11010323 - Level I Zoom

LEVEL I AGENDA February 8 - 10, 2023 ZOOM Virtual Class Training on MST Time

Wednesday, February 8

Indian Gaming Regulatory Act: An Introduction Liz Homer, Homer Law

9:00 AM 10:30 AM

10:30 AM 10:45 AM Break

Tribal Gaming Regulatory Agency: Purpose, Functions and Structures Liz Homer, Homer Law

10:45 AM 12:15 PM

12:15 PM 1:15 PM Lunch Break

What's the Big Deal - MICs Liz Homer, Homer Law

1:15 PM 2:45 PM

2:45 PM 3:00 PM Break

Managing a Tribal Gaming Regulatory Authority Billy David, Bo-Co-Pa & Associates Thursday, February 9 Rules of the Games – Classification of Games Liz Homer, Homer Law Break Gaming Compacts & Compact Compliance Liz Homer, Homer Law Lunch Break Anatomy of a Gaming Machine Peter Nikiper, BMM Testlabs Break Introduction to Enforcement Actions

3:00 PM 4:30 PM

9:00 AM 10:30 AM

10:30 AM 10:45 AM

10:45 AM 12:15 PM

12:15 PM 1:15 PM

1:15 PM 2:45 PM

2:45 PM 3:00 PM

3:00 PM 4:30 PM

Liz Homer, Homer Law Friday, February 10

Basic Principles of Casino Accounting Ryan Burns, CPA, Partner Blue Bird CPA's

9:00 AM 10:30 AM

10:30 AM 10:45 AM Break 10:45 AM 12:15 PM

Auditing Financial Audits & Agreed-Upon Procedures Ryan Burns, CPA, Partner Blue Bird CPA's

Please plan to stay for the entire class on each day to get your certificate of completion. Please be on time for sessions

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The Indian Gaming Regulatory Act: An Overview

ELIZABETH L. HOMER HOMER LAW CHARTERED

The Rich History of Gaming

A drawing found on the wall of a burial vault in Beni Hasan, Egypt (circa 2500 B.C.E.) shows a picture of a ball hidden under one of several cups, perhaps an early game of chance.

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The first signs of a lottery trace back to Asia, where ancient Keno slips were discovered. First played in China, the lottery has helped finance major governmental projects like the Great Wall of China. Organized governmental regulation of gambling, as opposed to taxation by force, is recorded as early as 321 B.C. in India where a Superintendent of Public Games supplied dice and collected a fee of 5% of the receipts. The Principality of Monaco, a country with more millionaires per capita than any country in the world, is primarily supported by gaming revenues.

Government Gaming Abroad

Government Gaming in the English Colonies Because the colonies had no power to tax, they were dependent on help from England. In 1612, King James I chartered the Virginia Company of London to raise revenue for the benefit and support of the Jamestown settlement. The company was authorized to conduct lotteries throughout England in order to raise money. The lotteries were relatively sophisticated and included instant winners. One colonist noted that the revenue from these lotteries were“reall and substantiall food, by which Virginia hath been nourished.” Eventually, the crown banned the lotteries because of complaints that they were viewed as robbing England of money.

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Lottery revenues were responsible for the building of much the infrastructure along the Northeast Coast. Many of the most prestigious universities, such as Harvard, Yale, and Brown, were built with lottery revenues. Lottery revenues funded many of the armaments and purchases made during the Revolutionary War.

Government Gaming and Growth

The Johnson Act (1962)

Prohibits the manufacture, possession, use, sale, or transportation of any “gambling device, except in accordance with a state regulatory scheme.” The Johnson Act defines a “gambling device” as any: Slot machine ... and other machine or mechanical device (including but not limited to, roulette wheels and similar devices) designed and manufactured primarily for use in connection with gambling, and (A) which when operated may deliver, as the result of the application of an element of chance, any money or property, or (B) by the operation of which a person may become entitled to receive, as the result of the application of an element of chance, any money or property. Any subassembly or essential part intended to be used in connection with any such machine or mechanical device, but which is not attached to any such machine or mechanical device as a constituent part.

