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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

AMA Details Components of a Strong AML/BSA Program for the Gaming Industry

Earlier this month, the American Gaming Association (“AGA”) released an updated Best Practices for Anti-Money Laundering (“AML”) Compliance (“Best Practices Guidance”) reflecting a heightened focus on risk assessment as well as Know Your Customer/Customer Due Diligence measures for the gaming industry.  This update amends the industry’s first set of comprehensive best practices for AML compliance, issued in 2014.  At the time, the best practices were well-received by the U.S. Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”).  These updated Best Practices have drawn from recent FinCEN guidance and enforcement actions, the Treasury Department’s National Money Laundering Risk Assessment, and the Office of Foreign Assets Control’s (“OFAC”) updated compliance guidelines and provide detailed guidance regarding how the industry can continue to be “a leader in compliance.”…

Continue Reading  AMA Updates AML Best Practices for AML Compliance

FinCEN Director Kenneth A. Blanco delivered prepared remarks on August 13 at the 12th Annual Las Vegas Anti-Money Laundering Conference.  We previously have blogged repeatedly on the anti-money laundering (“AML”) and Bank Secrecy Act (“BSA”) challenges facing the gaming industry.  This post will discuss Director Blanco’s comments at a high level only, consistent with the generality of his prepared speech.
Continue Reading  FinCEN Director Blanco Addresses AML Compliance and Casinos

Ballard Spahr is very pleased to host on December 17, 2018 at noon in our Philadelphia office a CLE program for the gaming industry and associated counsel to participate in a panel discussion with speakers from the Internal Revenue Service (IRS) on the latest industry trends in BSA/AML compliance and examination.

Please join us in…

The Treasury Inspector General for Tax Administration, or TIGTA, issued last month a Report, entitled The Internal Revenue Service’s Bank Secrecy Act Program Has Minimal Impact on Compliance, which sets forth a decidedly dim view of the utility and effectiveness of the current Bank Secrecy Act (“BSA”) compliance efforts by the Internal Revenue Service (“IRS”).  The primary conclusions of the detailed Report are that (i) referrals by the IRS to the Financial Crimes Enforcement Network (“FinCEN”) for potential Title 31 penalty cases suffer lengthy delays and have little impact on BSA compliance; (ii) the IRS BSA Program spent approximately $97 million to assess approximately $39 million in penalties for Fiscal Years (FYs) 2014 to 2016; and (iii) although referrals regarding BSA violations were made to IRS Criminal Investigation (“IRS CI”), most investigations were declined and very few ultimately were accepted by the Department of Justice for prosecution.

Arguably, the most striking claim by the Report is that “Title 31 compliance reviews [by the IRS] have minimal impact on Bank Secrecy Act compliance because negligent violation penalties are not assessed.”

A primary take-away from the Report is that an examination program lacking actual enforcement power is, unsurprisingly, not very effective.  The Report also highlights some potential problems which beset the IRS BSA Program, which include lack of staffing, lack of planning and coordination, and delay. Although the Report’s findings clearly suggest that what the IRS BSA Program really needs are resources and enhanced enforcement power, the repeated allusions in the Report to a certain purposelessness of the current BSA examination regime nonetheless might help fuel the current debate regarding possible AML/BSA reform, with an eye towards curbing regulatory burden.

The Report made five specific recommendations to the IRS for remedial steps. We will focus on four of those recommendations, and the findings upon which they rest:

  • Coordinate with FINCEN on the authority to assert Title 31 penalties, or reprioritize BSA Program resources to more productive work;
  • Leverage the BSA Program’s Title 31 authority and annual examination planning in the development of the IRS’s virtual currency strategy;
  • Evaluate the effectiveness of the newly implemented review procedures for FinCEN referrals; and
  • Improve the process for referrals to IRS CI.

…
Continue Reading  U.S. Treasury Report: IRS BSA Program “Has Minimal Impact on Compliance”

Director Blanco Emphasizes Investigatory Leads and Insights Into Illicit Activity Trends Culled from Nationwide BSA Data

As we just blogged, Financial Crimes Enforcement Network (“FinCEN”) Director Kenneth Blanco recently touted the value of Suspicious Activity Reports (“SARs”) in the context of discussing anti-money laundering (“AML”) enforcement and regulatory  activity involving digital currency.  Shortly thereafter, Director Blanco again stressed the value of SARs, this time during remarks before the 11th Annual Las Vegas Anti-Money Laundering Conference and Expo, which caters to the AML concerns of the gaming industry.

It is difficult to shake the impression that Director Blanco is repeatedly and publically emphasizing the value of SARs, at least in part, in order to provide a counter-narrative to a growing reform movement — both in the United States and abroad — which: (i) questions the investigatory utility to governments and the mounting costs to the financial industry of the current SAR reporting regime, and (ii) has resulted in proposed U.S. legislation which would raise the minimum monetary thresholds for filing SARs and Currency Transaction Reports (“CTRs”), and require a review of how those filing requirements could be streamlined.
Continue Reading  FinCEN Director Continues to Push Value of SARs and Other BSA Data