Casinos have historically been at risk of exploitation by those seeking to launder criminal property. We look at five things you need to know about the problem, rules and changes to sector guidance.
1. Why is this important?
The nature of services and products offered by the gambling industry can make it attractive to criminals seeking to launder or disguise the origins of criminally derived funds. Significant risk factors in this industry include the prevalence of cash transactions, accessibility to multiple premises and anonymity on the part of the customer.
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2. Who is covered by the rules?
New anti-money laundering provisions relating to casinos were brought in by the Money Laundering Regulations 2017 (MLR 2017) on 26 June 2017. A key change is that all casino operators, both remote and non-remote, are now caught by MLR 2017, rather than simply holders of a casino operating licence. A remote casino operator will be caught by the MLR 2017 if they have at least one piece of remote gambling equipment situated in the UK or if the gambling facilities provided by the remote casino are used in the UK.
This means that non-casino gambling providers, such as betting shops, are not covered by the MLR 2017.
3. What are the rules?
Under the MLR 2017, casino operators have a legal obligation to do the following:
- Risk assessment: conduct a written risk assessment in respect of money laundering risks faced by the business and ensure that there are adequate procedures in place to deal with those risks.
- Customer due diligence: conduct risk based customer due diligence (CDD) when they:< >establish a business relationshipsuspect money laundering or terrorist financingdoubt the veracity or adequacy of documents or information previously obtained for the purposes of identification or verification.Nominated officer: appoint a member of the firm as their nominated officer (i.e. outsourcing is no longer possible) as well as a member of the board of directors (or equivalent) as the officer responsible for compliance.
- Reliance on third parties: accept ultimate responsibility for compliance with MLR 2017, even where they are entitled to rely on CDD carried out by third parties.
In July 2010, the Gambling Commission, which oversees the casino industry’s compliance with their anti-money laundering obligations, published a guidance note entitled “Money laundering: the prevention of money laundering and combating the financing of terrorism: Guidance for remote and non-remote casinos” (PDF). This guidance was updated in 2011 and 2016 following changes in the law.
4. How are the rules/guidance changing?
In light of the changes brought about by the MLR 2017, and also the Criminal Finances Act 2017, the Gambling Commission’s guidance note has been revised to a new fourth edition to assist casino operators in complying with the latest requirements. The updated guidance went out to consultation in July 2017. Responses are sought by 8 September 2017.
The consultation document invites feedback on the above amendments and, in addition, asks for views on whether or not the Gambling Commission should remain the sole supervisory authority for money service business activities provided by non-remote casinos.
5. What can casino operators do to comply with the amended regulations?
Casino operators can ensure they have effective anti-money-laundering and counter-terrorist financing measures in place by taking the following steps:
- Risk assessment: review and revise the risk assessment, covering issues such as customer profile, premises and remote sites and incidents of actual or suspected attempted money laundering.
- Policies and procedures: review and revise policies and procedures in light of the identified risks. Ensure that the policies and procedures are properly disseminated and appropriate training is provided on them to front line staff.
- Senior management commitment: senior management must be fully engaged in developing and maintaining procedures and controls which are necessary to manage the risks identified in the casino operator’s risk assessment.
- Record keeping: keep records of all anti-money-laundering policies, procedures and controls and all ongoing transactions with customers. Records of CDD identification and verification must be maintained for at least 5 years.
- Suspicious activity reports: providing appropriate training to all relevant employees to enable them to make a report where they know, suspect (or have reasonable grounds to know or suspect) that a person is engaged in actual or attempted money laundering or terrorist financing.
Casinos in the United States which generate more than $1,000,000 in annual gaming revenues are required to report certain currency transactions to assist the Financial Crimes Enforcement Network (FinCEN) of the Internal Revenue Service (IRS) in uncovering money laundering activities and other financial crimes (including terrorist financing).
Although Title 31, also known as the Bank Secrecy Act, was originally focused on financial institutions, criminal use of banking services located within casinos created a need for additional regulations that were specific to casinos. Because large sums of currency are transacted through slot machines, gaming tables, automatic change machines, retail operations and the cage (banks), and with high frequency, the regulations were targeted at transactions in excess of $10,000. Casino regulation has been a topic of debate, prompting the United States Senate to have a hearing before the United States Congress in which Title 31 topics were discussed through testimony by industry experts such as Grant Eve, CPA and partner at Joseph Eve, Certified Public Accountants and Ernest Stevens Jr., Chairman of the National Indian Gaming Association.[1]
Bc Casino Money Laundering
- 2Suspicious activity
Transaction reporting[edit]
Currency transactions that occur within a single Gaming Day (the normal 24-hour period that any casino uses for accounting and business reporting), whether the currency is paid into the casino, paid out, or exchanged (in the case of foreign currency exchanges), in excess of $10,000 requires the completion of a Currency Transaction Report (CTR, FinCEN Form 112) and must contain enough information to accurately identify the individual(s) transacting the currency.
