In January, a federal jury convicted an Illinois man for stealing $700,000 from a Michigan tribal casino using a simple but devastating tactic: impersonating the tribal chairperson. This incident highlights a growing challenge facing tribal gaming operations, which collectively generated $41.9 billion in revenue in 2023, as reported by the National Indian Gaming Commission. As these facilities handle more cash than many traditional banks, they have become prime targets for increasingly sophisticated scams, and the cost of reactive internal control and security measures is proving unsustainable.
The stakes are particularly high for tribal gaming operations, which serve as vital economic engines for their communities, providing jobs and funding for essential programs. When security breaches occur, the consequences extend far beyond immediate financial losses to include reputational damage, regulatory scrutiny, and potential impacts on community services. As today’s threats become increasingly complex, a reactive approach to internal controls is insufficient.
Understanding vulnerabilities and solutions
Gaming operations today face a complex web of internal control and security challenges, both physical and digital. Social engineering scams, in which criminals impersonate executives to manipulate employees into making unauthorized cash transfers, have become increasingly common. These schemes often exploit internal system weaknesses and highlight critical gaps in verification protocols.
The vulnerabilities vary by facility size. Smaller operations often struggle with blurred staff roles and responsibilities, increasing the risk of internal fraud. Larger operations benefit from more defined roles, but they face challenges with operational complexity. This can lead to other vulnerabilities when processes and policies are not documented, staff do not follow them, or employees do not know or recognize each other. Each facility type requires tailored approaches that balance operational efficiency with risk management.
Many facilities lack stringent verification protocols and comprehensive fraud awareness training programs for non-standard cash transactions. Without proper safeguards and regular training updates, these gaps create opportunities for both external and internal theft.
Building a proactive internal control culture
Technology alone cannot solve security challenges. Successful risk reduction requires a comprehensive organizational approach that combines:
- Clear, comprehensive, written procedures for cash handling and verification
- Regular training on emerging threats and security protocols
- Employee empowerment to report suspicious activities
- Routine assessments of security measures
- Integration of physical and digital controls and systems
The key to implementation is engaging employees in the process. When staff understand the “why” behind new procedures and that they protect them and the casino, they become active participants in maintaining a secure control environment.
Moving forward
The transition from reactive to proactive security measures represents an investment in operational excellence and community protection. While the immediate costs of implementing comprehensive security measures may seem high, they pale compared to the potential losses from security breaches.
External expertise can provide valuable guidance for tribal gaming operations seeking to enhance their policies and procedures. Firms with deep experience in tribal gaming operations, such as REDW, can help develop and implement tailored security protocols that respect tribal sovereignty while protecting assets and operations. With over 40 years of trusted service to Tribal Nations, REDW’s client advisory and accounting team provides practical operational knowledge to help gaming facilities build resilient, secure systems and processes for the future. For details, visit redw.com/tribalgaming.
Key takeaways for gaming operations:
- Assess current vulnerabilities: Conduct a thorough review of existing internal control measures, focusing on both physical and digital vulnerabilities. Pay special attention to cash-handling procedures and verification protocols.
- Invest strategically: Consider external expertise and automation and technology solutions as long-term investments rather than expenses. Focus on solutions that provide multiple benefits, such as improved efficiency alongside enhanced security and control.
- Develop clear protocols: Establish and document clear procedures for all security-sensitive operations, ensuring they’re easily understood and consistently followed by all staff members.
- Prioritize training: Education is paramount. Make internal control, security awareness, and fraud prevention training a regular part of employee development, as well as update content to address emerging threats and scams.
- Create accountability: Implement clear chains of command and verification procedures for high-risk transactions, especially those involving large sums of cash or unusual requests.
Proactive controls and security aren’t just operational choices; they’re essential investments in the continued success and resilience of tribal gaming operations.
RESOURCES
- For details, visit redw.com/tribalgaming.
- Kevin Huddleston, CPA, CFF, CGMA | REDW Principal, Client Advisory & Accounting Services – Kevin Huddleston, an enrolled member of the Choctaw Nation of Oklahoma, brings extensive experience in tribal gaming operations and accounting, having overseen accounting, revenue audit, and cage operations for a major Oklahoma tribal casino before joining public accounting. He specializes in operational improvement and technological innovation in gaming operations.
- Kandi Link | REDW Senior Manager of Gaming Consulting – Kandi Link, an enrolled member of the Chickasaw Nation, brings over 18 years of gaming industry expertise, including management of gaming operations from 300-2500 slot machines and leading the pre-opening and opening of tribal casinos. She specializes in comprehensive casino operations, from slot and business analytics to policy development.
