1. Casino Money Laundering Methods
2. Casino Money Laundering Examples Against
3. Trump Casino Money Laundering Charges
4. What Is Money Laundering Examples

Individuals convicted of money laundering offences are liable to a fine not exceeding S$500,000 and/or a term of imprisonment not exceeding 10 years. Top image via online-casino.com.sg.

This document describes factors that a casino or card club may need to consider in applying a risk-based approach to the development and implementation of a Bank Secrecy Act ('BSA') compliance program. The BSA requires casinos and card clubs to develop and implement compliance programs tailored to business activities and customer risk profiles (e.g., type of products and services offered, the locations served, and the nature of their customers). Please note that the business/customer risk factors described below will not apply equally to all casinos and card clubs, and even when these factors are present, there may be different risk outcomes for different casinos and card clubs. A casino or card club may not be required to address each of the factors described below; also a casino or card club should not construe the risk indicators below as exhaustive and the only ones required to be addressed.

I. General Business Risk Indicators

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• German, QC, Dirty Money: An Independent Review of Money Laundering in Lower Mainland Casinos conducted for the Attorney General of British Columbia (Mar. 31, 2018) (“German Report”). As we noted yesterday, when discussing the U.S. Regulatory system, the German Report favorably cites the Nevada Gaming Commission and Nevada.
• At the anti-money-laundering conference in late August, the RCMP’s Ward used security videos seized from Silver International’s office, in a multi-storey business complex in the 5800-block of.
• Methods of money laundering. Money laundering is an extremely broad crime that can occur in countless different ways. In Nevada, one of the most common money laundering schemes involves using casinos. Reno NV criminal defense attorney Michael Becker gives an example: Example: Sam robs a store in Henderson and takes $10,000 from the register.

There are many risk indicators or factors that a casino or card club may need to consider when developing and implementing an effective BSA compliance program to combat money laundering and terrorist financing. Risk factors may differ depending on the business activities of a specific gambling establishment, or its products and services, as well as state, tribal or local gambling regulations that affect the gaming operation. Also, a casino or card club may need to consider the risk management principles that it applies in its operational areas when assessing and managing its BSA risk profile.

A casino or card club may need to consider, as appropriate, the following factors when developing and implementing risk-based policies, procedures, internal controls and systems to comply with the BSA:

• Gross annual gaming revenue ('GAGR') of the business as well as GAGR by type of gambling offered (e.g., table games, card games, slot machines, video lottery terminals, sports book betting, pari-mutuel wagering on horse or dog races);
• Overall physical layout of gambling establishment (e.g., square footage and gambling floor layout);
• Governmental wagering limitations or other legal constraints on betting or the types of games offered;
• Types of gambling offered (e.g., table games, card games, slot machines, video lottery terminals, sports book betting, pari-mutuel wagering on horse or dog races);
• Types of specific games offered (e.g., roulette, baccarat/mini-baccarat, or craps, which allow a pair of bettors to cover between them both sides of an even bet);
• Number of table games, card games, slot machines/video lottery terminals offered;
• Number of table games, slot machines or video lottery terminals with high dollar maximum bet limits;
• Number and location of cages and slot redemption booths;
• Number of cage windows and race/sports book windows;
• Number of slot kiosks for ticket redemptions and maximum dollar thresholds;
• Types of financial services offered at the cage (e.g., deposit accounts, credit/marker accounts, account access cards, check cashing accounts, currency exchange services), any limitations on financial services, and other types of payment methods accepted (e.g., credit cards, debit instruments, wire transfers);
• Types of negotiable instruments accepted for cashing, credit, deposit, and purchase of gaming instruments (e.g., business checks, cashier's checks, foreign drafts, domestic or international money orders, official bank checks, personal checks, promissory notes, third-party checks, domestic or foreign traveler's checks);
• Business and personal check cashing dollar limits;
• Whether customers can wire funds domestically or internationally through a domestic depository institution for deposit or payment of markers into their personal casino accounts;
• Whether a third-party contractor provides check cashing or money transmitting for customers on the premises;
• Whether a third-party contractor provides race and sports book wagering within a casino, and the extent to which a casino conducts such customer transactions on behalf of a third-party contractor;
• Types of financial transactions that a casino 'host' can conduct on behalf of customers;
• Whether customers are allowed to conduct transactions through chip runners and the types of transactions that can be conducted;
• Whether the casino or card club is located in a High Intensity Financial Crime Area ('HIFCA');¹
• Whether the casino or card club is located in a High Intensity Drug Trafficking Area ('HIDTA');²
• Whether the casino or card club is located in a town or city center, or in a more remote location;
• Whether the casino or card club is located near a U.S. land border crossing;
• Proximity of the casino or card club to any interstate freeways which allow customers quick ingress and egress to the gambling operation;
• Whether the casino or card club is owned by a state or tribal government, privately owned, a combination of state and private entities, or is a publicly traded company;
• Whether a casino is owned by a corporation that operates other casinos in the same state or other states, as well as other countries;
• Number of employees, experience levels, and turnover rate of key personnel and frontline employees;
• Number of surveillance employees and ratio of employees to surveillance cameras;
• Number of fiduciary accounts that are opened annually (e.g., deposit accounts, credit/marker accounts, check cashing);
• Number of marketing accounts that are opened annually (e.g., player rating and slot club);
• Geographic marketing areas, such as international, regional, and local marketing areas, as well as relative concentration in these markets;
• Business clientele model and profile (e.g., a large number of customers who gamble relatively small amounts of money, a large number of customers who gamble relatively large amounts of money, a small number of customers who gamble relatively small amounts of money, a small number of customers who gamble relatively large amounts of money, or some combination of these); and
• Customer base (number of accountholders versus estimated number of non-accountholders, organized casino tours/junkets, estimated number of local customers versus estimated number of travelers or tourists).

