Auditor General’s report on live and online gambling practices in Ontario raises multiple concerns.

Last month, the Office of the Auditor General of Ontario released a scathing, 74-page report detailing numerous deficiencies found in the procedures of the Alcohol and Gaming Commission of Ontario (AGCO). The report covers activities and procedures from 2015 to 2020. It uncovered a strain of problems that will need to be addressed immediately; preferably before Canada’s gambling market expands with the all-but-guaranteed passage of single-event sports betting laws.

The AGCO has a great deal of responsibilities in the province, including regulatory oversight of “the alcohol, gaming, horseracing and private cannabis retail sectors in Ontario”. Across all four industry sectors, the full list of licensees includes 78,500 businesses.

These services are so strictly regulated because they generate a substantial amount of annual revenue for the province, but are the most susceptible to criminal infiltration.  

Report Raises Concerns Over Live and Online Gambling in Ontario

The Auditor General’s report found a number of issues with AGCO’s oversight of gaming activities, revealing a compromised inspection system, irresponsibility in anti-money laundering measures, and vulnerabilities in electronic gaming machines.

Compromised Inspections

The first point of interest was the regulator’s lack of transparency regarding inspection of licensed establishments. Specifically, they found no documentation that states how thoroughly licensed establishment undergo inspection, or why an establishment is selected for inspection.

Furthermore, the report finds that the same inspectors are reviewing the same properties, year after year. As a result, the reports states an inspector’s “independence and judgment may be compromised by long-term relationships with licensees”.

Irresponsibility in Anti-Money Laundering Procedures

Of even greater concern to authorities is a resounding lack of responsibility in casino-related anti-money laundering (AML) practices. The report finds “suspicious transactions” between 2017-2019 increased 19% to 3,722, while the value of those transactions doubled to $340 million. However, during that same period, the AGCO’s response diminished. The number of incidents in which funds were seized amounted to just 4, with only 38 patrons banned from Ontario’s casinos for breach of AML laws.

The report included mention of one incident in which a patron who listed himself as a “restaurant cook” was permitted to place $1.3 million in wagers over a three year period, with nothing beyond a standard background check to determine the legitimacy of the source of funds.

Vulnerability to Slot Machine Payout Tampering

The report revealed that, in February 2020, 686 electronic gaming machines (i.e. slot machines) in Ontario casinos were not networked to the gaming management system of Ontario Lottery and Gaming (OLG). This means the machines were not being monitored, leaving them vulnerable to potential tampering with the software that determines payout percentages.

Report Concludes the AGCO Regulations are Ineffective

In its report summary, the Auditor General concluded a number of insufficiencies with the AGCO’s current practices.

“The AGCO does not have strong processes and systems in place to effectively carry out its regulatory activities across the four sectors,” reads the report. “The AGCO’s publicly reported performance measures focus largely on turnaround times and client satisfaction, with little measurement of its effectiveness as a regulator.”

The report goes on to condemn the AGCO for failing to focus compliance measures on higher risk establishments, and for providing undue autonomy in selecting which establishments to inspect, with no documented rationale as to the reason behind its selections.

AGCO Welcomes Assessment, Concurs with Findings

The Auditor General made more than two dozen recommendations in its report, all of which the AGCO responded to in affable agreement. The AGCO promises to “focus its efforts on delivering strong and effective regulatory services” in the future.

“This report’s recommendations will assist us in our efforts, including with anti-money laundering,” read a statement from the AGCO. “We have an integrated police bureau focused on preventing illegal activities at casinos, including money laundering. The Auditor General has identified clear opportunities for improvement and the AGCO is committed to moving forward.”