Casinos: Keeping In Line With Title 31 (Part II)

Topics: Fraud, Government, Money Laundering, Regulation & Compliance, Regulatory Intelligence, Thomson Reuters Regulatory Intelligence

Title 31

In a new two-part blog series, “Casinos: Keeping In Line With Title 31”, we will examine how casinos are on the front lines of money laundering investigations amidst rising government enforcement actions.

Will casinos (and other non-bank financial institutions) eventually need to be compliant with the “fifth pillar” of customer due diligence and beneficial ownership information?

In addition to the growing responsibilities of casinos in regards to Title 31, Jeremy Kuester, a counsel at White & Case and a former Deputy Associate Director for the Policy Division of the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN), noted that casinos also have a heightened obligation to make customer due diligence work for their compliance strategy.

Indeed, key challenges for casinos going forward include “how do you determine who your customers are? How do you collect the information required for reporting obligations, like suspicious activity reports (SARs) and currency transaction reports (CTRs)?” Kuester said. “Larger gaming places may use technology solutions, they may have specific loyalty cards, their cashiers are well trained to ask for this information. But it’s a real challenge to apply the sort of anti-money laundering (AML) compliance methodology that banks use to the gaming space — and in some cases, it’s just not applicable.”

Some ways casinos can heighten AML efforts include:

Forge stronger links between marketing and risk management — A casino’s marketers and customer relations officials are tasked with bringing in top-spending patrons, using such efforts as discounts, loyalty cards, and other promotions. However, what’s increasingly clear is that player development must work hand-in-hand with customer due diligence. No longer can high-rolling customers avoid serious background checks because they are willing to spend millions of dollars at a casino each year. “The property could get fined if their Title 31 person doesn’t have the player development staff supply all of the information they have,” noted Robert Ashton, Tribal Gaming Agency Manager for the Jackson Rancheria Casino and Resort, in Jackson, California.

His casino’s marketing team had a “top 25” report issued every few weeks — a list of which clients were spending the most, their win potential, and so forth. He saw this as an opportunity to push for deeper background checks. “I want to make sure all of those people are legitimate. Any time that someone hits our top 25 for the first time in a year, they get put through a background investigation. We take what could be a potential problem — money coming in and out in large quantities — and investigate those people for legitimacy.”

Title 31

Greater emphasis on physical observation — Having sharp eyes and ears on the casino floor is important. If a customer appears to be avoiding detection, such as playing for large stakes but declining to use a customer card, the casino could use close-circuit cameras to track the patron’s movements, including out to the parking lot.

“Even if we don’t have a name, we’ll have a license plate, make and model for a suspicious activity report,” Ashton said. If the casino finds the car in question returning for multiple visits, particularly with different patrons, that would be another red flag.

Improved use of technology improves background checks — It’s important to remember that casinos are in an arms race against money launderers and other criminals. The more sophisticated the latter get, the greater a casino’s need for enhanced information technology.

“We’re trying to use all our resources to be able to find out who they are. We’re connecting all the pieces and constantly trying to obtain identification,” Ashton explained. “Whether that’s getting people to sign up for cards, getting vehicle information, or using third-party online investigation software, and negative media searches to look for such indicators as a patron’s work affiliation not matching the money they’re spending. You’re looking for priors, and relatives and associates with priors.”

Another red flag is an affiliation with the marijuana industry. While marijuana is legal in states like California, due to federal banking laws, distributors and growers “have nowhere to bank their money, so there is the potential that they’ll come into casinos because they have no other avenue to conduct banking transactions,” Ashton said. “With FinCEN guidance, we’ve decided that we will not knowingly do business with anyone involved in marijuana. The risk is just too high.”

Casino operators expect government regulation levels won’t decline and may likely increase, even if operators won’t have to officially comply with the Customer Due Diligence (CDD) obligations.

“They want to audit every single casino in the U.S. — how long that will take, I don’t know,” Ashton predicted. “I don’t see them lessening regulation at all. If anything, I see them becoming more stringent on quality, making sure that you’re using all your resources, so that when they step in the door to audit you, they already have a clear picture of where any potential deficiencies are.”


Anti-money laundering regulations related to casinos are continuing to evolve. As these changes take place, you can help ensure your institutions aren’t unwittingly financing money launderers.

TRRI