On June 3, the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN) issued a $75 million penalty against a Northern Mariana Islands casino for Bank Secrecy Act violations – the largest-ever FinCEN penalty assessed against a casino. FinCEN's announcement follows an investigation of the casino, Hong Kong Entertainment (Overseas) Investments, Ltd., d/b/a Tinian Dynasty Hotel & Casino (Tinian Dynasty), in which the casino was found to lack an anti-money laundering program altogether.
FinCEN has regulatory authority to investigate casinos for Bank Secrecy Act (BSA) compliance, and casinos must, in turn, develop anti-money laundering (AML) programs to ensure that certain transactions and activities are reported to the government. Under U.S. law, AML programs developed by casinos must include a system of internal controls, independent testing for compliance, training of casino personnel in the identification of unusual or suspicious transactions, and designation of an individual or individuals to assure day-to-day compliance. Moreover, a casino's program must include procedures designed to detect suspicious transactions – i.e., transactions intended to disguise funds derived from illegal activity or to evade the requirements of the BSA.
FinCEN's investigation found that Tinian Dynasty readily accommodated undercover agents who requested that the casino refrain from reporting their gambling activity to the government, and even showed agents how to conduct their transactions to avoid the filing of Currency Transaction Reports (CTRs). Casinos must file CTRs for transactions involving either "cash in or cash out" of more than $10,000, which includes bets and purchases or redemptions of chips above this threshold, as well as safekeeping deposits. According to FinCEN, Tinian Dynasty failed to file thousands of CTRs. Additionally, Tinian Dynasty failed to report large deposits presented by FinCEN's undercover agents, even though such deposits would otherwise have been considered suspicious and triggered reporting obligations under the BSA, because the agents requested that the casino not file any reports.
Most importantly, however, according to FinCEN, Tinian Dynasty failed to maintain an adequate AML program. Tinian Dynasty did not delegate responsibility for BSA compliance to any member of its staff, nor did it develop internal controls or conduct independent testing of its system to ensure that suspicious transactions would be detected. Furthermore, it failed to train its personnel to spot these transactions. Tinian Dynasty's chief auditor decided not to file a large volume of CTRs because, according to FinCEN, no one had noticed the casino's failure to file CTRs in the past.
Even those who have previously avoided enforcement action in the past must be wary. FinCEN's action illustrates that it is taking a vigilant and aggressive approach to BSA/AML compliance at casinos, just as it has in recent years with banks and money services businesses.
The $75 million penalty is considerably higher than the next-largest AML penalty previously assessed by FinCEN on a casino, a $10 million penalty received by Trump Taj Mahal casino in Atlantic City, N.J. The Taj Mahal penalty, assessed earlier this year, also involved a failure to maintain an adequate AML program and a failure to file CTRs.
This article is presented for informational purposes only and is not intended to constitute legal advice.
