The Australian government has shut down the Norfolk Island Gaming Authority (NIGA) after a damning report found that it has failed to fulfil its regulatory role to an acceptable level.
The report by gaming-focused audit and assurance firm Centium Group ultimately found that the NIGA is "beyond redemption", with too many existing problems to simply be reformed.
The NIGA is based on Norfolk Island, which lies between Australia and New Zealand. It offered licences to online gaming operators serving Australian consumers.
The review was launched after Racing Australia, Racing Victoria and Racing New South Wales all raised concerns over the authority’s performance, noting a lack of probity checks on new licence applications.
This prompted the Australian government to order the NIGA to cease issuing new licences until the review was completed.
The review paints a damning picture of the regulator, stating that its internal controls are so inadequate that it can give rise to fraud and corruption. It operates in "a non-transparent way with little to no reporting or communication with the [Norfolk Island] Administration."
"The Authority has been grossly under-resourced," the report states. "Basic control elements are not in place, such as: governance and reporting structures, a risk register, contracts with key personnel, segregation of duties, controls to prevent conflicts of interest, staff remuneration processes and policies and procedures."
It was accused of being more interested in raising revenue from gaming licences than actually fulfilling its duties as a regulatory body, with the report claiming that the regulator had been "captured" by the industry.
It highlighted the fact that the regulator had recently won the EGR 'professional services partner' award as evidence of the authority's unhealthy relationship with the industry.
"The Authority should not be viewed as a 'partner'," the report stated. "Its role is that of a regulator."
Further issues were identified regarding conflicts of interest that had been allowed to arise without any disclosure. The NIGA's director is the brother-in-law of the island's former Minister for Tourism, Industry and Development and the former Chief Minister. This was not declared at any stage, with "no formal documented declaration or a documented plan to manage the potential conflicts."
These issues ultimately mean that the NIGA is beyond saving, Australian Federal Minister for Local Government and Territories Fiona Nash said.
"Gambling in Australia must be carefully regulated to ensure the integrity of our sport and to protect consumers," she explained.
"Centium's report made it abundantly clear that the authority is beyond redemption and that these problems cannot be resolved satisfactorily. As a result, I am entirely confident that closing the Authority is the right thing to do."
Operators licensed by the Norfolk Island Gaming Authority now have until March 31st, 2017, to seek licences in other jurisdictions.