WIXLIB

COMPLIANCE AUDIT MANUAL

DISCLAIMERThe Checklist is designed to assist auditors in performing and documenting the major considerationswhen performing a compliance audit in terms of Remote Gaming Regulations (RGR).However, this checklist is not intended to be a substitute for the professional and ethical requirements ofauditors. In fact, accredited auditors need to comply with inter alia: Remote Gaming Regulations, Subsidiary Legislation, Directives and other laws regulating the gamingindustry in Malta ;Code of Ethics;Professional Standards;Companies Act [CAP 386];Prevention of Money Laundering Act [CAP 373];Prevention of Money Laundering and Funding of Terrorism Regulations [Subsidiary Legislation, CAP373.01]; andTaxation legislation, amongst others.This checklist is not exhaustive of all the procedures that should be performed. The auditor should utilisethis Checklist in light of his or her professional judgment and the facts and circumstances involved in theirsetup and each particular Gaming Licensee. Auditors are encouraged to maintain their professionalscepticism and develop other procedures to address the risks associated with the particular Licence, inline with professional standard requirements.However, the procedures defined in this checklist are mandatory on each compliance audit.2LOTTERIES AND GAMING AUTHORITY COMPLIANCE AUDIT MANUAL

INDEXAStanding Information . 4BHuman Resources . 11CFinancial Analysis . 12DPublic Domain . 15EInformation Technology . 18FGaming Operation . 24GModification History . 353LOTTERIES AND GAMING AUTHORITY COMPLIANCE AUDIT MANUAL

Name of LicenseePerformed byDateLicensee NumberReviewed byDateA Standing Business Entity InformationA.1Build up the Licence InformationSheet from LGA records. Obtainalsoadditionalinformationconsidered necessary in thecircumstances.Meeting with LGA official Mr. XYZ, was held onDATE. Other than the standard LicenceInformation Sheet, the following information wasalso obtained: Document 1 Document 2 Document 3A.2When performing the onsite visitand checks, list down instanceswhereby there were changesimplemented by the Licenseewhich have not been notified tothe Authority as required by RGRSection 11 (1-5). Change in employeesOperating bank accounts number/sPlayers’ bank account number/sCommercial bankersa. Any change in the Board ofDirectors of management or;b. Any material changes in thedocumentation and informationprovided when applying for thelicence;c. Any resolution / application orintendedresolution/application to the Court for thedissolution or winding up of theLicensee;d. Transferofaqualifyingshareholding;e. Increase in a non qualifyingshareholding so as to becomea qualifying shareholding;f. Increase in a qualifyingshareholding so as to cause itto equal to or exceed 5% ofissued share capital or ofvoting rights or to cause it tobecome a subsidiary;g. A reduction in a qualifyingshareholding to fall below 5%of issued share capital orvoting rights;h. A reduction in a qualifyingshareholding so as to cease tobe a qualifying shareholding;i. The sale or other dispositionby the Licensee of itsbusiness;j. The merger of the Licensee4LOTTERIES AND GAMING AUTHORITY COMPLIANCE AUDIT MANUAL

