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January 13, 1998

Anti-Money Laundering Regulations Extended to Card Clubs

The Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued today a final rule that would extend regulations aimed at combating money laundering to card club establishments.

Most frequently found in California, card clubs typically offer facilities for gaming by customers who bet against one another, rather than against the establishment. While California does not permit casino gambling, customers wagered over $9 billion at these card clubs in 1996.

"Card clubs are at least as vulnerable to use by money launderers as other gaming establishments, both because of their size and because those institutions often lack the controls found at casinos," said Stanley E. Morris, Director of FinCEN.

The final rule would amend regulations issued under the Bank Secrecy Act (BSA) -- Treasury’s key tool in the fight against money laundering, financial fraud and tax evasion -- to include card clubs under the regulatory definition of financial institutions.

Under the final rule, card clubs -- including those operated on tribal lands -- would be treated in the same manner as casinos. Thus, they would be subject not only to currency transaction reporting rules but to the full set of provisions to which casinos in the United States are subject. These provisions include a comprehensive recordkeeping system and a compliance program containing anti-money laundering safeguards.

FinCEN, in administering the BSA, has sought to apply regulations to establishments that provide their customers not only with gaming but a broad array of other services typically found in more traditional financial services businesses, such as banks. In addition to gaming activity, card clubs offer their customers deposit and credit accounts, facilities for transmitting and receiving funds transfers from other financial institutions, and check cashing and currency exchange services.

Since 1985, Treasury, through its BSA regulations, has required recordkeeping and reporting of large cash transactions occurring at state licensed casinos with gross annual gaming revenue in excess of $1 million. This information preserves a financial trail for investigations or proceedings. In addition to state licensed casinos, tribal casinos have been subject to BSA reporting requirements since August 1, 1996.

"Given their growth, their prevalence in the nation’s most populous state, and their potential for expansion, there is no basis for distinguishing the operations of card clubs from those of casinos in the context of anti-money laundering controls," said Morris.

FinCEN’s move parallels recent efforts by California - which accounts for over ninety percent of the national card room gaming market - to impose state licensing and currency transaction reporting and recordkeeping requirements on the industry. The California and BSA requirements will be coordinated (as in other situations when BSA and state reporting rules overlap) to reduce regulatory burden and costs of compliance.

The Federal Register published the final rule today. The new rules will go into effect August 1, 1998.