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U.S. commercial and tribal gaming trade associations have expressed concerns about a new rule to strengthen federal anti-money laundering (AML) requirements under the Bank Secrecy Act (BSA).
The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) initially proposed a rule in June to implement certain aspects of the Anti-Money Laundering Act of 2020, such as a requirement that AML and counter-terrorist financing (CTF) programs be effective, risk-based and reasonably designed.
According to FinCEN, the proposed rule would require AML/CTF programs to include a mandatory risk assessment process.
Financial institutions would also be required to review government-wide AML/CTF priorities and incorporate them as appropriate into risk-based programs, provide for certain technical changes to program requirements, and promote clarity and consistency across FinCEN’s program rules for different types of financial institutions.
FinCEN set a September 3 deadline for financial institutions, which include casinos, to submit comments on the proposed rule.
The Indian Gaming Association (IGA) and the American Gaming Association (AGA) submitted comment letters before last week’s deadline outlining their concerns and reiterating past comments seeking greater clarity on AML obligations for the gaming industry.
“Our concerns largely focus on the clarity of language in the proposed [rule] and the increase in the burden that these revisions have the potential to place on tribal governments,” said Ernie Stevens Jr., chairman of the IGA.
In reviewing the proposed revisions, Stevens said, perhaps the most concerning to the IGA is the lack of clarity in the language discussing standards of review.
In a three-page letter submitted to FinCEN, the IGA questioned the proposed rule that would require casinos to “establish, implement, and maintain an effective risk-based, and reasonably designed AML/CFT program”.
Stevens wrote that the term “reasonably designed” creates a subjective standard and could leave tribal casinos unsure whether their programs comply with FinCEN requirements.
“In doing so, a tribal gaming facility may believe it is in compliance with program requirements and later learn that it is not, forcing the business board or governing body to repeat the onerous process of drafting, submitting for approval, and implementing a program that FinCEN deems ‘reasonable’.”
The IGA also questioned a requirement that AML/CTF programs, including each of their components, must be approved by the casino’s business board, which creates a considerable time burden. Stevens reminded FinCEN that many tribal nations do not have business boards, “so their governing bodies” would be responsible.
Stevens recommended that FinCEN revise the language to “explicitly allow for a tribal gaming regulatory authority to approve a resolution to adopt an AML or CFT program”.
The IGA also requested an extension to November 30 to submit additional comments.
“The rulemaking has the potential to significantly impact tribal-owned casinos, which often serve as one of the major sources of income for tribal nations,” wrote Stevens, adding it was important for tribal governments to have enough time to participate in the comment period.
Since 1985, most state-licensed casinos have been defined as "financial institutions" under the BSA, requiring the industry to maintain risk-based AML compliance programs to prevent money laundering and other criminal activities through gaming.
Bill Miller, president and CEO of the AGA, appreciated the opportunity to comment on FinCEN’s proposal to amend BSA regulations but urged the agency to address issues previously raised by the gaming industry.
“Since the passage of the Anti-Money Laundering Act of 2020 ... the casino gaming industry has been and remains committed to working collaboratively with FinCEN on modernizing [BSA] regulations and thresholds,” Miller wrote.
“Many issues that the industry has raised previously were addressed in the AMLA and we are eager to see these changes implemented,” Miller added.
The AGA submitted Miller’s comments while also resubmitting a seven-page document dated November 16, 2020, which was presented in response to a FinCEN request for comment on a proposed rulemaking on AML Program Effectiveness.
FinCEN issued the notice of proposed rulemaking in September 2020 that would require financial institutions to develop and adopt an “effective and reasonably designed” approach to providing useful intelligence to law enforcement.
The federal agency said the plan “would allow financial institutions to more efficiently allocate resources and would impose a minimal additional burden on existing AML programs”. Those proposed changes have yet to be finalized, according to the agency.
In the comments submitted in 2020, the AGA suggested any enhancements to FinCEN's AML programs should include increased sharing of suspicious activity reports (SARs), lighter SARs for when customers leave a casino with a significant number of chips, known as chip walking, and specific guidelines for online gaming and sports betting.
“All of the issues identified in this letter still remain a priority for the gaming industry, some even more so with the increase in online gaming and inflationary changes,” Miller wrote in his letter submitted last week.