Name of LicenseePerformed byDateLicensee NumberReviewed byDatewith another company;k. The reduction of the nominal orissued share capital, theincrease or reducing of thevoting share capital or anymaterial change in the votingrights;l. Entering into any profit sharingarrangements or a commissionbased arrangement with a thirdparty;m. Surrender of the licence duringthe licence term.A.3Obtain the Licensee’s Certificateof incorporation and performMFSA search for any statutorychanges.Evidence of MFSA search can be seen inDocument A. No changes noted.A.4Identify whether the company’smain objects included in theMemorandum and Article ofAssociation were changed. If so,indicate the changes. Inquire withthe Key Official of the Licensee.From discussions held with the Key Official and asper MFSA searches, there were no changes to theMemorandum and Articles of Association.A.5Observe that the minimum paidup issued share capital for therelevant licence class has beenadhered to.As per audited financial statements and as perMFSA search, the minimum paid-up share capitalhas been adhered to.A.6Obtain an understanding of thegeneral findings and follow-upaction taken by the Licenseeissued on previous inspections,reviews, audits or other reportsconsidered necessary carried outby LGA, compliance auditors,systemsauditors,internalauditors, external auditors andothers.The Licensee was subject to the following visits:-Your procedures should include areview of the letter issued by thestatutory auditor to those chargedwith A17/04/2010InternalAudit –SystemreviewConsultancyCo Ltd15/02/2010Letter ofcommentABCExternalAuditorComplete Schedule Document B.A.7Attach relevant copies of thesereports.Reports attached.Licence Terms and ConditionsA.8Inspect any conditions issued withthe licence and perform sufficientprocedures to obtain assurancethat such conditions have beenfulfilled as required.5LOTTERIES AND GAMING AUTHORITY COMPLIANCE AUDIT MANUAL

Name of LicenseePerformed byDateLicensee NumberReviewed byDateAdditional Procedures Identified by the AuditorA.9Audit procedure #16LOTTERIES AND GAMING AUTHORITY COMPLIANCE AUDIT MANUAL

Name of LicenseePerformed byDateLicensee NumberReviewed byDateA1Licensee InformationA1.1Name / CompanyRegistered NumberA1.2LGA RecordsABC Gaming Limited (C12345)Actual ResultABC Gaming Limited (C12345)Class Licence / (s)heldClass 4Class 4A1.3Platform (ifapplicable)N/AN/AA1.4Licence NumberLGA/CLX/XXX/XXXXLGA/CLX/XXX/XXXXA1.5Date of LicenseeFormation10 August 201010 August 2010A1.6Additional Licence/ (s) , Brewery Street, Mriehel1, Brewery Street, MriehelA1.8Operating Address15, South Street, Valletta15, South Street, VallettaA1.9Contact Number /(s)2112 34562112 3456A1.10Nature of GamesOfferedOnline lotteryOnline lotteryA1.11Front end SystemKLMKLMA1.12Back end .comA1.14Board of DirectorsMr. Peter Portelli;Ms. Jane Farrugia;Mr. Govanni Gatt;Mr. Peter Portelli;Ms. Jane Farrugia;Mr. Govanni Gatt (resigned on23/09/2012);A1.15Secretary to theBoardMs. Jane FarrugiaMs. Jane FarrugiaA1.16Key OfficialMs. Jane FarrugiaMs. Jane FarrugiaA1.17Money LaunderingReporting OfficerMr. Peter PortelliMr. Peter PortelliA1.18InformationSecurity OfficerMr. Peter PortelliMr. Peter Portelli7ththLOTTERIES AND GAMING AUTHORITY COMPLIANCE AUDIT MANUAL

Name of LicenseePerformed byDateLicensee NumberReviewed byDateA1.19Number ofemployees (attachan updatedorganigram of theLicensee)20 employees18 employeesA1.20AccountantDFC Consultancy LimitedDFC Consultancy LimitedA1.21Auditor Name andAddressACP Auditors, High Street, BirkirkaraACP Auditors, High Street,BirkirkaraA1.22LegalRepresentativeName and AddressGG Advocates, Republic Street,VallettaGG Advocates, Republic Street,VallettaA1.23Operating AccountNumber/ (s) andName of FinancialInstitution / (s)123-5678-999 – Bank of Valletta123-5678-9989 – Bank of VallettaA1.24Players’ AccountNumber / (s) andName of FinancialInstitution / (s)1221-199-000 – Bank of Valletta1221-199-678 – Bank of VallettaA1.25CommercialBankersHSBCBank of VallettaHSBCBank of VallettaBank of ScotlandA1.26Gaming Tax(Fourth Schedule)Class 4Class 48LOTTERIES AND GAMING AUTHORITY COMPLIANCE AUDIT MANUAL

