Despite Bank Secrecy Act, Casinos Face Risks From Money Laundering

Imagine for a moment you are a modern-day Al Capone. Through a combination of robbery, embezzlement and extortion you have amassed a good amount of ill-gotten gains which you now need to clean up – launder – to throw the G-men off your tail. How do you get rid of a mess of cash without losing it or drawing attention to yourself? Well, fortunately for you there is a casino close by that will serve perfectly for recycling all that dirty money. What could be easier than taking a couple of thousand in chips, gambling a few of them away and in short order returning to cash them out, walking away with a nice pile of new untraceable bills?

Of course it isn't that easy anymore. The U.S. has developed a comprehensive anti-money-laundering (AML) program, with Title 31 Bank Secrecy Act of 1970 central to government's efforts. The BSA requires financial institutions of all kinds, including casinos and “card clubs” with over $1 million in gaming revenue, to document any single-day transactions over $10,000, in addition to reporting “suspicious activity” of any amount.

Still, lest we think these new regulations have done away with money laundering – according to the government's own Financial Crimes Enforcement Network, some 40,000 “Suspicious Activity Reports” were filed by casinos between 2004 and 2008,with the last year of that study seeing the biggest proportion of reports; and their dollar amount, $254 million, more than twice that of 2004.

According to FinCen's report, most of the suspicious activities in question included the obvious ways of getting around the $10,000 limit: “structured” withdrawals of smaller sums that together added up to over that amount, lowering the cash out amount to under the limit when asked to provide identification, and withdrawing cash through other agent individuals. Another red flag identified by FinCen were large funds transactions together with minimal casino play: for instance, taking out several thousand in chips and cashing them without going to the tables; or doing the same with the “Ticket In Ticket Out” slot machines.

Getting back to Al Capone: there is a heavy criminal element to these suspicious activities. Everyone from pimps to terrorists can use casinos to finance their operations and disguise operational money flow. In short, money laundering is far from extinct. Which means that casinos need to be more vigilant now than ever.