Reporting rule raises casinos' suspicions

Judy Patterson, senior vice president and executive director of the American Gaming Association trade group, argued during a public hearing that the suspicious activity reporting requirement for banks is only triggered at the $5,000 threshold.

"We're concerned about the amount," Ms. Patterson said during a break in the hearing. "Why not $5,000? Why are we being singled out?"

Peter Djinis, associate director of Treasury's Financial Crimes Enforcement Network, tried to answer those questions during the hearing.

"This is not intended in any way, shape or form to point the finger at the casino industry," he said. "We are not on some regulatory crusade to make the life of the casino operator more difficult."

However, Djinis noted that casinos now offer "bank-like services."

"We have seen an increase in the illicit use of casino financial services," he said, explaining that money laundering and other types of financial crimes sometimes occur at casinos.

As for the $3,000 threshold for casinos to report suspicious financial transactions, Djinis said: "There is no scientific way to set a threshold."

Ms. Patterson, Casino Rouge's Leo Troy and other casino representatives asked the three-member FinCEN panel to recommend that the threshold be raised to at least $5,000.

Tuesday's public hearing in New Orleans was the first of four regional meetings to be held by FinCEN. The others are scheduled July 23 in Chicago, Aug. 6 in Scottsdale, Ariz., and Sept. 9 in New York City. The deadline for written comments on the proposal is Sept. 15.

Under the proposal, the rules would go into effect six months after they are made final. Casino representatives asked Tuesday that the six-month period be extended to one year.

Under the proposed Bank Secrecy Act rule announced in May, state-licensed casinos and tribal casinos with more than $1 million in gross annual gambling revenue would be required to report to FinCEN suspicious activity involving transactions of $3,000 or more.

The Bank Secrecy Act is Treasury's key weapon in the fight against money laundering, financial fraud and tax evasion.

Under the proposed suspicious activity rule, a casino would have to report transactions that it "knows, suspects, or has reason to suspect" are linked to illegal activity or have no legitimate purpose.

Ms. Patterson said the "reason to suspect" language opens up a Pandora's box. She said such language will cause Treasury to "second-guess" casinos.

Casinos currently must report cash transactions of more than $10,000 to the Internal Revenue Service.

FinCEN also released a guidance document for casinos to use in identifying suspicious activity. FinCEN has been working with federal law enforcement, state and tribal gambling regulators and the gambling industry on the document. It lists examples of how a casino's financial services might be used for illicit purposes.

FinCEN senior financial enforcement officer Leonard Senia highlighted several examples during the hearing:

- A customer opens a number of casino accounts under one or more names and later makes multiple currency deposits of less than $10,000 in a gambling day into each account.

- A patron is observed directly supplying large amounts of currency to individuals who then use the currency for deposit, purchase of chips, or exchange of currency.

- A customer purchases a large amount of chips (between $5,000 and $10,000) with currency at a gambling table, gambles minimally, and then redeems the chips for a casino check.

- A patron conducts transactions that the casino believes to be the result of some illegal activity or from an illegal source, such as drug trafficking.

Djinis said more than $525 billion was legally wagered in U.S. casinos last year. An estimated 125 million visitors gamble each year at government-licensed casinos, he added.

"With the large volumes of currency being brought in and played by legitimate customers from throughout the United States and other countries, gaming can create a good 'cover' for money launderers who are in possession of large amounts of currency," the FinCEN guidance document says.

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