Under the glitz and glamor of the gaming industry, casinos and online gaming establishments must adhere to strict financial regulations. This is especially true when it comes to anti-money laundering (AML) initiatives.
Recent regulatory changes regarding AML are impacting these organizations and ensuring compliance with these developments was the focus of a recent webinar, “The Evolving AML Regulatory Landscape.”
Presented by PwC and moderated by Vasilios P Chrisos, a Partner with PwC, panelists Greg Brower, Chief Compliance Officer at Wynn Resorts, and Frank DiGiacomo, Partner at Duane Morris, discussed the Anti-Money Laundering Act of 2020 (AMLA of 2020 or AMLA), current Financial Crimes Enforcement Network (FinCEN) priorities, and what gaming organizations should know to stay compliant as regulations continue to evolve.
Contained within the National Defense Authorization Act for Fiscal Year 2021, the AMLA came into effect on January 1, 2021 and introduced sweeping reforms to anti-money laundering regulations, impacting many organizations within the gaming industry.
As stated by Chrisos during the presentation, the AMLA is, “arguably the most significant piece of AML legislation that’s been passed since the Patriot Act and Title 31.”
As a vehicle to address long standing concerns by both the private and public sectors, not all of the provisions within the AMLA apply to casinos and other gaming organizations. That said, several, including the provision on whistleblowing, do have significant implications for casinos and other gaming operators.
In regards to whistleblowing, the AMLA incentivises and protects AML whistleblowers, Chrisos said. It replaced a previous program that capped awards at either 25% of monies collected or $150,000, whichever was lesser. The new program offers whistleblowers bounties of up to 30% of all monetary sanctions recovered in a Bank Security Act (BSA) enforcement action that results from an informant’s tip. There is also no cap on the amount of money that can be awarded.
The new provisions also provide protection from retaliation for employees that report AML violations.
“Obviously, this is a bit of a game changer,” Chrisos said. “Some of these BSA enforcement actions can be in upwards of $500,000 or even in the millions…so 30% of that is not a bad award. It could certainly incentivize a lot more people to come forward as whistleblowers.”
Looking at the provisions from the perspective of a casino or gaming organization, there has been some discussion on whether the new provisions may also incentivize reports of perceived violations, which could cause headaches for operators.
However, as shared by DiGiacomo, he hasn’t found the potential exposure from the new whistleblower provisions to be a major concern for his gaming clients. While there is certainly enhanced exposure from the monetary incentives, the regulatory obligations placed on these gaming companies, including what is required for their state licenses, already covers what would trigger an AML report or investigation under the AMLA.
“The industry is certainly prepared to address it and respond accordingly,” he said.
Another provision within the AMLA of note for gaming industry operators is one that requires the Treasury Department to conduct an analysis on current currency translation report (CTR) and suspicious activity report (SAR) thresholds and determine whether they should be adjusted.
“In my perspective, this is long overdue. I think the $10,000 requirement for CTRs and the $5,000 requirement for SARs could stand to be increased,” Chrisos said. “There is an impetus there to increase those thresholds and hopefully that would ease some of the filling burden on [gaming] operators.”
According to Chrisos, the AMLA imposed 57 deliverables on the Treasury, the Justice Department and/or the Government Accountability Office (GAO), including proposed rules, final rules, studies, and reports. Of those, 25 of those were required within 365 days of the date the AMLA went into effect. While five of those deliverables have been made publicly available, the other 20 have not.
For those within the gaming industry, it’s important to keep an eye on these deliverables as they continue to become publicly available as they may directly impact the way they do business.
One of the deliverables that has been publicly released is “Anti-Money Laundering and Countering the Financing of Terrorism National Priorities.” This document serves as a list of FinCEN’s priorities regarding AML and countering the financing of terrorism (CFT). As stated by Chrisos, this is the first list of priorities published by the U.S. at the federal level specific to financial crimes.
These priorities are:
For gaming organizations, these priorities demonstrate areas that FinCEN would encourage operators to pay special attention to.
