What Is Cashless Systems Industry Compliance within the Casino & Gaming Industry?

By Rudy Stevenson
Government Relations Executive

August 22, 2023

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The adoption of cashless casino systems marks a significant advancement in casino gaming technology, paving the way for the future of financial technology. By transitioning to cashless operations, casinos enhance their adaptability to the ever-evolving regulatory environment. This innovative approach offers players alternative payment options, eliminates the need for cash in gaming machines, and streamlines electronic payouts and deposits. Unlike traditional cash transactions, cashless casino systems provide increased transparency, facilitating Anti-Money Laundering (AML) and Know-Your-Customer (KYC) compliance efforts.

The rapid adoption of cashless casinos has transformed the gaming landscape, with many tribal and commercial casinos in the United States and beyond embracing advanced casino gaming technology. Countries like Canada, Bermuda, and Australia have also joined the cashless gaming movement.

While cashless casino gaming offers convenience, it introduces new cybersecurity challenges. Cyberattacks have specifically targeted these systems, revealing vulnerabilities unique to cashless technology. A notable incident was the termination of the NSW cashless gaming trial following a cyberattack, highlighting the risks inherent in this digital shift. The attack left other financial data untouched, sparking questions about the security of cashless gaming operations.

Cashless gaming, which allows players to make transactions using digital currencies or virtual payment methods, has gained popularity due to its ease of use and seamless integration with modern tech. Nevertheless, cybercriminals have recognized the potential for exploiting weaknesses in this novel landscape. The specific targeting of cashless gaming aspects in these attacks indicates a sophisticated level of understanding of the industry’s intricacies.

One possible reason behind these targeted attacks could be the relatively new and untested nature of cashless gaming systems. As these technologies continue to evolve, hackers may identify and exploit vulnerabilities that developers have yet to address adequately. Additionally, the potential financial gains for cybercriminals in the gaming world can be substantial, making it an attractive target.

To address the challenges posed by cyberattacks on cashless gaming systems, implementing robust Cashless Systems Testing is essential. Primarily, developers and gaming companies should integrate security as a core component during both the design and implementation stages. Comprehensive testing, frequent security audits, and ongoing monitoring are vital to identify and rectify vulnerabilities before they can be exploited by malicious entities.

Additionally, fostering collaboration among industry stakeholders is vital. Gaming companies, financial institutions, and cybersecurity professionals must exchange information on emerging threats and collaborate to bolster defenses. Establishing standardized security protocols across the industry can significantly improve protection against potential cyber threats.

User education is key in cybersecurity. Players should learn best practices, such as using strong passwords, enabling two-factor authentication, and avoiding suspicious links. A security-conscious user base can reduce the success of social engineering tactics by hackers.

Regulatory bodies play a crucial role in establishing cybersecurity standards for cashless gaming. Clear guidelines can encourage companies to enhance their security, making it more difficult for cybercriminals to identify weaknesses.

Regulators lead the charge in approving and adopting technologies, setting strong rules for cashless casinos to tackle risks. Cashless systems provide transparency and help prevent fraud. Gaming operators must grasp the regulatory landscape to ensure compliance and smooth operations.

Deciding on cashless operations involves weighing the pros and cons to align with both the needs of casino operators and their customers. Ultimately, it’s about assessing risks and opportunities. Consider these pros and cons as you explore cashless systems testing and its challenges.

Pros of Cashless Gaming Systems:

• Simplified legal adherence
• Boosted safety and health
• Optimized operations
• Encourages responsible gaming with user-set limits
• Improved transaction clarity
• Better anti-money laundering measures
• Enhanced safety for operators and guests
• Lower banking expenses
• Quicker transactions
• Unified data system
• Track customer spending
• Real-time customer insights
• Operator marketing and loyalty potential
• Seamless integration of online and offline gaming with shared payment systems

While these benefits seem promising for operators driving the industry towards a cashless future, it’s crucial to acknowledge the potential roadblocks and significant considerations that may arise, such as:

Cons of Cashless Gaming Systems:

• Cybersecurity: Susceptible to attacks and breaches.
• Tech dependency: Vulnerable to failures and disruptions.
• Excludes cash users: Preference for cash remains.
• Privacy: Stores transaction data.
• Limited access: Tech-averse face challenges.
• Regulatory costs: Compliance expenses increase.
• Fees: Extra charges for users and operators.
• Overspending risk: Easier to spend excessively.
• System issues: Malfunctions cause disputes.
• Infrastructure reliance: Needs stable internet.
• Transition costs: Training and setup needed.
• Resistance: Some prefer cash methods.
• Crypto: Choosing regulated currencies for payments.

