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Card Club Will Pay $900,000 and Undertake AML Program Review

The Financial Crimes Enforcement Network (“FinCEN”) has entered into a Consent Order with the Sahara Dunes Casino, doing business as the Lake Elsinore Hotel and Casino (“Lake Elsinore”).  The Consent Order describes Lake Elsinore, located in California, as a “medium-sized card club” with 22 tables offering card games such as poker.

In the Consent Order, Lake Elsinore has admitted to willful violations of the Bank Secrecy Act (“BSA”), including failing to implement and maintain an effective Anti-Money Laundering (“AML”) compliance program, failing to file Currency Transaction Reports (“CTRs”) and Suspicious Activity Reports (“SARs”), and recordkeeping failures involving a negotiable instruments log, which is supposed to list each transaction between a casino or card club and its customers involving certain monetary instruments with a face value of $3,000 or more. Lake Elsinore has agreed to pay a $900,000 penalty and be subject to an AML program review. 

The conduct at issue in the Consent Order is old:  it occurred from about September 2014 through February 2019.  The enforcement action arose from a 2017 examination of Lake Elsinore by the California Bureau of Gambling Control (“CABGC”).  The Consent Order illustrates how a federal enforcement action can flow from a state regulatory agency working with FinCEN – as well as just how long that process can take.  The Consent Order further illustrates that some BSA-covered institutions will operate with little to no day-to-day AML compliance until an exam occurs.

Continue Reading  FinCEN Issues Consent Order Against Card Club for “Fundamentally Unsound” AML Program

The Nevada Gaming Control Board (“Board”) recently filed a complaint (“Complaint”) against Resorts World Las Vegas casino (“Resorts World”), alleging that, despite repeated red flags, Resorts World’s Anti-Money Laundering (“AML”) Committee, executives, and other employees failed to bar Matthew Bowyer and other individuals who were patrons of Resorts World while being suspected of engaging in illegal bookmaking and other illicit activities. 

The Board is seeking fines, actions against Resorts World’s licenses, and the appointment of a supervisor if the Nevada Gaming Commission (the “Commission”) revokes or suspends Resorts World’s gaming license.  The Complaint is the latest development in a series of recent high-profile enforcement actions implicating major gaming institutions and the alleged use of the institutions to launder illegal bookmaking funds by high-end clients, with the institutions’ alleged tacit consent.

Bowyer came to the attention of both the Nevada Gaming Control Board and the Department of Justice (“DOJ”) following the investigation and guilty plea of Ippei Mizuhara, the Japanese-language interpreter and de facto manager of baseball superstar Shohei Ohtani.  One of Bowyer’s clients was Mizuhara, who allegedly placed at least 19,000 bets with Bowyer’s illegal gambling business. Bowyer, in turn, allegedly took the proceeds of his bookmaking business and wagered millions of dollars at Resorts World.

Continue Reading  Nevada Gaming Control Board Alleges Casino AML Failures Based on Wagering of Customers Involved in Illegal Bookmaking

Strategy Touts Regulations on Beneficial Ownership, Real Estate and Investment Advisers, but Bemoans Lack of Supervisory Resources for Non-Bank Financial Institutions

The U.S. Department of the Treasury has issued its 2024 National Strategy for Combatting Terrorist and Other Illicit Financing (“Strategy”).  It is a 55-page document which, according to the government’s press release, “addresses the key risks from the 2024 National Money Laundering, Terrorist Financing, and Proliferation Financing Risk Assessments. . . and details how the United States will build on recent historic efforts to modernize the U.S. anti-money laundering/countering the financing of terrorism (AML/CFT) regime, enhance operational effectiveness in combating illicit actors, and embrace technological innovation to mitigate risks.”

The Strategy discusses an enormous list of topics.  Given the breadth of its scope, the Strategy generally makes only very high-level comments regarding any particular topic.  This post accordingly is extremely high level as well, and offers only a few select comments. 

Continue Reading  Treasury Issues Broad National Strategy for Combatting Illicit Financing

Enforcement Trends, Gaming, Crypto — and More

I am very pleased to co-chair again the Practicing Law Institute’s 2024 Anti-Money Laundering Conference on May 23, 2024, starting at 9 a.m. in New York City (the event also will be virtual). 

I am also really fortunate to be working with my fabulous co-chair Elizabeth (Liz) Boison…

First of Three Posts in a Related Series on Recent AML and Money Laundering Prosecutions

The Department of Justice (“DOJ”) has been very active in the Bank Secrecy Act (“BSA”) / Anti-Money Laundering (“AML”) space, as reflected by a recent series of individual prosecutions and corporate non-prosecution agreements (“NPAs”). 

In this first blog post, we will discuss a significant prosecution of an individual, and two related corporate NPAs, involving the gaming industry. 

In the next related post, we will discuss two unusual prosecutions involving, respectively, an individual executive of a bank and an alleged AML specialist working with small financial institutions.  

In our final post, we will discuss the prosecution and sentencing of a lawyer who allegedly became part of the fraud and money laundering scheme perpetrated by his crypto client.

