Casinos up standards for AML compliance

As federal and state regulators clamp down on anti-money laundering compliance, gaming operations of all sizes are investing in new procedures and training to tighten the screws on money laundering and other illegal activity.

“It’s not a new compliance obligation,” said Vasilios Chrisos, a principal with PricewaterhouseCooper’s Financial Crimes Unit in New York City. He has worked with casinos and gaming operations for the past five years, and now serves on the Association of Certified Anti-Money Laundering Specialists’ Advisory Board.

Chrisos said since 1985 casinos have been required to maintain certain transaction records and file certain patron transaction reports with federal regulators, much like banks do under the federal Bank Secrecy Act. Those reporting requirements were further tightened after the Sept. 11, 2001 terrorist attacks, as federal authorities became increasingly concerned about the ability of terrorist groups to use casinos and other U.S. financial institutions to launder money.

“There is definitely a lot more regulatory scrutiny being heaped on the industry today, and we have seen a sea-change in how they (casinos) view money-laundering risk,” Chrisos said.

For casinos, the biggest challenge has arisen from the need to accommodate big money players, “the high rollers, the whales,” Chrisos said.

“Casinos are multi-faceted entertainment companies with hotels, shops, bars, restaurants, and of course, the gaming floor,” he said. “They are marketing and catering directly to these kinds of people. They want them there, but they know they also pose a real risk.”

Suspicious activity

The reluctance of many casinos to show such well-moneyed players the door for many years was reflected by the relatively small number of patrons banned and suspicious activity reports that were submitted by gaming properties to the Financial Crime Enforcement Network, a U.S. Treasury agency that combats money laundering.

In 2011 and 2012, gaming operators “terminated patron relationships” with a combined total of only 43 people, according to the American Gaming Association. However, by 2014, that number had soared to 616, a 275% increase from 2013’s terminations – and 2015 was expected to generate a similar increase, the AGA said in a report published in January 2016.

“Before a few years ago, not many said, ‘You can’t play here anymore,’” said Kim McCabe, a Las Vegas-based certified anti-money laundering specialist. McCabe, who has more than 20 years of experience in gaming and hospitality, now works as a consultant to casinos and gaming associations through her firm, KMC LLC., and  is gaming training compliance partner with OnCourse Learning.

The number of suspicious activity reports filed by casinos and card clubs with FinCEN about patrons also has increased dramatically in recent years. In 2012, casinos filed only 2,119 SARs, according to FinCEN reports. The number of reports rose to 27,505 in 2013 and to 45,185 in 2014. By 2016, the number had increased to 57,318, according to FinCEN.

In the past six years, federal and state regulators have given casinos a strong incentive to increase their scrutiny of all players, their sources of cash and their gaming activities, and if necessary, cutting some off from playing or reporting them to authorities.


Beginning around 2011, FinCEN subjected gaming operators to regulatory exams, gauging their level of compliance with anti-money laundering requirements. In some cases, those FinCEN exams resulted in enforcement actions and hefty fines ranging from $650,000 to $75 million, levied against casinos and other gaming properties.

Most recently, in October 2016, FinCEN doled out a $6 million fine to a Las Vegas sportsbook. That penalty came on top of a $16.5 million settlement to end a U.S. Department of Justice investigation of the sportsbook’s operations.

In addition to fines, casinos that run too afoul of anti-money laundering regulations potentially could lose their state operating license.

“The penalties they could face are not going to justify the revenues they may get in return (from money launderers),” McCabe said.

To satisfy regulators’ concerns, casinos in recent years have greatly increased their investment in AML compliance. According to the AGA’s 2016 report, two-thirds of casinos greatly increased their AML compliance budgets in the past five years, on average by 74%. A majority of casinos told the AGA they expected to continue to boost their AML spending in coming years.

“There’s a risk to casinos in this,” McCabe said. “It’s not the casinos that are trying to launder the money, it’s the patrons.”

Chrisos and McCabe said much of the efforts have focused on better patron screening and evaluating patrons against lists of known criminals, politically exposed persons (government officials or others who may have embezzled or otherwise siphoned public money through political corruption) or other likely launderers.

AML training

Inside the casino, gaming operations also have invested heavily in recent years on training key personnel to identify suspicious activity, both in real time and when reviewing customer transactions and behavior.

Chrisos described a few kinds of suspicious activity and behavior that could tip casinos off to potential money laundering. On the floor, such activity could include “structuring,” playing only a certain amount each time to avoid automatic reporting requirements, or “minimal play,” in which a player may exchange large sums for chips but then barely plays and cashes out, Chrisos said. Others may “chipwalk” — exchanging large sums for chips and then leaving with the chips to use as currency or cash out at a later date. Still others may divide up their money among several players who gamble smaller amounts to attract less attention, he said.

Both McCabe and Chrisos said casinos have come a long way in the past five years, boosting their AML compliance programs and more readily supplying federal regulators with information to help law enforcement identify patterns and bad actors. But they said gaming operators still can boost their AML compliance through greater investments in training and new AML tools. Those tools include programs and software to track and monitor game play, analyze data and patterns to help identify potential money laundering, and if necessary, generate and submit SARs to government regulators.

Chrisos said to this point most efforts so far have primarily centered on individual gaming properties. But he said the next steps could involve a more “holistic, enterprise-wide AML monitoring” program that looks at guest activity across several properties to boost the ability of casinos to identify suspicious people and move beyond mere compliance to “real risk management operations.”

“We’ve seen the industry as a whole evolve rapidly over the last four to five years,” Chrisos said. “But now we’re looking for them to continue to evolve their thinking.”

Freelance writer Jonathan Bilyk contributed to the writing and research of this article.

By |2019-11-25T06:38:15-06:00March 28th, 2017|Financial Services|0 Comments

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