II. Customer Risk Indicators

Although any type of customer activity is potentially vulnerable to money laundering or terrorist financing, certain customers may pose specific risks. In assessing customer risk, casinos and card clubs may need to consider other variables, such as services sought, products used, and geographical locations. For example, a casino or card club may need to consider the following:

• Particular aspects of operations (i.e., products, services, games, and accounts or account activities) that can be used by customers to facilitate money laundering and terrorist financing;
• Non-resident aliens and foreign nationals with deposit accounts who are citizens of countries or jurisdictions that are:
  • Identified as non-cooperative by the Financial Action Task Force (FATF)³ ,
  • Identified as Jurisdictions of Concern or Jurisdictions of Primary Concern in the U.S. Department of State's annual International Narcotics Control Strategy Report (INCSR)⁴,
  • Designated as jurisdictions of primary money laundering concern or subject to special measures through regulations issued by FinCEN, pursuant to Section 311 of the USA PATRIOT Act⁵, or
  • Sanctioned by the Office of Foreign Assets Control (OFAC), including those with state sponsored terrorism⁶.
• Customers with significant levels of gambling (e.g., in amounts of $3,000 - $10,000 inclusive) that are non-accountholders and for which identification is not known and is unavailable;
• Customers that pose higher risks based on type of account, account activity, types of products and services used, geographic locality, or player ratings, etc.;
• Customers that engage in a relatively high level of spending;
• Customers engaged in high value gambling that are inconsistent with a casino or card club's information about levels or sources of assets or incomes, or inconsistent with information about occupations in casino credit/marker account records (e.g., credit/marker applications) or other records;
• Customers using deposit accounts for non-gambling purposes;
• Customers observed borrowing money from non-conventional sources, including other customers;
• Customers conducting transfers of significant or unusual amounts of funds through depository institutions;
• Customers using domestic or international money orders in amounts just below the threshold for recordkeeping requirements, traveler's checks denominated in foreign currency, domestic wire transfers in amounts just below the threshold for recordkeeping requirements, debit cards, and prepaid access (stored value) cards either in significant numbers or with significant total monetary value;
• Customers conducting large transactions with minimal casino play;
• Regular customers with unusual spending pattern changes (e.g., dramatic or rapid increases in the size and frequency of transactions);
• Customers listed on a so-called 'barred patron list' and their known associates;
• Customer player rating and slot club accounts with P.O. Boxes only instead of permanent street addresses;
• Periodic review of FinCEN Form 102, Suspicious Activity Report by Casinos and Card Clubs ('SARCs') filed that are based on direct observation of customer activity and review of customer records;
• Dollar value of intercompany transfers of funds from customers' accounts for front money deposit or marker redemption conducted between casinos in the United States and their affiliated casinos located in other countries.

