEN • $1.5 Million – State of Nevada o Oaks Card Club – 12/17/15 • $650,000 o Sparks Nugget – 4/5/16 • $1 Million • More?
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BlueBird, CPAs
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Preparing Your Property for a Title 31/AML IRS Compliance Examination
5/3/2016
Recent Updates • Banks auditing Casinos AML Programs o Under same scrutiny as Casinos o Must know their customers’ source of funds o Casinos do not have to comply • Bank may terminate relationship
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Source of Funds
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BlueBird, CPAs
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Preparing Your Property for a Title 31/AML IRS Compliance Examination
5/3/2016
Source of Funds
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Source of Funds • 1021.320(a)(2)(i):
• “A transaction requires reporting under the terms of this section if it is conducted or attempted by, at, or through a casino, and involves or aggregates at least $5,000 in funds or other assets, and the casino knows, suspects, or has reason to suspect that the transaction (or a pattern of transactions of which the transaction is a part): o (i) Involves funds derived from illegal activity or is intended or conducted in order to hide or disguise funds or assets derived from illegal activity (including, without limitation, the ownership, nature, source, location, or control of such funds or assets) as part of a plan to violate or evade any Federal law or regulation or to avoid any transaction reporting requirement under Federal law or regulation.”
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BlueBird, CPAs
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Preparing Your Property for a Title 31/AML IRS Compliance Examination
5/3/2016
Source of Funds • Source of funds o How to implement (most common) • Top XX number of players (10, 15, 25, 30, etc.) • IRS looking at roughly 25 of your top players • CTR/SAR threshold o Conduct risk assessment to determine threshold
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Source of Funds • Obtaining information without invading privacy o No longer gaming at Casino • Per FinCEN guidance, not an excuse • According to IRS “Begging for a penalty” o No guidance from FinCEN • AGA best practices 2014 and 2015 (handout) • Host vs Non-Host Casino’s o More difficult to obtain without hosts • Should use Google, Spokeo, Facebook, etc.
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BlueBird, CPAs
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Preparing Your Property for a Title 31/AML IRS Compliance Examination
5/3/2016
Source of Funds • KYC Program should be established o Include: • How information is obtained • How it is verified • How it is retained • How it is secured (who has access) • How often it will be updated • At least annually
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OFAC • Office of Foreign Assets Control:
• Specially Designated Nationals (SDNs)
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BlueBird, CPAs
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Preparing Your Property for a Title 31/AML IRS Compliance Examination
5/3/2016
SDN List https://www.treasury.gov/resource-center/sanctions/SDN- List/Pages/default.aspx
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Source of Funds • Legitimate play ≠ no suspicious activity
• Level of play does not match information obtained during customer review o Suspicious Activity Report should be prepared
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BlueBird, CPAs
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Preparing Your Property for a Title 31/AML IRS Compliance Examination
5/3/2016
Source of Funds Example SAR Scenario 1
• A credit union manager wagers approximately $192,000 in gaming devices from January 2014 through March 2014.
• What do you think? Suspicious?
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Source of Funds Example SAR Scenario 2
• Male patron carrying a backpack enters Casino with female companion. The male patron enters high limit room and begins to play high limit slots. The female begins performing currency exchanges $20s for $100s, totaling roughly $6,000. The 100s are given to the male to wager in the slot machines. Total, the male has over $18,000 in bills inserted and $17,500 in jackpots.
o What do you think? Suspicious?
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BlueBird, CPAs
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Preparing Your Property for a Title 31/AML IRS Compliance Examination
5/3/2016
Scenario 3 Example SAR Scenario 3
• Casino’s highest roller in table games has had a KYC search done. He is a dentist. Unable to find car registration. o Owns a boat o Owns a plane (has a license with the FAA)
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Scenario 3 • Brother has been in/out of prison for crimes ranging from drug trafficking to money laundering.
• Suspicious? File? Source of funds issue?
