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Frequently Asked Questions Casino Recordkeeping, Reporting, and Compliance Program Requirements

Guidance

FIN-2012-G004
Issued: August 13, 2012
Subject:     Frequently Asked Questions
    Casino Recordkeeping, Reporting, and Compliance Program
    Requirements

This document provides guidance interpreting the requirements of the Bank Secrecy Act ("BSA") regulationss1 as they apply to the casino and card club industries in the United States. FinCEN additionally published frequently asked questions for casinos and card clubs as FIN-2007-G005 on November 14, 2007 and FIN-2009-G004 on September 30, 2009. Casinos and card clubs may continue to rely on the guidance contained in FIN-2007-G005 and FIN-2009-G004, which have not been incorporated into this publication.

Section A: 31 C.F.R. 1010.100 Casino and Card Club Definitions

Question 1: Are two separately licensed, but jointly-owned tribal gaming operations, one of which is a bingo hall and the other offering casino games, both treated as casinos under the BSA regulations?

Answer 1: If a tribal government issues two separate licenses, one for a tribal gaming operation that only offers traditional bingo, and one for a tribal gaming operation that offers casino games, the former is not treated as a casino under BSA regulations, while the latter is treated as a casino under BSA regulations.2 Joint ownership is not relevant to the determination. See FIN-2007-G005 (Nov. 14, 2007), Question and Answer 2, concerning the treatment of bingo.

Question 2: Is a casino or a card club that cashes checks considered a money services business ("MSB")?

Answer 2: No. A casino or a card club that is duly licensed or authorized to do business as such, and has gross annual gaming revenue in excess of $1 million, is subject to the requirements applicable to casinos or card clubs, even if a casino or card club does its own check cashing. A casino or a card club is not required to comply with rules specific to MSBs.3

Section B: 31 C.F.R. 1021.311(a) - (c) and 1021.313 Currency Transaction Reporting Requirements

Question 3: Can a casino comply with currency transaction reporting requirements by using a "two-strike" system to obtain identifying information for customers purchasing chips in multiple transactions?

Answer 3: FinCEN is aware that some casinos use a so-called "two-strike" system (or possibly a similarly designed system) to obtain customer identifying information related to reportable currency transactions involving multiple chip purchases during a gaming day. Rather than obtaining information directly from a customer during a transaction, the casino relies upon computer or other pre-existing internal records to identify transactions and obtain the identifying information (e.g., Social Security Number, an address) needed to complete a currency transaction report. If the necessary identifying information is absent or incomplete, the casino will file an incomplete report and enter the name of the customer into a computerized database.

When the same customer returns to the casino on another gaming day and purchases $5,000 or more in chips with currency, the casino will check a computerized database to determine if an incomplete report had previously been filed. The casino will ask the customer for any omitted identifying information. If the customer refuses to provide the information and the customer purchases chips for less than $10,000, the casino will wait until the customer's currency activity exceeds $10,000, at which point it will again request identifying information. If the customer refuses to provide the information, then the customer is banned from further cash buy-ins until the information is produced or until the expiration of six months.

A "two-strike" system could result in the filing of two incomplete currency transaction reports. The casino has knowledge that the same customer has conducted transactions in amounts aggregating to more than $10,000 during a single gaming day. A casino has 15 gaming days to file a complete report. If a casino has a reasonable opportunity to obtain identifying information from a customer, but instead relies on inaccurate or incomplete information in pre-existing internal records, the casino has not complied with the regulations.

Question 4: Is a card club required to create and retain records of all currency transactions related to Kum Kum betting?

Answer 4: The regulations implementing the BSA require card clubs to create and to retain records of all currency transactions by customers, including records in the form of currency transaction logs and multiple currency transaction logs.4 This requirement applies to card clubs that offer the practice of Kum Kum betting and banking.5 In Kum Kum betting, bets are broken into a ratio or evenly split among individuals in a partnership, and wins or losses are divided among the individuals. An individual placing a Kum Kum bet must exchange currency for chips with a card club dealer or chip runner before a Kum Kum bet is accepted.

