Casinos Asked to Help Fight Money Laundering
By MIKE HEUER
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.