Name of LicenseePerformed byDateLicensee NumberReviewed byDateA2Previous Findings and Follow up ActionA2.1LGA Review / Correspondence / ConditionsDateFindingsRecommendationFollow-up by Licensee13/10/2012Tax due in respect of theprevious month was notthsubmitted by the 20 dayof the following monthTo pay amounts dueNot Paid oLGA Administrative Compliance (fines – penalties – taxation)FindingsRecommendationFollow-up by -up by -up by LicenseeIssueresolved?(Yes/No)Systems AuditFindingsCompliance AuditFindings9LOTTERIES AND GAMING AUTHORITY COMPLIANCE AUDIT MANUAL

Name of LicenseePerformed byDateA3Licensee NumberReviewed byDateLicensee Financial ingsIdentifythekeyratios(profitability, liquidity, gearing onthelastauditedfinancialstatements and on the latestmanagement accounts submittedto the LGA for the preceding 12months.Auditors to include disclaimer.A3.2Inquire whether the Licensee hasamechanismtopreparemanagement accounts.A3.3Ask the Key Official for the playerliability report of the last 3 monthsand reconcile with the relatedbank statements.Take intoaccount any bank guaranteeissued in favour of the Authority.A3.4Observe that the company meetsits commitment to players. Testsmay include checking bankstatements, tests on the 5 daypayment cycle and response timeto the LGA.A3.5Carry out tests to obtaininformation on whether thecompany has failed in honouringits commitments with third partyproviders.10LOTTERIES AND GAMING AUTHORITY COMPLIANCE AUDIT MANUAL

Name of LicenseePerformed byDateBLicensee NumberReviewed byDateHuman rganisational Set-upB.1Attach an updated organisationalchart, detailing also the lines ofresponsibilities.B.2Comparethenumberofemployees with the latest FSSrecords.B.3Comparethenumberofemployees found on the payrollwith the list of employeesapproved by LGA to work with theLicensee.B.4Obtain a sample of employees’contracts to obtain assurance thatrelevant duty is in line with theirlevel of authority.Key OfficialB.5Inquire that the Key Official isapproved by the Authority.B.6Obtain confirmations throughMFSA records that the KeyOfficial is a director of theLicensee.B.7Inquire whether the Key Official isperforming supervisory role in theoperations of the Licensee.This can be seen throughsignatoriesonfiles,correspondence, access to thefront / end back end of thegaming system, capability ofextracting gaming reports andmonthly gaming / tax reports tobe submitted to the Lotteries andGamingAuthority,incidentreporting, correspondence oncomplaints etc.RGR Section 15 (2).Additional Procedures Identified by the AuditorB.8Audit procedure #111LOTTERIES AND GAMING AUTHORITY COMPLIANCE AUDIT MANUAL

Name of LicenseePerformed byDateCLicensee NumberReviewed byDateFinancial cation of Records – Make Changes to Business Entity Form so that Documents may not be Held at theRegistered AddressC.1Observe correspondences heldwith LGA and observe that theremote gaming records are keptwithin the approved premises.Inquire that the latest financialstatements are kept within theregistered offices.Inquire that operational andfinancial policies and proceduresare kept within the approvedaddress and readily available.RGR Section 50 (a) – (d)Management Accounts (internal use)C.2Observe that the Licensee hassufficient funds to cover playerdeposits(andjackpotsifapplicable) as per the RemoteGamingRegulationsrequirements working backwardfrom date of audit for 3 months.C.3Observe that the reconciliationprocedures are being adhered toand in particular monthly reportreconciling month-end balancesof all players funds in theaccount’s currency and in Euro,held in credit institutions and intransit, supported by creditinstitutions’ and payment serviceproviders’ statements, with themonth-endplayerliabilities,supported by a system report.This should also take into accountany Jackpot funds if applicable.For example observe that theLicensee adheres to the monthlysubmission of: Player balance report;Copies of bank statements.Inquireanynon-complianceconsiderations with the LGA in12LOTTERIES AND GAMING AUTHORITY COMPLIANCE AUDIT MANUAL