04091124 Level III Training Book

Commissioner Certification Training Level III AGENDA

April 9-11, 2024 Anaheim, California PST Time

Tuesday, April 9

8:00 AM 9:00 AM

Breakfast to be provided

Effective Regulation of Gaming Elizabeth Homer, Homer Law CHTD

9:00 AM 10:30 AM

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

Managing a Tribal Gaming Regulatory Agency Billy David, Bo-Co-Pa & Associates

12:30 PM 2:00 PM Lunch Break 2:00 PM 3:15 PM

Avoiding and Detecting Fraud: Active Investigation & Forensic Audits Josh Peukert, CPA & Gaming MICS Compliance, Blue Bird CPA's

3:15 PM 3:30 PM Break 3:30 PM 5:00 PM

Title 31/OFAC Josh Peukert, CPA & Gaming MICS Compliance , Blue Bird CPA's Wednesday, April 10

8:00 AM 9:00 AM

Breakfast to be provided Network Risk Assessment Peter Nikiper, BMM Test Labs

9:00 AM 10:30 AM

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

Hearing and Appeals Elizabeth Homer, Homer Law CHTD

12:30 PM 2:00 PM Lunch Break 2:00 PM 3:15 PM

Proper use of Gaming Revenue Elizabeth Homer, Homer Law CHTD

3:15 PM 3:30 PM Break 3:30 PM 5:00 PM

Conflict Management Elizabeth Homer, Homer Law CHTD Thursday, April 11

8:00 AM 9:00 AM

Breakfast to be provided

Surveillance Frauds, Threats & Vulnerabilities, PT 1 Billy David, Bo-Co-Pa & Associates

9:00 AM 10:30 AM

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

Surveillance Frauds, Threats & Vulnerabilities, PT 2 Abe Martin, CFE, CSP Casino Cryptology

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

11/10/22

The Effective Regulation of Gaming Elizabeth L. Homer

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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Federal Perspective Shield the Indian Tribe from organized crime and other corrupting influences Ensure that the Indian Tribe 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 of Tribal Gaming?

I want to tell the Committee about a young Choctaw man, only 37 years old. He got sick and needed a new kidney, but they told him at the hospital it would cost $250,000 and they wouldn’t do it unless he could put up at least half of the money. When we heard about it, we gave him the money out of our gaming account. The trouble was that we didn’t get all the right approvals from the Tribal Council, so we went back to Council to get their approval of what we did. The Council listened and when we got through, you know what they did? They enacted an ordinance that authorized me to spend the gaming money anytime a tribal member needs a transplant. They said from now on, no Choctaw will ever again die for lack of money.

This is what the gaming means to us.

Paraphrased from Testimony of Choctaw Nation Principal Chief Greg Pyle before the House Resources Committee on NIGC’s proposed Class II regulations, February 20, 2008, Miami, Oklahoma.

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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

How Does the Effective Regulation of Gaming Advance Tribal Goals?

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

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 High Work 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

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

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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The Case 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 regulator officials from these situations in order to ensure that regulatory objectives are not undermined by political considerations.

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?

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?

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 from Acting 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

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’s Take a Look at Some Model Examples

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

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 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

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 it Work by Everyone within the System.

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Even if a Government has Adopted an Excellent Gaming Ordinance Establishing a Well-Funded, State- of-the-Art Regulatory Structure with Clearly Defined Authority, Powers, Responsibilities, and Functions, there is NO Guarantee that the Agency will be Effective

A Regulatory Agency Cannot Be Effective without the Trust and Support of the Government that Created it.

Commitment to the System

The Importance of Oversight

Governmental Support and Trust 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

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 Bodies are the Appropriate Entities for Providing Oversight in the Context of Agency Action & Decisionmaking as the Interpretation of Law and the Application of the Law to Particular Facts is a Judicial Function

Principles for Oversight

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

To Trust and Support…

Decreases the Potential for Conflict and Power Struggles

Encourages Sound Decisionmaking

Advances the Tribal Interest

Increases Political Stability

Represents Half of the Equation

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 High Work Ethic Exercises Discretion Ensures that Subordinates are held to the Same Standards of Conduct

To Effect Compliance With the Law Through

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

Primary Goal of the Regulator

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In a Perfect World 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

The Job of a Regulator Is Easy…

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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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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Indian Gaming Association: Level III Commissioner Certification, Tribal Gaming Regulatory Agency Management

Billy David, Owner-Lead Consultant Billy.david90@gmail.com or billy@bo-co-pa.com 541.810.0700

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Discloser!

u If I say something offensive please accept my apologies, it is not my intention to be offensive or discourteous.

questions

This is a very open presentation and I encourage you to ask questions at anytime during the presentation, If you are not comfortable asking questions during class please feel free to ask after class, I will be available at the Conference/Tradeshow.

