FinCEN, the U.S. financial crimes enforcement arm of the Treasury Department, is demanding that casinos do more to prevent their use as vehicles for money laundering.
To this effect, casinos will be required to know the source of their customers’ funds. Of course, the first step in understanding the source a customer’s funds is to Know Your Customer.
Source: Wikimedia Commons
Secondly, FinCEN also demands that casinos adopt a Risk Based Approach to managing their exposure to financial crime, particularly money laundering and terrorist financing. A successful Risk Based Approach requires several well planned and functioning elements. These include 1) the process and guidelines in place to ensure that the approach is methodically applied within the organization, 2) well trained staff with the authority to make decisions related to the assessment of risk and a corporate culture that gives them the freedom and respect to make independent assessments of risk based on the situation and their experience, and 3) professional tools to support the research and evaluation of subjects of risk facing the organization.
As a third demand, FinCEN insists that casinos improve their information sharing with regulatory and law enforcement authorities. This means that casinos are required to voluntarily file Suspicious Activity Reports for any suspicious activity that would be identified within the casino. They also request that the casinos provide additional specific customer information for any unusual activity. As a matter of fact, it is well known that within the Department of Treasury Law Enforcement community there are many who believe that Suspicious Activity Reports should be changed to Unusual Activity Reports, but that is a topic for another post.
Finally, FinCEN has issued a warning against a high risk behavior called, “Chip Walking”. This involves using casino chips as a placement instrument for purposes of money laundering or facilitating illegal transactions. For example, suppose a bad guy obtains a hundred thousand dollars worth of chips and places those in a casino lock box. The bad guy can then take the key to that box out and give it to the bad guy who has brought him a load of illegal drugs. Deal done and no messy briefcases of cash to handle.
Of course, if the casino would know its customers, this suspicious activity would be noted and may eventually lead to reporting and arrest of the bad guys. And this is the whole point of the FinCEN demand.
KYC3 - Know Your Customer, Counterpaty and Competitor 