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Pre-IGRA Gaming

A number of tribal governments, including the Seminole, Eastern Band of Cherokee, and the Cabazon Tribe, among others, introduced high stakes bingo, which proved highly popular and lucrative In June 1984, the Interior Department presented testimony to Congress noting that 80 tribes were engaged in some form of gaming, primarily bingo, and the income from those operations was, in total, in the millions of dollars Bingo in Indian Country proved so successful in such a short time that state governments took notice States began taking the position that bingo games were illegal under state law

The Supreme Court’s decision in California v. Cabazon and Morongo Bands of Mission Indians (1987) paved the way for the Indian Gaming Regulatory Act (IGRA), passed the following year. In Cabazon , the State of California argued that under Public Law 280, California had criminal jurisdiction over tribal lands within the state’s borders. The Cabazon and Morongo Bands argued that the state’s regulatory laws did not criminally prohibit gambling; therefore, the authority to regulate such gaming activities was outside the control of Public Law 280. The Supreme Court agreed with the tribes and ruled against California having authority to regulate or prohibit tribal gaming. Cabazon prompted Congress to adopt a federal regulatory framework for Indian gaming.

Setting the Stage in Court

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Passage of IGRA

On Oct. 18, 1988, the Indian Gaming Regulatory Act (“IGRA”) was enacted by Congress IGRA divides gaming activities into three Classes – I, II, and III and establishes a regulatory framework for each category It also establishes the National Indian Gaming Commission (“NIGC”) to administer the IGRA statute It requires tribes to adopt and submit gaming ordinances for NIGC approval For Class III Gaming, IGRA requires a Tribal-State Compact approved by the Secretary of the Interior and creates an exemption from the Johnson Act for such gaming.

Early IGRA Indian Gaming

In the period between the enactment of IGRA in 1988 and the issuance of NIGC’s first regulations in 1992, Indian Gaming was already flourishing. In those early years, a number of innovations were introduced, including the use of electronic aids in Class II gaming, particularly for bingo and pull tab games. In the beginning these innovations were relatively modest, such as the introduction of computerized random number generators for bingo games and pull tab dispensers. But very quickly we began to see machines linked together by bingo-based software programs that allowed players to compete against one another for prizes with video screens that displayed spinning reels.

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Explosive Expansion of Indian Gaming From 1988 to 2013, gross revenues from tribal gaming grew more than 280-fold, from about $100 million to around $28 billion. The number of tribal gaming operations exploded from fewer than 30 to about 450 across 31 states. In the span of only thirty years, it has become the single largest revenue-producing activity for Indian tribes. The economic gains attributed to gaming have also had positive impacts on tribal employment and many other areas of development in Indian Country.

Sections of IGRA

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Section 2701 – Findings

Congress finds that:

Numerous Indian tribes have become engaged in or have licensed gaming activities on Indian lands as a means of generating tribal governmental revenue;

Federal courts have held that section 81 of this title requires Secretarial review of management contracts dealing with Indian gaming, but does not provide standards for approval of such contracts;

Existing Federal law does not provide clear standards or regulations for the conduct of gaming on Indian lands;

A principal goal of Federal Indian policy is to promote tribal economic development, tribal self-sufficiency, and strong tribal government; and

Indian tribes have the exclusive right to regulate gaming activity on Indian lands if the gaming activity is not specifically prohibited by Federal law and is conducted within a State which does not, as a matter of criminal law and public policy, prohibit such gaming activity.

Gaming Classifications under IGRA One of the primary features of IGRA is its classification of gaming. IGRA divides gaming into three classes, Class I, Class II, and Class III. With these classifications, IGRA provides a general framework for the regulation of tribal gaming.

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Gaming Classifications under IGRA, cont. Class I ◦ Social games solely for prizes of minimal value or traditional forms of Indian gaming engaged in by individuals as a part of, or in connection with, tribal ceremonies or celebrations Class II ◦ Games of chance commonly known as bingo (whether or not electronic, computer, or other technological aids are used in connection therewith) and, if played in the same location as the bingo, pull tabs, punch board, tip jars, instant bingo, and other games similar to bingo. Class II gaming also includes non-banked card games, that is, games that are played exclusively against other players rather than against the house or a player acting as a bank. Class III ◦ All forms of gaming that are not Class I or Class II gaming.

Regulations by Class

Class I ◦ Regulatory authority over Class I gaming is exclusively vested in tribal governments and is not subject to IGRA’s requirements. Class II ◦ To conduct Class II gaming, the Tribe must be located in a state that permits such gaming for any purpose and must adopt a gaming ordinance approved by the NIGC. Tribal governments are responsible for regulating Class II gaming, subject to NIGC oversight. Class III ◦ To conduct Class III gaming, the Tribe must meet the above-mentioned requirements for Class II gaming, and they must have a tribal-state gaming compact, permitting such gaming, approved by the Secretary (or under the procedures promulgated by the Secretary under circumstance identified in IGRA).