After assessing the pros and cons, if you are leaning toward venturing into this territory for your operations, here are a few key factors to guide you through your potential fintech journey towards cashless solutions.

Cashless Systems in Casinos – GLI Standards

GLI has presented a set of standards for cashless processes in casinos in GLI-16. Following certification, we will issue a certificate of compliance as well as an appropriate Gaming Labs Certified® Mark indicating compliance with this standard.

BSA and AML Compliance Basics

On a federal level, each country has established anti-money laundering legislation with basic requirements to ensure transparency and prevent money laundering. In the case of cashless systems, advanced technology can facilitate compliance by integrating checks and automated reports.

To safeguard the integrity of the casino industry and the U.S. financial system, casino companies and gaming operators have developed effective risk-based programs to ensure compliance with the legal requirements of the federal Bank Secrecy Act and associated AML statutes and regulations. AML programs also protect the casino and its employees from even unwittingly being involved in money laundering criminal conduct.

AMERICAN GAMING ASSOCIATION

Best Practices for Anti-Money Laundering Compliance 2022

Basic Compliance Requirements

• Implementing internal controls
• Compliance training of casino staff
• Independent compliance and AML-focused audits
• Having a compliance officer responsible for AML compliance
• Implementing programs to identify customers by name, address, SSN
• Implementing programs to detect suspicious transaction patterns
• Maintaining:
  • Multiple Transaction Log (MTL)
  • Negotiable Instrument Log (NIL)
  • Monetary Instrument Log (MIL)
  • Suspicious Activity Reporting (SAR)

Modern cashless systems often integrate and automate reports to facilitate compliance with the current regulatory requirements.

Digital Wallets – Risk Assessment

Transactions made using digital wallets through cashless wagering accounts create digital records. While deposits and withdrawals within casino premises are subject to currency transaction reporting requirements, transactions using other digital wallets are not. In this case, casino operators must implement efficient transaction review procedures capable of detecting suspicious activities.

The American Gaming Association advises,

“Wherever possible, casinos should require the withdrawal method to match the deposit method unless the funds have been sufficiently placed at risk. Funds deposited into a Cashless Wagering Account should be confirmed to be used for gaming purposes. A reasonable, risk-based review process should be put in place to detect customers that frequently make deposits and withdrawals without associated gaming activity. Such instances should be considered for SAR filing.”

Mobile Wallets

Virtual wallets let players activate slot machines via smartphones, depositing funds directly from debit cards. These wallets can link to casino loyalty accounts. Companies adopting this cashless tech need a Federal Deposit Insurance Corporation (FDIC) regulated money transmitter license.

Compliance Officers

Casinos require a compliance officer to ensure adherence to AML/BSA regulations. This officer should know regulations, casino offerings, and customer profiles, plus be aware of money laundering risks and reporting. They are the main regulatory contact.

Customer Identification

In order to open a digital account that they can use for gaming, patrons will be required to provide:

• Full name
• Address
• Social Security Number
• Additional information depending on assessed risk

Know Your Customer Due Diligence

Casino operators must keep records of the procedures used to analyze financial transactions and gaming patterns. Additionally, they must keep records of:

• Due diligence reports
• Risk determination
• Patron monitoring/termination/banning from certain casino services
• Reports to law enforcement
• Independent testing program reports

Cashless systems are here to stay. Using services from established companies helps casinos simplify transactions and improve compliance. While cashless gaming offers many benefits, it also presents cybersecurity challenges. By focusing on strong security, collaboration, education, and regulations, the industry can protect itself and its users. As technology evolves, a collective effort is needed to stay ahead of threats and maintain player trust in cashless gaming.

At GLI, our global experts help align your fintech gaming goals with customer needs and navigate future challenges. While the future is uncertain, our insights will help assess risks and opportunities in this evolving space. Gaming Laboratories International is the leading company providing independent testing and evaluation services for all gaming technology.