A Global Gaming Expo panel on the intersection of technology and compliance tried something different on the first day of G2E. Moderator Robert Boyle, a senior manager at Ernst & Young, live-polled the audience on its use of cutting-edge technology in their compliance efforts.
The polling showed that companies using technologies such as artificial intelligence (AI) are still in the early stages, employing technology in only limited fashion and in circumscribed areas.
To what extent were technological solutions part of compliance? A plurality of the audience, 42 percent, chose “somewhat.” Ten percent selected “none.”
Perhaps that was due to cost, cited as the biggest challenge in adopting new technology. Getting management to buy in to new technology was also singled out by attendees.
When employed, technological solutions are directed toward anti-money laundering (AML) efforts, anti-fraud measures, risk management, and know your customer applications, according to another polling question.
As for which skill sets would become essential in this brave new world, data analytics were far and away the top choice. Understanding and integration were distant runners-up.
Finally, attendees were asked where the greatest opportunity to leverage technology was. The leading choice was risk management, followed by transaction monitoring. One popular form of technology, added panelist Kelci Binau, a partner at the McDonald Carno law firm, was geolocation, “tied in with know-your-customer and anti-money-laundering practices.”
“I’m essentially a bank regulator,” said Jim Vivenzio, a partner at Perkins Cole law firm, introducing himself as a panelist. He said that AML policy had been the subject of “probably the only letter the federal government has put out” permitting the use of AI in compliance efforts, Interpretive Letter No, 1166.
Vivenzio added that it lays out a blueprint that casinos can use to automate their suspicious activity reports (SARs). Continuously acting SARs, he said, “can be completely built in.”
When it comes to adopting new technologies, warned Alfredo Lazcano, of the law firm Lazcano Samano, prejudice and the lack of knowledge are the main obstacles. Nobody wants to lose their job to a machine, he explained. The bad news, Lazcano said, is that humans who don’t use new technology will lose their jobs to those who do.
Companies that fail to adapt, he added, are vulnerable to savvy bad actors who are staying on the technological cusp. The most effective strategy is to banish the fear of the unknown. The technology available today, Lazcano continued, cannot be operated “without certain human skills.” Compliance professionals who avail themselves of technological tools will be more efficient, faster, less expensive, and more effective.
Many companies’ data analytics, said Jason Clairmont, principal account manager for gaming at Amazon Web Services, are vulnerable to a garbage-in garbage-out approach. “Regulators, unfortunately, aren’t empowered” to address this and are behind the times in many cases.
Although problem-gambling programs went largely undiscussed, Binau said, “They need assistance organizing all that data,” so as to understand player behavior in an actionable manner. AI, she said, can set betting limits and send alerts, responsible-gambling methods that studies have shown to be effective.
Returning to the subject of compliance, Vivenzio explained that AML measures have evolved, but so has fraud itself, while companies are reliant on outdated laws like the 2001 Patriot Act. “Citibank is spending hundreds of millions in compliance alone,” he said, and the new buzzword is “responsible innovation,” which can be more cost-effective.
“We’re seeing a lot of focus on enforcement in [frequently outsourced] third-party risk management,” which Vivenzio said was a risk in itself. Ditto board of directors’ oversight and governance or the potential lack of same. Binau later pointed to an additional disconnect, between the financial-services sector, which is federally regulated, and the gaming industry, which answers to state oversight.
On the subject of responsible innovation, Lazcano said he serves as the compliance officer for a large unnamed gaming company in Mexico for which his firm fills out AML reports every month. “All this data we get from the client is collected by its internal system,” but not checked against governmental databases, “so we must check all their reports against the governmental sources.”
This used to be done manually. “It was, of course, a waste of time. Some would say this would be an excellent opportunity for a law firm to bill many hours,” but Lazcano hired a data-science expert who developed an internal solution that employed data analytics and AI. Reports that took a week to generate now require only two to three minutes,
The largest AI benefits, Clairmont added, would enable companies to scale up their compliance efforts without adding staff. “The biggest operators can afford to do that,” he said, citing Sportradar. However, compliance departments aren’t usually technology-forward, he has found.
Binau returned to Clarimont’s earlier point about garbage-in garbage-out methods. “You need trained employees,” because third-party providers still generate massive amounts of data. Also, the phenomenon of “AI hallucination” (or erroneous output) must be guarded against, as it can occur in generative AI, particularly in large language programs.
Returning to a previous topic, Vivenzio said that companies attempting practices like customer identification are still mired in 2002 rules and methods. “Today, there are so many other ways to verify someone’s identity. I’ve been in this area a long time and, sadly, change comes slowly,” he continued. Adaptation, he said, “is going to be a long slog.”
Cautioned Clairmont, compliance has a considerable distance to go “and technology is the way to do it.”