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Section 2702 – Declarations of Policy

The purpose of this chapter is: 1. To provide the statutory basis for the operation of gaming by Indian tribes as a means of promoting tribal economic development, self-sufficiency, and strong tribal governments. 2. To provide a statutory basis for the regulation of gaming by an Indian tribe adequate to shield it from organized crime and other corrupting influences, to ensure that the Indian tribe is the primary beneficiary of the gaming operation, and to assure that gaming is conducted fairly and honestly by both the operator and players; and 3. To declare that the establishment of independent Federal regulatory authority for gaming on Indian lands, the establishment of Federal standards for gaming on Indian lands, and the establishment of a National Indian Gaming Commission are necessary to meet congressional concerns regarding gaming and to protect such gaming as a means of generating tribal revenue.

This section establishes the National Indian Gaming Commission (NIGC) as a commission within the Department of Interior. Per this section, the NIGC shall be composed of three full- time members. ◦ One Chairman who shall be appointed by the President with the advice and consent of the Senate ◦ Two Associate Members who shall be appointed by the Secretary of the Interior. One of the associate member will, after selection by the Chairman and with majority vote, be named Vice Chairman. The remainder of this section outlines the suitability and eligibility for commission members.

Section 2704 – National Indian Gaming Commission

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The Chairman, on behalf of the Commission, has the power to: • Issue orders of temporary closure of gaming activities • Levy and collect civil fines • Approve tribal ordinances or resolutions regulating Class II and Class III gaming • Approve management contracts for Class II and Class III gaming • Any other powers as may be delegated by the Commission

Section 2705 – Powers of the Chairman

The Commission itself is empowered to: • Approve the NIGC annual budget • Adopt regulations for the assessment and collection of civil fines

Section 2706 – Powers of the Commission

• Establish fee rates • Issue subpoenas • Affirm a temporary closure order • Issue regulations • Report to Congress

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Class I gaming on Indian lands is within the exclusive jurisdiction of the Indian tribes. Class II gaming on Indian lands shall continue to be within the jurisdiction of the Indian tribes but is subject to the provisions of this section. ◦ An Indian tribe may engage in Class II gaming is such gaming is located within a State that permits such gaming and the governing body of the Indian tribe adopts an ordinance or resolution which is approved by the Chairman of the NIGC.

Section 2710 – Tribal Gaming Ordinances

Section 2710 – Tribal Gaming Ordinances:

• May be encompassed within the existing independent tribal audit systems • Will be provided to the Commission by the tribe • All contracts for supplies, services, or concessions in excess of $25,000.00 shall be subject to such independent audits

Annual Outside Audits

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Section 2710 – Tribal Gaming

The construction and maintenance of the gaming facility, and the operation of that gaming is conducted in a manner which adequately protects the environment and the public health and safety.

Ordinances: Protection of the Environment

Background investigations for primary management officials and key employees must be conducted and ongoing oversight of such persons is required Tribal licenses for primary management officials and key employees must be issued Any person whose prior activities, criminal record, reputation, habits and associations pose a threat to the public interest or effective regulation of gaming or create or enhance the dangers of unsuitable, unfair, or illegal practices and methods and activities in the conduct of gaming shall not be eligible for employment. The Indian tribe must notify the Commission of the results of the background check before issuing licenses.

Section 2710 – Tribal Gaming Ordinances: Licenses and Background Investigations

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Section 2710 – Tribal Gaming

The Commission may consult with appropriate law enforcement officials concerning licenses issued by a tribe. If the Commission receives information that a primary management official or key employee does not meet the standard established, the tribe will suspend and, after notice and hearing, revoke such license.

Ordinances: Issuances of

Gaming License

Section 2710 – Tribal Gaming Ordinances: Per Capita Distribution Plans

Such plans are only permitted if: • The tribe has prepared a plan to allocate revenues • The plan has been approved by the Secretary • The interests of minors and other legally incompetent persons are protected • Tribes notify members that such payments are subject to federal taxation

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Section 2710 – Tribal Gaming

The Secretary may disapprove a compact only if such compact violates- • Any provision of this chapter • Any other provision of Federal law • The trust obligations of the U.S. If the Secretary does not approve or disapprove a compact 45 days after its submittal, it shall be considered approved. The Secretary shall publish in the Federal Register notice of any Tribal-State Compact that is approved.

