Illegal ’fishing’ activities found on gambling pulltab devices – Kentucky Today

Report on Illicit Financial Flows Affecting Charitable Gaming and Sustainable Development Goals in Kentucky

Executive Summary

The Kentucky Horse Racing & Gaming (KHRG) Office of Charitable Gaming has identified significant illicit financial flows resulting from criminal activity targeting electronic pulltab devices. A theft method known as “fishing” has led to the loss of tens of thousands of dollars, diverting critical funds from charitable organizations. This diversion directly undermines the achievement of multiple Sustainable Development Goals (SDGs) by weakening the financial capacity of civil society organizations.

Analysis of Illicit Activity and Institutional Failures

The criminal activity involves a process of manipulating currency validators to fraudulently credit gaming machines, which are then cashed out without gameplay. This constitutes a significant breach of security and a diversion of funds from their intended charitable purposes. An investigation has revealed systemic failures among licensed entities, which compromises the principles of SDG 16 (Peace, Justice and Strong Institutions) by failing to prevent illicit financial flows and ensure accountable governance.

• Facility Licensees: Demonstrated an inability to prevent criminal activity, thereby failing to secure charitable assets.
• Charitable Organization Licensees: Failed to provide adequate supervision of gaming activities, specifically in the proper receipt and recording of funds.
• Manufacturer Licensees (LNW Gaming, Inc. and Creative Game Technologies, LLC): Failed to supply devices with adequate security features to prevent theft, thereby compromising device integrity and public confidence.

Impact on Sustainable Development Goals (SDGs)

The diversion of these funds represents a direct impediment to local and state-level progress on the 2030 Agenda for Sustainable Development. The financial resources lost were intended to support community initiatives aligned with the following goals:

1. SDG 16 (Peace, Justice and Strong Institutions): The theft and associated licensee failures highlight a breakdown in effective and accountable institutions. The illicit financial flows directly contravene Target 16.4, which aims to significantly reduce such flows.
2. SDG 1 (No Poverty) & SDG 10 (Reduced Inequalities): Charitable organizations are key partners in poverty alleviation and supporting vulnerable groups. The loss of revenue weakens their capacity to address local inequalities.
3. SDG 3 (Good Health and Well-being) & SDG 4 (Quality Education): Funding intended for community health programs and educational opportunities is compromised, negatively impacting human development outcomes.
4. SDG 17 (Partnerships for the Goals): The incident exposes weaknesses in the public-private-civil society partnership that underpins charitable gaming. Restoring trust and accountability is essential for this partnership to contribute effectively to the SDGs.

Regulatory Directives and Enforcement

To restore the integrity of charitable gaming and safeguard funding streams essential for achieving the SDGs, the KHRG has issued a directive consistent with its mandate under SDG 16. The order requires the immediate disabling of all electronic pulltab devices manufactured by LNW Gaming, Inc. and Creative Game Technologies, LLC at locations other than a charitable organization’s primary office, licensed bingo locations, and pre-approved fundraising events. This action is a critical measure to halt the illicit financial flows and protect the public and charitable organizations. Failure to comply with this directive will result in further disciplinary action to ensure the rule of law is upheld.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

The primary Sustainable Development Goal (SDG) addressed in the article is:

• SDG 16: Peace, Justice and Strong Institutions

  This goal is central to the article’s theme. The text focuses on criminal activity (“illegal ‘fishing’ activities”), the failure of institutions to prevent crime, and the regulatory response to enforce the law. The issues of theft, diversion of funds from charitable purposes, and the lack of accountability by licensed organizations all fall under the umbrella of promoting just, peaceful, and inclusive societies, which requires effective and accountable institutions and the rule of law.

2. What specific targets under those SDGs can be identified based on the article’s content?

Based on the article’s discussion of illegal financial activities and institutional failures, the following specific targets under SDG 16 can be identified:

1. Target 16.3: Promote the rule of law at the national and international levels and ensure equal access to justice for all.

   The article directly relates to this target by highlighting the “violation of state law” and describing the illegal acts as “criminal activity.” The action taken by the Kentucky Horse Racing & Gaming (KHRG) to order the disabling of machines is a direct effort to enforce regulations and promote the rule of law within the charitable gaming sector.

2. Target 16.4: By 2030, significantly reduce illicit financial and arms flows, strengthen the recovery and return of stolen assets and combat all forms of organized crime.

   The “fishing” activity described is a form of theft resulting in an illicit financial flow. The article states this has led to the “theft of tens of thousands of dollars” and a “diversion of funds from legitimate charitable purposes.” The actions of the KHRG are aimed at combating this specific form of financial crime.

3. Target 16.6: Develop effective, accountable and transparent institutions at all levels.

   The article explicitly details the failure of multiple institutions. It states that “Facility Licensees have shown an inability to prevent criminal activity,” “Charitable Organization Licensees have failed to properly supervise,” and “Manufacturer Licensees have failed to provide electronic pulltab devices equipped with adequate security.” The KHRG’s intervention is a response to these institutional failures, aiming to enforce accountability and effectiveness.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

Yes, the article mentions or implies several indicators that can be used to measure progress:

• Monetary value of stolen funds from charitable gaming.

  The article explicitly mentions the “theft of tens of thousands of dollars.” A reduction in this amount over time would be a direct indicator of progress towards Target 16.4 (reducing illicit financial flows).

• Number of reported instances of illegal gaming activities.

  The KHRG is aware of “multiple instances of illegal ‘fishing’ activities.” Tracking and reducing the frequency of these reported instances would measure progress in upholding the rule of law (Target 16.3).

• Number of non-compliant gaming machines disabled or corrected.

  The KHRG’s order to have all machines from specific manufacturers “be disabled immediately” provides a clear metric. This indicator measures the effectiveness of regulatory action and institutional accountability (Target 16.6) by quantifying the response to security vulnerabilities.

• Number of disciplinary actions taken against non-compliant licensees.

  The article notes that “failure to immediately comply with their order will result in further disciplinary action.” This implies that tracking such actions against Facility, Charitable, and Manufacturer Licensees serves as an indicator of institutional accountability and enforcement (Target 16.6).

4. Summary Table of SDGs, Targets, and Indicators

Source: kentuckytoday.com