The nation’s casinos and card clubs will be required to report suspicious activityunder a proposed rule issued today by the Department of the Treasury’s FinancialCrimes Enforcement Network. Suspicious activity involves financial transactions which acasino or card club suspects are linked to illegal activity or have no legitimate purpose.The proposal is issued under the authority of the Bank Secrecy Act (BSA) --Treasury’s key tool in the fight against money laundering, financial fraud and taxevasion.
The proposed rule will require state-licensed and tribal casinos and card clubs withmore than $1 million in gross annual gaming revenue to report suspicious activity toFinCEN involving transactions of $3,000 or more. The amount of money legally wagered incasinos exceeded $480 billion in 1996. In addition, nearly $10 billion was wagered in cardclubs that same year, the latest data available.
"The explosive growth of gaming in the United States in the last decade increasesthe potential for abuse of casinos by money launderers and tax evaders," said RaymondW. Kelly, Treasury Under Secretary for Enforcement. "With large volumes of currencybeing wagered throughout the United States, the fast-paced environment of casino gamingcan create an especially effective cover for money laundering."
Since 1985, Treasury, through its BSA regulations, has required recordkeeping andreporting of large currency transactions occurring at state-licensed casinos with grossannual gaming revenue in excess of $1 million. Tribal casinos came under Treasury’sBSA regulatory purview on August 1, 1996 and card clubs will be required to report largecurrency transactions beginning on August 1, 1998. These reports preserve a financialtrail for law enforcement and have a high degree of usefulness in criminal, tax andregulatory matters, investigations or proceedings.
Since April 1, 1996 the nation’s banks, thrift institutions and credit unions havebeen subject to a suspicious activity reporting requirement through the filing of aSuspicious Activity Report (SAR). Since that time, more than 155,000 SARs have been filedfor use by law enforcement and bank regulators in their investigations.
"In proposing this rule, Treasury is stating again its judgment that reporting ofsuspicious activity in a timely fashion is a key component of the flexible andcost-effective compliance system required to prevent the use of the nation’sfinancial service providers for illegal purposes," said William F. Baity, ActingDirector of FinCEN.
Under the proposal, casinos must report transactions which they suspect:
- involve funds derived from illegal activity or used for illegal purposes;
- are intended, whether through structuring or other means, to evade the requirements of the BSA; and
- serve no apparent lawful purpose, and for which the casino or card club knows of no legitimate explanation.
Nevada’s state regulatory system has required that Nevada casinos send reports ofsuspicious activity to FinCEN since October 1, 1997. This requirement was introduced afterclose consultation with that state’s casino regulators and gaming industry. FinCENclosely examined the experience of Nevada casinos in drafting the proposal publishedtoday. Under a 1985 agreement between Nevada and Treasury, Nevada’s casinos aresubject to state imposed anti-money laundering rules that closely parallel federalrequirements.
FinCEN plans to hold at least three regional meetings to provide an opportunity for theindustry to comment on the proposal. The meetings are tentatively scheduled to occur inNew Orleans on July 14, Chicago on July 23 and in the Phoenix/Scottsdale area on August 6.
FinCEN has also been working with representatives from the gaming industry on aguidance document for casinos to assist in identifying suspicious activity. The documentlists examples of how a casino’s financial services might be used for illicitpurposes.
In addition to this proposal and the suspicious activity reporting requirement alreadyin place for banks, Treasury has also proposed to extend this reporting requirement tomoney transmitters and issuers and sellers of money orders and traveler’s checks. Asimilar proposal is being drafted for securities broker dealers and is expected to bepublished within a few months.