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BlueBird, CPAs
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Preparing Your Property for a Title 31/AML IRS Compliance Examination
5/3/2016
Scenario 4 Example SAR Scenario 4
• Casino allows patrons to purchase gift cards in the gift shop on credit, and redeem in the cage for cash. A high limit player regularly engages in this activity and has rated play. Today, he enters the Casino, purchases $9,000 in gift cards, redeems them in the Cage, and has no rated play.
• What do you think? Suspicious?
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CTR Red Flags • Late filing • Use of passport with one home country and address in another • No SSN o Other required information unknown • No filing • Support ≠ CTR o Information, amounts, etc.
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BlueBird, CPAs
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Preparing Your Property for a Title 31/AML IRS Compliance Examination
5/3/2016
Common Issues • The next several slides discuss common exceptions identified by our audit firm as well as the IRS
• We will discuss ways to correct each of these as we progress
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Common Issues #10 No/inadequate risk assessment performed #9 Compliance program not based on risk o Superficial, FinCEN only regulations #8 No KYC or Source of Funds program #7 MTL entries o Transactions not logged
o Lack of adequate description of unknown patrons (or known)
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BlueBird, CPAs
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Preparing Your Property for a Title 31/AML IRS Compliance Examination
5/3/2016
Common Issues #6 MIL entries
o Missing information o Transactions not logged #5 Inadequate or non-existent training #4 Lack of documentation regarding date of notification for filed SARs
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Common Issues #3
Lack of review of MTLs for suspicious activity #2 Automated data program review not completed o Pit ratings – Not just an internal document • Chip Walking/Structuring o Bills-in reports o Kiosk transactions #1 SAR Reporting o Lack of documentation regarding unfiled SARs
o Not properly identifying transactions as a failure of not performing items above o Not filing at all
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BlueBird, CPAs
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Preparing Your Property for a Title 31/AML IRS Compliance Examination
5/3/2016
Common Issues - IRS • Not using all available information for SAR reporting • Incorrect Legal name used for Tribal Casinos o If no legal corporation or partnership, legal name is Tribe’s name • Source of funds risk mitigation • Bank audits of Casinos
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Independent Testing • 1021.210(b)(2)(ii)
“Internal and/or external independent testing for compliance. The scope and frequency of the testing shall be commensurate with the money laundering and terrorist financing risks posed by the products and services provided by the casino.”
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BlueBird, CPAs
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Preparing Your Property for a Title 31/AML IRS Compliance Examination
5/3/2016
Independent Testing • Auditor (or firm) must have sufficient knowledge to audit Title 31
• Receive training, industry emails from FinCEN, IRS, etc.
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Independent Testing • More than just a cursory review o MTLs signed, added correctly, etc. • SAR focus o Was money gamed o Was a player’s card inserted when 5 $1,000 tickets inserted into the TRM (kiosk) • Does amount gamed make sense based on our knowledge of the customer?