“Corruption, for example. FinCEN is reinforcing the fact that operators could be conduits for proceeds originating from political corruption. Again, this is just a reminder that you should be conducting robust due diligence on your higher risk patrons, especially for those patrons you’ve identified as being politically exposed, and undertaking the right type of analysis to verify that the money they’re bringing to the table is not emanating from fraud, embezzlement, or other types of political corruption,” Chrisos said.
DiGiacomo added that these due diligence measures should be periodic to ensure that evaluations continue to be accurate as circumstances change and evolve.
“It’s prudent to reevaluate that periodically because circumstances change and even though that person got through the process one time, they may warrant a revaluation, even if just on an annual basis,” DiGiacomo said.
Collaboration between the different lines of defense is also important in reducing the risk of illicit financial activity, Chrisos said.
“[The hosts] know their customers the best and they will probably be aware of any change in the customer’s circumstances and be able to explain a deviation in that customer’s normal playing patterns,” he said.
Another FinCEN priority, cybercrime, should be of particular interest for gaming organizations. In the last year, a number of casinos were hit with ransomware and other cyberattacks, Chrisos said.
For online operators, fraud has also been an area of concern, with an uptick in things like chargeback and account takeover fraud.
“I think the gaming industry can certainly learn from other industries that have gone virtual previously,” Chrisos said.
DiGiacomo agreed, saying that while going online does offer organizations additional tools, it also exposes other avenues for fraud that can be exploited by bad actors.
“The risk multiplies when you go online,” Chrisos said.
For those organizations operating through brick and mortar locations, the FinCEN priorities on human trafficking offer a reminder that casinos should include due diligence activities that scan for monies derived from these activities. For front of house employees, it’s also an additional area of potential training, especially as more gaming regulators begin requiring that employees undergo human trafficking training as part of the licensing process.
Brower said at his organization, they have a policy that requires training regarding human trafficking.
“Not only are we doing everything we can to combat this problem, we’re also looking for ways to combat the money laundering side of the human trafficking problem. It is a significant issue and it’s one that the industry is taking very seriously, as they should, and it’s hopefully something we can make some progress on in the near term,” he said.
The final piece of regulatory guidance that the group covered during the presentation was the Exceptive Relief for Casinos from Certain Customer Identity Verification Requirements, issued by FinCEN in October 2021.
In essence, this allows casinos to utilize non-documentary methods to verify patron identities instead of a government issued I.D., including consumer reporting agencies, public databases, or other sources.
“I think this was done as a nod to the increase of electronic or online gaming to allow casinos or gaming companies to exercise these additional methods of identification,” Chrisos said.
AML continues to be a major area of focus by regulators, and gaming organizations should mirror that focus in their own operations. In regards to sports betting, there has yet to be any enforcement actions within the U.S., but there has been plenty of activity abroad.
“When it comes to AML, U.S. regulators are typically the toughest and over the course of time, the U.S. regulators have been the most aggressive in terms of civil money penalties and fines. If we see this type of enforcement activity elsewhere in the world, I think it’s fair to assume there will be similar scrutiny placed on online sports betting operators here in the U.S.,” Chrisos said.
Brower agreed, saying that regulatory screening will only grow in the months and years ahead as regulators catch up to the realities of the online side of the business.
“Frankly, regulators are still just trying to catch up to the brick and mortar side of the business because the BSA started with application to traditional financial institutions, like banks. It’s taken some time for regulators to catch up with the realities of our industry,” he said. “I spend an extraordinary amount of time on AML compliance and I’m sure my counterparts at other organizations do as well.
You just can’t be too diligent and your training can’t be good enough, your policies can’t be tight enough…it’s just something that demands a lot of time and resources.”
To support AML compliance and training at your gaming organization, Vector Solutions offers online casino training, gaming compliance and safety solutions, as well as a gaming-specific course catalog of nearly 150 online training courses. Beyond AML compliance, our courses also include customer service, sexual harassment awareness and prevention, responsible gaming awareness, as well as safety, cybersecurity, HR and and leadership courses, all hosted in our powerful Learning Management System, Vector LMS for Casinos.
To learn more about the topics covered in the webinar we discussed above and watch it for yourself, please click here. Please contact us today to request a demo or learn more about how Vector Solutions can support AML initiatives.