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Casino operators can ensure they have effective anti-money-laundering and counter-terrorist financing measures in place by taking the following steps: Risk assessment: review and revise the risk assessment, covering issues such as customer profile, premises and remote sites and incidents of actual or suspected attempted money laundering. Customers with casino accounts “may be deemed to present a higher risk if the casino learns that they are non-resident aliens or foreign nationals or residents of countries that have been defined by the United States as jurisdictions of concern for narcotics trafficking, human trafficking, money laundering, terrorism, or other forms of.

The staff in casinos represent one of the biggest risk factors for money laundering, as they are often low-paid administrative staff that can be easily bribed or threatened to assist the criminals laundering their money. But what makes the casino money laundering so appealing rather than off-shore shell companies or other such methods.

LAS VEGAS (CN) – Nationwide proliferation of casinos feeds a $300 billion annual money laundering industry, the federal government says, and it’s asked the gambling industry to help stop it.
In its 2015 National Money Laundering Risk Assessment report , the Department of the Treasury says fraud and drug trafficking account for most of the $300 billion laundered each year, with fraud greatly outweighing drug trafficking.
Fraud against federal programs accounts for more than twice as much money laundered as drug trafficking, and drug trafficking generates about $64 billion in sales each year in the United States, according to the Treasury report.
Unlike banks, which answer to multiple federal regulators, casinos answer only to the federal Financial Crimes Enforcement Network (FinCEN), and state regulatory bodies, and the FinCen director says casinos must work harder to comply with the U.S. Bank Secrecy Act.
Addressing casino executives during the 2014 Bank Secrecy Act Conference in Las Vegas, FinCEN Director Jennifer Calvery described casinos as “complex financial institutions with intricate operations that extend credit, and that conduct millions of dollars of transactions every day. They cater to millions of customers with their bets, markers, and redemptions.
“While the vast majority of these transactions are purely for entertainment purposes, casinos can serves as a vehicle for the use, movement, and concealment of ill-gotten gains,” Calvery said.
The Bank Secrecy Act aimed to thwart criminal activity, such as money laundering, by making large financial transactions more transparent. It requires casinos to report any combination of transactions amounting to more than $10,000 and file reports on any suspicious activity.
Casinos filed nearly 20,000 financial transaction reports in 2012, and that doubled to about 40,000 in 2014, according to FinCEN.
Las Vegas Sands in 2013 paid nearly $47 million to end a federal money laundering investigation involving a Mexican drug dealer. In the 13 years before that, the Treasury Department had collected only $4.2 million in fines from casinos across the country.
In September last year, Caesars Entertainment paid a $9.5 million fine to settle a money laundering investigation, and Caesars admitted it let wealthy patrons gamble in private room in the Caesar Palace VIP suites, which primarily serve Chinese guests.
“Caesars allowed a blind spot to exist in its compliance program – private gaming salons – enabling some of the most lucrative, and riskiest, financial transactions to avoid the scrutiny of Caesars’ compliance program,” FinCEN said of the settlement.
The Trump Taj Mahal in Atlantic City last year paid a $10 million fine for violating the Bank Secrecy Act’s reporting requirements.
Casinos can be ideal tools for criminals to launder money, as they have more lax reporting requirements than banks and other financial institutions, and a guest buying tens of thousands of dollars in chips and cashing them in later on will not raise alarms. A similar transaction at a bank would result in numerous questions to ascertain the money’s origin.
“You can walk into a casino with 100 grand and turn it into chips,” DEA spokeswoman Erica Curry told the Arizona Daily Star in October last year.
The DEA and state investigators in 2013 prosecuted drug traffickers accused of using a Tucson casino to launder money from a $1.6 million drug-trafficking ring.
Sharing a border with Mexico and its drug cartels, Curry said, Arizona’s tribal casinos are vulnerable to money laundering by drug traffickers.
“The geographic location of casinos in Southern Arizona probably makes it ideal for anybody coming from south of the border to exploit,” Curry told the Daily Star.
Curry said the most common way to launder money at a casino is to buy a large number of chips, spend a few on “minimal” betting, then cash out.
Though drug traffickers use casinos to launder money, a federal report indicates that most criminal proceeds laundered through casinos and other financial institutions comes from fraud.
Income tax returns, Medicaid and Medicare reimbursements, and food and nutrition subsidies are among the more common ways people and organizations commit fraud against federal programs, according to the report.
Also contributing to money laundering is human trafficking, organized crime and public corruption. The report identifies the five most common types of money laundering as cash, banking, money services businesses, casinos and securities.
To fight money laundering, FinCEN Director Calvery says, casinos need to assess where people get their money, particularly in high-risk jurisdictions where criminal activity and money laundering are common, and learn more about customers who make large transactions.
Casinos also need to pay close attention to international money transfers to see if third parties or unregistered money service businesses are involved.
Casinos also need to pay close attention to gaming accounts, Calvery says, to ensure they are not used to park money and hide it from federal regulators or to pass large sums of money through accounts with little indication of gambling.
Casinos can share information with other casinos, banks and financial institutions to help prevent money laundering that might be used to finance international terrorism and crime, Calvery said.
The American Gaming Association published a 24-page report on “Best Practices for Anti-Money Laundering Compliance” in December last year.