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BlueBird, CPAs
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Preparing Your Property for a Title 31/AML IRS Compliance Examination
5/3/2016
Independent Testing • SAR focus vs CTR focus
• Casino to prove why activity is not suspicious
• Missed filings? (CTR or SAR)
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From the Horse’s Mouth! • Below are the expectations of Raymond Dillion, Group Manager of the IRS Las Vegas, as discussed at IIA gaming conference. • SAR decision making process analyzed • Don’t just look at what was filed. Look for what isn’t being filed. • Are you doing transactional analysis • Are you leveraging ALL available data? Do you know all data fields such as bills-in
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BlueBird, CPAs
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Preparing Your Property for a Title 31/AML IRS Compliance Examination
5/3/2016
IRS Focus • 4 areas of focus o Source of funds o Risk assessment and compliance program linkage o Information Sharing • 314(a) and 314(b) o Chip Walking o Suspicious Activity Reporting
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IRS Audit – What to Expect • Initial Document Request o Compliance program, risk assessment, etc. • Pre-audit of CTR, SAR filings o Identify items that are clearly incorrect • Information regarding prior audit • Deficiencies noted
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BlueBird, CPAs
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Preparing Your Property for a Title 31/AML IRS Compliance Examination
5/3/2016
IRS Audit – What to Expect • Pre-audit of CTR o Ensure all required information completed o Ensure timely • Pre-audit of SAR o Same as CTR o Review where SAR’s are being identified • Cage, pit, back of house, etc • If all one location, why not others
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IRS Audit – What to Expect • If information available, should be documented o CTR and SAR • Even if not required
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BlueBird, CPAs
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Preparing Your Property for a Title 31/AML IRS Compliance Examination
5/3/2016
IRS Audit – What to Expect • When on-site: o Thorough interviews of Compliance Officer and staff • What are your daily job duties • How often are you trained • What’s included in training • Thorough document review o MTLs, MILs • Compared to CTR and SAR
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IRS Audit – What to Expect • Information Technology review o Utilize Casino records to review for missed CTR and/or SAR • Significant!!!!! o Using information you have to identify suspicious activity
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BlueBird, CPAs
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Preparing Your Property for a Title 31/AML IRS Compliance Examination
5/3/2016
IRS Audit – What to Expect • After completion: o Letter discussing findings (Letter 1112) o Management responds o Follow-up visit?
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Sheryl Ashley, Partner sashley@bluebirdcpas.com Thank you!
5585 Kietzke Lane | Reno, NV 89511 Phone: 775.827.5999 | Fax: 775.827.2104 info@bluebirdcpas.com | www.bluebirdcpas.com
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BlueBird, CPAs
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11/12/21
The Effective Regulation of Gaming Elizabeth L. Homer
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What is Regulation?
Regulation in the broadest sense may be defined as a government measure or intervention intended to direct, alter, or otherwise affect the behavior of individuals or groups to produce a socially desirable outcome, e.g.: Require individuals to wear seatbelts to reduce driving related mortality rates Require businesses to pay taxes monthly to improve the collection of tax revenue
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11/12/21
Federal Perspective Shield the IndianTribe from organized crime and other corrupting influences Ensure that the IndianTribe is the prime beneficiary of the gamin operation Assure that gaming is conducted fairly and honestly by both the operators and the players
Tribal Perspective Realize fullest measure of tribal sovereignty Improve the quality of life and standard of living of the tribal community Create jobs and business opportunities Protect tribal resources – both human and natural Preserve tribal identity and cultural existence for future generations
What Purpose is Served by the Regulation ofTribal Gaming?
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Licensing screens out the people most likely to cheat and steal and keeps them out of tribal casinos and away from tribal cash
Internal Controls operate to ensure that casino managers and employees follow the procedures necessary to prevent fraud, theft & waste of tribal dollars
HowDoes the Effective Regulation of Gaming AdvanceTribal Goals?
Monitoring serves to keep the staff honest
Auditing serves to keep management honest
Enforcement signals that theTribe means business when it comes to safeguarding its assets
Regulations clarify the meaning of the statutory law and establish the standards of conduct that must be met
Hearing and Appeals ensure fairness and protect people from abuses of power
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Regulatory Agency
Regulator Understands the Law Understands Role Understands Scope of Authority
Independence Sound Organizational Structure Proper Delegation of Authority Adequate Funding Proper Balance of Power Oversight Governmental Support of the Regulatory System
What Makes Regulation Effective?
Ethical, Principled, & Fair Possesses Sound Judgment HighWork Ethic Good Management Skills Good Interpersonal Skills
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An Independent Regulatory Agency is a governmental instrumentality created to interpret, implement, administer, monitor, and enforce statutory law within the limits of its delegated authority and to act and make decisions based on law and legal considerations ---
Regulatory Structure “Independence”
NOT POLITICAL CONSIDERATIONS
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Does not mean:
• “Separate and Apart From” • “Free of Constraints” • “Unaccountable for its Acts & Decisions”
“Independent”
It Means:
• Reasonably Insulated from Political Interference with its Decision making Processes in the Implementation and Enforcement of Civil Regulatory Law.
