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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

ABA Tax Fraud Panel to Discuss IRS CI and Crypto Criminals

The Internal Revenue Service – Criminal Investigation (IRS CI) has made it clear that it is focusing on the abuse of digital currencies to further tax evasion, money laundering, and other offenses. IRS-CI also has made it clear that this is an international effort, and that it is trying to partner with law enforcement agencies across the globe in order to coordinate and share investigative leads.

This is a hot topic, and we are honored that Ballard Spahr will be moderating a panel on these very same issues, at the ABA’s annual Tax Fraud/Tax Controversy Conference in Las Vegas on December 12, entitled Charging Cryptocurrency Violations—Tax Crimes or Money Laundering.  We are pleased to be joined by our wonderful panelists, Evan J. Davis, Betty J. Williams, and Ian M. Comiskey.  This is a unique conference, and we invite you to attend if you are interested in the fascinating cross-section of tax evasion and money laundering.

This blog will discuss the recent efforts by IRS-CI to “up its game” in investigating cross-border offenses committed through cryptocurrency, such as its participation in the international Joint Chiefs of Global Tax Enforcement task force. We then will discuss a recent high-profile case which exemplifies these two goals of fighting crypto-related crime and collaborating with foreign law enforcement officials to do so: the notorious “Welcome to Video” case, which led to a global takedown of a darkweb child pornography website, its administrator, and its customers. The Welcome to Video investigation, led by IRS-CI, also illustrates a key point we will discuss at the ABA conference: that cryptocurrency is only “pseudo-anonymous,” and that its protections can yield to a determined combination of modern digital forensics and old-fashioned investigative techniques.
Continue Reading  IRS CI Highlights International Efforts to Tackle Cryptocurrency Abuse, Money Laundering and Tax Evasion

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”

Conduct Performed Without Knowledge Still Can Lead to the Most Serious Penalties

Under the Bank Secrecy Act (“BSA”), the most onerous civil penalties will be applied for “willful” violations. That mental state standard might sound hard for the government to prove.  For example, in criminal and civil tax fraud cases under the Internal Revenue Code, “willfulness” is defined to mean a voluntary and intentional violation of a known legal duty – a very demanding showing. But as we will discuss, two very new court opinions discussing a required BSA filing – a Form TD F 90-22.1, or Report of Foreign Bank and Financial Accounts, otherwise know as a FBAR – remind us that, under the BSA, a “willful” violation does not require proof of actual knowledge. A “willful” BSA violation only needs to be reckless, and the government can prove it through the doctrine of “willful blindness” or “conscious avoidance.”

The fact that courts in civil FBAR cases have been holding that “willfulness” can mean “just recklessness” is not a new development, and it is well known to those practicing in the tax fraud and tax controversy space. This blog post will not attempt to delve into the long-running offshore account enforcement campaign that has been waged by the IRS and the DOJ; the related case decisions; or the related voluntary disclosure programs for offshore accounts (for those interested in this fascinating but complicated topic, the Federal Tax Crimes blog is one of many excellent resources). Rather, the point of this post is that the case law now being made in the FBAR and offshore account context will have direct application to more traditional Anti-Money Laundering (“AML”)/BSA enforcement actions, because the civil penalty statute being interpreted in the FBAR cases is the same provision which applies to claimed failures to maintain an adequate AML program and other violations of the BSA.  Thus, the target audience of this post is not people involved in undisclosed offshore bank account cases, but rather people involved in day-to-day AML compliance for financial institutions, who may not realize that some missteps may be branded as “willful” and entail very serious monetary penalties, even if they were done without actual knowledge.  This may be news to some, and it underscores in particular the risks presented by one the topics that this blog frequently has discussed: the potential AML liability of individuals.
Continue Reading  The BSA Civil Penalty Regime: Reckless Conduct Can Produce “Willful” Penalties

Second Part of a Two-Part Series

As we blogged yesterday, British Columbia’s (“B.C.”) Attorney General David Eby recently released an independent and very detailed report examining money laundering in B.C.’s gaming industry and providing 48 recommendations to combat the problem. See Peter M. German, QC, Dirty Money: An Independent Review of Money Laundering in Lower Mainland Casinos conducted for the Attorney General of British Columbia (Mar. 31, 2018) (“German Report”).  As we noted yesterday, when discussing the U.S. regulatory system, the German Report favorably cites the Nevada Gaming Commission and Nevada Gaming Control Board, whose Enforcement Division “acts as a first line of defence against organized crime and bulk cash buy-ins[,]” and further observes that the federal Financial Crimes Enforcement Network, “[i]n partnership with Internal Revenue Service, acts as the enforcement arm for most money laundering issues.”

The U.S.’s more robust, streamlined AML regulatory regime, although hardly perfect, stands in stark contrast to the dysfunction alleged in the German Report that plagues B.C.’s current framework. In this post, we describe the U.S. AML regulatory regime for the gaming industry, and the recent enforcement actions which it has produced.  Although the pace of AML enforcement has been somewhat sporadic, it appears to be increasing over time in regards to the gaming industry.  Certainly, attention by regulators — as well as by the industry itself — to AML/BSA compliance has increased over the last several years.…

Continue Reading  The U.S. Casino and Gaming Industry: AML/BSA Regulation and Enforcement

FinCEN announced on May 3, 2018 that Artichoke Joe’s, a card club and casino located in San Bruno, California and founded in 1916, has entered into a revised civil money penalty assessment regarding alleged deficiencies under the Bank Secrecy Act (“BSA”).  The most interesting aspect of this revised assessment is that it allows the casino to reduce its original $8 million penalty by $3 million if it successfully completes certain compliance undertakings.

No press release has been issued to date by FinCEN regarding this revised assessment, so its specific genesis is unclear.  Nonetheless, the revised assessment illustrates that financial institutions facing Anti-Money Laundering (“AML”)/BSA enforcement actions might be able to mitigate the financial consequences — not only when negotiating the initial penalty assessment, but even after it has been imposed — by undertaking steps towards enhanced compliance and monitoring.  It is also unclear whether the onerous nature of the original assessment, when compared to the available financial resources of the assessed institution, may have played a role in the revision.
Continue Reading  FinCEN Extends $3 Million Carrot to Card Club and Casino: Reduce Assessed Civil Penalty by Completing Compliance Undertakings

I am honored to be part of a panel on March 1, 2018 at the Florida Tax Institute in Tampa, Florida regarding potential money laundering risks, reporting obligations and related ethical issues facing U.S. tax professionals with foreign clients bringing money and assets into the United States.  The panel, entitled Working with Inbound Investors & …