Once a casino or card club has identified the specific risk factors unique to its operation, it should conduct a more detailed analysis of its level of vulnerability. The level and sophistication of the analysis may depend on the comprehensiveness of a casino or card club's risk assessment process or the risk factors that apply. Also, the results may differ according to its business risk model and governmental gambling regulations. By understanding its risk profile, a casino or card club can apply appropriate risk management processes to its BSA compliance program to identify and mitigate its operational risk.

In conclusion, an effective BSA compliance program must reflect potential money laundering and terrorist financing risks arising from a casino's or card club's products, services, customer base, and geographical location. Casinos or card clubs may need to update their risk indicators to reflect changes in operational risk profiles (e.g., revised products and services, new products and services, changes with regard to opening and closing accounts or closer monitoring of accounts, new categories of accounts, or changes resulting from acquisitions or mergers). It is a sound practice for a casino or card club to periodically review its risk indicators or factors to assure sufficiency and effectiveness.

For questions about this guidance, please contact FinCEN's Regulatory Helpline at (800) 949-2732.

For additional guidance, see Casino or Card Club Compliance Program Assessment, FIN-2010-G003 (June 30, 2010) and Frequently Asked Questions - Casino Recordkeeping, Reporting and Compliance Program Requirements, FIN-2007-G005 (November 14, 2007) and FIN-2009-G004 (September 30, 2009). Other reference material includes Suspicious Activity Report Filings Within the Casino and Card Club Industries, The SAR Activity Review, Trends, Tips and Issues, Issue 8 (April 2005) and FinCEN SAR Bulletin, Issue 2: Suspicious Activities Reported by Casinos (August 2000).

^{1 Locations designated as HIFCAs enable a concentration of law enforcement efforts at the federal, state, and local governmental levels. For a listing, seewww.fincen.gov/hifca}

Casino Money Laundering Methods

^{2 Locations designated as HIDTAs are provided additional Federal government resources to help eliminate or reduce drug trafficking and its destructive consequences. For a listing, see the Office of National Drug Control Policy's website at www.whitehousedrugpolicy.gov.}

^{3 FATF is an inter-governmental body whose purpose is the development and promotion of policies, at both the national and international levels, to combat money laundering and terrorist financing. Seewww.fatf-gafi.org.}

^{4 See www.state.gov/p/inl/rls/nrcrpt}

^{5 See www.fincen.gov/resources/statutes-regulations/311-special-measures}

^{6 See www.treasury.gov/offices/enforcement/ofac/programs/}

Second Part of a Two-Part Series

Casino Money Laundering Examples Against

As we blogged yesterday, British Columbia’s (“B.C.”) Attorney General David Eby recently released an independent and very detailed report examining money laundering in B.C.’s gaming industry and providing 48 recommendations to combat the problem. See Peter M. German, QC, Dirty Money: An Independent Review of Money Laundering in Lower Mainland Casinos conducted for the Attorney General of British Columbia (Mar. 31, 2018) (“German Report”). As we noted yesterday, when discussing the U.S. regulatory system, the German Report favorably cites the Nevada Gaming Commission and Nevada Gaming Control Board, whose Enforcement Division “acts as a first line of defence against organized crime and bulk cash buy-ins[,]” and further observes that the federal Financial Crimes Enforcement Network, “[i]n partnership with Internal Revenue Service, acts as the enforcement arm for most money laundering issues.”

The U.S.’s more robust, streamlined AML regulatory regime, although hardly perfect, stands in stark contrast to the dysfunction alleged in the German Report that plagues B.C.’s current framework. In this post, we describe the U.S. AML regulatory regime for the gaming industry, and the recent enforcement actions which it has produced. Although the pace of AML enforcement has been somewhat sporadic, it appears to be increasing over time in regards to the gaming industry. Certainly, attention by regulators — as well as by the industry itself — to AML/BSA compliance has increased over the last several years.

The U.S. AML Regulatory Framework for the Gaming Industry

As a threshold matter, the Financial Crimes Enforcement Network (“FinCEN”) has authority to investigate casinos for compliance with and violations of the Bank Secrecy Act (“BSA”). FinCEN, in turn, has delegated to the Internal Revenue Service (“IRS”) its authority to examine casinos for compliance with the BSA. Under this framework, if the IRS identifies significant BSA violations during a casino examination, FinCEN initiates an investigation into that casino and, depending on the investigation’s outcome, may assess a civil penalty against the casino. As a result, the IRS and FinCEN work in conjunction while enjoying broad mandates that are not at odds with one another.

