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U.S. casinos and other gaming operators should be aware of anti-money laundering (AML) regulators’ enforcement priorities and be prepared to apply enhanced due diligence for high-end patrons potentially gambling with the proceeds of corruption, experts said last week.
The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) released its first-ever list of priorities last June to clarify where financial institutions, including casinos, should focus their efforts to ban illicit transactions more effectively.
FinCEN’s eight priorities were compiled because of the Anti-Money Laundering Act of 2020, which became law in January 2021.
The priorities identified were: corruption; cybercrime, including relevant cybersecurity and virtual currency considerations; foreign and domestic terrorist financing; fraud; transnational criminal organization activity; drug trafficking organization activity; human trafficking and human smuggling; and weapons proliferation financing.
“Certainly, there are a number of these I would recommend operators pay attention to,” said Vasilios Chrisos, a principal in PwC’s financial crimes unit.
In terms of corruption, Chrisos said FinCEN is reminding gaming companies that they could be conduits for proceeds from corruption, including political corruption.
“It is just a reminder you should be making robust due diligence on your high-risk patrons, especially those you have identified as being politically exposed and making sure you are taking the right kind of analysis … to verify that the money they are bringing to the table to play in your casino is not [from] fraud, embezzlement or other type of political corruption,” he said.
Frank DiGiacomo, a partner with law firm Duane Morris, agreed, but he also recommended casino compliance departments conduct due diligence on high-risk clients regularly.
“It is probably prudent to do that KYC (know your customer) annually because circumstances change,” DiGiacomo said during a January 26 webinar hosted by the International Association of Gaming Attorneys (IAGA).
Chrisos and DiGiacomo were joined for the discussion by Greg Brower, chief global compliance officer with Wynn Resorts.
In a notice, FinCEN said the agency’s priorities reflect a need to modernize the U.S. AML framework and do not create an immediate change to Bank Secrecy Act (BSA) requirements or supervisory expectations for financial institutions.
The priorities are intended to assist casinos and other financial institutions covered by the BSA in their AML efforts and enable those institutions to prioritize the use of their compliance resources.
Chrisos said the FinCEN priorities allow gaming operators to define their own KYC policies, including which individuals will be the subject of greater scrutiny, what are the triggers for enhanced KYC, and what measures are going to be taken.
“Once that’s defined, we advise clients … not to just vet these players once but also do some things on an ongoing basis,” he added. “It could be something as simple as we are going to vet a player’s … sources of wealth, are they on a sanctions list or [the subject of] negative articles.”
Chrisos explained that when it comes to screening customers it is important that compliance officials work with casino hosts and marketing departments who know their customers the best and are aware of any changes in their play or an influx of money being gambled.
DiGiacomo added that periodic re-evaluation of customers is critical, especially if someone through their conduct or circumstances triggers a violation of internal policies. In that case, he stressed that casinos need to end their relationship with them, even if it is a lucrative client.
Chrisos cited a past example when he was hired to do an investigation of a customer who had already been the subject of more than 30 suspicious activity reports (SARs).
Through that investigation, alleged ties to organized crime were found.
“It shouldn’t have come to an investigation to find these crimes,” he said. “The fact that you are filing that many SARs and there is continuous or suspicious activity, that should have triggered consideration if we really want to let this patron continue to play.”
Chrisos urged casino executives to consider if it is worth whatever revenue is being generated or the reputational and regulatory risks that come with having that patron continue to play, especially for those multi-state operators with land-based casinos and online operations.
“It is not just one jurisdiction where the conduct was discovered or the violation took place,” DiGiacomo added.
“That agency will investigate and if warranted elevate it to a fine or something more serious and then [there’s] the ripple effect of that in other jurisdictions where the operator is licensed because there is a reporting obligation in those other jurisdictions as well.”
