| All businesses handling large
amounts of cash are subject to federal regulations that monitor
transactions to prevent customers or business partners from engaging in illegal
activity, such as money laundering. Financial services institutions,
such as banks, credit unions and securities firms, all fall under these
rules.
In 1992, the Financial Crimes Enforcement
Network (FinCEN), a law enforcement arm of the U.S. Department of the
Treasury, was authorized by Congress to require financial institutions
to file suspicious activity reports (SARs) to detect transactions that
were suspected of being linked to criminal activity. Banks and credit
unions began to submit SARs in April 1996, and the state of Nevada has
required its casinos to file SARs since October 1997.
As part of the federal government's strategy to combat money laundering,
FinCEN issued a proposed rule in May 1998 that would also require all
casinos and card clubs to file SARs. Although no final action has been
taken to implement the rule, a joint report released in September 1999
by the U.S. Treasury and Justice departments in the wake of Russian
money-laundering allegations highlighted this proposed rule as a
priority.
While transaction reporting requirements are not new for the casino
industry, the proposed rule would set a different standard for casinos
than for financial institutions. Banking institutions are required to
report suspicious transactions of $5,000 or more. Under the proposed
rule, casinos and card clubs outside Nevada would have a lower reporting
threshold than banks, requiring them to report suspicious transactions
of $3,000 or more.
In addition, the proposed language of the rule is vague, making it
difficult to determine under what circumstances a report would be
required. For example, the proposed rule would require a report to be
filed if a casino 'knows, suspects or has reason to suspect' activities
are suspicious. In contrast, the Nevada regulation requires casinos to
file an SAR if 'in the judgment of the casino a specific act or
transaction is suspicious.' The language of the proposed rule could lead
to second-guessing of the casino's judgment, defensive reporting or
overreporting, thus defeating the original intent of SARs to increase
the efficiency of the reporting process.
Because the proposed rule places on the financial institution the burden
of determining whether or not a transaction is suspicious, it would
leave casinos and their employees open to potential liability. Some
recent court decisions have suggested limitations on the immunity
granted to financial institutions under the Bank Secrecy Act, raising
the possibility that casinos could face lawsuits if they report patrons'
transactions as 'suspicious.'
Another language problem in the rule would essentially compel casino
employees to consider patrons guilty before proven innocent when
conducting transactions. Under the current language, transactions with
'no business or other lawful purpose' are considered suspicious. Because
casino patrons do not have 'business' purposes on a gaming floor, all
transactions in a casino could technically be considered suspicious
under this proposal.
Finally, the federal government already requires casinos to report cash
transactions of more than $10,000. Currency Transaction Report by
Casinos (CTRC) filings also have been used to report suspicious
transactions. |