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Why is Independence Important?
To regulate effectively, the regulator must apply the law to facts on the basis of legal and regulatory policy considerations in much the same way as a judicial body operates, but for the purpose of achieving the regulatory objective: Enforcing Compliance with the Law
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Regulatory bodies are responsible for making hard decisions that may be politically unpopular, e.g. Denial of a gaming license to someone well-liked in the community Imposition of a fine or sanction Order to suspend use of or remove equipment
Independence
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TheCase for Independence
When politically unpopular decisions are made, those aggrieved by such decisions often resort to political tactics and seek to bring political pressure on the agency. The principle of independence is intended to shield both political and regulatory officials from these situations in order to ensure that regulatory objectives are not undermined by political considerations.
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The Enactment of Law is a Political Process The Promulgation of Regulations is Largely Political in Nature, but The Implementation and Enforcement of the Law is a Regulatory Process Hence the Concept of Independence is much stronger in the Context of Implementation and Enforcement than in the Context of Rulemaking
Regulatory v. Political Processes
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The Legislature Enacts the Law through the Political Process Establishing the “Independent Regulatory Agency” Specifying the Functions, Duties, and Responsibilities of the Agency Delegating the Agency the Necessary Authority to Implement and Enforce the Law Imposing Standards for Agency Conduct Providing for Agency Oversight
How is the Framework Supposed to Work?
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Typically, an Independent Regulatory Agency is Delegated Broad Authority to: Interpret & Implement the Law through the Promulgation of Regulations (Quasi-Legislative Power) Monitor Compliance and Enforce the Law (Quasi- Executive Power) Apply the Law to Facts to Determine whether the Law has been Offended and Assess Sanctions (Quasi- Judicial Power)
Agency Authority &
Functions, Duties, and Responsibilities
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Legislate
Execute
Adjudicate
Making the Framework Work: Balance of Power
= “Basic Powers of Government”
In the Constitution, the Framers Carefully Divided These Powers and Assigned them to the Three Branches of Government WHY?
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To Provide a Strong Governmental Structure with Proper Checks & Balances To Secure the Basic Rights and Fundamental Freedoms of the Citizenry Guaranteed by the Constitution
Why?
To Constrain Governmental Power
To Prevent Governmental Abuses of Power
To Ensure Fundamental Fairness and Due Process of Law
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Regulatory Agencies may Possess Broad Powers, but they are Limited in Nature
A Regulatory Agency may not Act so as to Exceed the Scope of its Delegated Authority
How are these Objectives Achieved in Relation to Regulatory Agencies?
Standards are Applied: An Agency is Prohibited fromActing in an Arbitrary & Capricious Manner
Agencies must Faithfully Interpret and
Apply the Law as Intended by the Legislature.
Agency Actions & Decisions are Subject to Political and Judicial Oversight
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May be Achieved through Various Organizational Models Structured to Meet the Particularly Structure of the Governmental Entity Creating the Agency
Effective Regulatory Structure
Structures may have Varying Degrees of Complexity from Basic to Complex
Structure of the Agency will Depend on the Organizational Components Necessary
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Let’sTake a Look at SomeModel Examples
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Citizenry (Electoral Process)
Legislature – Legislates and Confirms Executive Appointments
Judiciary - Judicial Oversight
Executive - Appointment Power
Model 1
Regulatory Agency – Legislative, Executive, and Judicial Duties
Gaming Operations
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Tribal Court
Tribal Council - Legislates
Model 2
Licensing
Enforcement
Gaming Operation
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Tribal Governing Body
Office of Tribal Gaming Compliance – Day-to-Day Regulatory Activities
Tribal Gaming Commission – Rulemaking and Hearing Procedures
Model 3
Tribal Gaming Enterprise
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Electorate
Executive
Legislative
Judicial
Model 4
Regulatory Agency
Gaming Enterprise
Gaming Facility
Gaming Facility
Gaming Facility
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Gaming Commission & Commissioner(s)
Legal Counsel
Model 5
Audit & Enforcement Division
Office of Hearings & Appeals
Licensing Division
Gaming Enterprise
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Gaming Commission &
Commissioner(s) – Hearing &Appeals
Legal Counsel
Executive Director
Model 6
Enforcement Division
Licensing Division
Audit Division
Employee Licenses Vendor Licenses Facility Licenses Background Investigations
Gaming Machines MICS: Operational Special Investigations IT
Internal Audits Title 31 MICS: Accounting
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All Models Can Be Effective
The Key to Effective Regulation is not in a Particular Organizational Framework The Key to Effective Regulation is Selecting the Right Framework in terms of: The Overall Institutional Structure of the Tribal Government; The Size and Scope of the Regulated Activity; Available Resources; and An Unwavering Commitment to the Framework and Making itWork by Everyone within the System.