Ordinances: Approval of Tribal-State Compacts

Section 2711 – Management Contracts

Requirements for Chairman’s approval: • Adequate accounting procedures • Access for appropriate tribal officials to daily operations • Minimum guaranteed payment to the tribe • Agreed ceiling for the repayment of development & construction costs

• Terms not to exceed 5 years (in some cases 7 years) • Grounds and mechanisms for terminating the contract

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Section 2711 – Management

Contracts with a fee based upon a percentage of the net revenue are acceptable if the fee is reasonable in light of surrounding circumstances. Such fee shall not exceed 30 percent. Upon request of a tribe, the Chairman may approve a contract with a fee that exceeds 30 percent but not 40 percent.

Contracts: Approval of Fees

The Chairman shall have the authority to levy and collect appropriate civil fines, not to exceed $25,000 per violation, against the tribal operator of an Indian game or a management contractor for any violation of any provision of this chapter, any regulation prescribed by the Commission, or tribal regulations, ordinances or resolutions approved under section 2710 or 2712 of this title.

Section 2713 – Civil Penalties

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ELIZABETH L. HOMER HOMER LAW CHARTERED 1730 RHODE ISLAND AVE., N.W. SUITE 501

END

WASHINGTON, D.C. 20036 PHONE: (202) 955-5601 FAX: (202) 955-5605 WWW.HOMERLAW.COM

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Understanding the System: Purposes, Roles, & Functions

Elizabeth L. Homer Homer Law Chtd.

Authority of Tribal Governments • Doctrine of Tribal Sovereignty • Pursuant to U.S. Constitutional Law, Indian Tribes are Political Entities, Possessing Inherent Sovereign Powers • Federal Indian law flows from the legal premise that Indian tribes retain a certain "nationhood" status, which pre-dates the establishment of the United States, and includes inherent powers of internal self-government.

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Authority of Tribal Governments • Tribes have been characterized as domestic dependent nations retaining all powers of government not extinguished by an express act of the Congress or inconsistent with their dependent status. See, Worcester v. Georgia , 31 U.S. (6 Pet.) 515 (1832); Cherokee Nation v. Georgia , 30 U.S. (5 Pet.) 1 (1831); Talton v. Mayes , 163 U.S. 376 (1896); United States v. Wheeler , 435 U.S. 313 (1978). • As a general principle, the United States Congress has exclusive authority over Indian Affairs, which preempts the assertion of power over tribes by states, unless expressly authorized by Congress. Williams v. Lee , 368 U.S. 217 (1959). • The exclusive power of the United States to oversee Indian affairs is Constitutional in origin and traces to Art. I, Sec. 8, cl. 3, the Indian Commerce Clause. See, Kagama v. United States, 118 U.S. 375 (1886).

Inherent Powers of Tribal Self- Government Ø Make and form their own government Talton v. Mayes , 163 U.S. 376 (1896). Ø Establish membership Santa Clara Pueblo v. Martinez , 436 U.S. 49 (1930)

Ø Make and enforce laws, civil and criminal Ex Parte Crow Dog , 109 U.S. 556 (1983).

Ø Tax

Merrion v. Jicarilla Apache Tribe , 455 U.S. 130 (1982).

Ø Engage in commercial activity

Brendale v. Confederated Tribes of Yakima Indians , 492 U.S. 408 (1989).

Ø License, zone, and regulate

Merrion v. Jicarilla Apache Tribe , 455 U.S. 130 (1982).

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Authority of Tribal Governments

• The establishment of Regulatory Agencies comes within the inherent governmental authority of tribal governments • With respect to gaming, the Indian Gaming Regulatory Act (IGRA) mandates that a tribal governments must provide an adequate system for the regulation of tribal gaming activities. 25 U.S.C § 2710 (b)(F).

Tribal Governments: Governmental Responsibilities • Separation of Powers Doctrine • Legislative Branch • Enacts law • Executive Branch • Executes Law • Judicial Branch • Interprets Law

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Dual Functions

Governmental Functions • Enact Law • Administer Law • Enforce Law • Interpret Law • Regulate Activities • Tax Activities • Provide Governmental Services

Corporate Functions • Own Enterprises • Operate Enterprises • Manage Enterprises • Invest Capital • Provide economic goods & services

Competing Interests

• Corporate and Governmental Structures Differ Significantly by Design because each Serve Distinct Interests • Governmental Bodies are Political in Nature Requiring Deliberative Processes, which inevitably are slower and less efficient. Haste in a political environment invites conflict, turmoil, and sometimes instability • Corporate Bodies operate in a completely different environment – the marketplace – which flows at a much swifter pace and where decisions are not based on political considerations, but rather are profit driven. Inefficiency in a corporate environment results in lost opportunity, reduced profitability, and sometimes failure.