And, in contrast to the B.C. system described in the German Report, the U.S. has implemented more streamlined regulatory requirements for casinos pursuant to the Bank Secrecy Act (“BSA”), including:

• Filing suspicious activity reports (“SARs’) for suspicious transactions of at least $5,000;
• Filing currency transaction reports (“CTRs”) for cash ins or cash outs exceeding $10,000;
• Complying with certain recordkeeping requirements for up to five years, including a casino’s receipt of funds for each customer, bookkeeping entries for debits or credits into a customer’s casino account, and credit extensions exceeding $10,000; and
• Implementing AML compliance programs.

FinCEN issued guidance in 2010 regarding AML/BSA compliance programs in the gaming industry, stating that, “at a minimum,” such a program must include:

• A system of internal controls to assure ongoing compliance with the BSA;
• Internal or external independent testing for compliance with a scope and frequency commensurate with the risks of money laundering and terrorist financing posed by the products and services provided;
• Training of casino personnel, including training in the identification of unusual or suspicious transactions;
• An individual or individuals to assure day-to-day compliance with the BSA;
• Procedures for using all available information to determine and verify, when required, the name, address, social security or taxpayer identification number, and other identifying information for a person;
• Procedures for using all available information to determine the occurrence of any transactions or patterns of transactions required to be reported as suspicious;
• Procedures for using all available information to determine whether a record required under the BSA must be made and retained; and
• For casinos and card clubs with automated data processing systems, use of the programs to aid in assuring compliance.

Arguably, the gaming industry remains one of the last bastions of a major business that still often deals significantly in cash — in a world increasingly driven by technology and credit. To that end, some gaming businesses may attract a disproportionate share of customers seeking to avoid ensconced BSA reporting and record-keeping requirements, including the CTR filing requirement. Similar to some of the allegations in the German Report, some casinos also may attract certain individuals from across the globe who potentially are attempting to undermine certain laws in their home country, including tax reporting obligations.

AML Enforcement and the Gaming Industry

In recent years, FinCEN has shown an increased focus on AML compliance in the gaming industry. It assessed only three civil penalties against casinos, for a total of $1.6 million, from 2003 to 2014. In contrast, it imposed approximately $110 million against casinos from 2015 through 2016 and has pursued four significant enforcement actions since 2016.

As we have blogged, FinCEN announced on May 3, 2018 that it imposed a $5 million civil monetary penalty against Artichoke Joe’s for the casino’s alleged deficiencies in its BSA compliance. FinCEN asserted that Artichoke Joe’s AML program failed to implement sufficient procedures to identify loan-sharking operations. It found that: (1) the club’s senior management admitted loan-sharking operations were commonplace and observed by employees; (2) the club failed to file SARs and CTRs in compliance with the BSA; and (3) the club failed to undertake an independent audit after illegal loan sharking was initially detected.

Trump Casino Money Laundering Charges

FinCEN also pursued three large enforcement actions in 2016, about which we have also blogged:

• Cantor Gaming: FinCEN assessed a $12 million civil penalty against Cantor Gaming for purportedly “egregious and systemic” AML compliance failures on October 3, 2016. It found that Cantor Gaming failed to (1) provide adequate AML training for its officers and employees; (2) use all available information to identify and report suspicious transactions; and (3) maintain adequate internal controls to detect money laundering.
• Hawaiian Gardens Casino: On July 15, 2016, FinCEN imposed a $2.8 million civil penalty against the casino for allegedly repeatedly violating its BSA requirements. FinCEN attributed these failures to the club’s lack of a compliance culture, emphasizing that: (1) its leadership failed to meet as required by its charter; (2) its leadership failed to review and approve its risk assessment; and (3) its management failed to implement policies and procedures for customer identification.
• Sparks Nugget: On April 5, 2016, FinCEN imposed a $1 million civil penalty against the company for purportedly engaging in willful and repeated AML violations. FinCEN alleged that: (1) the company’s committee for deciding whether to file SARs never actually met and it included members that did not know that they were on the committee; (2) the company prohibited its compliance managers from interacting with BSA examiners; and (3) the casino used customer information only to further its business interests and not to comply with the BSA.

What Is Money Laundering Examples

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