Not Ready for Prime Time

There’s an episode of the Seinfeld television program in which Kramer decides he wants to be a corporate executive and manages to find an empty office with a large company. He begins showing up for work even though he is never officially hired and doesn’t get paid.

He’s dressed in a suit and tie—unusual for Kramer—and attends meetings and goes out for drinks with the other execs after work. But when push comes to shove, his “boss” realizes that Kramer has no idea what he’s doing. “It’s almost as if you have no business training at all,” says the boss.

Well, that seems to be the case with lots of the player development execs and casino hosts on the Las Vegas Strip. The big companies—Wynn Resorts, MGM Resorts, Resorts World Las Vegas and others—have paid millions of dollars in fines for failing to prevent money laundering and for violating “know your customers—KYC”

regulations. Lots of this occurred after the federal government had warned the industry that it needed to tighten up the way it processes money.

But Nevada regulators had no clue that this was happening until the IRS and Homeland Security indicted several officials at Resorts World Las Vegas. Scott Sibella, a highly respected former MGM executive and RWLV CEO, became the poster boy for wrongdoing. But he was only following the processes that were being practiced at MGM properties for years.

The indictments surrounded a group of high-rolling illegal bookmakers, one of whom, Mathew Bowyer, took millions of dollars in illegal bets from the translator for Los Angeles Dodgers star Shohei Ohtani, who was using Ohtani’s own money. Millions of dollars were reportedly funneled through the casinos by the bookmakers in a way that suggested money laundering.

I was a dealer at the Golden Nugget in Atlantic City in the mid-1980s when the IRS instituted a law that casinos had to report buy-ins of more than $10,000. Before that, the cash was flying across the tables without any oversight, to the delight of the casinos and the players, who might play one hand and walk away with freshly laundered money. Afterwards, the pit bosses and supervisors were very diligent in reporting any large buy-in.

So what happened in the intervening years, even with a stern warning from the IRS in the mid-2010s? If pit bosses and supervisors knew the rules back in the ’80s, you can be sure player development and casino hosts were well aware of the pitfalls of taking large deposits without notifying state regulators and the IRS.

The fact that this practice was so widespread is disturbing. And the millions of dollars paid in fines dwarfs the amount the casinos likely made from those nefarious deposits—even with Wynn forfeiting more than $130 million to the U.S. Justice Department in addition to the $5.5 million fine issued by Nevada regulators.

In a hearing about the $8.5 million fine imposed by the Nevada Gaming Control Board, MGM executives claimed they had a good AML compliance program in place. “But we could do better.”

MGM, and all gaming operators for that matter, will have to do better. You can be sure the IRS is going over all the financial disclosures with a fine-toothed comb, and one misstep could result in millions of dollars of additional fines and possible license revocations.

The Financial Crimes Enforcement Network (FinCEN) also doesn’t fool around. Through its relationship with the Financial Action Task Force (FATF), its focus goes far beyond the U.S. The FATF designates nations that may be hotbeds for money laundering. That in turn affects the ability of those countries to borrow money from the world’s largest banks, so a negative rating from FATF is never a good thing. Inside the U.S., FinCEN enforces FATF ratings, so casinos need to toe the line when it comes to AML, KYC and compliance.

While all casino companies have chief compliance officers, those individuals now need to be empowered to ensure that all customer-facing executives and employees understand laws and regulations and the importance of these issues.

Like security and surveillance, compliance is a non-revenue producing division of companies, and it therefore doesn’t get the attention of divisions that actually produce revenue. But compliance now needs to be at the top of the list for gaming companies, operators and suppliers alike. Because your existence literally depends upon it.