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The U.S. Department of Justice and Financial Crimes Enforcement Network (FinCEN) continues to actively pursue enforcement activities over anti-money laundering (AML) violations involving casinos, according to federal officials and legal experts.

“I can lump our cases basically into three baskets,” Rollin Badal, section chief of the money services business and non-banking financial institutions enforcement and compliance division at FinCEN, said about how the agency gets the cases it pursues.

“First, I want to start with externally,” Badal said. “So we have a lot of relationships with IRS SBC, which is the small business self-employed section of the IRS that is a delegated examiner. So many (casinos and cardrooms) have had them on your property conducting Bank Secrecy Act (BSA) and anti-money laundering exams."

Badal said FinCEN receives a lot of information from those exams. The agency also gets referrals through its contacts with law enforcement at the federal, state and local levels that can lead to an enforcement action.

“I can say our second bucket is internally generated,” Badal said. “So, it’s either by proactive review of our BSA database, getting referrals from other sections within FinCEN, and … running negative searches. We also read the news and that can also generate interest in a case within FinCEN.”

Finally, FinCEN’s whistleblower program has been proving to be an extremely good case lead resource, Badal told attendees at last week's Gaming Law, Compliance and Integrity Bootcamp at Seton Hall Law School in Newark, New Jersey.

“I think the industry should pay attention because a lot of these [complaints] could come from people who are actually working in your organization,” he said.

Badal suggested gaming companies should consider establishing whistleblower programs to address any issues internally before a regulator gets involved, like FinCEN.

FinCEN, a division within the U.S. Department of the Treasury, enforces Bank Secrecy Act (BSA) requirements, and over the past ten or so years has increased its monitoring for potential violations of Title 31 of the BSA that applies to casinos and cardrooms.

Title 31 of the BSA requires all casinos with an annual gross gaming revenue of at least $1m to draft and implement a written training program that ensures compliance with the law’s anti-money laundering (AML) regulations. If a casino’s revenues are less than $1m, they are not subject to Title 31 and instead are subject to .

Lauren Utz, director of compliance with casino and entertainment operator Delaware North, said there are three major requirements of AML, BSA and Title 31 compliance, with the first being having a risk-based program.

“Number two, file your reports,” Utz said. “For us, they are CTRs, or currency transaction reports, and SARs, or suspicious activity reports. Number three is to keep all of it for five years; don’t lose anything.”

A SAR violation can cost anywhere from $69,000 to a maximum of $278,000, while recordkeeping violations run to $25,000-plus per incident and the AML program violation is $69,733 or $25.4m annually, according to FinCEN.

Utz and Badel were joined on the Seton Hall law compliance panel by: Stephanie Brooker, a partner at Gibson, Dunn & Crutcher; Brian Lopez, director of Dowling Advisory Group; and Hal Crawford, managing director of financial crimes unit at PwC. Gregory Lisa, senior counsel with Hogan Lovells, moderated the discussion on AML compliance, prevention and enforcement.

Lisa asked Brooker, a former prosecutor at the U.S. Department of Justice (DOJ) for a sense of the DOJ’s enforcement in the BSA space.

“DOJ and FinCEN have concurrent authority to investigate and prosecute violations,” Brooker said. “The real difference is the intent standard of the law. Obviously, the DOJ is focused on the criminal intent.”

Brooker said there is a lot of room for prosecutorial discretion in this space and AML experts have seen that playing out over time, where a decade ago the DOJ focused on deciding if they had to prosecute criminally or whether significant criminal proceeds were going through a casino or bank.

“Part of the DOJ enforcement policy is if a civil regulator can appropriately handle a matter then DOJ should consider not prosecuting. I think that line has shifted over the last decade and DOJ is much more interested in bringing a criminal case than they used to be.”

Most recently, the DOJ reached a settlement with two MGM Resorts International casinos in Las Vegas that agreed to pay a combined $7.45m to resolve alleged violations of federal AML laws in a settlement connected to the guilty plea by former gaming executive Scott Sibella.

The fines to be paid by MGM Grand and The Cosmopolitan of Las Vegas are part of non-prosecution agreements (NPAs) that will allow the two casino-resorts to avoid charges for violations of the BSA.

Brooker said the other phenomenon happening in the BSA and AML space is a high degree of coordination and collaboration between the DOJ, FinCEN and other regulators, including sometimes state regulators.

From a government perspective, Brooker said, more collaboration is a good thing.

“But from a private sector perspective, I think that collaboration is not helpful because it makes it more likely that there will be more agencies involved,” Brooker said.

“It makes it more likely that remedial obligations like monitors or independent consultants will be more onerous and the penalties will be higher because a number of agencies will not just credit DOJ … but they want to collect a portion of the penalty.”