FinCEN Taj Mahal Penalty First Major Bureau Fine Against Large Casino

The US Treasury’s $10 million penalty against the Trump Taj Mahal Casino Resort last week for anti-money laundering program violations, the first significant fusillade the bureau has ever fired against a large gaming operation, has gotten the industry’s attention.

The penalty against the Atlantic City, NJ-based operation is also the largest the Financial Crimes Enforcement Network (FinCEN) has ever levied against a household name casino and marks the second time in less than two years a federal agency has meted out hefty penalties against such operations for financial crime program violations.

Here is a roundup of FinCEN Casino Penalties:

Casino:                                   Penalty size:               Date:                           Violation:

Trump Taj Mahal                     $10 million                  March 2015                 Missed SARs, CTRs

George Que                            $5,000                        August 2014               Missed SARs, CTRs

Jackpot Junction                     $250,000                    April 2011                   Missed SARs, CTRs

Tonkawa Tribe, E. Street         $2.5 million                 March 2006                Missed SARs, CTRs

Lighthouse Point Casino          $350,000                     May 2003                  Missed CTRs

The penalty is also evidence of the new mantra and mindset of FinCEN’s leader, Jennifer Shasky Calvery, who took over the bureau in September 2012 from heading the US Department of Justice’s Asset Forfeiture and Money Laundering Section.

Shasky Calvery had stated in conferences in recent years she was more willing to penalize a broad range of industries for program failures.

She buttressed that sentiment in discussions with banks and casinos, stating there was a sense that some gaming operations had weak AML controls with little desire to improve them and risk losing high-net worth customers with possible ties to criminal gangs or corrupt foreign political power brokers.

FinCEN stated that the Taj Mahal had AML problems dating back to 2003 with strings going further to 1998, when the bureau penalized it nearly $500,000 for failing to aggregate and file currency transaction reports (CTRs).

In addition, examiners from the IRS AML division, which examines many of the sectors subject to financial crime rules but are without a federal functional regulator, noted that the Taj Mahal had failed to report on possible suspicious activity, file required CTRs and even adequately audit its AML defenses as far back as 2010, with unresolved problems extending to 2012.

The Taj Mahal is currently in bankruptcy proceedings and has been so since filing in September, its third time filing since 2004. FinCEN stated the bankruptcy court has approved the settlement.

The action states that the Taj Mahal failed to file 100 SARs between 2010 and 2012, representing a 56 percent failure rate, with the suspicious activities including patrons engaging in minimal gaming activity, structuring marker payments and redemptions to avoid CTR rules and laundering the issuance and redemption of tickets.

More broadly, IRS AML examiners found that the casino didn’t have the ability to monitor patrons across various gaming platforms, table gaming, slots and when those individuals were cashing in and out, making it difficult for the company to capture and aggregate disparate data points and determine if suspicious activity was occurring or if the customers had breached reporting thresholds.

Though casinos have had state and federal AML requirements for more than a decade, it’s only more recently that operations, in particular large companies such as those in Las Vegas, have had their AML programs dissected by examiners and been on the receiving end of hefty penalties.

Prior to the latest FinCEN penalty, in August 2013, Sands Corp. agreed to pay the US Justice Department $47.4 million to settle allegations that it had failed to identify nearly $60 million in suspicious transactions.

Two months later, Caesars Entertainment Corp., the parent company of Las Vegas-based Caesars Palace, disclosed in regulatory filings that it may be subject to a FinCEN penalty, with additional reports at that time stating that the bureau was also scrutinizing the financial crime programs of the MGM Grand and Wynn Las Vegas.

In the August 2013 non-prosecution agreement with Sands, prosecutors said that compliance staff at the Venetian-Palazzo failed to identify nearly $45 million in wire transfers and $13 million in cashier’s check deposits between February 2005 and March 2007 by Zhenli Ye Gon, a Chinese national accused of trafficking narcotics.

The casino allowed the transactions even though Ye Gon used multiple third parties to move the funds, including foreign casas de cambio, and compliance officers could not link him to most of the businesses he said he owned, key red flags that should have warranted further investigations.