You are encouraged to share information, please only information that you can,

I am available by email, cell phone,

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Managing a TGRA

Politics, politics and yes politics

u We talked about it before but let be honest, most positions are politically appointed…being politically appointed does bring “POLITICS”

u We all have to deal with it, it is the nature of the position.

u How do you deal with this reality of the position? u Discussion

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What is your perception of regulatory management? Are you a supervisor, manager or leader?

What am I

u Depends on what is expected from you as define by the governing documents, your leadership and what you desire from the position.

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What am I?

u Supervisor, u Manager, u Leader,

u Counselor, u Mediator, u Delegator, u Communicator, u More?

What is the regulatory body's management role?

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Management: In a regulatory environment

Management: 1. the process of dealing with or controlling things or people. 2. the people in charge of running a company or organization, regarded collectively. 3. the responsibility for and control of a company or similar organization.

Regulatory management

u First and foremost, the Tribal Gaming Regulatory Agency is responsible for COMPLIANCE per governing documents requirements.

u But many times, the administrative processes of the regulatory authority can take more of your time to deal with.

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Regulatory management:

Generally Speaking

Signs of a successful Regulatory Body

1. Fully developed regulatory documents : Writing well thought out and researched documents make for an effect, efficient and relevant agency. Discussion: How well are your governing documents? 2. A Developed Regulatory Management Plan : As a leader of the organization what is your vision? Is that vision memorialized and if not why? Discussion: The importance of a well-developed plan. 3. Stable Funding : How do you justify your existence? Discussion: We cannot just live on the old philosophy of “it’s the cost of doing business”

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Develop a regulatory management plan u In this plan is should encompass the following:

1. Enforcement Processes : Know what your enforcement responsibilities are. Keep in mind if you take an enforcement action you may be affecting some ones lively hood. 2. Governing Document Reviews : Make sure that you are reviewing the governing documents at a minimum annually, 3. Understanding Technology : Remember everything is migrating to technology, do not avoid it accept it, 4. Trainings : It is essential to get proper training, outline your needs. Remember training is expensive so make sure you are seeking the right training, 5. Compliance Ø Define how compliance will be achieved (Develop a Compliance Plan) Ø What tools will be needed to achieve compliance including updates to technology 15

Time Management is essential to your team's success

Time management is the act or process of planning and exercising conscious control over the amount of time spent on specific activities, especially to increase effectiveness, efficiency or productivity.

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Develop training programs for all positions in the TGRA When developing training programs consider the following: 1. Make sure the content is current and applicable 2. Try your best to have a program that is deployable across as many generations as possible. 3. Document all processes. 4. Consider out sourcing your training program to be developed.

One of the best skills a Regulatory Manager should mast is Communication

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Way to communicate effectively in the to workplace

Meetings

Its inevitable we all must attend meetings!

u To be effective have an agenda and stay on track.

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Emails

Essential nonverbal way of communicating in the office……. ü Make sure you are responsive to emails.

Texting

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Texting

u Texting is a normal function of all our lives, but what does it mean to the workplace. u Is it a millennial thing??? u Is it an approved form of communication per policy?

One on One

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One on One meetings

u Successful One on One meetings will have positive nonverbal body language as well as an open setting.

Elements of effective communication

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Creating the right environment

Choose the right time,

Facilitate an open conversation,

II.

III. Remove distractions: Facebook, twitter, snap chat etc…

Organize your communication

I. Clarify your ideas in your mind, II. Stay on topic, III. Thank your listener for their time and participation,

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Communicating with speech

Organize your communication

I. Clarify your ideas in your mind, II. Stay on topic, III. Thank your listener for their time and participation,

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Communicating with speech

Set the listener at ease,

Be articulate,

II.

III. Enunciate clearly, IV. Be vocally interesting, V. Be attentive when listening and ensure that your facial expressions reflect your interest, I. Listen actively, II. Validate people's feelings,

Communicating with body language

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Communicating with body language

Recognize people,

II. Be clear and unambiguous with your body language, too, III. Communicate eye-to-eye, IV. Use breathing and pauses to your advantage, V. Consider how your gestures come across, VI. Keep a check on your other body signals,

Balance is success

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Leadership: Emotional Intelligence skills (as explained by D. Goleman

• Self-awareness, • Self-regulation, • Motivation,

•Empathy, •Social Skill,

Emotional Intelligence: Self- awareness

KNOW AND UNDERSTAND YOUR STRENGTHS, WEAKNESSES, DRIVES, VALUES, AND IMPACT ON OTHERS.

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Emotional Intelligence: Self Regulation CONTROLLING OR REDIRECTING DISRUPTIVE IMPULSES AND MOODS

Emotional Intelligence: Motivation. Relishing achievement for its own sake.

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Emotional Intelligence: Empathy Understanding other people’s emotional makeup.

Emotional Intelligence: Social Skill BUILDING RAPPORT WITH OTHERS TO MOVE THEM IN DESIRED DIRECTIONS.

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Self-awareness: Self-confidence, realistic self-assessment, thirst of constructive criticism.