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For example, if a man walks into a casino and stops at the blackjack tables and buys into the game for $12,000 (using cash), a CTR must be completed by the casino and filed with the IRS. In this example, currency is paid into the casino in the form of cash and happened within the unique 24-hour Gaming Day of the casino.
Here is an example of a cash out transaction: the established Gaming Day of a certain casino begins at 1:00am and ends at 12:59am. At 6:30am, a woman takes $6,400 in slot machine tickets to the main cage of the casino and requests payment in all $20 bills. Later that day, at around 7:10pm, the same woman approaches another cash cage on the opposite side of the casino and exchanges $4,000 in blackjack chips for cash. Because $10,400 was paid out in cash to a single individual in a single Gaming Day, a CTR must be filed by the casino to report the Cash Out transaction, because it is above the $10,000 threshold.
Because multiple transactions are aggregated for the purpose of Title 31 reporting, casinos create tracking programs to identify large transactions and automatically aggregate them in real time to ensure that they are compliant with the regulations.
Suspicious activity[edit]
Many criminals, such as those interested in tax evasion and money laundering, have researched the Title 31 requirements and have created a number of strategies to avoid detection of their activities by circumventing the reporting requirements. When these activities are discovered, casino staff are required to file a Suspicious Activity Report (SAR, FinCEN Form 114) to report the suspicious activities. Because there are many types of suspicious activities, it is required that casino personnel receive Title 31 training to avoid penalty and remain compliant.
Two of the most popular strategies for circumventing CTR reporting are structuring and minimal gaming.
Structuring[edit]
Because the $10,000 per gaming day CTR threshold is part of the Bank Secrecy Act, a criminal may seek to evade being recorded on a CTR by breaking a transaction over $10,000 into multiple smaller transactions, which is known as structuring. Single and multiple currency transactions in excess of $10,000 (in a single Gaming Day) are reported to the IRS. To track multiple transactions, many casinos record transactions as low as $3,000 (and lower) to ensure that they remain compliant with the CTR requirements. Again, criminals (including those interested in tax evasion) may break up their transactions into several, smaller transactions to avoid detection.
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For example, conducting three transactions of $4,000 is more than $10,000, which is the threshold of reporting a CTR. If the casinos did not track multiple transactions, the individual might be able to circumvent the reporting of their transactions. However, because most casinos track transactions of $4,000 (and lower), structuring this $12,000 transaction into three, smaller transactions would not prevent a CTR from being filed. And, while it may be possible to break up $12,000 into 20 individual transactions of $600 each, casino personnel also maintains awareness of this tactic and would likely detect the numerous trips to the cage to perform similar transactions.
Minimal gaming[edit]
Another type of suspicious activity is related to money laundering, where a casino patron may put large amounts of money in play, but gambles very little before cashing out.
For example, a bank robber steals $50,000 from a large bank. Most banks mark cash with exploding dye or sequential numbering of the large bills. To avoid being apprehended, the bank robber needs to exchange the stolen money for money that cannot be traced back to the robbery. In this situation, a bank robber may put $1,000 in $20 bills into a slot machine and spin twice before cashing out. Whether the slot machine pays the bank robber in coins or a slot ticket is irrelevant because the traceable money is in the machine and the bank robber will effectively receive 'clean' or 'laundered' money.
Money Laundering Through Indian Casinos
Both of these situations are suspicious, as defined by Title 31 regulations, and require a completed SAR by the casino, within a specified period of time.
Involvement of Agents[edit]
Two or more individuals handling the same currency bankroll are commonly referred to as 'agents' by the casino. An example of this would be individuals purchasing chips and dividing them amongst themselves. Agents cashing out chips or making currency transactions on behalf of one another are also popular examples of agent activity. Since agents handle the same bankroll, they essentially become entities and their transactions must be recorded together. All parties involved in agent activity must submit proper identification and complete the required IRS forms when their COMBINED transactions reach over $10,000 in a gaming day. While agent activity can sometimes occur with legitimate transactions (e.g. a husband cashing out his wife's slot vouchers so she can continue to play), agent activity is highly suspicious because it allows individuals to structure their transactions below the $10,000 to avoid being documented to the IRS.
Involvement of casino staff[edit]
It is illegal for an employee of the casino to assist a casino patron in circumventing the reporting requirements of Title 31. Such circumvention can include notifying patrons that they are nearing reporting thresholds, disclosing the time that the Gaming Day ends, and neglecting to report suspicious activity. A casino employee that has been found to have circumvented Title 31 can be assessed civil and criminal fines, in addition to incarceration.
References[edit]
- ^United States Senate Committee on Indian Affairs (November 17, 2011). 'The Future of Internet Gaming: What's at stake for tribes?'. One Hundred Twelfth Congress First Session.
