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Disclaimer ThisdocumenthasbeenpreparedandisintendedsolelyforOntarioLotteryandGaming Corporation’suseandmaynotbeedited,distributed,published,madeavailableorrelied uponbyanyotherpersonwithoutKPMG’sexpresswrittenpermission. ©2006KPMGLLP,theCanadianmemberfirmofKPMGInternational,aSwisscooperative.Allrightsreserved. Ontario Lottery and Gaming Corporation PhaseIReport–LotteryReview November3,2006

Transcript of Ontario Lottery and Gaming Corporation - Home Page | OLG€¦ · Phase I Report – Lottery Review...

Disclaimer

This�document�has�been�prepared�and�is�intended�solely�for�Ontario�Lottery�and�Gaming�

Corporation’s�use�and�may�not�be�edited,�distributed,�published,�made�available�or�relied�

upon�by�any�other�person�without�KPMG’s�express�written�permission.���

©�2006�KPMG�LLP,�the�Canadian�member�firm�of�KPMG�International,�a�Swiss�cooperative.�All�rights�reserved.

Ontario Lottery and Gaming Corporation Phase�I�Report�–�Lottery�Review����November�3,�2006�

Disclaimer

This�document�has�been�prepared�and�is�intended�solely�for�Ontario�Lottery�and�Gaming�

Corporation’s�use�and�may�not�be�edited,�distributed,�published,�made�available�or�relied�

upon�by�any�other�person�without�KPMG’s�express�written�permission.���

©�2006�KPMG�LLP,�the�Canadian�member�firm�of�KPMG�International,�a�Swiss�cooperative.�All�rights�reserved.

Summary 1

Background.................................................................. 1

Scope and Work Plan................................................... 1

Key Observations......................................................... 3

Recommendations for Enhancing Current Processes. 4

Next Steps ................................................................... 5

Observations 6

Overview of the Process.............................................. 6

Observations................................................................ 6

Lottery Tickets 8

Ticket Security Features.............................................. 8

Retail Lottery Terminals .............................................. 8

Purchaser Anonymity .................................................. 8

Standard for Redemption ............................................ 8

Key to Protecting Tickets............................................ 9

Recommendation One ................................................. 9

Recommendation Two................................................. 9

Table�of�Contents�

Phase I Report – Lottery Review

November 3, 2006 For the Internal Use of

Ontario Lottery and Gaming Corporation

Damaged/Stolen/Lost Tickets ...................................... 9

Retail Outlets 11

Positioning of Retail Lottery Terminals .................... 11

Recommendation Three............................................. 11

Insiders 12

OLG Definition ........................................................... 12

Insider Win Policy ...................................................... 12

Recommendation Four............................................... 13

Insider Database ........................................................ 13

Insider Win Investigation Files .................................. 13

Insider Policy Evolution............................................. 14

Contact Centre 15

Lottery Terminal Freeze............................................. 15

Tracking of Calls........................................................ 15

Recommendation Five ............................................... 15

Technology and Other Security Matters 16

Technologies Used to Support Gaming..................... 16

Access to Facilities.................................................... 16

Segregation of Duties................................................ 16

Ticket Sales of On-Line Games.................................. 16

Phase I Report – Lottery Review

November 3, 2006

For the Internal Use of Ontario Lottery and Gaming Corporation

Page 1 of 16

Summary�Background

KPMG�LLP�(KPMG)�was�engaged�by�the�Ontario�Lottery�and�Gaming�Corporation�

(OLG)�to�review�certain�policies�and�procedures�relating�to�its�lottery�operations�

and�specifically�those�pertaining�to�“insider”�(as�defined�by�OLG)�activities�

including�the�sale,�purchase�and�redemption�of�lottery�tickets.���

This�report�exclusively�outlines�the�observations�and�recommendations�resulting�

from�the�Phase�I�work�performed�during�the�period�from�October�29,�2006�to�

November�3,�2006.��Additional�recommendations�will�result�from�the�completion�

of�Phase�I�and�Phase�II.�

Scope and Work Plan

In�accordance�with�our�engagement�letter,�dated�October�29,�2006,�our�work�

steps�will�include�the�following:�

� Phase�I:�

� Reviewing�the�direction�received�by�OLG�from�the�Minister�of�

Public�Infrastructure�Renewal.�

� Reviewing�OLG�policies�and�procedures�and�interviewing�OLG�

representatives�on�matters�relating�to�insiders�including�the�

“insider�win”�procedures�and�processes�relating�to�the�Contact�

Centre�and�the�Prize�Office.��

� Reading�a�recent�Report�on�Controls�in�the�Lottery�Gaming�and�

Lottery�Gaming�Support�Systems,�dated�October�6,�2006,�

prepared�by�Ernst�&�Young,�an�independent�accounting�and�

auditing�firm.�

� Carrying�out�a�high-level�review�of�certain�information�

technology�controls�and�processes�surrounding�the�sale�of�

lottery�tickets�and�the�security�of�lottery�terminals.�

� Observing�the�processing�of�certain�lottery�transactions�at�

various�retail�locations�in�Toronto.�

� Preparing�a�Phase�I�report�setting�out�our�observations�and�

recommendations�based�on�the�work�completed�as�at�

November�3,�2006.�

� Phase�II:�

� Carrying�out�selective�testing�of�the�relevant�OLG�policies�and�

procedures�to�ascertain�that�they�are�operating�as�described.�

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November 3, 2006

For the Internal Use of Ontario Lottery and Gaming Corporation

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� Reviewing�available�benchmarking�reports�and�analyses,�as�

well�as,�practices�in�other�jurisdictions,�as�available�and�as�time�

permits.��

� Reading�third-party�reports�provided�by�OLG�relating�to�the�

statistic�analysis�of�insider�wins�over�$50,000.�

� Preparing�a�report�setting�out�our�remaining�observations�and�

recommendations.��

In�performing�our�Phase�I�work�steps,�we�reviewed�or�are�in�the�process�of�

reviewing�OLG�procedures�manuals�and�documents,�observed�processes,�

conducted�interviews,�and,�gathered�and�analyzed�data�obtained�from�OLG�

employees,�publicly�available�sources�and�other�sources.��For�the�purpose�of�this�

Phase�I�report,�we�relied�on�the�information�provided�by�the�individuals�being�

interviewed�and�have�not�had�the�opportunity�to�independently�verify�this�

information;�accordingly,�we�do�not�express�an�opinion�as�to�the�accuracy�or�

completeness�of�the�information�obtained�to�date.���

Status of Our Work

We�have�not�yet�completed�Phase�I,�as�set�out�above.��We�are�issuing�a�report�

dated�November�3,�2006�in�order�to�provide�a�status�of�Phase�I�of�our�

engagement.�

The�following�summarizes�the�work�we�have�conducted�from�October�29,�2006�

to�November�3,�2006�as�well�as�the�work�that�is�in�progress.�

Work Completed:

� Reviewed�the�direction�received�by�OLG�from�the�Minister�of�Public�

Infrastructure�Renewal.�

� Reviewed�certain�available�OLG�policies�and�procedures�relating�to�

insiders�including�the�“insider�win”�procedures�and�processes�relating�

to�the�Contact�Centre�and�the�Prize�Office.��Other�documentation�

relating�to�these�procedures�and�processes�continues�to�be�gathered�by�

OLG�for�our�review.�

� Performed�the�following�procedures�in�connection�with�the�relevant�

OLG�policies�and�procedures�(see�work�in�progress�below�for�those�

which�are�incomplete�as�at�November�3,�2006):�

� Interviewed�certain�internal�audit�staff�relating�to�certain�lottery�

operations�and�related�procedures�

� Interviewed�certain�OLG�employees�at�the�Lottery�Test�Lab�in�

North�York�concerning�the�operation�of�Retail�Terminals�and�

observed�certain�elements�of�the�operation�of�a�terminal�

� Interviewed�certain�OLG�employees�at�the�Yonge/Dundas�Prize�

Centre�

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November 3, 2006

For the Internal Use of Ontario Lottery and Gaming Corporations

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� Observed�two�major�win�interviews�and�all�related�procedures�

