Are you the subject of a SARC?
Like to play cash, or like to bet sports at one casino and play slots or table games at another with the winnings from your sports wagers?
If your cash action exceeds $5,000 at a particular casino, over any window of time, good chance, and unbeknown to you, the casino has likely submitted a Suspicious Activity Report to the IRS/Treasury Department with your name and other identifying information prominently featured on it.
The government, in its questionable wisdom, many a years ago decided casinos were to be considered financial institutions for the purpose of Currency Transaction Reporting and Suspicious Activity Reporting under Title 31. At the time Nevada was the big gaming gorilla, but rather than fight over the rules or go along with the silliness of classification, Nevada obtained an exemption from Title 31 as long as Nevada casinos reported under Nevada Gaming Regulation 6A.
Regulation 6A actually fought money laundering, as it prohibited certain transactions, and very effectively made casinos an inefficient place to try and launder money.
Rightly or in this writer’s opinion wrongly Nevada, under pressure from both the Feds and multi-jurisdiction casino operators, opted to surrender its exemption, naively thinking the industry would be under less regulatory risk and pressure. As a result Nevada casinos were then required to have “know your customer programs” and track and report a range of qualifying patron.
At first things seemed easier, then the Fed started tightening things up with great emphasis on Suspicious Activity Reports for Casinos (SARC) with substantial fines for failing to file.
We here in Nevada were used to tracking customer activity over a 24-hour period and were so used to patrons betting cash and giving chips to others to play that those transactions, which the Feds deemed suspicious, were not considered suspicious to casino operators.
Reflective of the pressures and tightened reporting requirements are the facts that in 2012 in all of Clark County there were 62 SARCs filed. That grew to 1,549 in 2013, then 1,703 in 2014 and 4,289 in 2015. Now that a number of Clark County/Las Vegas casinos are erring on the side of over-reporting, indications suggest there will likely be more than 10,000 SARCs filed for 2016.
While there are many categories of activities that can trigger SARC reporting, the main reason for the spike in reporting is the IRS, on behalf of the Treasury Department, is taking the position that cash activity can be aggregated over any period of time and include patron action on slot machines to get to the triggering thresholds for a SARC.
This has resulted in an expansion of the population subject to reporting beyond that which might be considered reasonable. Inspired by a few low-end marijuana sellers who were caught running their smelly bills through slot machines to get “fresh” bills, slot machines are now a regular part of the federal auditors’ review of a casino. Accordingly the single largest category of “suspicious activity” is “minimal gaming with large transactions.”
What is most disconcerting about the SARC process is it reports innocent activity while trolling for bad actors. Example: An affluent businessman brings a top executive to Las Vegas as a reward for that executive’s efforts. The businessman gives the executive $6,000 in chips to play with at Casino A. If Casino A is on their game the $6,000 that was passed would trigger a SARC.
Let’s say after ten minutes they decide they want to go to Casino B. So the executive cashes out the chips with minimal gaming action, triggering another SARC or extra categories of reporting on the first SARC. Bouncing around from casino to casino with full buy-ins, short play and cash outs on leaving each casino the poor executive, off a generous act by his boss, may have generated several SARCs due to one simple generous gesture.
We all want a safe protected society with reasonable rules and regulations followed, but when did we start presuming because a casino patron brings cash to play in a casino or when someone gives chips to a friend or family member to play, something illicit is going on?
Perhaps if the IRS were deemed a fair and reasonable organization, whose mere name did not invoke trepidation, the expanded SARC reporting would not be such a big deal, but they are not considered such and SARC reporting is growing almost exponentially.
It would be nice if the Fed, in our allegedly transparent society, would let the casinos copy customers on the SARC reports like they do on W2-Gs.