United States: FinCEN Assesses Significant Penalty Against Casino For Bank Secrecy Act Violations

Philip "Phil" Baker-Shenk and Kathleen M. Nilles are partners in our Washington, D.C. office and Gregory A. Baldwin is a partner in our Miami office.


  • The Financial Crimes Enforcement Network (FinCEN) assessed a civil money penalty in the amount of $2.8 million against The Gardens Casino for Bank Secrecy Act (BSA) regulatory violations.
  • Members of the tribal and commercial casino industry need to actively address any BSA anti-money laundering deficiencies or potentially pay similar costly penalties.

The Financial Crimes Enforcement Network (FinCEN) assessed on July 15 a civil money penalty in the amount of $2.8 million against Hawaiian Gardens Casino Inc., d/b/a The Gardens Casino, for Bank Secrecy Act (BSA) regulatory violations. The penalty sends a direct message to the entire tribal and commercial casino industry: Promptly correct your BSA anti-money laundering (AML) deficiencies or pay a costly price.

FinCEN issued Assessment of Money Penalty Number 2016-04 (the Assessment) against The Gardens Casino located in Hawaiian Gardens, Calif. The Gardens is considered a "card club" in regard to the BSA, which means that it is required to comply with the same rules that apply to casinos.

How The Gardens Casino Was Caught and Why It Was Fined

A recurring theme throughout the 16-page Assessment is that the issues leading to the $2.8 million penalty "spanned the course of several years" from September 2009 to the present. Even worse, many of the issues had already been identified and reported to The Gardens at least two times before the latest Internal Revenue Service (IRS) audit leading to the $2.8 million penalty. The first time was by the IRS in 2011, after what appears to have been a routine BSA/AML audit. Not only were those deficiencies not corrected following the 2011 audit, they continued and were identified again by an independent consultant hired by The Gardens in 2013. Even then, the deficiencies remained uncorrected and were identified a third time by the IRS in the course of its second BSA/AML audit in 2014.

FinCEN is making certain that the long-standing deficiencies at The Gardens will, at long last, be corrected. In addition to paying the $2.8 million penalty, The Gardens is required to complete a new Risk Assessment within 90 days of the Assessment and to retain – at The Gardens' sole expense – "an independent, external, qualified, and experienced external auditor" acceptable to FinCEN to examine The Gardens' BSA/AML program and to test the remedial steps taken by The Gardens to correct the existing deficiencies.

The examiner will be engaged for more than three years (and at substantial additional expense to The Gardens) because the testing will involve three reviews taking at least that long to complete. The first will begin 90 days after the completion of the Risk Assessment, the second will take place no later than 12 months after the completion of the first and the third will take place no later than 24 months after the completion of the second. Each review will be sent to FinCEN, and each will cover the prior year and at least three months of transactional analysis to include a review of suspicious activity reporting (SAR) filing for that period.

The Deficiencies

FinCEN found that The Gardens' BSA/AML program failed to cover, and in some cases did not even discuss, all of the necessary elements required by BSA regulations. These missing elements included:

  • transaction monitoring and red flags
  • customer identification and verification
  • preparing and filing SARs and currency transaction reports (CTRs)
  • recordkeeping
  • addressing deficiencies identified in prior compliance tests

The Gardens also failed to use all available information to 1) identify and verify customer information, including permanent address and Social Security number, and 2) determine transactions or patterns of suspicious activity. It failed to use information available in its own database, as well as open-source public information available on the internet. As a result, it missed red flags and reportable suspicious transactions, and 80 percent of its SARs and 5 percent of its CTRs filed in a 21-month period had at least one "unknown" subject, serving only to pique IRS interest.

The Gardens' recordkeeping was also seriously deficient. The IRS exam leading to the Assessment found that all of the entries in the negotiable instrument log were incomplete in one or more ways, including missing the type of instrument, missing the name of the drawee and listing multiple customers with only a P.O. box as a permanent address.

The Importance of Establishing a Culture of Compliance

A major concern of FinCEN was The Gardens' failure to create a culture of compliance, a key BSA/AML element enunciated by FinCEN in its August 2014 Advisory FIN-2014-A007. FinCEN concluded that "the leadership" at The Gardens did not take an active role in promoting a strong culture of compliance. For example, the Risk Assessment was inadequate and insufficient, and it had not been reviewed and approved by senior management. Further, the compliance officer had no prior experience in the gaming industry or in BSA/AML compliance; instead, he was trying to learn the BSA regulations while on the job. In addition, the casino's leadership failed to ensure that corrective steps were taken to remedy the BSA/AML deficiencies identified in the prior two audits. These are deficiencies laid directly at the door of every casino's senior management according to FinCEN's August 2014 advisory.

The FinCEN Assessment of Civil Money Penalty is available on FinCEN's website.  

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.

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