So far, tribal casinos have escaped unscathed from multi-million dollar fines assessed against their commercial counterparts for failing to prevent money laundering, but the scrutiny of regulators all over the world is increasing and so is the cost of maintaining programs to prove compliance.

The crackdown commenced on August 27, 2013 when Las Vegas Sands agreed to pay $47.4m to avoid federal charges for failing to report suspicious gambling transactions by an alleged drug kingpin from China.

In September 2015, U.S. and Nevada regulators fined Caesars Entertainment Corp. $9.5m for deficient anti-money laundering (AML) controls at its operations in Asia and Las Vegas.

From 1998 to August 2013, there were four fines totaling about $3m for AML violations, according to Kacy Drury, who is a senior vice president at Everi, an AML compliance, slots manufacturer and payments company in Las Vegas.

In less than four years since the Las Vegas Sands settlement, gambling regulators in the United States, the United Kingdom and Australia have levied fines totaling $210m on casinos for failing to comply with AML guidelines, Drury said.

“If you don’t have a good AML program right now, it would behoove you to start taking those steps,” Drury said during an April 11 panel presentation at the annual trade show of the National Indian Gaming Association in San Diego.

Peter Alvarado, a former deputy director at the Financial Crimes Enforcement Network (FinCEN) who is the head of compliance for San Manuel Indian Bingo & Casino near San Bernardino, said the focus of AML regulators has shifted since the terrorist attacks of 9/11.

Although still pursuing individuals involved in money laundering, Alvarado said, regulators are concentrating more on institutions such as casinos which are legally required by Title 31 of the U.S. Code to maintain effective AML programs.

“It came to a head because, to a degree, the Department of Justice was starting to act as a de facto regulator,” Alvarado said.

FinCEN is a branch of the U.S. Department of the Treasury, but “if FinCEN didn’t jump on board and start focusing on casinos, the Department of Justice was going to,” Alvarado said.

As expensive as the costs may be for AML compliance, the consequences of not complying can be catastrophic.

For example, as part of a money laundering investigation, nine different agencies raided and temporarily closed the Bicycle Hotel & Casino earlier this month in Southern California.

“The public may not know much about money laundering, but when a casino is raided, the perception is that the casino was cheating them,” Alvarado said. “That’s a black mark for the whole industry.”

Banks consider casinos to be “high risk” businesses if their AML programs are deficient, according to Drury.

“A number of casinos have lost their banking relationship and their accounts have been closed because their AML programs don’t meet the bank’s expectations,” Drury said.

Liability for AML violations is not confined to companies and individual casino employees but can extend to the casino’s management, and can result in lifetime bans from the industry.

“Ten years ago, I think that nobody ever would have considered that the AML person filing the CTRs (currency transaction reports) and SARs (suspicious activity reports) in the back room could actually impact the entire operation as a whole,” Drury said.

Grant Eve, a certified public accountant who is a casino consultant, said there is a shortage of AML professionals but it is important for casinos to be proactive in obtaining independent advice on their AML programs.

“After they were fined, Caesars went out and hired Benjamin Floyd who was the head of Walmart’s AML compliance program,” Eve said. “The Associated Press said it was over a seven-figure dollar contract.”

Stephanie Hardy, compliance manager for Downstream Casino Resort in Quapaw, Oklahoma, said her casino’s AML program proved pivotal during an audit last year by the Internal Revenue Service.

“I personally feel that the most important thing you can have is management support,” Hardy said.

Gambling Compliance
Written by: Tony Batt