United States: FinCEN Announces Caesars Penalty After Multiyear Investigation

Last Updated: September 17 2015
Article by Jeffrey M. Hanna and J. Patrick Rowan

This week the Financial Crimes Enforcement Network (FinCEN) announced a Consent Agreement that imposed an $8 million civil penalty against Desert Palace, Inc. d/b/a Caesars Palace. Caesars first disclosed the investigation in SEC filings in late 2013. The investigation grew out of a 2012 audit performed by FinCEN's examiner, the Internal Revenue Service Small Business/Self-Employed Division (IRS SB/SE).

In addition to the penalty, the Agreement made factual determinations and imposed "undertakings" – remedial measures – intended to bring Caesars into compliance with the requirements of the Bank Secrecy Act (BSA) and its implementing regulations under Title 31. The emphasis on the undertakings is consistent with FinCEN's remedial enforcement approach, and it is conceivable that the cost of the undertakings will exceed the fine. In addition, FinCEN identified many compliance concerns. Accordingly, the Agreement contains plenty of issues for compliance professionals to consider in assessing their own anti-money laundering (AML) programs.

Factual Determinations

FinCEN found that Caesars willfully violated the BSA's requirements (1) to develop and implement a reasonably designed AML program, and (2) to report suspicious activity.

Violations of the Requirement to Develop and Implement an Effective AML Program

While identifying a number of violations, FinCEN focused on "severely deficient internal controls" for private gaming salons and the failure to monitor branch offices for suspicious transactions in marketing the private salons. FinCEN noted that both "catered to the casino's wealthiest – and riskiest – clientele." These deficiencies caused a "blind spot" in the compliance program. Following is a summary of the factual determinations found in the Agreement.

Internal Controls

  • Private Gaming Salons. Caesars "creat[ed] the opportunity for unknown patrons" to gamble significant sums anonymously by permitting "team play" or a shared/common bankroll in the salons. By permitting guests to play from the primary player's front money or credit line, Caesars did not identify the other gaming patron(s), thereby potentially "frustrating recordkeeping and reporting requirements."
  • Branch Offices. "Caesars did not consistently monitor [its] branch offices for suspicious activity." As examples, FinCEN cited to Caesars' Hong Kong office accepting $50,000 in cash without staff or BSA compliance personnel "deeming the transaction suspicious or conducting any inquiry regarding the source of funds." In addition, Caesars "routinely" accepted third-party checks at its Hong Kong branch office without verifying the relationship between the patron and the third party.
  • Detecting and Reporting Other Suspicious Activities. FinCEN identified a "broad range of suspicious activity" that went unreported or was not flagged internally (listed below).
  • Independent Testing. FinCEN identified that Caesars did not implement its own AML procedures for detecting suspicious activity, and its tests assessed only whether the casino implemented its own AML policies, not whether it was in compliance with the BSA.
  • Training. Caesars failed to provide adequate BSA training for employees, some of whom believed that (1) suspicious activity reports (SARs) applied only to cash transactions, and (2) the filing of a currency transaction report (CTR) relieved a casino of its obligation to file a SAR.
  • Procedures for Using All Available Information. Caesars failed to use data collected for marketing purposes to satisfy BSA obligations. Of note, Caesars did not draw upon this information to verify relationships between patrons and third parties who made payments.

Violations of SAR Reporting Requirements

The Agreement identified a number of scenarios in which Caesars failed to file a SAR, citing more than 100 instances during the period covered by the IRS SB/SE 2012 exam. These included the following:

  1. permitting "team play" (common/shared bankroll)
  2. suspicious transactions at branch offices
  3. third-party payments from unrelated individuals/businesses
  4. structuring
  5. minimal gaming/bill stuffing
  6. chip walking
  7. observing suspicious behavior of individual patrons

The Agreement highlighted a few examples where FinCEN believes a SAR should have been filed:

  • A patron received over $300,000 in wires from two unaffiliated individuals and four different businesses located in two different countries.
  • A patron took out $35,000 in cage markers, but risked only 1 percent of the funds.
  • A patron took out a slot marker, engaged in minimal play, and then wired in external funds to satisfy the marker.
  • Patrons, in 22 instances, structured transactions between $9,000 and $10,000.
  • In four instances, patrons "walked from the pit with chips worth over $10,000."


Under the Agreement, Caesars is required to implement several improvements to its BSA/AML program, including "those with respect to fostering a culture of compliance, complying with all applicable BSA programs, recordkeeping, and reporting requirements, including implementing risk-based 'Know Your Customer' (KYC) measures and preventing and detecting money laundering." These include:

  • An External Independent Reviewer. Caesars is required to retain a third-party reviewer to perform four annual reviews, each of which will cover at least three months of transactional analysis. The testing "will include program governance, compliance structure and staffing; risk assessments; compliance with all BSA recordkeeping and reporting requirements, including CTR, SAR, and KYC policies, procedures and controls; transaction monitoring; and training and communications."
  • AML Program Report. Caesars must provide four annual reports to FinCEN on the status of its BSA/AML program implementation.
  • Training Plan. As with the reviews and reports, Caesars must, for four years, provide FinCEN with a copy of its training program, attendance records and the results of any testing conducted.
  • SAR Look-Back. Caesars (or a third party) must review all transactions conducted through its Asia and Monterey Park, California, branch offices for the three-year period ending December 31, 2014. Caesars must file or update SARs as necessary.

Lessons for Operators

As chronicled here, this enforcement action is just the latest demonstration of FinCEN's commitment to bringing casino compliance programs closer in line with those of "traditional" financial institutions. In light of the penalties – in particular, the burdensome and protracted remedial measures – U.S. casinos must make compliance a priority. Otherwise, FinCEN's message appears to be that if a casino does not establish an effective BSA/AML program, there is a significant risk that FinCEN will play an intimate role in designing one. Designing, implementing and testing an effective BSA/AML program seems a far more attractive alternative, particularly since FinCEN has stated that credit is available for making documented improvements.

The following are some additional reminders from this enforcement action:


A failure to take corrective measures after a gap has been identified during an IRS examination is certain to draw FinCEN's ire. Here, the Agreement noted that procedures to detect and report "bill stuffing" were not implemented until late 2012, even though this need was identified in the 2008 examination.

Know Your Customer (KYC) Practices

Though not explicit in the Regulations, FinCEN's director has stated affirmatively, "Casinos are required to be aware of a customer's source of funds under current AML requirements." FinCEN emphasized this point in the Agreement, requiring that Caesars comply with "all BSA recordkeeping and reporting requirements, including CTR, SAR, and KYC policies, procedures and controls." Casinos should be mindful that, under the Regulations, a "customer" refers to anyone party to a reportable or recordable transaction, not just the wagerer. Obviously, this implicates third-party transactions, which were emphasized in this Agreement.

The Importance of SARs

With FinCEN's focus on reporting suspicious activity in this Agreement and in general, casinos should reexamine the training provided to their personnel in identifying and reporting suspicious activity. As stated in its August 11, 2014 Advisory (FIN-2014-A007), FinCEN is using SAR and CTR reporting to "serve as tips to initiate investigations" and "expand existing investigations." FinCEN may identify the failure to file SARs through an examination of the casino or an independent investigation. For example, if a patron who is the subject of an unrelated investigation has spent substantial sums at a casino without that casino reporting such activity or performing due diligence on that patron, FinCEN may scrutinize the casino's KYC procedures and recordkeeping practices. The lesson here seems to be that a casino must assiduously comply with its obligations to identify and report suspicious activity.

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
Related Video
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
Check to state you have read and
agree to our Terms and Conditions

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.

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 by clicking here .

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.


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.