The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) released its national priorities for anti-money laundering for casinos and other institutions last year, but the regulations behind those policies are still being developed.
The eight priorities were issued as part of the Anti-Money Laundering Act of 2020 (AMLA), which became law in January 2021.
FinCEN's AML priorities include: corruption; cybercrime, including cybersecurity and virtual currency; foreign and domestic terrorist financing; fraud; transnational criminal organization activity; drug trafficking; human trafficking and human smuggling; and proliferation financing.
Brian Lopez, a director with the consulting firm the Dowling Advisory Group, said many in the gaming industry are already familiar with these issues but what the AMLA is really about is refocusing the regulations behind these priorities, “which hasn’t happened yet.”
“What we are waiting for is to know how these are going to impact the different financial industries, including casinos,” Lopez said Thursday (May 26) during an hour-long online seminar hosted by Global Gaming Expo (G2E).
Lopez urged gaming executives and compliance officers to start thinking about these priorities and how they might relate to their operations.
“At the very least you should be looking at these as whether you need to start considering them in your risk assessment and policies,” he added. “Some might apply, some might not, but at the very least start considering these priorities because that’s the expectation FinCEN is putting out there.”
In addition to the national AML priorities, a former FBI special agent noted additional threats to the integrity of the U.S. financial system, including identifying the flow of dirty money to support Russia’s war in Ukraine.
“Are casinos directly involved in the transferring of funds over there? No,” said James Dowling, president and managing director of the Dowling Advisory Group in Pasadena, California.
“But criminal organizations are going to use whatever method they can to move money wherever they can.”
Although FinCEN has in the recent past announced a series of major enforcement actions involving casinos and cardrooms, Dowling asked attendees how many monetary penalties FinCEN has levied in the last year or two.
“I can tell you publicly, none,” he said. “There are some non-public enforcement actions FinCEN does undertake but they don’t necessarily publicize them. That’s their discretion.”
“But in my opinion, what is even a worse scenario is criminal enforcement actions,” Dowling said. “It’s not just a matter of signing a check and saying you’re sorry. It could be people going to jail.”
He cited the Bicycle Club Casino, Operation Leaving Las Vegas and Operation Casino Royale, which is still ongoing, as examples of serious cases that have involved the gaming industry.
About six years ago, federal agents raided the Bicycle Club cardroom in Southern California and seized its records, computers and almost everything else. The investigation concluded in November with a non-prosecution agreement and a $500,000 fine.
In the non-prosecution agreement, the government stated that a Chinese national over an eight-month period in 2016 wagered millions of dollars in cash playing high-limit baccarat in a VIP room, sometimes bringing the money to and from the cardroom in duffle bags.
Dowling said the Chinese national relied on an assistant to conduct over $100m in cash-in or cash-out transactions. The cardroom admitted in the agreement that for six months it improperly filed currency transaction reports in the name of the assistant when it should have referred to the gambler in those reports.
The Bicycle Club also failed to file suspicious activity reports for casinos (SARCs) during that period.
Dowling said what was striking about the case is that the government alleged that over $100m of currency went through that casino and it was brought in by a Chinese national.
“Where did he buy the money?” Dowling asked. “An emphasis on buy because you can not make a withdrawal from a bank of that much. You cannot move money out of China in that amount.”
He said the “big elephant in the room” is why the government did not pursue that line of inquiry.
Another case, dubbed Operation Casino Royale, involves former Los Angeles City Councilman Jose Huizar who allegedly received $1.5m in cash and benefits from a Chinese billionaire who wanted to develop a building in downtown Los Angeles.
Huizar and the developer, Wei Huang, who is believed to be in China, met at a Las Vegas casino to gamble but the two men were seen sharing chips. Huang would buy the chips and give them to Huizar.
Dowling credited the casino’s compliance and surveillance teams with noticing their sharing of chips and realizing the property was being frequented by a city councilman from Los Angeles and a “politically exposed person” in Huizar.
He added that Huizar was escorted from the casino when he refused to sign a document stating he has other independent income beyond his salary as a councilman to afford to buy chips.
“My guess is that is going to be a cornerstone of the government’s case because part of the city councilman’s defense is that the other payments he received were actually campaign contributions,” Dowling said.
Huizar’s trial on federal bribery and racketeering charges is scheduled to begin on February 21, 2023.
“We are seeing a lot of growth across the gaming industry, even during the (coronavirus pandemic),” Lopez said. “Hopefully, your compliance department is growing as your business is growing.”