The regulations require a card club to file a currency transaction report for each transaction in currency involving cash in or cash out of greater than $10,000.6 An individual purchasing chips with currency is conducting a cash-in transaction. Card clubs completing a currency transaction report must identify persons on whose behalf transactions are conducted and must aggregate transactions based on the identities of these persons. An individual placing a Kum Kum bet places the bet on behalf of each individual in the partnership. Card clubs must have risk-based procedures to identify Kum Kum bets and the individuals involved in the bets.

Question 5: Can a casino rely on an ITIN as a means of verifying identity?

Answer 5: No. The Internal Revenue Service ("IRS") issues an Individual Taxpayer Identification Number ("ITIN")7 to individuals for use as a tax processing number. The IRS issues ITINs to foreign nationals and others (both resident and nonresident aliens) who have Federal tax reporting or filing requirements and do not qualify for Social Security numbers. The regulations require casinos and card clubs to verify the identities of these individuals by examining a passport, alien identification card, or other unexpired official document evidencing nationality or residence.8 Casinos should not rely on ITINs in verifying identity or responding to items in a currency transaction report that elicit information on verification of identity, since ITIN applicants are not required to provide identification documents.

Question 6: What transactions are exempted from currency transaction reporting requirements?

Answer 6: A casino is not required to report currency transactions with:


In addition, a casino is not required to report the following transactions:

Question 7: Can a casino subtract cash-out transactions from cash-in transactions when aggregating multiple transactions?

Answer 7: No. Cash-in and cash-out transactions are to be aggregated separately and must not be offset against one another. If there are both cash-in and cash-out transactions that individually exceed $10,000, a casino should enter the amounts separately on the currency transaction report.

Section C: 31 C.F.R. 1021.320 Suspicious Transaction Reporting Requirements

Question 8: Is a casino required to report suspicious transactions conducted through slot machines or video lottery terminals?

Answer 8: Yes. Transactions conducted through slot machines or video lottery terminals are transactions "conducted or attempted by, at, or through" a casino for purposes of 31 C.F.R. 1021.320. Exemptions from the requirement to file currency transaction reports are not exemptions from the requirement to report suspicious transactions.11 A casino is required to establish risk-based internal controls for ensuring compliance with the requirement to report suspicious transactions. Risk-based internal controls12 may include procedures for the use of automated slot monitoring systems,13 including a gaming device bill validator file,14 and surveillance systems to identify customers conducting suspicious activity through slot machines and video lottery terminals.

Question 9: Is a casino required to use kiosk or slot ticket redemption reports to detect suspicious activity?

Answer 9: A casino is required to establish risk-based internal controls for ensuring compliance with the requirement to report suspicious transactions, including procedures for using all available information, and procedures for the use of automated data processing systems. Many casinos offer multifunctional customer kiosk machines, connected to a gateway or kiosk server, that can perform a variety of financial transactions, such as redeeming slot machine or video lottery tickets for currency, exchanging U.S. currency for U.S. currency (i.e., breaking bills or paper money), redeeming player slot club points, and initiating electronic transfers of funds to or from a wagering account.

While ticket in/ticket out ("TITO") tickets redeemed at kiosks or terminals do not contain a customer's name or any account number, each ticket has the number of the slot machine or video lottery terminal that issued it, as well as an 18-digit validation number and a unique bar code that can be used to identify a customer.15 Although customers are limited to redeeming tickets usually valued at no more than $3,000, a customer can conduct a series of ticket redemptions in amounts less than $3,000 at the same kiosk, or two kiosks located near each other, during a short period of time (often within several minutes) and thereby avoid limits on the value of tickets redeemed at a kiosk.16 In addition, customers can feed bills into multiple slot machine validators, make no bets or a single small bet, print out TITO tickets, and cash them at a slot redemption kiosk, without human interaction. Both of the above are casino vulnerabilities. For purposes of suspicious transaction reporting, casinos should note that the reporting requirement also applies to "patterns of transactions" that are suspicious and aggregate to $5,000. Thus, when a casino develops its risk-based compliance procedures for monitoring for suspicious activities, it must consider and use, as practicable, the transactional information in kiosk-slot ticket redemption detail reports 17 for the purposes of reporting suspicious activities.

