FinCEN Fines Trump Taj Mahal $10 Million for AML Deficiencies
On March 6, 2015, the Financial Crimes Enforcement Network ("FinCEN") announced the assessment of a $10 million civil money penalty against Trump Taj Mahal Associates, LLC ("Trump Taj Mahal"), owner of the Trump Taj Mahal Casino Resort in Atlantic City, NJ, for the long-standing and repeated deficiencies in its anti-money laundering ("AML") compliance program.
Trump Taj Mahal also will be required to undergo periodic external audits through 2019 and provide the results to its board of directors, as well as FinCEN and the Internal Revenue Service ("IRS"). The settlement, which was discovered several weeks ago in filings relating to Trump Taj Mahal's Chapter 11 plan, was approved by the Bankruptcy Court on March 4, 2015.
Since a casino is a kind of "financial institution," the Bank Secrecy Act ("BSA") requires it to file Suspicious Activity Reports ("SARs") for "suspicious" transactions of $5,000 or more. According to FinCEN's consent order, Trump Taj Mahal lacked the policies and procedures to aid in the monitoring and reporting of slot machine transactions, short-term credit lines provided to customers and transactions with customers who engaged in suspicious activities. As a result, between 2010 and 2012, Trump Taj Mahal failed to file approximately 100 SARs for transactions with patrons engaged in minimal gaming activity, customers who structured marker payments and chip redemptions to avoid currency reporting requirements, and customers who cashed out winning slot machine tickets at automated kiosks.
Despite BSA regulations that require a Currency Transaction Report ("CTR") to be filed for currency transactions of more than $10,000 during a single gaming day, Trump Taj Mahal also failed to file a CTR when customers inserted more than $10,000 in cash into a slot machine in a single day. In addition, the casino failed on numerous occasions to address discrepancies in customers' names and Social Security numbers on disclosure paperwork even though it had been notified by the IRS of such errors previously. Other recordkeeping violations included the failure to log certain customer marker payments, despite Trump Taj Mahal's having been informed previously of the error during prior BSA examinations.
See: FinCEN Release; FinCEN Assessment of Civil Money Penalty; FinCEN Release (January 28, 1998); FinCEN Correspondence with the American Gaming Association Regarding Sports Betting Conducted on Behalf of Third Parties (2015); FinCEN Casinos Home Page.
Related news: FinCEN Fines Trump Taj Mahal for AML Violations (February 11, 2015).
Commentary
The $10 million settlement with Trump Taj Mahal involves the largest fine ever sought by FinCEN against a casino. The imposition of the fine is consistent with priorities articulated by Director Jennifer Shasky Calvery. In previous comments, the Director linked scrutiny of the gaming industry with the fight against criminal and terrorist activity. The fine is also an example of aggressive interagency cooperation between FinCEN, the IRS and the Department of Justice's Commercial Litigation Branch, all of which view casinos, sports-betting books and other components of the gaming industry as especially prone to AML abuses. The severity of the fine reflects Trump Taj Mahal's history of prior violations, including a $477,700 civil money penalty back in 1998, and serves as a warning that regulators will have little sympathy for repeat offenders.
Casinos are not mere cash-heavy businesses anymore; they also incorporate a variety of electronic gaming technologies and extend credit to customers in the form of markers and other arrangements. Trump Taj Mahal is an example of a casino with an AML program that failed to evolve, allowing customers to access cash in a variety of ways that caused the casino to fail in its reporting obligations and left it, in Ms. Calvery's words, "unacceptably exposed." While Trump Taj Mahal's bankruptcy status means it is unlikely ever to pay the full settlement amount, others should view the settlement as an example of FinCEN's seriousness in treating casinos as sophisticated financial institutions that are expected to invest the same resources into AML controls as they do in servicing "high rollers."