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High Stakes, High Penalties: How Casinos Can Avoid Costly BSA Violations with Strong Information Governance



In 2024, the global gambling industry faced financial penalties totaling approximately $184.4 million. While this marked a significant decrease of 73.3% from the record $442.6 million in fines issued in 2023, it underscores the fact that the ramifications of failing to comply with laws like the United States Bank Secrecy Act can be both swift and severe.


In particular, a number of recent enforcement actions underscore the critical importance of adhering to the Bank Secrecy Act (BSA) through diligent recordkeeping and anti-money laundering (AML) compliance.


Recent Enforcement Actions Highlighting Compliance Failures


For example, in January 2024, moneylaundering.com and other publications announced that 2 prominent Las Vegas casinos faced significant penalties for BSA violations. The MGM Grand agreed to pay over $6.5 million, and The Cosmopolitan of Las Vegas settled for nearly $1 million.


Both establishments were found to have inadequate AML programs, leading to violations such as failing to file required Currency Transaction Reports (CTRs) and Suspicious Activity Reports (SARs). As part of their settlements, both casinos committed to enhancing their AML compliance programs and undergoing external reviews.


Similarly, and more recently, in October 2024, the Wall Street Journal reported that the Lake Elsinore Hotel and Casino in California incurred a $900,000 civil monetary penalty for "willful" BSA violations. An investigation revealed that the casino failed to implement an effective AML program and neglected to file necessary CTRs and SARs over a span of more than four and a half years. This case marked FinCEN's first enforcement action against a casino in six years and highlighted the agency's commitment to ensuring compliance within the gaming industry.


Understanding BSA Requirements for Casinos


Under the BSA, casinos with gross annual gaming revenues exceeding $1 million are classified as financial institutions. This designation subjects them to specific recordkeeping and reporting obligations designed to combat money laundering and other financial crimes. According to the Financial Crimes Enforcement Network (FinCEN) website (a bureau of the U.S. Department of the Treasury that focuses on combating money laundering, terrorist financing, and other financial crimes), key requirements include:


  • Currency Transaction Reports (CTR): Casinos must file a CTR for any currency transaction exceeding $10,000 within a single gaming day. This encompasses transactions where cash is paid to or received from customers.

  • Suspicious Activity Reports (SAR): If a casino detects any suspicious transactions that may indicate illegal activity, regardless of the transaction amount, it is required to file a SAR. This includes activities such as structuring transactions to evade reporting thresholds or minimal gaming with large cash buy-ins and quick cash-outs.

  • Record Retention: Casinos are obligated to maintain records of financial transactions, including those involving negotiable instruments, for at least five years. These records must be comprehensive and readily accessible for examination by regulatory authorities.


Implementing Effective Information Governance to Ensure Compliance


To avoid the severe penalties associated with BSA violations, casinos must establish robust information governance frameworks that emphasize meticulous recordkeeping practices. Here are key strategies to consider:

  1. Develop Comprehensive AML Policies and Procedures: Establish clear guidelines that outline the processes for monitoring transactions, identifying suspicious activities, and reporting to regulatory authorities.

  2. Leverage Advanced Technology: Implement sophisticated software solutions capable of real-time transaction monitoring and data analysis to detect anomalies indicative of potential money laundering activities.

  3. Conduct Regular Training Programs: Ensure that all employees are well-versed in AML regulations and internal policies through ongoing training sessions, fostering a culture of compliance within the organization.

  4. Perform Independent Audits: Regularly engage external auditors to assess the effectiveness of your AML program and identify areas for improvement.

  5. Maintain Detailed Records: Adopt a meticulous approach to recordkeeping, ensuring that all transactions are documented accurately and retained for the required duration.


By implementing these strategies, casinos can not only comply with the BSA but also protect their reputation and contribute to the integrity of the financial system. The recent enforcement actions serve as a stark reminder of the consequences of inadequate compliance measures and underscore the necessity of robust information governance in the gaming industry.

 

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