Question 10: What must a casino or card club do when it receives a subpoena for a suspicious activity report?

Answer 10: If a casino or card club is served with a subpoena requiring disclosure of a suspicious activity report or the fact that a suspicious activity report has been filed, except to the extent that the subpoena is submitted by an appropriate law enforcement or supervisory agency, a casino or card club should neither confirm nor deny the existence of the report. A casino or card club should immediately notify FinCEN's Office of Chief Counsel at (703) 905-3590.

Section D: 31 C.F.R. 1021.410 Casino Recordkeeping Requirements

Question 11: Are wagering accounts subject to the same recordkeeping requirements as front money accounts?

Answer 11: Yes. Customers can deposit funds or winning tickets into race book/sports pool wagering accounts, transfer funds between front money accounts and wagering accounts, and withdraw funds from wagering accounts in the form of casino checks, currency, electronic transmittals of funds, credits to a personal debit card, or as bookkeeping withdrawals to fund bets or wagers on events. Wagering accounts function similarly to front money accounts and are therefore subject to the same recordkeeping requirements.18

Question 12: When a junket representative opens a front money account at a casino, is a casino required to obtain and verify identifying information for each member of the junket?

Answer 12: A "junket" is a term of art for a group of players who travel together for the purpose of gambling. A "junket representative" is the person responsible for organizing the group. Junket members often are known and rated gamblers and expected to participate in a given level of gambling activity. Typically, the junket representative will send an electronic transmittal of funds to a bank maintaining an account for a casino or possibly to a money transmitter located on the premises of a casino, in an amount equal to the total funds that the members of the junket intend to gamble. The funds will be held in a front money account at a casino until the junket arrives.

Recordkeeping requirements at 31 CFR 1021.410(a) state that "where [a] deposit [or] account is in the names of two or more persons, the casino shall secure the name, permanent address, and social security number of each person having a financial interest in the deposit [or] account." The provision requires that casinos verify identity at the time the deposit is made or the account opened. If a casino allows members of a junket to conduct wagers or other transactions through the front money account, then the account "is in the names of two or more persons," and each member of the junket has a "financial interest" in the account.19

When a person is a nonresident alien, the casino shall record the person's passport number20 or a description of another government document used to verify identity.21 Also, when a junket representative sends funds to a casino via an international funds transfer, customer identification requirements apply at any monetary value.22

Casinos are required to implement risk-based procedures for ensuring compliance with the requirement to report suspicious transactions, including procedures for using "all available information to determine the occurrence of any transactions required to be reported" as suspicious.24 A casino is required to implement procedures for identifying the junket representative and each member of the junket, obtaining other information on these individuals, and conducting due diligence, for front money accounts.

Question 13: How should a casino treat jackpots from slot machines or video lottery terminals when customers lack identification?

Answer 13: Typically, jackpots from slot machines or video lottery terminals are paid in currency. If a customer does not have valid identification, a casino usually places a payout slip and currency in a safekeeping account at the cage with instructions that the deposit cannot be released to a customer until valid identification is provided. If this occurs, the transaction should be treated as a safekeeping deposit.

Question 14: What is the record retention requirement for original or microfilm records regarding a customer's gaming activity?

Answer 14: Casinos are required to retain the original or a microfilm or other copy or reproduction of all records for five years24 that are prepared or used to monitor a customer's gaming activity. Also, the regulations require casinos to maintain records that are required by other Federal, State, local, or tribal laws or regulations25 which can include currency transaction logs and multiple transaction logs (both computer and manual), currency worksheets, and any other similar record that a casino relies upon to track the currency activity of its customers. Further, a casino or card club may not delete or destroy paper multiple transaction logs (prior to the end of the five-year retention period). A casino or card club may not retain only a computerized worksheet of the information that is keyed in by a cage or the floor employee since the paper logs are original source documents of customer's gambling activities.26

Question 15: Is a casino required to record check numbers for transactions involving personal checks in face amounts of $3,000 or more?