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Competing Objectives

• Politically Driven • Open & Transparent • Collective Decision making

• Financially Driven • Proprietary & Confidential • Hierarchical

Inescapable Factors

• A Tribal Enterprise is owned by a Political Entity • Tribal Enterprises Serve a Public Rather than a Private Interest • In the context of Tribal Enterprise, it is impossible to achieve complete separation between political and business considerations

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Successful Tribally-Owned Enterprises

• Are built on structures that achieve a proper balance between competing interests and governed by laws that designed to achieve a balance between: • Efficiency and Accountability • Autonomy and Oversight • Business Objectives and Tribal Objectives

Step 1: Structure

• Designing a Structure that: • Balances & Harmonizes Competing Interest

• Regulatory Structure • Enterprise Structure

• Fosters Accountability and Profitability • Works within the Overall Institutional Framework of the Tribal Government

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Step 2: Making the System Work

• Understanding the System • Respecting the System

• Committing to the System • Complying with the Law • Operating within the System • Respecting the Respective Roles of each Component of the System

Tribal Gaming Regulatory Agencies • Instrumentalities of Tribal Government • Possess and exercise powers delegated by the legislative body of the tribal government • Typically, are delegated broad regulatory powers, including the authority to: • Promulgate rules and regulation • License • Enforce and sanction violations • Adjudicate

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Tribal Gaming Regulatory Agencies • Indian tribes have the exclusive right to regulate gaming activities on Indian lands if the gaming activity is not specifically prohibited by Federal law and is conducted within a State which does not prohibit such gaming activity. Congressional findings and Statement of Policy, Indian Regulatory Act, 25 U.S.C. § 2701; see also, Cabazon Band of Mission Indians v. National Indian Gaming Comm’n, 827 F. Supp. 26, 31 (D.D.C. 1993); aff’d, 14 F.3d 633, 635-36 (D.C. Cir. 1994).

Agency Authority & Functions, Duties, and Responsibilities • Typically, an Tribal Gaming 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)

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Tribal Gaming Regulatory Agencies • Promulgate Regulations • Issue Opinions, Guidelines and Policy Statements • Develop and Implement Plans • Issue Licenses & Permits • Prepare Technical Documents & Reports • Conduct Studies, Fact Findings, & Investigations • Bring Enforcement Actions

• Adjudicate and Make Decisions • Assess Fines and Other Sanctions

Tribal Gaming Regulatory Agencies • Interpret, implement, administer, monitor, and enforce statutory law within the limits of its delegated authority – the scope of this authority will vary from one tribal government to another

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Tribal Gaming Enterprises

• Own, Operate, & Manage • Make Business Decisions • Supervise Staff • Allocate Resources • Operate Collateral Business Activities

Tribal Court

Tribal Council

Legislates

Appeals

Commission Rulemaking, Enforcement, Licensing, Hearings

Enterprise Board

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TGRA

Council Legislates

Hearing & Appeals

Enforcement Licensing & Enforcement

Enterprise Board

Tribal Court

Council Legislates

Enforcement

Licensing

Enterprise Board

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Enterprise Board

Casino

Retail

Food/Beverage

Enterprise Board

Casino

Retail

Food/Beverage

Hotel

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What Happens When Respective Are Roles Not Respected? • CONFLICT • TENSION • STRESS • LOSS OF FOCUS • ACRIMONY • INSTITUTIONAL INSTABILITY • POLITICAL CRISIS

What Can Regulators Do? • NOTHING -- In a Perfect World Because Everyone Would: • 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

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In the REAL World: Rule 1 is to Know Thyself 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 ---

NOT POLITICAL CONSIDERATIONS

The Rest of the Rules • Understand Your Responsibilities, Duties, Obligations as well as the Agency’s Functions under the Law • Act within the Scope of Authority Delegated • Fairly and Objectively Apply the Law • Exercises Good Judgment • Be Ethical, Reasonable, and Fair • Maintain a High Work Ethic • Exercise Discretion • Ensure that Subordinates are held to the Same Standards of Conduct

