The waters of anti-money laundering controls are becoming ever more difficult for casino compliance officers to navigate as the U.S. Financial Crimes Enforcement Network ramps up its auditing of the gaming industry, a panel of compliance and regulatory experts warned Monday morning in a panel discussion at G2E.
Of particular alarm was the increased incidence of compliance officers bearing the blame for slip-ups in AML controls, even if an officer is not necessarily at fault for a company’s violation.
Earlier this year, a U.S. District Court in Minnesota ruled that compliance officers can be held responsible for AML violations under the Bank Secrecy Act. In that case, Thomas Haider, MoneyGram’s chief compliance officer, was slapped with a $1 million fine for his company’s negligence.
“It’s slippery slope being a compliance officer. I’ve never met a compliance officer who didn’t want to do the right thing,” said Peggy Jacobs, Vice President of Gaming Compliance at MGM Grand.
This development creates a conundrum for gaming industry compliance officers and casino managers who are stuck between the rock and the hard place: reporting suspicious activity with too little justification, versus asking intrusive questions that potentially can drive away customers.
Because losing business is a cardinal sin in any industry, battles between compliance and management teams over what activities to report and which customers to refuse are becoming a source of frustration.
Jacobs elaborated on how problems can quickly snowball. “Their casino is doing something and they don’t feel it’s going down the right path. They have the conversations, but the behavior doesn’t change. They don’t know where else to go, so they leave,” she said. “It’s driving away good compliance officers who want to do the right thing.”
Donna More, a gaming attorney with Fox Rothschild in Chicago and a former Illinois gaming regulator, echoed the sentiment that pressure from FinCEN is becoming more problematic for the industry. “Is the goal here to have a compliance person have to choose between being gainfully employed and resigning to avoid being indicted?” she asked rhetorically, while urging FinCEN to broaden the scope of their investigations. “There needs to be less of a ‘gotcha’ game between FinCEN and the casino industry.”
The panel explained that self-reporting of suspicious activity by casinos is still seen as best practice, but implementing such a system in a meaningful manner can be a tough sell to reluctant management teams by compliance officers.
“We’re told in kindergarten that you don’t beef on your friends. In the casino industry, we’re told you have to beef on yourself and you have to beef on the person next to you who’s doing something wrong,” said More, adding that there needs to be more internal cooperation on the matter so that “the compliance officers can get up in front of CEOs to say ‘look there’s a benefit to self-reporting.’”
Moderator Paul Havalchak of PricewaterhouseCoopers noted that there is a trend emerging in FinCEN’s approach to the audits and fines it is conducting with respect to gaming companies. The agency’s three most recent fines have been levied against poker rooms, which is strange given that poker has traditionally been thought of as a lower-risk game as far as AML controls are concerned.
But because it can be difficult to assess how much money a player has actually won in poker, particularly if he is playing unrated, there are money-laundering risks that are distinctly different from other games.
“You can supervise the game, yet if you have two people playing head-to-head, you don’t know if the game is being legitimately won,” said Jon Duffy, Director of Corporate Assurance & Regulatory Affairs at Genting UK.