conducted�for�these�wins�at�the�Yonge/Dundas�Prize�Centre�

� Observed�certain�payouts�for�other�amounts�(i.e.,�between�

$990�and�$50,000)�at�the�Yonge/Dundas�Prize�Centre�

� Observed�the�operating�practices�of�several�lottery�retailers�(the�

retailers�were�unaware�of�the�observation)�

� Interviewed�certain�OLG�senior�management�representatives�

� Reviewed�the�documents�included�in�41�insider�major�win�files�

made�available�to�us,�which�were�processed�through�the�

Toronto�Prize�Centre�

� Interviewed�certain�OLG�employees�concerning�the�policies�

and�procedures�of�the�Contact�Centre�and�observed�certain�of�

the�operating�practices�of�the�Contact�Centre�in�Sault�Ste�

Marie,�and�

� Observed�a�major�insider�win�telephone�call�while�in�the�

Contact�Centre�

� Read�a�recent�Report�on�Controls�in�the�Lottery�Gaming�and�Lottery�

Gaming�Support�Systems,�dated�October�6,�2006,�prepared�by�Ernst�&�

Young,�an�independent�accounting�and�auditing�firm,�and�

� Carried-out�a�high-level�review�of�certain�information�technology�

controls�and�processes�surrounding�the�sale�of�lottery�tickets�and�the�

security�of�lottery�terminals.�

Work in Progress for Phase I

� Continue�our�review�of�policy�and�procedures�documentation�and�files�

located�in�Toronto,�Sault�Ste.�Marie�and�the�Mississauga�Distribution�

Centre.�

Key Observations

Key�observations�based�on�information�provided�to�us�and�work�conducted�from�

October�29,�2006�to�November�3,�2006�include:�

� OLG�lottery�tickets�have�several�key�security�features�built�into�them�

� Retail�lottery�terminals�operate�with�several�key�security�features�

� Generally�purchaser�anonymity�is�preserved�and�prizes�are�payable�to�

the�ticket�bearer�

� Ticket�bearers�are�informed�of�certain�activities�to�protect�tickets�

� Damaged�and�stolen�tickets�circumstances�are�subject�to�certain�

security�procedures�and�protocols�

Phase I Report – Lottery Review

November 3, 2006

For the Internal Use of Ontario Lottery and Gaming Corporation

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� Lottery�terminals�are�now�subject�to�a�“freeze”�process�for�major�wins�

(winning�tickets�over�$50,000)�

� Calls�into�the�Contact�Centre�are�not�automatically�logged�

� “Insider”�wins�greater�than�$50,000�are�subject�to�specific�procedures�

and�checks�generally�conducted�by�the�Prize�Office�and/or�Internal�Audit�

� OLG�does�not�have�a�comprehensive�database�of�all�individuals�that�are�

“insiders”�and�it�may�not�be�practicable�to�have�a�complete�list�of�

insiders.�

� Not�all�retail�lottery�terminals�are�positioned�to�ensure�customers�are�

able�to�see�on�their�ticket�at�all�times.�

� OLG�uses�sophisticated�technology�systems�to�produce,�control�and�

validate�tickets�sold�and�to�secure�their�facilities.�

� OLG�is�committed�to�the�continued�development�and�enhancement�of�

its�technologies�and�processes�to�support�the�integrity�of�gaming�in�

Ontario.�

Recommendations for Enhancing Current Processes

Based�on�the�summary�of�observations�contained�in�this�Phase�I�report,�our�

recommendations�are�as�follows:�

1 OLG�should�initiate�a�comprehensive�educational�campaign�to�make�

customers�aware�of�the�techniques�they�should�employ�to�protect�

purchased�tickets.��In�particular,�the�campaign�should�emphasize�the�need�to�

complete�and�sign�the�back�of�the�ticket�at�the�rime�of�purchase.�

2 OLG�should�establish�a�policy�that�retailers�will�only�validate�tickets�if�the�

customer�has�completed�and�signed�the�back�of�the�ticket.��Tickets�should�

not�be�validated�and�processed�unless�signed.��OLG�will�need�to�provide�

training�to�retailers�on�this�policy�and�will�need�to�consider�an�appropriate�

approach�to�motivating�and�enforcing�compliance.�

3 OLG�should�consider�a�more�comprehensive�roll-out�of�customer-accessible�

ticket�checkers�with�an�appropriate�awareness�program.�

4 OLG�should�consider�a�review�of�the�“insider”�definition�and�policy�with�a�

view�of�making�the�policy�more�practical�and�controllable.��As�part�of�

changes�to�the�“insider”�policy�we�would�suggest�that�the�threshold�of�

$50,000�that�initiates�more�specific�procedures�and�checks�be�reduced.��

Consideration�should�be�given�to�returning�to�the�1995�level�of�$10,000.�

5 OLG�should�consider�the�implementation�of�an�automatic�call�logging�facility�

at�the�Contact�Centre.��In�conjunction�with�such�an�implementation,�

appropriate�monitoring�and�follow-up�processes�should�be�developed�and�

rolled�out�as�well.�

Phase I Report – Lottery Review

November 3, 2006

For the Internal Use of Ontario Lottery and Gaming Corporations

Page 5 of 16

Next Steps

It�is�anticipated�that�further�information�will�be�provided�by�OLG�after�issuance�of�

