United States: FinCEN Doubles Down On Casinos With Heightened Regulatory Expectations

Gregory Baldwin is a Partner in the Miami office and Kathleen Nilles is a Partner in the Washington D.C. office.

For the second time in nine months, Financial Crimes Enforcement Network (FinCEN) Director Jennifer Shasky Calvery has publicly addressed FinCEN's increasing concerns regarding casino compliance with the Bank Secrecy Act (BSA), including tribal casinos. In her latest remarks on June 12, 2014, at a BSA Conference in Las Vegas, Dir. Shasky Calvery highlighted what FinCEN expects casinos to do and what points FinCEN and the Internal Revenue Service (IRS) will be looking for in conducting Title 31 casino audits.1

Tribal casino management and tribal gaming commissioners need to be aware of these issues and pay closer attention to the implementation, supervision and regulation of casino anti-money laundering (AML) compliance programs and the preparation for the casino's next IRS Title 31 compliance audit.

The primary concerns of FinCEN and the IRS are the following:

  • casinos must know the source of their customers' gambling funds
  • casinos should develop effective risk-based AML compliance programs based on solid written risk assessments
  • casinos should comply with mandatory information sharing and participate in voluntary information sharing
  • casinos should be aware of a new "red flag" called "chip walking"

FinCEN Expects Casinos to Know the Source of Their Customers' Funds

In her speech, Dir. Shasky Calvery sharply denied recent press reports that existing BSA rules do not require casinos to vet their customers' source of funds and denied that FinCEN rulemaking would be forthcoming on this subject. She said, "Casinos are required to be aware of a customer's source of funds under current AML requirements." As she explained, as far as FinCEN is concerned, casinos are already expected to be aware of the source of their customers' gambling funds, and a casino's Know Your Customer (KYC) procedures need to specifically include this.

Dir. Shasky Calvery based this mandate on the existing requirement that casinos report suspicious activity. Meeting this obligation, she said, requires every casino to know its customers, and that includes an implicit understanding of the source of funds under a risk-based approach.

Although she declined to specify exactly how far casinos need to go in verifying sources of fund at the various levels of play, Dir. Shasky Calvery emphasized that "[a] casino's capability for knowing its customers' preferences and credit information – combined with [its] security technology – can and should be leveraged to piece together relevant information to understand [its] customers' source of funds." In short, if a casino is not already determining its customers' source of funds, waiting for forthcoming rulemaking or clarification will not be an excuse.

Importance of Risk-Based AML Compliance

In her address, Dir. Shasky Calvery stated that effective AML compliance programs must be "risk-based." In virtually all BSA audits, a primary starting point is the casino's written AML "risk assessment." If casinos do not have an up-to-date risk assessment, they will be instructed to prepare one. Further, if a casino doesn't have one or if the IRS decides that its risk assessment is outdated or inadequate, the IRS will develop its own risk assessment and use it as the starting point for that casino's audit.

Because AML is risk-based, there is no "one-size-fits-all" casino AML program, Dir. Shasky Calvery said. FinCEN cannot just "tell casinos what to do" or issue a definitive "yes-or-no/check-the-box" form because every casino – and its money laundering risk – is different. A casino's program must therefore be tailored to the risks it faces, which in turn are based on the types of financial services it offers, the profile of its patrons and the community in which it is located.

Dir. Shasky Calvery further stressed that casinos, like all financial institutions, need to cultivate a "culture of compliance." While this should not be difficult for tribal governments, there is sometimes a lack of connection between the compliance mandates of tribal gaming commissions and the financial incentives of tribal casino managers. Casino management, not just tribal gaming commissioners, must set the right "tone at the top" on compliance matters.

Information Sharing Mandates and Opportunities

Information sharing, which is another focus of Dir. Shasky Calvery, allows the exchange of information relating to money laundering and terrorist financing under a safe harbor that prevents the party giving information from being sued in court. The two types of information sharing are mandatory sharing under section 314(a) and voluntary sharing under section 314(b) of the USA PATRIOT Act.

Mandatory information sharing requires recipients to promptly respond to written FinCEN inquiries about accounts maintained by or transactions conducted with certain individuals or entities named in the inquiry. In the past, FinCEN has not issued 314(a) requests to casinos but has issued more than 43,000 requests to banks and other entities. Noting that 95 percent of these requests have contributed to arrests or indictments, Dir. Shasky Calvery implied that FinCEN will start sending 314(a) requests to casinos in the future.

Since mandatory information sharing is required by existing regulations, casinos should already have procedures in place for responding to these requests.2 However, many casinos do not because FinCEN has not issued 314(a) requests to casinos in the past. Based on Dir. Shasky Calvery's remarks, this is likely to change, and casinos will need to prepare written procedures designed to receive – and properly respond to – 314(a) requests from FinCEN.

Voluntary information sharing in Section 314(b) allows casinos to share information (including specific customer information) with other casinos as well as banks and other financial institutions for the purpose of identifying and reporting activities that the casino suspects may involve possible money laundering or terrorist information. The information received may be used only to report money laundering or terrorist activity, to determine whether to open or maintain an account, or to assist in complying with the BSA. If the regulation governing voluntary information sharing is fully complied with, no party exchanging information may be sued in any court.3

Furthermore, Dir. Shasky Calvery stressed that FinCEN strongly encourages casinos to engage in voluntary information sharing and pointed out that it is a valuable tool in identifying reportable suspicious activity and that FinCEN's website has details on how to take advantage of this program and the benefits of doing so. Casinos should seriously consider registering for voluntary information sharing as one means of using all available information to determine the occurrence of any transactions or patterns of transactions required to be reported as suspicious.

A New Red Flag: Chip Walking

Dir. Shasky Calvery closed her conference speech by warning casinos of a particular activity that has come to the attention of FinCEN and federal law enforcement as a potential "red flag" of suspicious activity, namely "chip walking." This is a process in which a customer leaves the casino with a large amount of chips or stores them on-site in a lock box for an extended period of time. Dir. Shasky Calvery said that law enforcement knows that there may be legitimate reasons for customers to do this, but it also could be a sign that the customer is trying to hide funds or structure reportable cash transactions, or use the chips as a form of currency for illegal transactions such as drug deals.

If it's for an illegitimate purpose, then "this is the kind of activity that [casinos] should report" as suspicious activity, Dir. Shasky Calvery said. When such a circumstance arises, a casino will be expected to identify it when it happens, investigate it, and report it on a Suspicious Activity Report (commonly known as a SAR) when appropriate. This means the "red flags" listed in AML procedures should include chip walking, and employees must be trained to identify and report this "red flag" as well as all others for review by compliance personnel.


1 Dir. Shasky Calvery's speech can be read at http://www.fincen.gov/news_room/speech/html/20140612.html

2 See31 C.F.R. 1010.520; 1021.520.

3 See31 C.F.R. 1010.540; 1021.540.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions