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Do As I Say, Not As I Do

Transparency and integrity in casino financial transactions

Do As I Say, Not As I Do

A few years ago, Jennifer Shasky Calvery, the director of the Justice Department’s Financial Crimes Enforcement Network (FinCEN), came to G2E and dressed down the casino industry for its lack of transparency when it came to cash transactions. She scolded casinos for not being more forthcoming about the sources of the funds that are deposited by players.

This address clearly shook the industry to its core. She was suggesting that virtually everything the industry was doing was wrong and needed to be improved.

Later, FinCEN proposed dropping the slot jackpot threshold from $1,200 to $600. That’s not even considering that the $1,200 threshold was established in 1978, and $1,200 in 1978 dollars isn’t even close to $1,200 in 2016 dollars. Luckily, the industry was able to dodge that bullet, but Calvery’s message was loud and clear: Clean up your act.

Now to be sure, casinos can’t account for every penny that their customers deposit to gamble. But undoubtedly, they can do better than to simply turn their heads and deny, deny, deny.

But when Calvery stepped down from FinCEN, she made a move that would never have been accepted in any regulated gaming jurisdiction. She immediately jumped to British bank HSBC Holdings Plc., taking a leading position in that company. FinCEN has the responsibility of regulating banks, so like gaming, there should be some kind of “cooling off” period, but there is not. So Calvery can just walk out the back door of FinCEN into the front door of HSBC.

But what makes this move even more egregious is the fact that the DOJ in 2012—during Calvery’s reign—fined HSBC a record $1.92 billion for laundering $850,000 for a Mexican drug cartel. Certainly, Calvery brings some credibility to HSBC, but that credibility is sullied by the haste with which she took the job.

But FinCEN has not gone away. At a Las Vegas conference in September, a representative of the Justice Department chided casinos and card clubs to uphold the Bank Secrecy Act. Some high-profile cases most likely spurred that warning. A $1 million fine for violations of anti-money laundering regulations was levied against the former owners of the Sparks Nugget in Reno, and the longtime owners of the legendary Normandie card club in California were forced out after many financial reporting violations were uncovered. Other violations at California card clubs have also been revealed in the last year.

So casinos must do everything they can to abide by the regulations, as confusing as they are. For example, casinos are required to file Suspicious Activity Reports for anyone who moves at least $5,000 through the cage in one day. But the caveat that the casino must have a reason to suspect illicit activity makes this particularly perplexing.

Last month, William Hill opposed a strengthening of the anti-money laundering reporting required in Nevada for sports books. A complaint was filed by tiny Mesquite Gaming, which operates two casinos in Mesquite. They compete against another casino in the market that takes advantage of a loophole in state regulations that allows them to avoid reporting $10,000 winning sports bets.

William Hill objects, saying that there have been no violations and the complaint is more about competition than regulation.

Here’s where the casino industry needs to go the extra mile to avoid the scrutiny from FinCEN. If you wait for a violation to occur, there’s going to be repercussions. If you have regulations in place to prevent violations, FinCEN will most likely be more amenable to logical explanations.

FinCEN and the DOJ can certainly overreach when it comes to transaction reporting by casinos, as evidenced by their attempt to change the jackpot threshold to $600. And those things should be opposed by the industry because they serve no purpose.

But with today’s electronic transactions, it’s getting easier to track this activity, and FinCEN is going to want to see what’s occurring with cash coming in and going out of your cage. So let’s get used to providing them with more and more information, so the casino industry will achieve the goal of a transparent business with the integrity for which we all strive.

Roger Gros is publisher of Global Gaming Business, the industry's leading gaming trade publication, and all its related publications. Prior to joining Global Gaming Business, Gros was president of Inlet Communications, an independent consulting firm. He was vice president of Casino Journal Publishing Group from 1984-2000, and held virtually every editorial title during his tenure. Gros was editor of Casino Journal, the National Gaming Summary and the Atlantic City Insider, and was the founding editor of Casino Player magazine. He was a co-founder of the American Gaming Summit and the Southern Gaming Summit conferences and trade shows. He is the author of the best-selling book, How to Win at Casino Gambling (Carlton Books, 1995), now in its fourth edition. Gros was named "Businessman of the Year" for 1998 by the Greater Atlantic City Chamber of Commerce, and received the Lifetime Achievement Award from the American Gaming Association in 2012.

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