this�Phase�I�report.��During�Phase�II,�we�will�perform�further�review�and�testing�

of�the�policies,�procedures,�processes�and�controls.��We�may�have�additional�

observations�and�recommendations,�and�our�current�observations�and�

recommendations�may�be�modified.��At�that�time,�we�will�provide�our�additional�

observations�and�recommendations�in�a�final�report.�

Phase I Report – Lottery Review

November 3, 2006

For the Internal Use of Ontario Lottery and Gaming Corporation

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Observations�Overview of the Process

Tickets�are�sold�through�retail�outlets�located�throughout�the�Province�of�Ontario.��

Tickets�fall�into�two�major�categories,�instant�games�and�on-line�games.��

Customers�can�also�purchase�tickets�through�a�subscription�service.�

There�are�various�processes�used�to�pay-out�winning�tickets.��At�the�retail�level,�

OLG�provides�Retail�Terminals�which�are�used�to�verify�that�a�ticket�is�a�winner.��

A�pilot�project�involving�250�customer-accessible�ticket�checkers�was�rolled�out�

during�the�spring�of�2006.��Retailers�also�are�limited�to�maximum�prize�payment�

of�$990.��Retail�Terminals�print�a�validation�receipt�which�can�be�provided�to�the�

ticket�owner.�

Subject�to�sufficient�funds�being�available�at�the�retailer,�the�retailer�will�pay-out�

winning�tickets�up�to�their�specific�prize�limit.��Tickets�redeemed�are�marked�by�

the�Retail�as�being�paid�out.�

For�winning�tickets�less�than�$50,000�and�more�than�$990,�winners�are�

instructed�to�go�to�the�Prize�Office�at�Yonge/Dundas�in�Toronto.��The�Prize�office�

uses�the�NRS�system�to�verify�legitimacy�of�the�ticket.��To�verify�the�claimant’s�

entitlement�to�the�ticket,�OLG�staff�ask�the�claimant�if�they�are�the�rightful�sole�

owner�of�the�ticket.��In�the�absence�of�any�other�information�(including�other�

names�on�the�ticket,�damages�to�the�ticket,�ticket�being�on�hold,�knowledge�of�a�

dispute),�OLC�accepts�the�claimant’s�verbal�response.���OLG�systems�check�to�

see�if�the�claimant�has�outstanding�family�responsibility�amounts.��If�

responsibility�amounts�are�due,�they�are�withheld.�

For�winning�tickets�over�$50,000,�the�process�is�enhanced.��A�series�of�

additional�computer�validation�processes�and�manual�examinations�are�

conducted�by�trained�OLG�personnel.��OLG�uses�an�interview�to�assess�

plausible�grounds�for�entitlement.��Various�individuals�are�involved�in�this�

process.��Current�OLG�policy�is�to�escalate�the�process.��

For�all�tickets�greater�than�$990,�claimants�are�required�to�provide�acceptable�

identification.�

Observations

Based�on�the�work�that�we�have�conducted�to�November�3,�2006,�we�have�

organized�our�observations�under�the�following�categories:�

� Lottery�Tickets�

� Contact�Centre�

� Insiders�

� Retail�Ticket�Outlets�

� Technology�and�Other�Security�Matters�

Phase I Report – Lottery Review

November 3, 2006

For the Internal Use of Ontario Lottery and Gaming Corporations

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To�protect�the�effectiveness�of�security�features�and�protocol,�we�have�

presented�our�observations�in�general�terms�rather�than�providing�specific�details�

of�such�features�and�protocols.���

Phase I Report – Lottery Review

November 3, 2006

For the Internal Use of Ontario Lottery and Gaming Corporation

Page 8 of 16

Lottery�Tickets�Ticket Security Features

OLG�Lottery�tickets�have�several�key�security�features�built�into�individual�

tickets.��These�features�combined�with�an�extensive�array�of�validation�

procedures�enable�OLG�to�verify�the�authenticity�of�tickets�purchased�through�its�

systems.�Tickets�which�are�torn,�damaged,�lost�or�altered�are�subject�to�

additional�procedures�and�investigation.�

Retail Lottery Terminals

OLG�has�several�key�security�features�and�alarms�on�its�terminals�as�well�as�

significant�limitations�on�functions�that�can�be�performed�on�a�terminal.��Primary�

use�of�the�terminals�is�to�print�tickets�and�validate�potential�winning�tickets.�

