Tag Archives: sports gambling

FinCEN Director Addresses Gaming Industry

On August 13, Financial Crimes Enforcement Network (“FinCEN”) Director Kenneth Blanco addressed the 12th Annual Las Vegas Anti-Money Laundering Conference and provided insights on his agency’s expectations for the ever-evolving gaming industry.

The following are some key takeaways:

Cost Cutting Poses National Security Threat. Director Blanco stressed that reports of compliance budget cuts by casinos looking to trim costs and retain gamblers is seen by FinCEN as a national security issue and not something the agency takes lightly. Further, despite FinCEN not publicizing any enforcement actions against a casino during the last year, it is continually looking at compliance across all financial institutions and will not hesitate to act if it identifies violations of the Bank Secrecy Act (“BSA”). It is also important to note that not all enforcement actions are public—FinCEN often closes cases with warning letters sent to financial institutions or refers cases to our delegated examiners for additional review.

Casino Industry Trends. In terms of suspicious activity being reported in 2019, Minimal Gaming with Large Transactions is the highest reported activity with more than 5,000 Suspicious Activity Reports (“SAR”) reflecting this activity. Reports of Chip Walking have dramatically increased since this was added to the SAR form in the summer of 2018. Chip Walking is now the second most selected suspicious activity on the SAR form, with more than 4,400 reports being cited this year to date.

The other frequently cited suspicious activities include:

  • Transactions below CTR Threshold
  • Unknown Source of Chips
  • Two or More Individuals Working Together
  • Alteration or Cancelation of Transactions to Avoid CTR Requirement
  • Suspicion Concerns on the Source of Funds

Additional analysis of trends reported by casinos checking the “other” box on the SAR form includes reports of suspicious activity involving sports betting, abandoned jackpot, and bill stuffing.

Sports Betting and Mobile Gaming. Casinos and card clubs must integrate sports betting and mobile gaming products into their existing AML programs. FinCEN expects casinos and card clubs to collect cyber-related indicators through their mobile gaming or betting applications in order to monitor and report potentially suspicious activity. Examples of such cyber-indicators include: source and destination information, file information, subject user names, system modifications, and account information.

Relevance of Convertible Virtual Currency (CVC) Advisory to Casinos. There are generally two areas where CVC will intersect with casinos and card clubs: so-called CVC casinos on the internet, and physical casinos and card clubs that accept CVC for gaming.

As FinCEN’s CVC guidance points out, internet gaming sites that operate online without licensure from a state or tribal gaming regulator are not “casinos” for purposes of regulations implementing the BSA. However, they are likely operating as money transmitters. Money transmitters have their own obligations under the BSA and its implementing regulations, which includes a formal registration with FinCEN.

Casinos and card clubs that accept CVC from customers either on location or through mobile applications, need to ensure that CVCs are accounted for in policies, procedures, internal controls and risk assessments. This includes developing processes for reviewing and conducting due diligence on transactions in CVC, for conducting blockchain analytics to determine the source of the CVC, and incorporating CVC-related indicators into SAR filings.

Culture of Compliance. Critical to fostering a culture of compliance is utilizing enterprise-wide information and ensuring such information gets into the hands of compliance personnel. For example, information developed by casinos for business and marketing, as wells as information developed by casino security departments for combating and preventing fraud should be used by casino compliance personnel to monitor customers for suspicious activity. Similarly, a casino’s legal department should alert compliance personnel when a subpoena is received as it could trigger reviews of customer risk ratings and account activity. Moreover, larger casinos may have multiple affiliated casinos that could benefit from the sharing of information across the organization.

Innovation and BSA Value. In January 2019, FinCEN began an ambitious project to catalogue the value of BSA reporting across the entire value chain of its creation and use. The project will result in a comprehensive and quantitative understanding of the broad value of BSA reporting and other BSA information to all types of consumers of that information.

As an example, given the current state of the opioid epidemic, something a minor as the mobile phone number of a suspect from a casino SAR could be vitally important to a DEA agent since the suspect would provide a real phone number to ensure he is called when his winnings are wired out to a bank account. Using that mobile number, the agent can build out a communication tree and identify new individuals, entities, addresses or accounts. A DEA agent can also use this information to seek legal approval to wiretap or track the movement of the phone, identify potential informants, and build out a network of associates.