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Even if aGovernment has Adopted an Excellent GamingOrdinance Establishing aWell-Funded, State- of-the-Art Regulatory Structure withClearly DefinedAuthority, Powers, Responsibilities, and Functions, there is NOGuarantee that theAgency will be Effective
A RegulatoryAgencyCannot Be Effective without theTrust and Support of theGovernment that Created it.
Commitment to the System
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The Importance ofOversight
Governmental Support andTrust are Prerequisites to Effective Regulatory Agencies It is Antithetical to Human Nature, however, to Place a High Degree of Trust in an Entity that Possesses Tremendous Power over which one has Limited Capacity to Control, Particularly where the Entity has the Power to Affect the Financial Health of one’s Most Valuable Asset
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The Most Effective Check Against Agency Abuses of Power is Oversight because it Operates to Effect Accountability If Accountability Measures are Built Into the Regulatory Framework, it is much Easier to Place One’s Trust in the Agency
Effective Oversight is Essential to Accountability
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The Statute Provides for:
Clearly Defined Agency Roles & Responsibilities Clear Delegation of Powers Due Process of Law Qualified Appointees & Staff Standards to Guide Conduct & Decisionmaking Judicial Oversight Appropriate Political Oversight
Accountability Measures
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No Person should ever be the Ultimate Arbiter of his or her Own Decisions Political Processes are not Appropriate for Handling or Reviewing Civil or Criminal Law Enforcement Actions and Decisions in particular cases or matters because Political Processes Entail Political Considerations which are Inappropriate in the Context of the Application of the Law to a Particular Set of Facts Judicial or Quasi-Judicial Bodies are the Appropriate Entities for Providing Oversight in the Context of Agency Action & Decision- making as the Interpretation of Law and the Application of the Law to Particular Facts is a Judicial Function
Principles for Oversight
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Decision Makers Make Better Decisions when they
Understand that the Decision is Subject to Judicial Review
The Assurance of Due Process Increases Public Confidence in the Government and its Processes
Judicial Review Serves as an Important Check Against Abuses of Power
Principles of Oversight
Judicial Review Serves as a Check Against Error, Bias, Poor Judgment in Decisionmaking, Misapplication of Law, and Misconduct
Judicial Review Serves to Ensure the Proper Interpretation and Application of the Law
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Strengthens the Regulatory Framework
Improves Regulatory Effectiveness
Advances Statutory Objectives
ToTrust and Support…
Decreases the Potential for Conflict and Power Struggles
Encourages Sound Decisionmaking
Advances theTribal Interest
Increases Political Stability
Represents Half of the Equation
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The Effective Regulation of Gaming:The Effective Regulator
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The Effective Regulator
Inspires Trust and Confidence in the Regulatory Process Understands his or her Responsibilities, Duties, Obligations as well as the Agency’s Functions under the Law Acts within the Scope of Authority Delegated Fairly and Objectively Applies the Law Exercises Good Judgment Is Ethical, Reasonable, and Fair
Has a HighWork Ethic Exercises Discretion Ensures that Subordinates are held to the Same Standards of Conduct
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To Effect Compliance With the LawThrough
Fair and Reasonable Regulation In Order to Ensure the Integrity of the Regulated Industry without stifling its growth & profitability so as to Foster Public Confidence and Achieve All Regulatory Objectives
PrimaryGoal of the Regulator
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In a PerfectWorld EveryoneWould: Know the Law and Regulations by Heart Obediently Comply