OLG�has�the�ability�to:�

� Detect�tampering�of�their�equipment�

� Shut-down�and/or�freeze�any�terminal�located�on�its�dedicated�network�

across�the�Province,�and�

� Review�all�transaction�activity�on�all�of�its�terminals.���

Security�procedures�and�technologies�are�continuously�being�considered�for�

upgrade�to�minimize�the�related�risk�to�both�the�public�and�OLG.�

Purchaser Anonymity

In�Ontario,�as�in�most�other�jurisdictions,�tickets�are�sold�on�an�anonymous�basis�

(i.e.,�there�is�no�requirement�to�provide�identity�information�at�the�time�of�

purchase).��The�sole�exception�to�this�is�tickets�purchased�through�subscription�

programs�offered�by�lottery�organizations�including�the�OLG.�

Standard for Redemption

OLG�has�a�bearer�standard�for�tickets.��The�Concise�Oxford�Dictionary�definition�

of�bearer�includes:�“a�person�who�presents�a�cheque�or�other�order�(e.g.,�lottery�

ticket)�to�pay�money”�and�“payable�to�the�possessor.”�

OLG�rules�include�that�the�bearer�of�the�ticket�must�be�the�lawful�bearer�of�the�

ticket.���

We�understand�that�OLG�has�two�key�responsibilities�with�respect�to�prize�

payments:�

� Only�legitimate�winning�tickets�are�paid,�and�

� Prizes�are�paid�to�legitimate�holders.�

In�Ontario,�as�in�most�other�jurisdictions,�given�the�anonymous�nature�of�lottery�

purchases�(for�the�most�part),�it�is�very�difficult�to�prove�that�the�bearer�of�a�

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November 3, 2006

For the Internal Use of Ontario Lottery and Gaming Corporations

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ticket�is�the�actual�purchaser�or�otherwise�legitimate�holder�of�the�ticket.��There�

are�some�acceptable�circumstances�where�the�purchaser�may�not�be�the�legal�

owner�of�the�ticket�(e.g.,�the�tickets�are�purchased�as�gifts�for�another�person).�

OLG�has�several�processes�and�security�protocols�that�are�used�to�process�and�

validate�major�wins.��These�processes�vary�as�to�the�value�of�the�prize�being�

claimed�by�the�bearer.���

Key to Protecting Tickets

A�winning�ticket�entitles�the�bearer�to�collect�the�related�prize.��To�protect�

winning�tickets,�the�following�should�be�done�by�the�lawful�ticket�holder:�

� Sign�and�complete�the�back�of�the�ticket�as�soon�as�possible�after�a�

purchase�

� Store�tickets�in�a�safe�place�

� Consider�checking�one’s�own�ticket�prior�to�validating�with�any�retailer�

� Take�advantage�of�an�OLG�self-checking�device�(where�available)�

� Observe�the�ticket�being�validated�through�a�Retail�Terminal�

� Listen�for�the�music�from�the�lottery�terminal�indicating�a�win,�and�

� Look�at�the�customer�display�screen�for�messages.�

We�have�been�advised�that�OLG�has�various�communications�and�awareness�

building�programs�to�inform�customers�of�the�preceding�techniques.��It�is�our�

understanding�that�OLG�is�planning�to�launch�another�program�for�customers�in�

this�area.�

Recommendation One

OLG�should�initiate�a�comprehensive�educational�campaign�to�make�

customers�aware�of�the�techniques�they�should�employ�to�protect�

purchased�tickets.��In�particular,�the�campaign�should�emphasize�the�

need�to�complete�and�sign�the�back�of�the�ticket�at�the�rime�of�

purchase.�

Recommendation Two

OLG�should�establish�a�policy�that�retailers�will�only�validate�tickets�if�

the�customer�has�completed�and�signed�the�back�of�the�ticket.��Tickets�

should�not�be�validated�and�processed�unless�signed.��OLG�will�need�to�

provide�training�to�retailers�on�this�policy�and�will�need�to�consider�an�

appropriate�approach�to�motivating�and�enforcing�compliance.�

Damaged/Stolen/Lost Tickets

OLG�has�certain�sophisticated�procedures�and�security�protocols�that�have�on�

occasion�assisted�individuals�who�could�not�locate�a�ticket.��These�same�

Phase I Report – Lottery Review

November 3, 2006

For the Internal Use of Ontario Lottery and Gaming Corporation

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procedures�are�used�to�assist�OLG�to�correlate�the�bearer�with�the�ticket�

purchase.�����

Phase I Report – Lottery Review

November 3, 2006

For the Internal Use of Ontario Lottery and Gaming Corporations

Page 11 of 16

Retail�Outlets�Positioning of Retail Lottery Terminals

Our�review�of�select�locations�within�downtown�Toronto�indicated�that�many�

Retail�Terminals�were�positioned�such�that�it�was�very�difficult�for�any�customer�

to�ensure�that�they�were�able�to�see�their�ticket�at�all�times.��In�some�locations,�

the�terminal�was�positioned�such�that�it�was�very�easy�for�the�customer�to�keep�

eye�contact�on�their�ticket.�

Recommendation Three

OLG�should�consider�a�more�comprehensive�roll-out�of�customer-

accessible�ticket�checkers�with�an�appropriate�awareness�program.�

Phase I Report – Lottery Review

November 3, 2006

For the Internal Use of Ontario Lottery and Gaming Corporation

Page 12 of 16

Insiders�OLG Definition

OLG�defines�an�insider�as:�

“Any�individual�who�may�be�perceived�by�the�general�public�as�having�an�unfair�

advantage�of�winning�a�prize�because�of�their�relationship�with�the�OLG�and�

includes:�

� All�OLG�employees,�contract�workers�and�Board�members�

� Spouses,�children,�parents�and�siblings�of�OLG�employees,�contract�

workers�or�Board�members�

� All�hosts�of�OLG�television�productions�

� External�auditors�

� Interprovincial�Lottery�Corporation�employees�and�their�spouses,�

children,�parents�and�siblings�

� Authorized�lottery�retailers�and�their�employees,�and�

� Suppliers�of�computer�software�applications�for�OLG�on-line�games�and�

their�employees.”�

Insider Win Policy

OLG’s�current�policy�includes�the�following:�

“It�is�paramount�that�the�Corporation�be�perceived�by�the�public�of�

Ontario�as�ensuring�the�utmost�integrity�in�the�conduct�of�its�lottery�

games�and�that�no�unfair�advantage�is�gained�by�any�individual�who�is�

directly�or�closely�affiliated�with�the�conduct�of�the�Corporation’s�

games.�

It�is�the�policy�of�the�Ontario�Lottery�and�Gaming�Corporation�(OLG)�that�

any�employee�of�the�Corporation�or�their�immediate�family�member�

(including�spouse,�children,�parents,�brothers�and�sisters),�who�will�win�

a�prize�of�$50,000�or�higher�from�a�OLG�or�Interprovincial�Lottery�

Corporation�(ILC)�game�in�which�the�OLG�participates�shall�be�subject�to�

this�policy.�Any�employee�of�a�closely�affiliated�company�or�individuals�

closely�affiliated,�as�defined,�shall�also�be�subject�to�this�policy�for�any�

prize�greater�than�$50,000.”�

Policies�indicate�that�all�prizes�of�greater�than�$50,000�are�subject�to�specific�

procedures�and�checks.��Where�the�bearer�declares�themselves�as�an�insider�or�

is�identified�as�an�insider�through�these�procedures,�additional�due�diligence�

checks�are�to�be�performed.���

Phase I Report – Lottery Review

November 3, 2006

For the Internal Use of Ontario Lottery and Gaming Corporations

Page 13 of 16

The�insider�win�policy�does�not�apply�to�any�wins�cumulating�to�less�than�

$50,000�for�anyone�meeting�the�definition�outlined�in�the�previous�section.��

Policy�requires�these�wins�to�be�processed�in�the�same�fashion�as�other�tickets.�

Recommendation Four

� OLG�should�consider�a�review�of�the�“insider”�definition�and�policy�with�

a�view�of�making�the�policy�more�practical�and�controllable.��As�part�of�

changes�to�the�“insider”�policy�we�would�suggest�that�the�threshold�of�

$50,000�that�initiates�more�specific�procedures�and�checks�be�reduced.��

Consideration�should�be�given�to�returning�to�the�1995�level�of�$10,000.�

Insider Database

At�present,�there�is�no�comprehensive�database�of�all�individuals�(including�

relevant�details)�who�would�be�classified�as�an�“insider”�under�the�current�OLG�

policies.��Certain�electronic�resources�and�tools�are�available�to�partially�check�for�

insiders.��Reliance�is�placed�on�representations�of�the�claimant�and�results�of�the�

interview�with�claimants�of�winning�tickets�greater�than�$50,000.���

We�observe�that�the�definition�of�retailers�is�very�broad�and�would�include�a�

truck�driver�who�has�nothing�to�do�with�ticket�sales�but�is�employed�by�a�major�

retailer�who�sells�tickets�at�one�of�the�retailer’s�locations.��Family�members�of�

retailers�are�not�included.��Furthermore,�given�the�turnover�of�employees�in�the�

retail�business�it�may�not�be�practical�to�maintain�a�comprehensive�database�of�

all�insiders.�

Insider Win Investigation Files

KPMG�was�provided�with�access�to�a�number�of�Insider�Win�Investigative�Files�

which�were�completed�by�the�Toronto�Prize�Office�and/or�Internal�Audit�during�

the�period�2004-2006.��As�of�November�3,�2006,�we�were�not�able�to�examine�

all�the�files�for�this�period�but�we�reviewed�a�number�of�files�for�each�year�as�

follows:�

Year� Number�of�Files�Reviewed�

2004� 10�

2005� 18�

2006� 13�

Our�initial�review�of�these�files�was�limited�due�to�time�availability�and�additional�

time�will�be�required�in�phase�to�assess�their�contents.��On�the�basis�of�our�

preliminary�review;�however,�we�are�able�to�make�the�following�observations:�

� The�nature�of�the�anonymous�purchasing�used�in�nearly�all�provincial�or�

state�lotteries,�limits�the�ability�to�be�absolutely�certain�the�bearer�is�the�

lawful�owner�of�the�ticket;�but�interviews�and�other�OLG�procedures�are�

structured�to�establish�plausible�grounds�that�the�claimant�is�the�rightful�

owner�of�the�winning�ticket.���

Phase I Report – Lottery Review

November 3, 2006

For the Internal Use of Ontario Lottery and Gaming Corporation

Page 14 of 16

� Claimants�are�assumed�to�be�the�lawful�owner�unless�there�is�evidence�

to�the�contrary.�

� The�current�policy�is�if�a�ticket�is�reported�and�can�be�identified�by�an�

external�party�as�being�stolen,�it�will�be�put�on�hold�until�the�ownership�

interest�in�the�ticket�can�be�investigated.��Where�ownership�is�not�clear,�

the�policy�is�to�pay�the�winning�into�the�courts.�

� The�practice�is�that�if�there�are�any�ownership�disputes�after�payment,�

the�parties�can�refer�the�matter�to�the�police�or�courts�for�resolution.���

� OLG�systems�are�programmed�to�check�for�family�responsibility�

amounts�owing�prior�to�paying�out�any�amount�over�$990.���

� If�a�ticket�is�reported�stolen�and�can�be�identified�by�the�individual,�a�

hold�is�placed�on�the�ticket�with�the�system�preventing�the�payment�

until�an�investigation�is�complete.�

Insider Policy Evolution

Similar�to�all�corporate�policies,�the�insider�policy�has�evolved�from�its�

introduction�in�1984.��We�were�informed�that�the�major�changes/additions�

included:�

� The�addition�to�the�insider�definition�of�all�distributors�and�their�sales�

staff�in�1987�

� Lowering�of�the�prize�amount�subject�to�the�policy�from�$100,000�to�

$10,000�in�1995�

� The�addition�of�external�auditors,�ILC�employees�and�their�family,�lottery�

retailers�and�their�employees�in�1995,�and�

� Coinciding�with�the�change�with�the�definition�of�the�major�win�level,�

the�prize�level�subject�to�the�policy�was�raised�to�$50,000�or�greater�in�

1999.�

Preliminary�information�received�and�subject�to�confirmation,�would�indicate�that�

the�current�policies�are�comparable�to�other�provincial/state�lotteries.��While�the�

