The Crown allegations show the failure of our gambling regulators. Serious reform requires real oversight

Regulatory failure has been a hot topic in Australia recently. Royal commissions into the financial and aged care sectors have revealed major regulatory failures.

The harm done by these oversights has been significant. Regulation is not just red tape. It protects the interests of those who put their faith, money, and in some cases, loved ones, into regulated institutions.

Crown, Australia’s biggest casino operator, has been linked to organised crime, money laundering and fast-tracked visas for big gamblers. All of these issues are the responsibility of gambling regulators.

Yet, regulators appear to have missed it, despite their key role in preventing criminal influence affecting gambling operators.

The “underwhelming” performance of regulators

Not that this is a surprise. The Victorian Commission for Gambling and Liquor Regulation has been under scrutiny for some time.

In 2017, the Victorian auditor-general pointed out that VCGLR’s capacity to regulate Crown (and other liquor and gambling venues it also regulates) was underwhelming. In its conclusions, the Auditor observed:

There is a need for VCGLR to improve its oversight of the casino. VCGLR is not able to demonstrate that its casino supervision is efficient or effective as is required for best practice regulation of a major participant in Victoria’s gambling industry.

In 2016-17, punters using Crown’s Melbourne casino lost A$1.56 billion. The Victorian government’s share of this, via tax revenue, was A$207.7 million. The Crown casino in Perth relieved its patrons of A$622.8 million. The WA government got A$61.9 million of this.

This revenue is important to cash-strapped state governments. With few sources to raise revenue, and many big-ticket items to fund, states need revenue.

Even so, Crown’s contribution to Victoria’s revenue stream is modest. The 2018-19 state budget papers estimate a contribution of A$237 million from the casino, compared to A$1.119 billion from pokies in pubs and clubs, and A$1.876 billion in total gambling taxes.

Read more: Effective gambling regulation is not just 'red tape'

Yet, Crown has many advantages when compared to its rivals in the gambling business. It operates monopoly casinos in both Victoria and WA, pays a low tax rate compared to its suburban rivals in Victoria (pub and club pokies pay about 37% of gambling revenue to the state), and has far fewer constraints on its operations.

In Victoria, for example, Crown has smoking areas inside the casino, has unlimited bets on many of its pokies, has ATMs on-site, can operate 24 hours a day, and appears to be able to get planning approval without any of the usual fuss.

In the case of the proposed development at Barangaroo on Sydney Harbour, its unsolicited bid for a skyscraper with casino, luxury apartments and a hotel sailed through with support from both government and opposition.

Crown clearly enjoys beneficial access to decision makers. This also appears to extend to regulators.

Failures to ensure responsible gambling

Headline stories about suspected criminal involvement in casino operations are worrying, and demonstrate just how little apparent scrutiny regulators apply. But more worrying from a public health perspective are the regular breaches of “responsible gambling” principles that are supposed to govern legalised gambling in Australia.

For example, Australia’s largest pokie operator (and Woolworths subsidiary), ALH Pty Ltd, was caught (via whistleblowers) collecting information on patrons that could be used to encourage heavier gambling, and in some cases plying them with free drinks.

In NSW, the Illawarra Steelers club was fined A$100,000 after it was revealed the club advanced large sums of cash to punters, disguising it as large-scale liquor sales. Crown casino in Melbourne was fined A$300,000 by VCGLR after whistleblowers revealed that pokies had been tampered with. Whistleblowers also revealed that Crown provided punters with plastic picks for jamming pokie buttons to facilitate continuous operation. The VCGLR found this to be irresponsible and banned the picks, but no fines were levied.

Regulators are supposed to be concerned with protecting vulnerable people and minimising harm. But evidence suggests that in this area, they have also failed.

The day-to-day exploitation of the ordinary gamblers who contribute most of the money that goes into gambling industry in Australia (about A$24 billion every year) attracts less interest, but is arguably at least as important.

The Victorian auditor-general’s report focused on this issue, as well.

VCGLR has not adequately performed its compliance functions. Compliance activities are not sufficiently risk based and have been focused on meeting a target number of inspections, rather than on targeting inspections where noncompliance has a high risk or high potential for harm. This approach to compliance does not support the legislative objectives for harm minimisation.

The VCGLR can hardly be unaware of the extent of its failure to achieve compliance with regulatory requirements.

Last year, VCGLR’s sixth review of Crown’s casino operator licence found, amongst other issues:

• failures of governance and risk management, contributing to compliance slippages

• a lack of innovation and progress regarding Crown’s approach to responsible gambling, such as might now be required of a world-leading operator to meet heightening community and regulatory expectations.

A lack of political will

It’s not just regulators who are at fault, of course. Politicians have also demonstrated little appetite for much in the way of harm prevention. Regulators may be willfully ignorant in their selective vision, but they do so in the knowledge that few governments want gambling disrupted.

The memorandums of understanding between Clubs NSW (whose members operate about 70,000 pokies) and successive NSW governments show how deep the ties are between gambling operators and governments.

Political donations are equally significant measures used by casino and other gambling operators. Not to mention the revolving-door recruitment of influential individuals to act as lobbyists and “government relations experts” practised by the gambling industry (and Crown in particular).

Current board members of Crown include former head of the Australian departments of health and finance Jane Halton, former Liberal Minister Helen Coonan, former Australian Chief Medical Officer John Horvath and former AFL CEO Andrew Demetriou. These are very well-connected and influential people, who lend their credibility to Crown, along with their expertise in dealing with government and regulation.

Read more: Gambling lobby gives big to political parties, and names names

The good news is that there is much that could be done to improve gambling regulation. Improved surveillance of criminal activity in casinos is one such step. Increased tax rates might even fund it.

On the harm prevention front, public health experience in multiple areas (such as tobacco control, alcohol policy, and motor vehicle injury reduction) demonstrates that there is a great deal that can be done to minimise or prevent harm from inherently dangerous products.

Our recent report, published by the Victorian Responsible Gambling Foundation, pointed out 104 things that could be done to prevent or reduce gambling related harm. Many of them would require better-equipped regulators, with more powers and stronger penalties at their disposal.

What we know from the whistleblowers and investigative journalists (and most pointedly not from regulatory activity) is that Australia’s biggest and most prominent gambling operators regularly flaunt regulation, and apparently get away with it.

Any government that wants to clean up gambling has the tools to do it. An integrity investigation into Crown announced today by Attorney-General Christian Porter may help achieve some reform, especially around allegations of Crown’s involvement with criminals and money laundering.

However, these are the tip of the iceberg. The exploitation of vulnerable people by gambling operators across the country needs its own inquiry, and governments need to find the will to regulate in the genuine interests of ordinary people.