AML Update for Casinos from FinCEN
September 3, 2019
At this year’s ACAMS Annual AML and Financial Crime Conference, Director Kenneth Blanco warned casinos that cuts to compliance budget in order to reduce costs and retain gamblers is seen by FinCEN as a national security issue and the agency would not take the issue lightly.
“So it concerns me when I hear about some compliance budgets being cut by casinos looking to trim costs and retain gamblers. To be clear—we take the culture of compliance seriously. This is a national security issue: not something to be taken lightly—and we will not take it lightly.”
Director Blanco also cautioned the gaming industry that just because the agency had not publicly issued an enforcement action against a casino or card club since 2018, that the agency was not looking at how the industry was doing.
“FinCEN is continually looking at compliance across all financial institutions and will not hesitate to act when it identifies financial institutions that violate the BSA. It is also important to note that not all enforcement actions are public—FinCEN often closes cases with warning letters sent to financial institutions or refers cases to our delegated examiners to conduct additional examinations.”
Casino Industry Trends
In terms of suspicious activity being reported in 2019, “Minimal Gaming with Large Transactions” was the highest reported activity with more than 5,000 Suspicious Activity Reports (“SAR”). Other frequently cited suspicious activities include:
- Transactions below CTR Threshold
- Unknown Source of Chips
- Two or More Individuals Working Together
- Alteration or Cancelation of Transactions to Avoid CTR Requirement
- Suspicion Concerns on the Source of Funds
Suspicious activity involving sports betting, abandoned jackpot, and bill stuffing were often cited in SAR forms for those who checked the “other” box.
Looking ahead, casinos and card clubs must integrate sports betting and mobile gaming products into their existing AML programs. “Sports betting, and other mobile gaming services run through your casino, are no different than other products and services. FinCEN expects that your casino or card club is monitoring your sports betting programs for potentially suspicious activity. This includes offering sports betting through a mobile app.”
The agency has recently updated the SAR form to have fields allowing compliance to report cyber-indicators ranging from source and destination information, file information, subject user names, system modifications, and account information.
Convertible Virtual Currency (CVC) Advisory to Casinos
As FinCEN’s CVC guidance points out, “internet gaming sites that operate online but that are not duly licensed or authorized to do business as casinos in the United States are not “casinos” for purposes of regulations implementing the BSA. Rather, it is likely they are operating as money transmitters. Money transmitters have their own obligations under the BSA and its implementing regulations, which includes a formal registration with FinCEN.”
Casinos and card clubs accepting CVC from customers either on location or through mobile applications must ensure that this is accounted for in policies, procedures, internal controls and risk assessments. They should also consider how they will review and conduct due diligence on transactions in CVC. They should also be prepared to answer questions like “How will they conduct blockchain analytics to determine the source of the CVC?” and “How will they incorporate CVC-related indicators into SAR filings?”
While Director Blanco did not address specific patron-related risks, this is a perennial concern for compliance teams in the gaming industry.
In a previous ACAMS conference panel, Benjamin J. Floyd, Senior Vice President, AML / OFAC Compliance Officer at Caesars Casino, says that his organization takes an enterprise approach to patron-related risks. They evolved from an ad-hoc approach to one where they focus on high-risk players/patrons. They have also become more sophisticated by using more factors to evaluate risks, and with the data they have collected over the last three and a half years, the casino has been able to focus on high-risk guests, not just the top players.
When discussing how due diligence in casinos differs from in banks, it was agreed that given the volume of patrons and the nature of the relationships, casinos cannot know everyone the same way as banks. According to Paul Camacho, Vice President of AML Compliance at Stations Casinos, the information that is most valuable to law enforcement is in employees’ heads. Transaction information is important, but so too is what hosts learn about the players.
Krystal Saab, Director of AML Compliance at Cosmopolitan Las Vegas, stressed the importance of training employees and of ensuring management builds relationships with hosts, which makes them more likely to share concerns or suspicions about patrons. As noted by the panel, the transaction pattern of a successful doctor and a small-scale fraudster can look very similar, and it is human intelligence that can help tell them apart.
In closing, the panel recommended that risk identification and segmentation should go beyond the top 50 players because many high rollers are good patrons. In addition, gaming should rely on more than one risk intelligence provider so they can verify the data. They should also engage with these providers if they find errors so that the overall quality of the products increase and everyone can work together to reduce illicit behavior.
Managing money laundering risks continues to be a challenge for the gaming industry. Increasing and changing regulations along with new gaming products add to compliance challenges. For this reason, technology like Alessa gives casinos the ability to monitor patrons and their transactions. To learn more about how Alessa can assist with your compliance activities, contact us.