Compliance officers on the Las Vegas Strip said Nevada’s new anti-money-laundering regulations will cost casinos revenue, but they’re more focused than ever on enhancing customer oversight of source of funds. The compliance officers spoke Wednesday at a gaming conference at Circa Las Vegas hosted by the Nevada Society of Certified Public Accountants.
The speakers included Stephen Martino, vice president and chief compliance officer at MGM Resorts International; Eric Akiyama, Banking Secrecy ACT and AML officer at Wynn Resorts; Brittany Morales, director of internal audit at Fontainebleau Las Vegas; and Kim Barley, director of National Gaming & Hospitality Group. Daniel Holmes, a partner and gaming services practice leader for Rubin Brown moderated the panel.
Compliance has been in the news since the Nevada Gaming Control Board and Nevada Gaming Commission signed off on new regulations in April.
Over the last year-plus, four Strip casinos were fined a combined $32 million for AML-related violations: Caesars Entertainment $7.8 million, MGM Resorts $8.5 million, and Resorts World Las Vegas $10.5 million, all three dealing with illegal bookmakers. Wynn Resorts was fined $5.5 million for unregistered international money transfers.
In recent months, illegal bookmakers Wayne Nix and Matthew Bowyer, who between them were involved in violations at three of the casinos, were put in the state’s Black Book excluding them from casinos.
Barley said all the cases started with the Department of Justice following the bookies’ money trail and seeing it filter into casinos. The Nevada Gaming Control Board followed up on those investigations.
Holmes asked the panel where bad actors have been stopped since the new regulations went into effect.
“A couple of weeks ago, we banned a $26 million loser,” Akiyama said of Wynn. “It’s not easy to do and it raised a lot of eyebrows. In the past, it would have been difficult. But in this new environment, there were no questions asked.”
Under the regulatory changes, the Gaming Control Board will review and approve individuals whose primary responsibility is oversight of the casino’s AML program, along with employees within player development. Companies are required to report to the Board when an employee is separated for violations related to the AML policies to prevent employees who shouldn’t be working in the industry from migrating to another property.
One new regulation requires that operators take steps to ensure that a business entity doesn’t fund patron deposits, make payments on casino credit, or issue cash wagering instruments. Unlike other regulations already in place, that won’t take effect until late October.
Martino cited the prohibition on business-entity funding as one to watch. MGM already took a close look at that funding before approving.
“I don’t know how significant, but there’s going to be an impact on gaming revenue,” Martino said. “I’ve heard from others in the industry who are getting some kind of modified third-party payments and verification, particularly through businesses. Now only sole proprietorships will be allowed. We’ll have to navigate through that and see what the impact is.”
The business-entity funding is being watched closely in terms of what the expectations are and how far it’s taken, Morales added. She’ll be reaching out to people in the industry to see how they’re approaching it.
Martino talked about how compliance officers have to be licensed, saying the Board is looking for a “throat to choke” and find the one person to hold responsible. As a former gaming regulator for 10 years, he said he appreciates the position the Board is in. “They were probably making the best decision to reflect well on the industry and the integrity of the state, as well as uphold their responsibilities.”
Martino said his licensing requirement won’t change the culture of compliance and feels strongly about what they’re doing at MGM. On the margins it might affect his risk tolerance, but those with a red or green light will be treated the same.
Since the fine from the Gaming Control Board, Martino said they have added staffing. MGM has about 100 employees working on compliance from suspicious activity reporting to know your customer and Title 31 audits. He sits in on every conversation about banning a customer.
“We never had a culture where we were running yellow lights,” Martino said. “We were getting information on sources of funds, including tax returns. If we don’t know the sources of funds, we won’t clear people to play at our properties. I don’t think the risk is changing. But the number of SARS (Suspicious Activity Reports) we’re filing is increasing. We had to embrace enhanced software or AI, which we hadn’t done before, to make sure we’re more efficient.”
Barley said things are happening at the federal level that will change their approach, including a whistleblower provision in the AML Act of 2020. If someone notices anything improper, they can get up to 30% of any fine of more than $1 million. That encourages employees to report to outside entities rather than an internal hotline.
Martino told the audience that MGM paid $15.5 million in fines between the state and federal governments for AML-related violations involving Nix, who played at the MGM Grand and Cosmopolitan. That case led to former MGM Grand President Scott Sibella pleading guilty for failing to notify to federal officers that illegal gamblers were playing at the casino.
“We had a property president who was (allegedly) placing wagers with a bookie coming out of California and who was also a customer at the MGM Grand,” Martino said. “He comped him and they were going on trips together. He wasn’t a particularly high player who would have gotten on our radar, but a property president placing wagers with the bookie knew what he was doing. He was caught on a wiretap saying he didn’t want to report it to compliance, because if he did, he knew he would no longer have the bookie as a customer. Why the property president felt like he had to place wagers with a bookie rather than walk down the street to Caesars, we’ll never know.”
Martino, who has been with MGM for about a decade, said people are banned all the time. He cited Bowyer, the bookie for the interpreter of baseball player Shohei Ohtani, in 2018. They couldn’t determine his source of funds.
“You can’t pay $15.5 million in fines and say you can’t find anything to improve,” Martino said. “Policies and procedures needed to be sharpened.”
Martino said what was happening between the casino marketing department and compliance was more on an informal basis, but it’s formalized now. They also do more profiles on top cash customers. “We continue to work on it to make sure we have the appropriate culture of compliance and right tone at the top and that if people know something is going on that isn’t right about a player or employee, they reach out to us.”
Morales said the Fontainebleau is planning for AML audits year-round and following articles and enforcement memos to build into their program. They’re trying to gauge the culture of compliance within the company to ensure they understand how important it is.
Akiyama pointed out that Wynn was subject to a non-prosecution agreement with the federal government and forfeited $130 million for using unlicensed business money-moving services, which were organized by casino marketing employees. He said he now meets monthly with the casino marketing group to communicate relevant matters, including regulatory changes.
