FinCEN Settles with Casino for AML Violations
The Financial Crimes Enforcement Network ("FinCEN") announced the assessment of an $8 million civil money penalty against a casino for willful and repeated anti-money laundering ("AML") violations.
In addition to agreeing to the fine, the casino consented to a comprehensive revamping of its AML compliance program under the watch of an external independent reviewer for the next three years, extendable to additional years at FinCEN's sole discretion. The settlement will be treated as a general unsecured claim in the casino's pending bankruptcy case.
Under the Bank Secrecy Act ("BSA"), casinos and other financial institutions are required to implement know-your-customer procedures using all available information to verify the names, addresses and other data to identify its customers. Despite this requirement, the casino openly allowed high-roller patrons to gamble anonymously via private gaming salons that were marketed to customers through branch offices located in the U.S. and abroad. As a result, the casino failed to file Suspicious Activity Reports ("SARs") or otherwise comply with recordkeeping and reporting requirements.
The FinCEN consent order also noted significant deficiencies in the casino's AML/BSA compliance program, including key employees' lack of basic knowledge concerning how to identify suspicious transactions. For example, compliance staff reportedly believed that SARs requirements applied only to cash transactions, and that the filing of a Currency Transaction Report relieved the casino from the obligation of filing a SAR. Compliance personnel were found to be lacking in knowledge about common AML/BSA evasion schemes - even those identified previously by the Internal Revenue Service in prior years' examinations. The three-year remediation plan will require comprehensive reports to be submitted to FinCEN on the casino's AML/BSA compliance program, as well as a revamped system of hiring and training its compliance employees. The casino also agreed to conduct a three-year "look-back" of all transactions conducted through certain of its branch offices to ensure compliance with SARs requirements.
The FinCEN action against the casino follows similar ones brought earlier this year against the Tinian Dynasty Hotel and Casino in the Northern Mariana Islands and the Trump Taj Mahal Casino Resort in Atlantic City.
Commentary
At this point, the casino industry has been given ample notice that it is a high-priority target for FinCEN action – particularly with respect to its servicing of "high rollers." Even though customers will always look for creative ways to circumvent AML/BSA controls, there is no excuse for having a sub-par compliance program in which employees lack basic skills on how to identify and report suspicious transactions. Casinos and other financial institutions should have established baseline compliance programs with staffing, resources and training that will withstand scrutiny, and that incorporate industry best practices. Even more importantly, any compliance program should reflect the lessons learned from prior FinCEN and IRS reviews. Conducting business as usual without taking those lessons to heart can result in some very expensive and onerous consequences.