Self-regulation: Trustworthiness, Integrity and comfort with ambiguity and change.

Practice…..

Motivation: Passion for the work itself and for new challenges.

Empathy: Expertise in attracting and retaining talent, ability to develop others and a sensitivity to cross-cultural differences.

Social Skill: Effectiveness in leading change, persuasiveness, extensive networking and expertise in building and leading teams.

Crisis Management CREATE OUR PROCESSES

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Where do we fit as a TGRA

Questions?

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Thank you!

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Avoiding and Detecting Frauds Josh Peukert, CFE, CIA Partner BlueBird, CPAs

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.

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 from misappropriation of assets”

Principal Categories of White Collar Crime

Misrepresentation of material facts Concealment of material facts

•

Bribery

•

Conflicts of interest

•

Theft of money or property

•

• 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.

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

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

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

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

Perpetrator’s Age

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Perpetrator’s Gender

Common Schemes

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Duration of Fraud Schemes

Initial Detection of Occupational Frauds

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Source of Tips

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

Josh Peukert, CFE, CIA Partner BlueBird, CPAs

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.

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.

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

Active Investigations

Josh Peukert, CFE, CIA Partner BlueBird, CPAs

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Quiz Question 1

• How early can children lie as successfully as adults?

a) 5 b) 8 c)

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%

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%

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%

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!

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

7 Universal Facial Expressions of Emotion

Happiness

•

Surprise Sadness

•

Fear

•

Anger

•

Contempt

•

Disgust

•

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Happiness

Happiness & Fake Smiles

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Surprise

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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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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.

So, what does this mean?

• Absolutely nothing…on their own

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Other Things to Consider:

Let’s practice!

• https://youtube.com/clip/UgkxsCwK6wf6rVQHGbjP6XVzAylfciNg4BEa

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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.

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

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

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.

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?”

11/10/22

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

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

11/10/22

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)

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

11/10/22

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

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

11/10/22

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

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

11/10/22

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

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

11/10/22

Investigative Techniques – Interviewing

Assessment Question Techniques:

•

• 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

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

11/10/22

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

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

11/10/22

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

Josh Peukert, Partner jpeukert@bluebirdcpas.com Thank you!

5585 Kietzke Lane | Reno, NV 89511 Phone: 775.827.5999 | Fax: 775.827.2104 info@bluebirdcpas.com | www.bluebirdcpas.com

Preparing Your Property for a Title 31/AML IRS Compliance Examination

5/3/2016

Title 31 and OFAC

Josh Peukert, CIA, CFE, Partner BlueBird, CPAs

About Our Firm • Founded in 1996 • Leadership has over 125 years of experience • 15 States o 60 Casinos

o 24 Title 31 engagements in 2019 • 10% of Tribal gaming revenue

BlueBird, CPAs

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

Recent Updates

Enforcement Actions o

•

Trump Taj Mahal – 3/6/15 • $10 Million

o Tinian 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?

BlueBird, CPAs

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

Anti-Money Laundering Act of 2020 • FinCEN to publish emerging trends (priorities) in money laundering o Casinos will build these into Risk Assessment and Compliance Program • Modernization of AML regulations o Changes to CTR/SAR reporting for example o Additional CTR exemptions

BlueBird, CPAs

Preparing Your Property for a Title 31/AML IRS Compliance Examination

5/3/2016

Anti-Money Laundering Act of 2020 • Current Priorities

o Corruption o Cybercrime o Domestic and International Terrorism o Fraud o Transnational Criminal Organized Activity o Drug Trafficking Organization Activity o Human Trafficking and Human Smuggling o Proliferation Financing

Source of Funds

BlueBird, CPAs

Preparing Your Property for a Title 31/AML IRS Compliance Examination

5/3/2016

Source of Funds

Seizures

BlueBird, CPAs

Preparing Your Property for a Title 31/AML IRS Compliance Examination

5/3/2016

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.”

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

BlueBird, CPAs

Preparing Your Property for a Title 31/AML IRS Compliance Examination

5/3/2016

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.

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

BlueBird, CPAs

Preparing Your Property for a Title 31/AML IRS Compliance Examination

5/3/2016

OFAC • Office of Foreign Assets Control:

• Specially Designated Nationals (SDNs)

SDN List https://www.treasury.gov/resource-center/sanctions/SDN- List/Pages/default.aspx

BlueBird, CPAs

Preparing Your Property for a Title 31/AML IRS Compliance Examination

5/3/2016

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

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?

BlueBird, CPAs

Preparing Your Property for a Title 31/AML IRS Compliance Examination

5/3/2016

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?

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)

BlueBird, CPAs

Preparing Your Property for a Title 31/AML IRS Compliance Examination

5/3/2016

Scenario 3 • Brother has been in/out of prison for crimes ranging from drug trafficking to money laundering.

• Suspicious? File? Source of funds issue?

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?

BlueBird, CPAs

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