U.S. Gaming Industry Seeks Updates To Federal AML Regulations

February 22, 2022
After rapid technology advancements and legal developments in recent years in the gaming industry, the American Gaming Association has said regulatory changes at the federal level are needed to address the growth of online gaming and sports betting.


After rapid technology advancements and legal developments in recent years in the gaming industry, the American Gaming Association (AGA) has said regulatory changes at the federal level are needed to address the growth of online gaming and sports betting.

In its response to a recent request for information (RFI) issued by the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN), which oversees anti-money laundering (AML) compliance on behalf of the federal government, the AGA said the vast majority of federal regulations applicable to casinos have not been updated since gaming was solely conducted face-to-face at casinos.

The association said further guidance is required as to whether licensed casinos or their partners are responsible for AML compliance reporting when other companies operate online gaming or sports-betting platforms as the skin of a land-based casino.

“Although these operators, and not the casino licensee, are responsible for customer relationships and are engaged in the gaming transactions, they generally are not licensed as casinos and have no status under the regulations,” the AGA wrote. “Accordingly, the application of BSA regulations to an increasing portion of the gaming industry remains uncertain, making timely guidance or regulatory updates to address this issue of great import.”

The U.S. trade group also urged FinCEN to extend Bank Secrecy Act (BSA) coverage to states engaged in the gaming business, including sports betting via their lotteries, which often occurs through contracts with private operators.

“When a state government agency conducts a non-sovereign function that would otherwise be subject to the BSA, the agency should be subject to the BSA, as any other entity would be, to avoid a gap in the regulatory regime that can present financial crime risk,” the AGA wrote in its submission.

Since 1985, state-licensed casinos have been defined as financial institutions under the BSA, requiring the industry to maintain effective risk-based AML compliance programs to comply with BSA requirements to prevent money laundering and other criminal activities through gaming.

The AGA also called for regulators to extend the pilot program of sharing of suspicious activity reports (SARs) to foreign casino affiliates.

Bill Miller, president and CEO of the AGA, wrote that the industry was pleased that casinos were included in the financial institutions eligible to participate in this program.

A new rule being proposed by FinCEN would allow casinos to share SARs with their foreign resorts, subsidiaries, and affiliates to strengthen efforts to combat money laundering.

Under current federal law, those business units are ineligible for sharing.

“Several U.S. gaming entities have casino affiliates outside of the United States and in many cases, a number of their patrons game at both their U.S. and foreign properties,” Miller wrote in the ten-page submission to FinCEN dated February 14.

“Allowing for SAR sharing among these entities would promote enterprise-wide risk management and provide casinos with a more complete view of patron activity, which in turn would increase the efficiency and effectiveness of casinos’ AML compliance programs and enhance their ability to combat illicit finance risks.”

Miller also requested that last year's temporary relief allowing non-documentary identity verification by casinos of gaming accounts be “codified in the BSA regulations to allow casinos the same flexibility to verify identity by documentary or non-documentary means as is afforded to banks.”

Among the other recommendations submitted by the AGA were a request for further guidance from FinCEN regarding digital identification, extending public-private information sharing programs to the casino industry, and streamlined SAR reporting.

The AGA submitted these comments as part of FinCEN's process to consider how to modernize AML and counter-terrorism financing regulations in accordance with the BSA.

The RFI was part of a larger effort to update U.S. AML regulations by FinCEN following the enactment of the Anti-Money Laundering Act of 2020, which became law in January 2021.

Gaming Priorities In An Election Year

In addition to the proposed regulatory changes submitted to FinCEN, the AGA continues to lobby Congress to increase the mandatory tax reporting threshold at land-based casinos, which currently stands at $1,200. Nevada Democratic Representative Dina Titus has supported increasing the total to $5,000.

Miller said increasing the reporting threshold is long overdue.

“When you consider inflation holding us to a level that was set in the 1970, it makes no sense,” Miller said earlier this month during the AGA’s State of the Industry webinar.

He also said the AGA would continue to push for eliminating the “outdated sports betting federal excise tax” set at 0.25 percent of the handle.

The wagering excise tax was first passed by Congress in 1951 and initially imposed a 10 percent tax on sports-betting revenue and a $50 tax for each person employed by the sportsbook.

In the early 1970s, the excise tax was reduced to 2 percent, and Congress lowered it again in 1982 to 0.25 percent of handle.

In April 2021, Titus and Republican Representative Guy Reschenthaler of Pennsylvania introduced HR 2350 to repeal the federal excise tax. The bill was referred to the House Committee on Ways and Means but lawmakers have yet to consider their measure.

“The AGA will also continue to tout our industry’s leadership on anti-money laundering and use our strong relationship with FinCEN and the Treasury Department to advance priorities that strengthen and modernize AML regimes,” Miller said.

“No matter the outcomes of the elections in November,” Miller said, “this industry and the AGA are well positioned here in D.C.”

“We have built strong bipartisan support for gaming and have made the case that our industry that operates in 44 states is a significant and dependable partner.”

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