According to the IRS and FinCEN, Casinos licensed to do business as casinos and which have gross annual gaming revenues in excess of $1,000,000 are Financial Institutions subject to the requirements of the Bank Secrecy Act, which is known as Title 31. As a result, Casinos are subject to the Bank Secrecy Act and are required under 31 CFR 103.64 to have an effective written anti-money laundering (AML) program. Each casino has to generate its own written AML program based on an analysis of the risks presented by the casino’s products and services. An assessment of risk ought to be made for each product or service offered by the casino. The size of the casino, location, dollar volume, types of games, type/nature of customers, and internal controls are some of the factors to consider when analyzing the possible risk of money laundering occurring at the casino.
In addition to AML requirements, Casinos are required to file FinCEN Currency Transaction Report (CTR) for any transaction that exceeds $10,000 and file FinCEN Suspicious Activity Report (SAR) for any suspicious transaction that exceeds $5,000.
And then – there is FATCA
A casino that meets the definition of a Financial Institution because its gross annual revenues are over $1 Million could be subject to FATCA reporting and withholding. Casinos need to determine their FATCA status in order to be in compliance with FATCA regulations and the IRS.
A Casino’s AML Program must include at minimum:
- Internal controls (policies and procedures designed to assure compliance with the Bank Secrecy Act (BSA)
- Training of the casino employees
- Independent testing for compliance
- A compliance officer, who is responsible for day-to-day compliance with the BSA and the casino’s AML program
- Procedures for using all available information to determine, when required, the name, address, and Social Security Number (SSN), and to verify the identity of, a person
- Procedures for using all available information to determine any transactions or patterns of transactions required to be reported as suspicious
- Procedures for using computers to aid in assuring compliance if the casino has computerized systems
An effective Casino AML Program should be designed to prevent the casino from being used to facilitate money laundering and terrorist financing
Each casino should have its own, risk-based, compliance program and compliance officer if they have different potential risks because of different circumstances, such as different types of games and patrons. Other factors such as the distance between casinos and the use of separate record keeping systems may increase the need to have a separate compliance officer for each location.
CTR
Transactions in currency involving cash-in include:
- Purchase of chips, tokens, and plaques
- Front money deposits
- Safekeeping deposits
- Payments on any form of credit, including markers and counter checks
- Bets of currency
- Currency received by a casino for transmittal of funds through wire transfer on behalf of a customer
- Purchases of a casino’s check
- Exchanges of currency for currency, including foreign currency
Transactions in currency involving cash-out include:
- Redemption of chips, tokens, and plaques
- Front money withdrawals
- Safekeeping withdrawals
- Advances on any form of credit, including markers and counter checks
- Payments on bets, excluding slot and video lottery terminal jackpots
- Payments by a casino to a customer based on receipts of funds through wire transfer for credit to a customer
- Cashing of checks or other negotiable instruments
- Exchanges of currency for currency, including foreign currency
- Reimbursements for customers’ travel and entertainment expenses by the casino
SAR
BSA requires that Casinos file a Casino SAR (SARC) for any transaction conducted or attempted by, at, or through a casino, and involving or aggregating at least $5,000 in funds or other assets, that the casino knows, suspects, or has reason to suspect:
- involves funds derived from illegal activity or is intended or conducted in order to hide or disguise funds or assets derived from illegal activity (money laundering);
- is designed to evade the reporting or recordkeeping requirements of the BSA (structuring);
- has no business or apparent lawful purpose or is not the sort in which the particular customer would normally be expected to engage, and the casino knows of no reasonable explanation for the transaction after examining the available facts; or
- involves use of the casino to facilitate criminal activity.
Activities that are considered suspicious for a casino are:
- Exchanging many small bills for large ones
- Exchanging several monetary instruments, such as traveler’s checks, for one casino check
- Regularly conducting currency transactions that are just below $10,000
- Purchasing chips and then, after minimal gambling, redeeming the chips for a check
- Using other patrons to cash-out chips
- Supplying other patrons with cash to purchase chips
- Using the casino purely for its financial services
- Using identification that appears to be altered or forged
There are certain reporting, recordkeeping, and other requirements under the Bank Secrecy Act that apply to all financial institutions, including casinos
Such requirements include:
- the requirement to report the transportation of currency or monetary instruments into or out of the United States
- the requirement to report foreign financial accounts
- the requirement to file complete currency transaction reports within a specified period of time
- the requirement to identify persons involved in currency transactions
- the requirement to maintain records relating to foreign financial accounts
- the requirement to maintain records relating to funds transfers and other specified transactions
- requirements relating to the form records must take, and the retention period for records
- the requirement not to structure, attempt to structure, or assist in structuring transactions
Casino operators ought to encourage an environment of compliance, due diligence and control as well as staying abreast of all regulatory developments and requirements
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