By their very nature, casinos deal with large volumes of money, rendering them uniquely vulnerable to abuse by those seeking to launder ill-gotten gains. Like all financial institutions, casinos have always been required to monitor and detect suspicious activity and file the appropriate reports with the Financial Crimes Enforcement Network (FinCEN).

Last year, several prominent casinos faced stiff penalties and were required to strengthen their risk management and anti-money laundering (AML) procedures for reporting suspicious activity. This year, the trend is expected to continue. Regulators will increasingly look at a casino’s AML program to determine if there are truly effective controls, policies, procedures and technology in place to detect and prevent “high rollers” from laundering funds.

Regulators are placing more emphasis on whether senior casino executives maintain a strong “tone at the top” that makes compliance a true priority in the corporate culture. From a risk management perspective, casinos would be wise to develop and implement programs to ensure that all employees fully understand their institution’s AML obligations.

A casino’s board ought to be part of this process and be asked to sign off on an AML compliance program. Just as important, casinos need to put in place well-trained compliance staff members to constantly monitor and mitigate the risks associated with money laundering. Regulators will expect nothing less.

If not already in place, casinos should also design and implement an AML risk assessment. A solid risk assessment needs to identify the casino’s inherent AML risks, with particular emphasis on risks associated with products, geographies, transactions and customer characteristics. It is important to perform the risk assessment annually or in conjunction with material changes in the business.

At a minimum, the risk assessment methodology needs to include five key action items:
• Identify the business segments, business units and support functions to be assessed.
• Determine the scope of applicable AML rules and regulations that apply to each business segment, business unit and support function.
• Score the inherent risk factors and control strength factors.
• Generate inherent risk and residual risk heat maps.
• Document the risk assessment narrative for each business segment, business unit or support function.

A review of existing technology should also be a major focus for compliance and risk management teams. Historically, systems utilized by the gaming industry to detect suspicious behavior have not been held to the same rigorous standards as in the banking industry. Investments may be required and additional data may need to be captured to ensure that a casino is properly monitoring and detecting suspicious activity.

Casino Money Laundering Risk

Whether it is home-grown or off-the-shelf, the technology selected should be able to detect suspicious or unusual patterns of transaction activity and identify certain high-risk geographies and/or individuals. Risk scenarios and parameters need to be constantly evaluated and tested to ensure that the appropriate thresholds are in place for the risks identified by the risk assessment process.

Given the increased regulatory scrutiny, it is more important than ever that a casino’s AML program be designed and implemented with a risk-based approach in mind. Once an appropriate program is in place, it is just as critical to implement an independent testing function to ensure that the controls are working as designed. A robust independent testing program should ensure proper documentation of the scope of testing, the review process, weaknesses identified, and the corrective actions needed to address them. Rest assured that AML regulators will review an independent testing program to determine if it is comprehensive and overseen by individuals who understand AML and the relevant Bank Secrecy Act regulations.

Even with the best programs and technologies, casino employees will always be on the front line for detecting suspicious behavior. Casinos must hold their employees directly accountable for AML compliance, so an ongoing training program is critical for effective risk management.

For instance, policies that offer employee incentives based on high-roller customer activity may encourage the wrong behavior and should be reviewed. Conversely, bonuses tied to compliance efforts are likely to be viewed favorably by regulators and should be encouraged.

Casino Money Laundering Risk Assessment

The controls and strategies described above are just a few of the considerations for a casino to address AML risks within its global organization. As regulators continue to intensify their review of these organizations, we can expect to see more casinos struggle with AML compliance.

Ready or not, one thing remains certain: the regulatory environment for casinos has changed and will likely continue to change throughout the year. Casinos would be well advised to begin adjusting now to this new reality. This will help them avoid the steep penalties and reputational damage that will surely result from failing to do so.