A former enforcement chief with the U.S. Treasury Department’s Financial Crimes Enforcement Network warned that the expansion of sports betting in states is raising his former agency’s radar when it comes to monitoring anti-money laundering.
Gregory Lisa, FinCEN’s former interim director of the Office of Compliance and Enforcement, said in an interview with CDC Gaming Reports that a 2014 letter sent out by FinCEN on the risks of sports betting and anti-money laundering has greater relevance today now that the U.S. Supreme Court has struck down the federal ban on sports betting. Lisa spoke at a University of Nevada Las Vegas conference on payment processing,
“Everything is happening very quickly, and everyone wants to get that market share quickly and get those customers in their system,” said Lisa, a partner with the Washington-based law firm Hogan Lovells. “There’s a lot of regulatory attention on that, and they’re going to be looking at everything from laying off bets to the possibility of elicit finance going in. From the AML perspective, they’re worried about a big amount of immediate uptick (of money) in that area.”
In the 2014 letter, FinCEN warned that increases in sports betting conducted on behalf of third parties are posing a money laundering risk to the U.S. financial system. It said casinos should ask patrons if they are wagering on behalf another party. It also increases the chance of illegal sports books and criminal organizations placing sports bets in states where it’s legal.
Las Vegas has been taking sports bets for so long that they have the compliance staff and technology in place, Lisa said. That’s not true for many states adopting sports betting this year.
“There’s a greater risk if they get out over their skis and develop the business before they develop their regulatory compliance, there’s going to be missteps,” Lisa said. “Anytime you do something fast and doesn’t have compliance program build up beforehand, you’re playing catchup.”
Casinos face millions of dollars in fines for violations.
Between 2002 and 2013, there were only three enforcement actions by FinCEN. There were seven in 2015 and 2016, including a $12 million civil penalty against CG Technology for violations of anti-money laundering provisions of the Bank Secrecy Act.
The case centered on illegal gambling and money laundering stemming from a criminal investigation and indictment of 25 individuals, known as the “Jersey Boys,” conducted by the U.S Attorney’s Office for the Eastern District of New York, according to FinCEN.
There was only one case each in 2017 and 2018.
“I don’t think the game is over here, and the scrutiny is only going to be continuing,” Lisa said during a presentation at the conference. “Despite the fact in the last year there’s only been one enforcement action, this scrutiny is not going away. I think unlike what is happening with a lot of other deregulation in other spaces like environmental protection and consumer protection rollbacks, in the anti-money laundering and sanctioning space, that’s defying political gravity right now. I think there will always be heightened enforcement and scrutiny in this area.”
Casinos can be penalized for the same civil or criminal conduct by multiple law enforcement agencies and regulators.
“You never know when the other shoe is going to drop, Lisa said.”
He added there is no excuse if other departments of a casino aren’t talking to each other. If marketing knows about a customer’s bankruptcy or source of funds and doesn’t share that with compliance, it doesn’t shield the property.
“A casino is very clearly under the obligation to understand on a risk basis a customer’s source of funds,” Lisa said. “That argument that it’s not in the regs has not held weight with FinCEN.”
Lisa said casinos don’t have to make inquiries of every customer, but for the higher volume players, compliance needs to have any information other departments have collected.
“Even if those other departments don’t have and don’t collect that information, you have to do a public records search,” Lisa said. “There may be some instances where the best practice is to ask the customer, especially if there is some unusual play or transaction activity.”
The IRS is starting to insist that on Currency Transaction Reports filed by casinos, the player’s occupation is on forms, Lisa aid.
Congress is proposing to raise the currency transaction reporting amount from $10,000 to $25,000, and the reporting amount for Suspicious Activity Reports from $5,000 to $25,000. The FBI and FinCEN are opposed, Lisa said.
“The primary answer that Treasury has given back is that information is really important to law enforcement,” Lisa said. “To fund a foreign transaction fighter for someone who travels from Syria to Belgium to set off a bomb doesn’t take a ton of money so tracking that information is important.”