Seek out the Regulator’s Advice and Guidance Eagerly Await the Regulator’s Visits Enthusiastically Adopt the Regulator’s Recommendations View the Regulator with Utmost Respect and Appreciation Always Agree with the Regulator’s Viewpoint Welcome an Enforcement Action as an Opportunity to Improve
The Job of a Regulator Is Easy…
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Regulators are Often Regarded:
With Equal Measures of Dread and Distrust As Intrusive Second Guessers As Unsympathetic and Self-Important As Harsh and Unyielding As Thoughtless and Unmindful of Practical Realities As a Drain on Resources As an Imposed Evil
In the Real World…
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Stay Professional Stay Calm Be Deliberate Refrain fromActing in Anger
Stay Focused on the Regulatory Objective
Understand the Importance of Effective Regulation Understand the Importance of Effective Regulators
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End
Homer Law, Chtd. 1730 Rhode Island Ave., N.W. Ste. 501 Washington, D.C. 20036 (202) 955-5601
(202) 955-5605 (fax) www.homerlaw.com
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Administrative Hearings and Appeals
Elizabeth L. Homer
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The Hearing Process
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DISCLAIMER
• This Presentation is Based on General Principles of Law and Jurisprudence Arising Primarily from the Federal Administrative Procedures Act. • The Law Governing the Hearing Process for Tribal Gaming Commissions is Tribal Law . • Accordingly, While this Presentation is Intended to Assist you with Basic Concepts and Principles, You Should Always Rely on Your Tribe’s Gaming Ordinance or Administrative Procedures Laws in Conducting Hearings • If Your Agency is Authorized to Conduct Hearings, but Tribal Law Does Not Contain Procedures Your Agency, if Authorized, Should Promulgate Regulations Establishing such Procedures and Make them Available to All Licensees.
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Tribal Gaming Regulatory Agencies
• Tribal Gaming Regulatory Agencies are Typically Accorded Broad Powers, Including the Authority to: • Promulgate Rules • Monitor Compliance • Investigate Possible Violations • License • Enforce the Law • Sanction and Penalize • Adjudicate
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The Authority of a Regulatory Agency, however, is of a Limited Nature An Agency may only Exercise Such Power as it has been Delegated and NO MORE.
Limitations on Authority
Agency Authority is also Constrained by Certain Fundamental Principles
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An Agency Must…
Adhere to Principles of Due Process of Law and Fundamental Fairness
It Must Act Within the Scope of its Delegated Authority
It May Not Act in an Arbitrary and Capricious Manner
It Must Interpret the Law Fairly and Reasonably
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WARNING
• No Matter How Good its Hearing Procedures or HowWell it Conducts Hearings, an Agency Action or Decision is Vulnerable Upon Appeal if it Fails to Adhere to the Foregoing Principles
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• While a Gaming License is Usually Deemed a Privilege NOT a Right, Most Tribal Gaming Ordinances Grant Licensees some Right of Hearing if the Agency Denies, Suspends, or Revokes a Gaming License or if it Acts to Sanction a Licensee for a Violation of Law.
The Basics
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The Right to Hearing
• The 5 th and 14 th Amendments of the U.S. Constitution guarantee all citizens the right to “Due Process of Law” when government actions deprive a citizen of life, liberty, or property. • This principle is applicable to actions of tribal governments by means of the Indian Civil Rights Act of 1968. 25 U.S.C. § 1301
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Trial v. Administrative Hearing
At the Same Time, Both Trials and Administrative Proceedings are Governed by the Same Constitutional Principles of Fundamental Fairness and Due Process of Law
An Administrative Hearing is Typically a Significantly less Formal Proceeding than a Trial in a Court of Law
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