Given the growing number of avenues available to fraudsters, politically exposed persons (PEPs) and organized criminal organizations to commit financial crime, the scope of anti-money laundering (AML) requirements in the modern age of finance now extends far beyond traditional covered financial institutions. Today these requirements have grown to encompass a number of additional entities, a list that includes money service businesses, investment advisers, title insurance companies, lawyers and law firms, and the gaming industry. With respect to the latter, the United States Treasury Department has warned of increasing crime risks posed by the growth of the online gambling and sports betting markets seen both domestically and abroad over the past several years, with the U.S. government recently moving to address these threats.
To better prevent cross-border crime and terrorism funding efforts through this growing industry, the USA Bank Secrecy Act (BSA) has labeled casinos as “non-bank financial institutions.” As such, casinos that generate more than $1 million in annual gaming revenue are effectively required to establish and implement a comprehensive risk-based anti-money laundering (AML) program. BSA regulations also require casinos to file suspicious activity reports (SARs) for any transaction attempted to be conducted through their enterprise that involves at least $5,000 in funds or other assets if it has reason to believe the funds are derived from illegal activity, or said transaction is intended to hide or disguise funds or assets derived from illegal activity.5
Like other financial institutions, the requirements for casinos with respect to maintenance of an effective AML program involve several key components. These include:
- Maintaining a formal, written AML compliance program
- A robust system of internal controls
- Internal and external testing of the program
- Training of casino employees that are relevant to the AML compliance program
- Training specific to identifying and reporting suspicious activity
- Designation of a person or persons to oversee day-to-day compliance
- Procedures for know-your-customer (KYC) input and related reports
- Automated compliance solution for casinos that utilize automated data processing systems
Given the high volume of cash-based transactions that take place within the physical casino domain, the practice of gambling has historically served as a tangible vehicle for money laundering which has allowed for the proliferation of countless other forms of criminal activity. Financial crime through the gaming industry has already grown exponentially coupled with the boom in online gambling and sports betting seen over recent years. Sports betting is now legal in the United States on a state-by-state basis, though the vast majority of states to date (38 total plus the District of Colombia) now allow some form of sports betting. Among those betting states, 30 also permit online wagering.3 The figures that have followed these recent legislative developments have been staggering. In fact, in 2023 Americans wagered a record $119.84 billion on sports alone. While relatively unheralded, the economic effects of the growth in the commercial gaming industry have loomed as a large boost for state and local government revenues and have also contributed to increased rates of employment across participating states.
As has been evidenced amongst a number of industries through which funds are free-flowing however, there are always bad actors looking to take advantage of potential loopholes in oversight for personal gain. Historically, individuals seeking to legitimize illicit income derived from a number of channels (i.e. organized crime, the narcotics trade) often flock to this sector, with both alleged and confirmed financial crime through the gaming sector increasing heavily over recent years. Given that the industry itself hosts a wide variety of options for criminals to exploit (i.e. both physical and online casinos and sports betting services that often do not require state residency to participate in), both individuals and entire criminal organizations are able to move large amounts of cash through these platforms quickly and with relative regularity, all while avoiding detection by the proper authorities. The American Gaming Association estimates that the illicit sports betting market in the United States alone is worth between $44bn – $64bn per year, with the regulator’s 2022 report on the unregulated gaming markets in the U.S. finding that bettors gamble upwards of $510 billion per year using unregulated sites, offshore sportsbooks, unlicensed gaming machines or offshore third-parties. This crime trend has also reportedly costs legal operators over $44 billion worth of gaming revenue and state governments over $13 billion in potential tax revenue as of 2022.3
The United States government has begun to move to address this troublesome trend. Recently, the U.S. Department of Justice, in conjunction with state regulators, has increased its requirements for anti-money laundering (AML) and BSA compliance when it comes to casinos in the United States. Senior government officials stressed this repeatedly during a recent AML casino conference in Las Vegas where increasing scrutiny of AML compliance efforts within the gaming industry was a significant point of discussion. These efforts are already being proven fruitful as evidenced by several recent settlements reached with major players in the gaming sector. Just last week, the Treasury’s Financial Crimes Enforcement Network (FinCEN) – a bureau of the U.S. Department of the Treasury tasked with collecting and analyzing financial data in order to combat international money laundering, terrorism financing and other significant financial crimes – assessed a $900,000 civil money penalty against Lake Elsinore Hotel and Casino for willful violations of the Bank Secrecy Act (BSA) and its implementing regulations over a multi-year period. Reports indicate this penalty was issued after the gaming firm chose against filing suspicious activity reports and currency transaction reports, along with a litany of other blatant record-keeping failures. “Lake Elsinore operated for years without the most basic AML controls, putting its customers and the U.S. financial system at risk and denying law enforcement information on suspicious activity,”1 said FinCEN’s Director Andrea Gacki in a statement released following assessment of the penalty. “This action should serve as a reminder that all financial institutions – regardless of their type or size – must comply with their obligations under the BSA and FinCEN’s regulations.”1
This penalty comes shortly after another major name in the American casino scene agreed to a civil forfeiture for wrongdoing of their own. In September, Wynn Las Vegas – the Las Vegas casino and subsidiary of Wynn Resort – agreed to forfeit over $130 million to settle criminal allegations that it conspired with unlicensed money transmitting businesses to circumvent the conventional financial system worldwide in order to transfer funds for the financial benefit of the casino.6 The move instantly became the largest forfeiture by a casino based on admission of criminal wrongdoing in American history.6 The company’s transgressions reportedly occurred over nearly a decade-long period and involved tens of millions of dollars’ worth of funds derived from over 50 foreign casino patrons.6 During this time, investigators acting on behalf of the Homeland Security Investigations unit, IRS-Criminal Investigations, and the U.S. Drug Enforcement Administration discovered that Wynn was perpetrating illicit activity on behalf of a number of individuals tied to international crime in facilitating the unlicensed transfer of funds to and from China. During this time, the firm also actively worked around the filing of SAR’s to allow this activity to continue unimpeded. As part of this investigation, 15 other defendants previously have admitted money laundering, unlicensed money transmitting, or other crimes, with associated criminal penalties of over $7.5 million.6 Wynn now enters a Non-Prosecution Agreement where it will be forced to meet various criteria to ensure compliance with current regulations for the foreseeable future.
These recent actions confirm that the U.S. federal government is no longer allowing casinos to fly under the radar and ignore their due diligence requirements, and regulators hope these efforts will continue to set the tone for the domestic gaming sector moving forward.
Citations
- “FinCEN Assesses $900,000 Civil Money Penalty against Lake Elsinore Hotel and Casino for Violations of the Bank Secrecy Act.” Financial Crimes Enforcement Network, U.S. Department of the Treasury, 23 Oct. 2024.
- Lammi, Glenn. “Federal and State Enforcement Actions Focus on Casino Anti-Money-Laundering Compliance Practices.” Washington Legal Foundation, 24 Sept. 2024.
- Maher, Tyler, and Henry Palattella. “Sports Betting Statistics: Legality by State in 2024.” Forbes, Forbes Magazine, 22 Sept. 2024.
- “Sizing The Illegal and Unregulated Gaming Markets in the United States.” American Gaming Association, Nov. 2022.
- “Suspicious Activity Reporting Guidance for Casinos.” Financial Crimes Enforcement Network, Dec. 2003.
- “Wynn Las Vegas Forfeits $130 Million for Illegally Conspiring with Unlicensed Money Transmitting Businesses.” Southern District of California | United States Department of Justice, 6 Sept. 2024.
