3 takeaways from casino industry’s latest huddle on anti-money laundering

NetSpend, Wells Fargo And PayPal
NetSpend, Wells Fargo And PayPal

Casinos in Nevada and beyond continue to put a lot of emphasis on how to combat money laundering — enough, at least, to fill a ballroom every year.

Some 400 people gathered at the South Point on Tuesday for the latest installment of the Bank Secrecy Act conference, an annual gathering of industry lawyers and others. Presented by the gaming law section of the State Bar of Nevada, the conference generally relates to what casinos are and should be doing to prevent their businesses from being used to disguise the flow of illegal money.

The issue has made big headlines over the last year or so, as the government hit Caesars Palace and the former ownership of the Nugget casino in Sparks with big fines regarding weakness in their anti-money laundering efforts. Also, a recently announced state fine against Las Vegas Sands Corp. stemmed in part from millions of dollars it agreed to pay years earlier to conclude a money-laundering investigation.

And as proof that the industry is paying attention to making improvements in anti-money laundering, the American Gaming Association in 2014 released a set of best practices in that area that were updated last year.

Tuesday’s conference provided another window the important realm of what casinos do to fight money laundering, and what can happen when things go wrong. Here are three of the main takeaways from the conference.

The government and the private sector might be able to collaborate more in the fight against money laundering.

Casinos are already working with the government to combat money laundering — they’re mandated to do so by law. The law requires, for example, that casinos file reports about any currency transaction of more than $10,000 in one day. And they have to file suspicious activity reports if they know, suspect or have reason to suspect that a transaction of at least $5,000 may be connected to illegal activity.

But the relationship between the public and private sides of anti-money laundering has potential to become more collaborative, according to Chris Warrener, deputy assistant director of the FBI’s criminal investigative division.

In Warrener’s keynote address that kicked off the conference Tuesday morning, he said he saw a lot of parallels to banking within the casino industry. Like the banking sector, casinos are becoming increasingly regulated, Warrener said — and, as that continues, both sides may benefit from working together a bit more.

Warrener suggested the creation of a gaming industry working group where casino representatives can get together with government officials to share information about anti-money laundering. He said the government could benefit from hearing more directly about problems in that area, and it may be able to provide more context to casinos.

“I hope that’s the direction we’re headed in,” Warrener said.

Casinos are still adjusting to a world of increased regulatory expectations.

At another keynote address in the afternoon, conference attendees heard from Juan Zarate, a former government official who wrote the book “Treasury’s War: The Unleashing of a New Era of Financial Warfare.” Zarate said casinos are in many ways still in the early phases of feeling increased regulatory attention and scrutiny — and the situation may only continue to get more complicated.

Zarate echoed Warrener’s comparison of casinos and banks, arguing that the increased governmental focus on casinos resembles what once happened with banks. He said there’s been an attempt by the government to flex regulatory muscle and embed the idea of a so-called “culture of compliance.”

But the casino industry still faces some unique challenges, even as it has grown to accept the more-regulated state of affairs, according to Zarate. The industry’s cash-driven nature is one, he said. Another is the exposure of international casino operators to foreign markets that may not have the same compliance culture or appreciation for what U.S. regulators and law enforcement need, among other concerns.

“You’re doing all the right things and you’re appreciating the importance of these issues,” Zarate said. “But my message to you is that these issues aren’t going to go away.”

He said the casino industry had become seen as a “central, important part of the international financial system.”

Money laundering is a challenge faced by large and small casinos alike.

Conference attendees heard details of one of the biggest cases recently — the $9.5 million in state and federal fines for Caesars — as presenters sought to teach them lessons from the woes of other operators.

Kevin Rosenberg, chairman of government investigations and the white collar crime litigation group at Lowenstein & Weatherwax LLP, reviewed the basis of the fines. He went over the claims that Caesars Palace had “severely deficient internal controls” over the operations of its private gaming salons, allowed high rollers to wager anonymously and had inadequate monitoring of transactions at certain branch offices.

Rosenberg reminded the audience that the deficiencies in the Caesars case were labeled “systemic and severe.” And he reviewed, among other things, the potential cost of punishment: not only fines, but also reviews and additional requirements imposed by the Financial Crimes Enforcement Network.

But such issues are not only confined to the big players in the industry, according to attorney Jeffrey Setness, a shareholder with Fabian VanCott. He reviewed a smaller and more recent case: one that resulted in a $1 million civil penalty against the former ownership of the Nugget casino in Sparks.

Setness discussed a number of the notable statements made by FinCEN when it announced the fine against Sparks Nugget Inc. For example, the complaint said there was a “blatant disregard for (anti-money laundering) compliance that permeated all levels of Sparks Nugget.” Also, the casino’s compliance manager was told not to speak to IRS examiners and it had a suspicious activity report committee that never met, among other issues, according to FinCEN.

In discussing that, as well as other cases regarding card clubs in California, the session hammered home a clear message about anti-money laundering: it applies to everyone.

“Whether you’re in Las Vegas, Nevada, Emeryville, California, Sparks, Pahrump, wherever — crimes do occur, and sometimes people will spend illegal gains at your casino,” Setness said. “You don’t have to be a huge casino … you still have the same type of requirements.”

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