FinCEN Director Speaks on Anti-Money Laundering and Casinos

On June 12, 2014, Jennifer Shasky Calvery, Director of the Financial Crimes Enforcement Network ("FinCEN"), spoke at a Bank Secrecy Act ("BSA") conference in Las Vegas sponsored by the gaming industry. Her remarks provided insights into FinCEN's concept of an adequate anti-money laundering ("AML") program for casino businesses.

The recurring theme of Ms. Calvery's presentation was that "there is no one-size-fits-all approach to AML" that may be universally adopted and applied. Casinos are expected to invest the same degree of risk-based controls to an AML program as they do to protect themselves from customer cheating and theft. This includes leveraging a casino's sophisticated monitoring tools and customer service capabilities to identify illicit actors and funds that may be associated with foreign corruption offenses and other criminal activities.

Ms. Calvery's remarks suggest that FinCEN considers casinos to be much more than simple cash-intensive businesses. Casinos not only extend credit, but also provide customized financial services in the form of bets, markers and redemptions. Casino chips, which operate as a form of de facto currency, may be cashed out or retained by customers for future use. Casinos also have BSA obligations, which include the filing of Suspicious Activity Reports (for suspect financial transactions) and Currency Transaction Reports (for all currency transactions in excess of $10,000). Thus, FinCEN expects casinos, like banks and other traditional financial institutions, to employ "robust" techniques to identify suspicious transactions or patterns of transactions.

Ms. Calvery emphasized that casinos are expected to understand the individuals and entities with whom they do business, which in some cases may involve inquiring about a customer's source of wealth. This is due to the risks associated with money originating from jurisdictions with weak AML controls, such as through affiliations with offshore casinos or when receiving patrons by way of overseas junkets. In such cases, casinos should pay attention to factors that may include:

• Source of Funds - Whether the funds originate from a high-risk jurisdiction, including from foreign casinos with weak AML controls.
• Customer Due Diligence - Whether the customers have been linked to negative news reports or illegal activity.
• International Money Transfers - How the customer or junket operators' funds are moved into and out of the United States, including the use of third parties or possibly unregistered money servicing businesses.
• Pass-Through Activity - Whether funds are being passed through casino accounts that don't reflect much gambling activity.
• Dormant Accounts - Whether accounts are being used to park funds for extended periods of time.

The presentation also mentioned FinCEN's 314(b) safe harbor provisions, which permit casinos to share information about suspicious transactions with other financial institutions. Such transactions may involve funds that move through a casino and are suspected of relating to foreign corruption or other predicate offenses involved in money laundering. While this is a voluntary program, Ms. Calvery took pains to emphasize that FinCEN "strongly encourages" all casinos to participate.

In stressing the need for a culture of compliance within the gaming industry, Ms. Calvery pointed out the severe civil and criminal penalties that may result from a BSA violation. She also noted that FinCEN works alongside the Internal Revenue Service, the Federal Bureau of Investigation, and other partner agencies within the law enforcement community to investigate and prosecute bad actors. She ended by observing that the public has entrusted the gaming industry with providing entertainment services, and with that trust comes the responsibility to identify and control risks inherent to the casino business.

See: FinCEN Casinos Home Page. See generally: Cabinet AML Materials. For more information or answers to questions, please contact Jodi Avergun, Scott Cammarn, Joseph Moreno or Ray Banoun.