Dangers of online gambling

The US Congress recently passed legislation at the end of 2006 which will
make it impossible for many online betting businesses to collect revenues in the
US.

Following this, the British government announced the first ever international
summit to discuss the global challenges posed by remote gambling including ‘the
best way to ensure children and vulnerable people are protected, games are fair
and crime is kept out of gambling’. The UK government appears keen to allow
access to gambling, albeit under strict controls to protect individuals, while
on the other hand the US government is apparently looking to reduce access to
internet gambling.

What is the right approach? Is this all about protectionism or raising tax
revenues as has been suggested? What about the threats to businesses from
gambling?

Dr Newman, a UK GP with a specialist interest in addictions, believes that
pathological gamblers can seem quite normal. They retain their thinking powers
and devise more ingenious ways to cover their activities and to obtain money
from family, friends or their business associates.

In almost fifteen years of investigating fraud, my experience has been that
funding a gambling habit is one of the main reasons why people commit fraud. One
of my earliest cases involved a financial controller who was pocketing customer
receipts and ‘cooking the books’ to cover this up. After stealing £1m the fraud
came to light. Each lunch time he crossed the road to the betting shop to place
his bets.

Everybody knew he had a ‘habit’ and had access to company funds but no one
said anything.

Vicious circle

It can take between two to six years for pathological gambling to develop.
There are three distinct stages from winning to losing to desperation where the
person will do anything to acquire money to keep betting. In the example above,
the financial controller kept a record of his wins and losses.

He did well in his first year but by the end of year three he was betting and
losing £10,000 a day. The scale of his losses mirrored the scale of the fraud
and the means to which he went to cover it up. He kept two sets of books and the
constant juggling of numbers, creation of false documents, lies and deceit
finally took its toll. The stress resulted in time off work which led to the
uncovering of the fraud.

With the increased access to gambling over the last few years, this problem
has become worse. Analysis of reported fraud cases, where a motive was
disclosed, shows that there were almost two and half times more such cases in
2006 (nine month figures extrapolated for 2006) than there were in 2003. The
launch of super-casinos in the not too distant future, I believe, will only
increase this problem. Another marked increase is in relation to online
gambling. Analysis of reported cases shows that such cases have trebled since
2004.

Further exploration of such cases of reported fraud identified that a
significant percentage were perpetrated by employees. More worryingly, most of
these employees worked in the financial services sector.

Companies, especially those in the finance sector, need to wake up to this
threat and do something to mitigate their risk. They will never be able to
eliminate the risk of fraud completely but a few simple steps will go a long way
to reducing exposure to it.

Removing employee access to internet gambling and betting sites (including
spread betting) through PCs located in the workplace can help. I believe that
employers have a duty to look after the interests of their staff, and just as
drinking at lunchtime has become less prevalent due to a change of culture in
the workplace, the same should apply to gambling. Many BlackBerry type devices
also allow access to the internet and access through these should be limited as
well.

Employers will need to monitor new technologies and take appropriate steps to
limit access. Remote gambling (which includes access through the internet) also
encompasses access via the mobile phone. Companies have already developed
products that are accessible via SMS text messaging.

Erratic behaviour

Employees should be encouraged to come forward if they have suspicions or
concerns about fellow staff. In the case referred to above, the finance
department staff all knew that the finance controller was visiting the
bookmakers everyday. His behaviour was becoming more and more erratic ­ he
started buying champagne for staff each Friday afternoon. As the company did not
have a confidential hotline staff did not have any way of making head office
staff aware of their concerns.

Employers should provide a confidential service for staff who might be ‘in
trouble’. This would extend to any addictions. Staff in key functions should be
‘screened’ regularly. Among other things, this should identify signs of debt
such as County Court judgments.

Corporate entertainment can involve trips to various sporting events such as
horse and dog racing. Again, companies should be thinking carefully about such
trips and whether they want to be encouraging gambling during work.

Dodgy deals

• A 32 year old accountant stole more than £9m to fund a gambling addiction
that grew rapidly out of control. He transferred all the money into a spread
betting account from which he withdrew almost £1m.The remainder was lost on
gambling. Not only did the accountant breach the trust of his employers and the
company shareholders, but he also betrayed his colleagues. He transferred money
by logging on to the banking system in his colleagues’ names so that payments
could be approved.

• A book keeper addicted to gambling on the internet stole more than £1m from
his employer causing the company to collapse. The book keeper, who was paid
£16,000 a year, was often stealing more than that each day from a construction
company where he was a payroll administrator. Over 18 months he stole and
gambled the equivalent to one tenth of the company’s turnover.

• A stockbroker received over one hundred cheques authorised by claiming they
were going to his clients. However, the employee, who was in a significant
position of trust, was addicted to online gambling, horse racing and casinos. He
had run up over £0.5m of debt and was using the stolen cash to cover it.

• A financial adviser stole £1.75m from his clients and squandered the money
on an online gambling habit. He would charm his way into the affections of his
clients before plundering their credit cards and bank accounts. He was believed
to have spent £2m on his gambling habit and did not accumulate any assets as a
result of the fraud.

Andrew Durant is MD at Navigant Consulting’s Disputes
& Investigations practice