GamblingCompliance:DoJ Official Warns Casinos On AML Compliance

17TH AUG 2016 | WRITTEN BY: CHRIS SIEROTY

The Gardens Casino and Sparks Nugget combined were recently fined more than $3m for anti-money laundering (AML) violations, mistakes a federal law enforcement official warned other casinos Tuesday to avoid making.

“Despite its importance, compliance often takes a back seat to other financial considerations,” Deborah Conner, deputy chief of the U.S. Department of Justice’s Asset Forfeiture and Money Laundering Section, said in remarks prepared for an AML conference in Las Vegas.

“Compliance is seldom thought of as a money-maker for any business,” Conner said.

“That view can be especially true in the gaming industry where financial services, and their attendant compliance costs, may be considered secondary to the primary mission of … customer entertainment.”

Conner was the keynote speaker Tuesday at the 2016 National Title 31 Suspicious Activity & Risk Assessment Conference & Expo held at the Cosmopolitan of Las Vegas.

Casinos and card clubs have been required to comply with reporting requirements of the Bank Secrecy Act (BSA) for many years, and since 2001 have been obligated to implement formal AML policies.

Recent years have also seen a notable increase in federal enforcement activity for AML lapses, with at least seven actions brought against licensed gaming operators since the beginning of 2015.

According to federal regulations, AML programs must consist of at least four components: internal policies, procedures and control; a designated compliance officer; ongoing AML training; and independent auditing to test the effectiveness of the program.

But Conner reminded gaming executives Tuesday that these “four pillars of a compliance program … are simply the minimum requirements,” and may not be sufficient given the specific risks confronting casinos and card clubs.

“In other words, there is no one-size-fits-all compliance program,” Conner said.

She added that from the Justice Department’s perspective, effective compliance programs should ensure a casino’s senior managers provide strong and visible support for their corporate compliance policies, and compliance staff should have stature within the company.

Compliance policies should also be effectively enforced, with Conner warning that the DoJ “does not look favorably on situations in which low-level employees who may have engaged in misconduct are terminated, but the more senior people who either directed or deliberately turned a blind eye to the conduct suffer no consequences.”

Conner reminded conference attendees that compliance teams need adequate funding and access to the necessary resources to do their jobs.

“While the requirement may seem logical, a gross violation of this requirement occurred just a few months ago in the $1m enforcement action against Sparks Nugget,” she said.

Sparks Nugget, previously known as John Ascuaga’s Nugget, in Sparks, Nevada, was fined for what the Financial Crimes Enforcement Network (FinCEN), a branch of the U.S. Department of Treasury, said were egregious violations of its AML responsibility under the BSA.

FinCEN found the northern Nevada casino had disregarded the recommendations of its own compliance manager, choosing not to file suspicious activity reports (SARs) the manager had prepared and ordered her not to interact with Internal Revenue Service auditors.

Sparks Nugget also failed to report several currency transaction reports (CTRs) and committed hundreds of recordkeeping violations, according to FinCEN.

“This is the type of behavior that is unacceptable under the BSA and this enforcement action should serve as a warning for other institutions,” Conner said.

Conner said effective detection of illicit money laundering activity in the gaming industry goes beyond AML and BSA compliance, and includes “know your customer” requirements, sharing customer money transfer information and cooperating with law enforcement.

Conner advised casinos and card clubs to make a particular effort to identify the beneficial owners of funds when it is apparent that transactions are being conducted by or through a third party, such as a junket operator.

Conner admitted that it may be difficult for a casino or card club to know every customer that passes through its casino. However, she cautioned, the industry would be wise to “identify those customers … who pose the greatest risk to your business.”

Conner also repeated that federal law enforcement agencies expect any customer information gathered by casinos’ marketing officials — “the business side” — should be shared with “the compliance side of the house.”

A recent example of “know your customer” deficiencies was California’s Hawaiian Gardens Casino, which agreed to a $2.8m settlement with FinCEN in July.

Among other things, FinCEN said the Los Angeles-area card club allowed patrons to gamble anonymously and failed to use customer databases to complete information in its AML filings.

“I cannot emphasize this point enough — sharing customer information with your AML compliance components is not only critical to being able to identify high-risk customers, it’s also required under the BSA,” Conner said.

Hawaiian Gardens Casino was just one of several card rooms that were recently fined by federal authorities for lapses in AML compliance.

In December, the Oaks Club near San Francisco was fined $650,000 by FinCEN, and in January theNormandie Casino agreed to pay $2.4m to settle a criminal complaint brought by the U.S. Attorney’s office in Los Angeles.

In her speech, Conner also highlighted another action brought by FinCEN that resulted in an $8m fine being brought last August against the Caesars Palace casino in Las Vegas.

According to FinCEN, Caesars Palace turned a blind eye to its “private gaming salons” where its wealthiest clientele could anonymously gamble millions of dollars in a single visit.

Despite the elevated risk present in these salons, Caesars allowed some of the riskiest financial transactions to go unreported, Conner said.

Furthermore, Caesars marketed the salons through branch offices in the U.S. and abroad, but failed to adequately monitor transactions, such as large wire transfers, conducted through these offices for suspicious activity, she said.

Conner said the DoJ was “keenly aware of the unique compliance challenges” faced by the gaming industry, but nevertheless operators have a “responsibility in the fight against illicit finance.”

“You may have noticed that, in explaining casinos’ AML expectations, I cited a number of recent enforcement actions FinCEN had brought against casinos,” Conner said.

“While FinCEN has been very active on this front in the last two years, make no mistake, the DoJ will pursue criminal charges and penalties against any financial institution — including casinos and card clubs — that willfully violates BSA.”

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