As an industry that is constantly bringing in new customers and transactions, the casino sector is a key target for criminals and money launderers, claims Alessa.
Due to this appeal, casinos have become one of the most heavily regulated businesses in operation. These regulations, Alessa claims, while necessary – can be difficult to understand and manage.
Casinos are regulated under Title 31, which is a component of the Bank Secrecy Act that requires banks and other financial institutions – including casinos – to comply with recordkeeping and reporting requirements.
Alessa offer a detailed explanation of Title 31 casinos regulations, penalties that are incurred for compliance failures and ways to ensure compliance.
Title 31 is under the primary responsibility currently of the Department of Treasury. However, the Treasury Secretary has delegated the responsibility of implementing and enforcing the BSA to the Director of FinCEN.
The BSA currently states that all casinos and gaming institutions that have a gross annual gaming revenue of $1m or more must comply with Title 31. If it is below $1m, it is not subject to Title 31, but instead to Title 26.
Alessa said, “Ensuring compliance to Title 31 is a necessary component for your casino’s AML compliance program.”
If a casino meets or exceeds the threshold of $1m in GAGR, it will need to meet a number of requirements. These include implementing internal controls for compliance assurance, conducting independent compliance testing to understand money laundering and terrorist financing risks, conducting ongoing training of employees which includes identification of suspicious transactions and activities and ensuring procedures are in place to use information to find a customer’s name address and social security number to verify identities.
In addition, there must be procedures in place to utilise all available information to aid in detecting and determining suspicious transactions and patterns of suspicious activities, as well as detecting instances that are required to be reported. Alongside there also needing to be a compliance officer fulfilling daily compliance duties, there also needs to be procedures in place for a casino’s computer system to assist with compliance.
If a casino that meets Title 31 requirements in found to not be in full compliance with the regulation, it can result in various penalties and fines – the penalties of which can be either civil or criminal.
Of those civil, each violation of any reporting or recordkeeping requirements may lead to a civil penalty that is not to exceed $500. Penalties not to exceed $100,000 in the transaction or $25,000 may be given for each violation of reporting requirements to the casino or any stakeholder who participated in the violation.
Failure to file FinCEN Form 105 may also result in a penalty up to the amount of the currency or monetary instruments transported into or out of the US. A penalty will also be given to any person who wilfully structures transactions with the purpose of evading reporting requirements. A penalty up to $1000 may be assessed for each willful violation of recordkeeping requirements.
Criminal penalties potentially faced includes $1000 fine and/or imprisonment for any person who wilfully violates recordkeeping requirements of the BSA. The fine is then increased to $10,000 and/or five years of imprisonment if the violation while violating another federal law is punishable by imprisonment by more than one year.
Alessa added, “Any person who wilfully violates the BSA’s currency and foreign transactions reporting requirements may be fined up to $250,000 and/or imprisoned for up to five years. If this violation is committed while violating another Federal law, or as a pattern of illegal activity involving transactions exceeding $100,000 in any 12-month period, the fine will be increased by up to $500,000 and/or ten years of imprisonment.”
In addition, any person who knowingly makes a false or fraudulent statement or representation in any report may be fined up to $10,000 and/or imprisoned for up to five years.
Alessa remarked, “Due to the volume of transactions at gaming institutions, without a properly implemented casino compliance software it can be easy to miss certain suspicious activities, or submit errors in reporting.”
The severity of the penalties for compliance failures of Title 31 can be severely damaging to a business and employees. Alessa said that as a result, it can be key to establish a robust compliance program that can identify casino-specific red flags, detect and accurately report suspicious activities, identify customers and meet all compliance requirements.
The firm concluded, “Proper training of employees and compliance professionals is one component of an effective AML program, however equally as important is equipping your compliance professionals with modern and effective tools to detect compliance risks and aid in compliance investigations and reporting.”
Alessa recently published a whitepaper detailing how financial institutions (FIs) can deal with the cryptocurrency market and manage its associated risks.
Read the full post here.