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Educate with Infinite Patience • 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 • Monitoring serves to keep the staff honest • Auditing serves to keep management honest • Enforcement signals that the Tribe 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 Efficiency & Economy Serve the Interests of the Casino Efficiency & Effectiveness Serve the Interests of the Regulator Accountability and Integrity Serve the Interests of the Tribe, but So Too Does Efficiency, Economy, and Profitability

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END

Elizabeth L. Homer Homer Law, CHTD. 1730 Rhode Island Ave., N.W. Suite 501 Washington, D.C. 20036 (202) 955-5601

(202) 955-5605 Fax www.homerlaw.com

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What’s the BIG DEAL? Threats and Vulnerabilities in a Cash Intensive Industry

Elizabeth Lohah Homer

Governments have used gaming as a source of revenue for millennia.

Government Regulation of Gaming

Fraud in gaming began at the same time.

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• One notable example was a private lottery passed by Congress in 1823 for the beautification of Washington D.C. • Unfortunately, the organizers absconded with the proceeds and the winner was never paid. • The Supreme Court held the Government liable for the winnings. Clark v. City of Washington , 25 U.S. 40 (1827)

Government Regulation of Gaming

To much of the public, this incident illustrated that the lotteries of that time were crooked. This ultimately led to the widespread restriction of gaming in the 1830s and 1840s.

Government Regulation of Gaming

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•The use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization’s resources or assets.

Occupational Fraud:

Fraud & Money Laundering

• A financial transaction scheme that aims to conceal the identity, source, and destination of illicitly-obtained money.

Money Laundering:

Money Laundering

• Because of the cash-intensive nature of casinos, criminals may try to use them to launder money. • Tools:

• Bank Secrecy Act, MICS, & TICS require reporting of all significant transactions.

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By working to eliminate theft and fraud.

Robust Gaming Regulation Protects Tribal Resources

By ensuring public perception of honesty & integrity.

By protecting the Gaming Enterprise from civil penalties imposed for failing to comply with the Bank Secrecy Act.

IGRA’s Declaration of Policy: • Shield the Indian tribe from organized crime and other corrupting influences.

Indian Gaming Commissions: Purpose and Functions

• Ensure that the Indian tribe is the prime beneficiary of the gaming operation. • Assure that gaming is conducted fairly and honestly by both the

operator and players. • See 25 U.S.C. 2702(2)

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Understanding Vulnerabilities:

• Cash intensive environment intensifies temptation to steal. • A cash intensive environment without good internal controls significantly increases the likelihood of theft and fraud. • Increasing the probability of discovery decreases the probability that theft or fraud will succeed.

Importance of Effective Regulation

Ensuring that Tribes are the Primary Beneficiaries of Gaming Revenues

• Occupational Fraud and Abuse is Projected to Cost Businesses Worldwide Nearly $4.7 Trillion Annually. • Approximately 5% of the Annual Revenues of an Average business will be lost to Occupational Fraud. • Frauds lasted a median of 12 months before being detected, resulting in a median loss of approximately $100,000.

Source: 2022 Report to the Nations on Occupational Fraud and Abuse, Association of Certified Fraud Examiners (2022 Report).

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Anti-Fraud Controls

• The presence of anti-fraud controls is associated with lower fraud losses and quicker fraud detection. • Nearly HALF of fraud cases occurred due to lack of internal controls (29% of cases) or override of existing controls (20% of cases).

• Following the discovery of fraud, 81% of victim organizations modified their anti-fraud controls.

Source: 2022 Report to the Nations on Occupational Fraud and Abuse, Association of Certified Fraud Examiners (2022 Report).

Occupational Fraud and Abuse

Asset Misappropriation

Financial Statement Fraud

Corruption

Occupational Fraud Classification System

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Corruption

Conflicts of Interest

Economic Extortion

Bribery

Illegal Gratuities

Occupational Fraud Classification System

Financial Statement Fraud

Asset/Revenue Overstatements

Asset/Revenue Understatements

Asset Misappropriation

Inventory and All Other Assets

Cash

Theft of Cash on Hand

Theft of Cash Receipts

Fraudulent Disbursements

Misuse

Skimming

Larceny

Cash Larceny

Occupational Fraud Classification System

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How is Occupational Fraud Committed?

Data Source: 2022 Report to the Nations on Occupational Fraud and Abuse, Association of Certified Fraud Examiners (2022 Report)