OLG�policy�has�included�retailers�in�its�definition�since�1995,�certain�other�

jurisdictions�do�not�presently�include�retailers.��

We�have�observed�that�there�is�clearly�a�documentary�trail�and�process�for�

handling�major�insider�wins.��At�present,�we�are�reviewing�the�details�of�the�

individual�files�provided�to�us.�

Phase I Report – Lottery Review

November 3, 2006

For the Internal Use of Ontario Lottery and Gaming Corporations

Page 15 of 16

Contact�Centre�Lottery Terminal Freeze

During�early�2006,�as�a�part�of�OLG’s�continuing�efforts�to�improve�lottery�

security,�OLG�implemented�a�new�lottery�terminal�freeze�process�for�major�

wins.��When�a�valid�major�win�ticket�is�validated�at�a�Retail�Terminal,�the�lottery�

terminal�freezes�and�a�message�is�provided�on�the�screen�instructing�the�retailer�

to�phone�the�Contact�Centre.��The�customer-facing�screen�displays�the�big�win�

without�the�dollar�amount�and�longer�music�is�played�by�the�Retail�Terminal.��To�

balance�between�informing�the�winner�and�protecting�their�personal�security,�the�

claimant�learns�of�the�magnitude�of�their�win�on�the�phone.��The�phone�is�

passed�to�the�claimant�once�the�Retailer�calls�(or�is�called�by)�the�Contact�Centre�

to�obtain�the�specific�win�information.���

No�other�transactions�can�be�processed�until�the�machine�is�unlocked�by�OLG.��

If�the�Contact�Centre�does�not�hear�from�the�retailer,�the�policy�requires�the�

Contact�Centre�to�call�the�retailer.��During�the�call,�certain�information�is�

gathered�from�the�claimant,�instructions�are�given�to�sign�the�ticket�and�options�

for�collecting�the�prize�are�provided.��This�information�is�relayed�to�OLG’s�Prize�

Office.���

Our�preliminary�understanding�is�that�many�other�lotteries�also�have�this�new�

security�feature.�

Tracking of Calls

Current�OLG�technology�does�not�record�incoming�telephone�calls�to�the�

Contact�Centre.��Customer�Service�Representatives�are�instructed�and�trained�to�

always�create�a�profile�in�Onyx�(a�logging�system)�and�to�log�all�calls�(except�for�

the�automated�recording�replaying�the�winning�numbers).��Our�preliminary�

understanding�is�that�there�is�no�guarantee�that�all�calls�and�related�information�

are�captured.��

Recommendation Five

OLG�should�consider�the�implementation�of�an�automatic�call�logging�

facility�at�the�Contact�Centre.��In�conjunction�with�such�an�

implementation�appropriate�monitoring�and�follow-up�processes�should�

be�developed�and�rolled�out�as�well.�

Phase I Report – Lottery Review

November 3, 2006

For the Internal Use of Ontario Lottery and Gaming Corporation

Page 16 of 16

Technology�and�Other�

Security�Matters�Technologies Used to Support Gaming

OLG�uses�sophisticated�technology�systems�to�produce,�control�and�validate�all�

tickets�sold.��Similar�to�other�state/provincial�lottery�organizations,�OLG�

continues�to�enhance�and�develop�its�systems�and�related�procedures.��These�

systems�are�reviewed�by�third�parties�on�a�regular�basis�and�subject�to�internal�

testing.�

Access to Facilities

Access�to�OLG�facilities�is�very�controlled�and�encompasses�multiple�levels�of�

security�designed�to�protect�the�integrity�of�gaming�and�detect�unauthorized�

access.�

Segregation of Duties

OLG�focuses�on�segregation�of�duties�to�ensure�that�no�one�person�can�pay�a�

prize�claimant�or�access�systems�without�being�monitored.��Extensive�testing�is�

conducted�in�a�test�lab�prior�to�being�rolled-out�for�sale�in�Ontario.�

Ticket Sales of On-Line Games

OLG�designs�its�processes�to�prevent�winning�tickets�from�being�produced�after�

a�draw�or�sporting�event�that�drives�winning�tickets.���

Phase I Report – Lottery Review November 3, 2006

For the Internal Use of Ontario Lottery and Gaming Corporation