As an industry with a constant stream of new customers and transactions, the casino and gaming sector is a prime target for criminals and money launderers.
To combat money laundering and criminal activities, casinos and gaming institutions have become some of the most heavily regulated businesses in operation. These regulations, while necessary for the prevention of illicit activities, can be difficult to understand and manage.
In this article we will go over Title 31 casino regulations, penalties for compliance failures and ways to ensure compliance.
What is Title 31?
Title 31 is a component of the Bank Secrecy Act (BSA). In 2008, FinCEN proposed a restructuring of 31 CFR 103 of the BSA in order to improve the effectiveness of its regulatory oversight. In short, Title 31 requires banks and other financial institutions, including casinos, to comply with recordkeeping and reporting requirements.
Which Regulatory Body Enforces It?
The BSA, and Title 31 by association, is under the primary responsibility of the Department of Treasury. The Secretary of the Treasury, however, has delegated the responsibility of implementing and enforcing the BSA to the Director, Financial Crimes Enforcement Network (FinCEN).1
The responsibility of assuring that financial institutions comply with the BSA has also been delegated by the Secretary of Treasury to a variety of federal agencies, including the IRS.
Which Casinos and Gaming Institutions Must Comply with Title 31?
The BSA states that all casinos and gaming institutions that have a gross annual gaming revenue of $1 million or more must comply with Title 31.
If a casino or gaming institution’s gross annual gaming revenue is below $1 million it is not subject to Title 31, but rather Title 26, which we will be covering in a follow up article.
What Your Casino’s AML Program Needs for Title 31 Compliance
Ensuring compliance to Title 31 is a necessary component for your casino’s AML compliance program. If your casino meets, or exceeds, the threshold of $1 million in gross annual gaming revenue, it will need to meet the following requirements:
- Implement internal controls for compliance assurance
- Conduct independent compliance testing to understand money laundering and terrorist financing risks
- Ongoing training of employees which includes identification of suspicious transactions/activities
- Procedures in place to use information to find a customer’s name, address and Social Security Number in order to verify identity of customer
- Procedures in place to utilize all available information to aid in detecting and determining suspicious transactions and patterns of suspicious activities, as well as detecting instances that are required to be reported
- Procedures in place for casino’s computer systems to assist with compliance (if the casino has computerized systems)
- A compliance officer fulfilling daily compliance duties2
Title 31 Compliance Failure Penalties
If your casino or gaming institution meets or exceeds the threshold of $1 million in gross annual gaming revenue, and is found to not be in full compliance with Title 31, it can result in various penalties and fines. These penalties can be either civil or criminal.
Compliance failures may result in the following civil penalties:
- Each negligent violation of any reporting or recordkeeping requirements may result in a civil penalty, that is not to exceed $500.
- A penalty not to exceed the greater of the amount involved (not to exceed $100,000) in the transaction or $25,000 may be given for each willful violation of reporting requirements to the casino as well as any partner, director, officer or employee who willfully participated in the violation.
- Failing to file FinCEN Form 105 may result in a penalty up to the amount of the currency or monetary instruments transported into, or out of the United States. The penalty will be reduced by any amount that is seized (by Customs) or forfeited for failure to file FinCEN Form 105. The penalty additionally applies to a report filed that contains material omissions or misstatements.
- A penalty up to the amount involved, less any amount forfeited to the United States, may be given to any person who willfully structures transactions with the purpose of evading reporting requirements.
- A penalty up to $1000 may be assessed for each willful violation of recordkeeping requirements.3
Title 31 compliance failures may result in the following criminal penalties:
- Any person who willfully violates recordkeeping requirements of the BSA may be fined up to $1000 and/or imprisoned for up to one year for each violation. This fine is increased to $10,000 and/or five years of imprisonment if the violation while violating another Federal law that is punishable by imprisonment for more than one year.
- Any person who willfully violates the BSA’s currency and foreign transactions reporting requirements may be fined up to $250,000 and/or imprisoned for up to five years. If this violation is committed while violating another Federal law, or as a pattern of illegal activity involving transactions exceeding $100,000 in any 12-month period, the fine will be increased by up to $500,000 and/or ten years of imprisonment.
- Any person who knowingly makes a false, fictitious or fraudulent statement or representation in any report may be fined up to $10,000 and/or imprisoned for up to five years.4
Strengthening Your AML Program
Due to the volume of transactions at gaming institutions, without a properly implemented casino compliance software it can be easy to miss certain suspicious activities, or submit errors in reporting.
The severity of the penalties for compliance failures of Title 31 can be detrimental to your business and employees. As a result, it is important to establish a robust compliance program that can identify casino-specific red flags, detect and accurately report suspicious activities, identify customers and meet all existing and future compliance requirements.
Proper training of employees and compliance professionals is one component of an effective AML program, however equally as important is equipping your compliance professionals with modern and effective tools to detect compliance risks and aid in compliance investigations and reporting.
Alessa is a powerful AML compliance solution with integrated real-time due diligence with identity verification and sanctions screening, transaction monitoring, regulatory reporting and more. Contact our risk specialists today to learn how Alessa can assist your business with Title 31 casino compliance and more.