Gambling-related fraud: more than loose change in a high-stakes con

When you see the words “What’s gambling really costing you?” pop up after one of those saturation ads for gambling on TV or YouTube, you tend to think it’s aimed at gamblers, even at gambling addicts. But perhaps you shouldn’t. It’s a real question for everybody not employed in the industry.

Because not everybody gambles with their own money. Quite a lot of them gamble with someone else’s. Let’s look at the evidence. You can do it yourself, if you like. I searched ‘gambling’, ‘fraud’ and ‘Australia’ for the past 12 months. It came up with 20 cases where people had ripped off their employers, their investors, their insurers or the government in order to feed their gambling habits.

The value of these frauds ran the gamut from a few thousand dollars to nearly $40 million and totalled more than $76 million. That’s an undeniable baseline. You may not find it impressive – it’s only about 0.3 per cent of the frankly unbelievable $24 billion Australians gamble every year.

Starting with that baseline, though, we really have to make some adjustments. Not all defendants think their cases would benefit from claiming gambling addiction; if they don’t, they won’t come up in the search. Not all fraud cases are reported (though the bigger they are, the more newsworthy); if they aren’t, ditto. Not all cases brought to the police get into court at all; legal hurdles abound, ditto.

Not all cases uncovered are reported to the police – and this is a big one. Many companies are justifiably afraid of looking like unreliable stewards of their finances and prefer to hush their losses up. I certainly know not-for-profits that didn’t want to blow the whistle lest their donors drop them for as-yet-untainted charities.

And, of course, not all fraud does get uncovered. At any given moment there’s an unquantifiable amount of money out there that the owner hasn’t noticed is gone. It’s what economist JK Galbraith called ‘the bezzle’ (from ‘embezzlement’) – he felt that the amount went up in booms and tended to shrink in depressions, when people became more niggly.

Adjusting for each of those underestimations relies on some reasonable assumptions and some wild guesses, but my calculations would suggest that once they’re all taken into account, the amount of other people’s money that goes into Australia’s little flutters is about 2.1 per cent of the total gambling take. That’s not overwhelming, but it’s well into the ‘worth a second look’ belt. It’s the equivalent of the house percentage on a roulette wheel, for instance.

If two per cent of Uber drivers stiffed you on the fare (and I’m not for an instant suggesting that they do) it would be front-page news and probably a Walkley.

If I wanted to attract the attention of the people who count, I could say that it’s also about one per cent of the $47 billion total annual Australian financial fraud figure. Still think it’s a rounding error, big banks?

So what should we do about it? The first line of defence would obviously be general measures to reduce gambling, such as banning gambling ads and harsher self-exclusion measures. These may not be enough; embezzlers who gamble have particular incentives both to steal and to gamble, because they can tell themselves at every point on the down escalator that they’re only fixing it up so that everybody can be made whole by the payoff on the next bet. Being in the dock is the first time that reality cuts in.

There would seem to be grounds for an industry levy to cover the losses of those who’ve been ripped off, with additional funds directed to the not-for-profit Alliance for Gambling Reform. If that’s not feasible, the government should acknowledge that part of its current take is dealing in stolen goods.

Even if the industry feels this is a storm in a teacup it should be willing to get the facts straight. This is, if there ever was one, a case for calling on big data. Ask the police and the courts to tag every instance of fraud linked to gambling as it comes up, at each stage along the way, and we’ll get a better idea of how much blood we’re really losing.

Even if nothing does come of it, it would be documenting another shovelful of misery and broken lives to throw on the vast tumulus of gambling harms that we now tolerate and make it slightly harder again for governments to cosy up to industry donors.

Denis Moriarty is group managing director of OurCommunity.com.au, a social enterprise that helps the country's 600,000 not-for-profits.