Casino Employee Fraud – 10 Strategies to Protect Your Profits

The 2016 Report to the Nations found an average loss of $2.7 million in revenue to employee fraud and theft. That represents 5% of total revenue, every year, for each company in their study.

That is a staggering sum of money considering how much your casino or other type of business also spends on taxes, expenses, employee payroll, and other costs. Eating up 5% of your total revenue just to fraud means you’re losing a much greater percentage of your net profits.

In other words, that 5% of total revenue lost to employee fraud is 100% taken from what would have been your profits. For example, if your net profit after all taxes and expenses would have been $10 million but you lose $2 million to fraud, now your net profit is only $8 million – a 20% loss. If your net profit would have been $2.5 million but you lose $2 million to employee fraud, you net only $500,000 – an 80% profit loss.

For a little more detail on the numbers in the study, the median loss was $150,000. That means half of companies in the study lost less than that, and half lost more. So, a smaller number of huge losses due to employee fraud are bumping up the average. The report states that 23.2% of the cases in their study lost $1 million or more.

But to a small business, losing $150,000 can be far more catastrophic than a large business losing $1 million. Again, 100% of these losses come from your profits – money you would have gotten to keep.

To protect your casino from employee fraud, begin implementing the strategies below as soon as possible. Or, if you’re already using them, revisit and strengthen them across your entire casino operation. Also, see 7 warning signs an employee may be engaging in theft, or considering it.

  1. Delegate Tasks Among Multiple Employees

For casino employee fraud that happens behind closed doors, such as with vendors or on computer screens in your accounting department, what often facilitates that fraud is one person having too much control over sensitive data.

By splitting up certain tasks, such as having one employee review bank statements but another employee sign checks and make payments online, you reduce the likelihood that one person can set up their own little fraud scam to fleece your profits.

Reducing casino employee fraud is in large part accomplished by minimizing the opportunities to commit it.

  1. Get Documentation for Every Signed Check

When you start considering all the checks your casino writes to vendors and contractors for all the zillion things it takes to run a casino, you will realize that your vulnerability to employee fraud isn’t just confined to the casino floor, table games, food and beverage, and slots. Contracts with vendors, where one employee and a vendor team up to steal from your casino, are a major problem area.

Insist on documentation and receipts for all purchases that include details about exactly what was purchased.

  1. Cameras Cameras Cameras

This one isn’t new of course, and these days, every casino uses surveillance cameras. However, the challenge arises when the time comes to access and utilize the reams of data all your surveillance systems are collecting.

With video recordings now stored in the cloud, it actually takes longer to export the videos you want to view than it does to record them. So if you’re looking for video of a certain employee’s actions for the past six months, you will have a major challenge simply accessing and viewing all the relevant data.

It is critical that all your cameras and other technological surveillance systems can talk to each other. You need to be able to integrate the times for when things happen. For instance, if a bartender is skimming on drink profits, can your payment processor link up its times with your surveillance cameras? That’s what you’ll need if you want to produce ironclad proof of their theft.

  1. Use Identity Verification Software when Hiring

Most people who want to work at casinos are fine people. But some want in because they want to be around all that money. And some have records. So they falsify their identities. Catching the liars and imposters before you hire them is essential.

You can get software that aids in verifying a new hire’s identity so you can be sure you aren’t about to hire someone who has been blacklisted by the Gaming Control Board. If they’ve lost their registration because of fraud, you want to know it. Here’s one identity verification software service (Casino Schedule Ease has no affiliation with this company and offers this just as an example, not an endorsement).

  1. Conduct Frequent and Publicized Audits

This is one of your most powerful deterrents against casino employee fraud.

Conducting audits of your finances and security systems in secret may help you catch fraud after the fact. And that’s good. But it’s better to prevent it from happening in the first place. Make it well-known that you conduct frequent unannounced audits at irregular intervals.