Although these cases are all unique and interesting in their own way, they are also all united in certain ways – particularly in regards to the need for institutions to perform sufficient due diligence regarding the conduct and source of funds of high- or higher-risk customers, and the related need for institutions to ensure that their own employees are not undermining the institutions’ AML compliance programs.

Continue Reading  Criminal Case Round-Up: Recent Prosecutions Involving Casinos

Report Previews Potential Implications for the United States

The European Commission (“Commission”) recently released its 2022 Supranational Risk Assessment Report (“SNRA Report”) to the European Parliament and Counsel regarding the “risk of money laundering and terrorist financing affecting the internal market and relating to cross-border activities.”  The SNRA Report analyzes, on a broad scale, money laundering and terrorism financing risks and proposes a plan of action to address them.  The Report also examines more specifically “sectors or products where relevant changes have been detected.” 

The SNRA Report flags the “Gambling Sector” as a “high risk” area of Anti-Money Laundering (“AML”) and Countering the Financing of Terrorism (“CFT”) concern, with a particular focus on online gambling.  According to the Commission, online gambling presents a particularly high AML/CFT risk due to factors such as “the non-face-to face element, [and] huge and complex volumes of transactions and financial flows.”  The potential use of e-money and virtual currencies, as well as the emergence of unlicensed online gambling sites, exacerbates this risk.

As the European Union (“EU”) considers how to tackle the potential risks of online gambling, the United States is simultaneously grappling with the rapid expansion of online gambling and online sports betting in particular.  Before May 2018, when the Supreme Court struck down a 1992 federal law that effectively banned commercial sports betting in most states, Nevada was the only state with legalized sports betting in the United States.  Although California ballot Proposition 27, which would have legalized online and mobile sports betting in California, failed to pass during last week’s national and state elections, more than 30 states still have legalized some form of sports betting, and there is politial pressure to continue to expand online gambling and other forms of gaming.  As Americans jockey for the immense potential receipts that the expansion of online gambling can bring, it may be worth taking a page out of the EU’s book in order to consider the potential money laundering and terrorist financing risks that can accompany it.

Continue Reading  European Commission Highlights Online Gambling’s Money Laundering Risks

The Financial Crimes Enforcement Network (“FinCEN”) has been busy during the last few weeks – and presumably will remain busy for the rest of 2021, as it attempts to satisfy numerous mandates imposed by the Anti-Money Laundering Act of 2020.  In October, in addition to issuing an analysis of Suspicious Activity Reports and ransomware, FinCEN extended its Geographic Targeting Order for real estate transactions; issued exceptive relief providing that a casino may use suitable non-documentary methods to verify the identity of online customers; and reminded U.S. financial institutions to account for the fact that the Financial Action Task Force added and removed countries from its list of jurisdictions with anti-money laundering (“AML”) deficiencies.  We discuss each of these developments in turn.
Continue Reading  FinCEN Round-Up:  Real Estate GTOs, Exceptive Relief for On-Line Gaming for Non-Documentary Customer Verification, and the FATF Grey and Black Lists

First in a Two-Post Series

The U.S. Department of Treasury (“Treasury”) has issued its 2020 National Strategy for Combating Terrorist and Other Illicit Financing (“2020 Strategy”). This document sets forth the key priorities of the U.S. government regarding enforcement of the Bank Secretary Act (“BSA”), and the furthering of the government’s Anti-Money-Laundering (“AML”) and Combating the Financing of Terrorism (“CFT”) goals in general. It is lengthy document addressing numerous issues – albeit in a relatively high-level fashion in regards to any specific issue.

In this post, we will summarize the findings and recommendations of the 2020 Strategy, and will highlight some topics this blog has followed closely – including calls for: increased transparency into beneficial ownership; strengthening international regulation and coordination, and modernization of the AML/BSA regime. Our next post will focus on the 2020 Strategy as it relates to combating money laundering relating to real estate transactions and “gatekeeper” professions, such as lawyers, real estate professionals and other financial professionals, including broker-dealers.

The 2020 Strategy also focuses on several other important issues which we will not discuss in this limited blog series, but on which we certainly have blogged before, including the role of money laundering in international trade, casinos, money services businesses and digital assets.
Continue Reading  Treasury Department’s 2020 National Illicit Finance Strategy: Aspirations for BSA/AML Modernization and the Combatting of Key Threats

Government Suggests that Unusual Pleas are Just the Tip of an Iceberg

Chinese law generally prohibits its citizens from converting more than $50,000 in Chinese yuan into foreign currency in a year.  On Monday, two men living in Las Vegas pleaded guilty in federal district court in the Southern District of California to operating an unlicensed money transmitter business, in violation of 18 U.S.C. § 1960.  Allegedly, they ran a scheme in which they helped clients circumvent this Chinese law — as well as the anti-money laundering programs of U.S. financial institutions — by converting electronic funds in China into hard currency in the United States, which the clients then used to gamble at casinos.

The case reflects the continuing ingenuity employed by individuals to use expanding technologies to circumvent currency controls and money laundering laws.  The case is also interesting because the defendants allegedly ran their scheme with the help of insiders at the casinos, who provided assistance in exchange for a cut of the cash.
Continue Reading  Guilty Pleas Highlight Illicit Funneling of Chinese Cash to Casinos