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As more global jurisdictions legalize land-based or online gambling there are greater international opportunities for U.S. operators and suppliers, but also pitfalls in jurisdictions that may have less developed regulatory regimes.

Major U.S. casino operators and gaming suppliers have grown their presence in international markets in recent years, particularly as they have sought to expand their online businesses.

Las Vegas-based gaming giant MGM Resorts International is one company that has looked to “engage aggressively in development”, Stephen Martino, the company's senior vice president and chief compliance officer, said Wednesday (May 1) during a webinar on compliance in less regulated markets hosted by the International Association of Gaming Advisors (IAGA). 

“First and foremost, is a commitment to investigation, making sure you know who you are dealing with. Outside consultants, your own staff get involved in knowing about the jurisdiction,” Martino said of MGM’s policy when considering whether to enter any new market.

Martino explained that MGM commits to putting all its outside vendors and consultants through a probity review and recommended that policy for any gaming company.

“The Foreign Corrupt Practices Act (FCPA), which is going to hang over all of the engagement, I am particularly mindful … when you are looking at development outside the United States and how this is going to be perceived by U.S. regulators and their risk tolerance.”

Enacted by Congress in 1977, the that prohibits U.S. citizens and any U.S. entities from engaging in bribery of foreign government officials to benefit their business interests.

In one well-known FCPA case, Las Vegas Sands Corp agreed in 2017 to pay a $6.96m penalty to resolve a U.S. Department of Justice (DOJ) investigation of the company’s compliance with the law in some of its dealings in China and Macau involving a third-party consultant.

The non-prosecution settlement in January 2017 stemmed from the same case that led the U.S. Securities and Exchange Commission (SEC) to fine Sands $9m in April 2016. Sands admitted to paying an estimated $5.8m to a business consultant in Asia without a legitimate business purpose.

The DOJ and SEC settlements ended an investigation that began in 2011.

Flutter Entertainment, the parent company of FanDuel, paid a $4m penalty last year under the FCPA related to the past activities of PokerStars in Russia, before acquiring it.

Martino said it was important to consider not only how international business activities could be perceived by federal regulators, but also the risk tolerance of state regulators regarding a particular jurisdiction.

He cited Nevada where licensees have to be mindful of the Foreign Gaming Act, which continues to apply to major operators and suppliers even though it was revised last year to remove the requirement that Nevada companies provide state gaming regulators with copies of all documents filed in other jurisdictions.

“U.S. gaming regulators are going to be keeping an eye [on you] and you are going to have to meet their standards,” Martino said.

“What you don’t want to do is go into a new jurisdiction and create a whole bunch of U.S. regulatory problems for yourself, notwithstanding whatever problems or challenges may exist in the jurisdiction that you are going into.”

Steve Kastner, vice president of compliance with IGT's Play Digital division, agreed, saying that most gaming companies are licensed in more than one jurisdiction and “just by default these jurisdictions are going to have different viewpoints and sensitivities”.

“It is important that as a company that you are establishing and really understand what your internal position is and tolerance for risk as part of your governance program, and to be clear with your current regulators before you consider such adventures,” Kastner said.

Kastner, Martino, and other participants in the webinar addressed one purely hypothetical scenario that outlined an opportunity in a non-U.S. country for companies to seek one of several limited licenses that would result in a geographical monopoly in a province of the country.

If licensed, the company would be allowed to operate a casino with slot machines and table games, as well as being licensed to offer online sports betting and other online casino games. 

Among the issues with the country are broad, but non-sensational, indications of relatively widespread corruption, and a history of small “black market” gaming parlors with some indication that organized crime may control some of the parlors and there is little to no active regulation.

A decade ago, the ruling monarchy of the country was overthrown and replaced with a parliamentary governing system modeled on members of the European Union, while the country also passed new national gaming legislation generally modeled on the UK, Singapore, and certain U.S. states.

Kastner and Martino were joined for the webinar discussion by Sam Basile, vice president of gaming and licensing with GeoComply, Alfredo Lazcano, partner with Lazcano Samano law firm in Mexico City, and Michael Bonner, a shareholder with law firm Greenberg Traurig.

Lazcano said his approach if faced with the hypothetical scenario on behalf of a client would be to learn everything about them, especially about their country of origin. He noted that “enforcement is very different in the U.S. and UK than say the host country of the case study.” 

Lazcano also said he would want to know what the company leadership team’s priorities are, as some companies only want to operate in strictly regulated jurisdictions and do not want to operate in grey markets.

“I also saw with this case study a link between illegal gambling and organized crime,” Lazcano said. “This is a reputational risk, especially in … Colombia, Mexico, and different Latin American countries and probably other regions of the world.”