When employees know that not only is someone always watching on surveillance cameras, but that someone is also looking closely at financial transactions at all levels of operations within the casino, the majority of employees who might have considered trying to steal from you will choose otherwise.

Nothing beats the fear of getting caught. The Report to the Nations referenced at the start of this article found that only 5.2% of employee fraudsters had prior convictions. And only 8.3% had been previously fired for fraud. There is no doubt substantial overlap between those two groups.

That means the vast majority of employee fraud is committed by first-time offenders. Doing it the first time is always the scariest. So, the more fear you can put into them that they will be caught, the fewer who will attempt to steal.

  1. Have and Enforce an Employee Code of Conduct

When expectations are known and communicated, behavior improves. The Report found that where controls such as a code of conduct and frequent audits are present, financial losses to employee fraud were 14.3-54% lower, and people were caught 33.3-50% more quickly.

You will lose a lot less money to fraud and you’ll catch the thieves faster, if you implement the strategies on this list.

  1. Create a Healthy Company Culture – with Integrity

Leadership plays a big role in preventing fraud. When employees feel unknown, uncared for, and devalued, they start to consider doing things they normally would not. A lack of communication is a breeding ground for resentment.

You must make it a priority to keep your team engaged and informed. There is a ton written about creating healthy and positive company cultures. If your casino staff, departments, and managers all feel isolated in silos and unappreciated, make it a top priority to start fixing this now.

Casino Schedule Ease is a terrific way to start changing your company culture. Employees frequently have schedule change requests, early out requests, and inquiries about vacation time, family medical leave, and so much more. All these requests burden your systems and personnel. But delays and lack of communication can infuriate your employees.

With our scheduling software – built specifically for casinos – your team can access everything on their mobile phones. They can make change requests and EO requests and get answers quickly. Employees love our software, and they will appreciate you for providing them with this convenience. Try our 90-day free trial.

One caveat about company culture is that your leadership and supervisors must also abide by the cultural values you create. Integrity across all levels is critical, or the culture breaks down. You can’t get angry at a bartender for skimming profits if the bartender’s supervisor gives free drinks to a pretty lady or a best friend.

  1. Create a Multimedia Reporting Hotline

In the Report, businesses with no reporting hotlines were only 28.2% likely to catch employee fraud, whereas ones with hotlines were 47.3% likely. That’s a huge difference for something this simple.

All you have to do is create a phone hotline for employees to use if they see or learn about employee fraud or other abuses taking place. To increase employee buy-in, create an online form and a dedicated email address as well. In other words, make it easy to report abuses and fraud. You should be doing this anyway for reasons other than just fraud, like employee safety.

People who care about honesty and a good reputation will report abuses and fraud – but ONLY if they feel safe in doing so. Make it easy and safe for your whistleblowers to take action.

  1. Require Management Certification of Financial Statements

This is another way to combat backroom employee fraud and theft. Again, the more people who are looking at your financial statements, the harder it will be for someone to set up fraudulent scams. With managers looking at statements, you would need at least two people to set up a recurring fraud.

If you also delegate different tasks to different people as mentioned earlier, now you’d need three or more people to get away with it. Opportunity for theft decreases exponentially the more you can set up your operations in this manner.

  1. Train Your Managers and Surveillance Teams

How many managers and surveillance staff at your casino have ten or more years of experience? How many know what to look for to spot employee fraud on the casino floor and table games?

Do they know how to spot the false shuffle? Do they know the signs that a dealer is colluding with a friend at their table? Your managers and surveillance teams need to be trained to spot fraud. Working with security firms can help you elevate the skillsets of your critical staff to prevent on-floor employee theft and fraud.

How Else Can We Prevent Casino Employee Fraud and Theft?

In addition to implementing the above strategies, it also helps to know the warning signs that an employee might be considering stealing from you.

The good news is, you can spot at least seven warning signs relatively easily if you know what to look for. Some warning signs are evident before the person decides to steal. Other warning signs are indications that fraud and theft are already occurring.

See 7 warning signs of casino employee theft