Answer 15: Yes. A casino is required under 31 C.F.R. 1021.410(b)(9) to create and retain a list of transactions involving personal checks27 and other specified instruments, in face amounts of $3,000 or more, regardless of whether currency is involved. The list must contain "all reference numbers." A "personal check number" is cited in 31 C.F.R. 1021.410(b)(9)(ii) as an example of a reference number.

Question 16: Is a casino required to record casino account numbers for transactions involving personal checks in face amounts of $3,000 or more?

Answer 16: Yes. A casino is required to include "all reference numbers" in its list of transactions. A "casino account number" is cited in 31 C.F.R. 1021.410(b)(9(ii) as an example of a reference number. Under 31 C.F.R. 1021.100(b), a "casino account number" means any and all numbers by which a casino identifies a customer. Front money account numbers, wagering account numbers, credit account numbers, player rating numbers and slot club numbers are all casino account numbers.

Some casinos use one master number that applies to all accounts while others use multiple numbers (i.e., one set of numbers for deposit and credit accounts, and another set of numbers for player rating and slot club accounts). If a casino assigns more than one number to a customer, a casino must record each of the numbers for every transaction. For example, if a personal check is deposited into a front money account, a casino that assigns a customer a separate player rating number must record a check number, a front money account number and a player rating number.

Question 17: Is a casino required to record transactions in which instruments with face values of $3,000 or more are held as collateral for an extension of credit?

Answer 17: Yes. A casino is required under 31 C.F.R. 1021.410(9) to create and retain a list of each transaction between a casino and a customer involving specified instruments in face amounts of $3,000 or more. The requirement applies to a broad set of transactions, including those where a cashier's check or business check is held by a casino as collateral for an extension of credit.28 When a customer buys back the cashier's check or business check, or when a casino uses the cashier's check or business check to satisfy amounts outstanding under the extension of credit, a casino must record the transaction separately.29

Question 18: Is a casino required to record transactions in which instruments with face amounts of $3,000 or more are issued or received through the mail?

Answer 18: Yes. While many transactions between a casino and a customer occur at a cage, casino accounting departments or offices also may receive winning tickets through the mail from customers (e.g., TITO, Keno, Races, and Sports) that a casino pays through negotiable instruments mailed to customers (known as "mail pays"). In addition, a casino may receive negotiable instruments to pay off outstanding credit lines through the mail from customers. A casino must have procedures in place for ensuring compliance with 31 C.F.R. 1021.410(b)(9).

Many larger casinos share accounting departments with other corporate divisions or related corporations. If an accounting department receives instruments from customers of a casino that are intended for other corporate divisions or related corporations (e.g., banquet payments, convention sales deposits, miscellaneous incoming checks), or for a hotel, gift shop, or restaurant operating on the premises of a casino, and the instruments are not deposited into an account of a casino, then a casino is not required to record them.

Question 19: Is a casino required to record negotiable instruments with face amounts of $3,000 or more that originate from markers?

Answer 19: Yes. If a customer fails to redeem a marker, a casino will complete the marker.30 A casino will create a counter check and include on the counter check the name of the payee and a check number.31 The counter check is a negotiable instrument, and a casino will process the counter check through the Federal Reserve System or commercial clearinghouses and correspondent banks. To request a marker or credit extension, a customer initially completes a casino credit application. FinCEN views the completion of the marker as a "transaction between the casino and its customer involving an official bank check." If the counter check has a face amount of $3,000 or more, requirements under 31 C.F.R. 1021.410(b)(9) would apply to the transaction.

Section F: Other Casino Issues

Question 20: Can a casino or card club provide customers with information cards that describe the requirements?

Answer 20: The regulations implementing the BSA do not require or prohibit casinos or card clubs from providing information cards to customers. Similarly, the regulations neither require nor prohibit casinos or card clubs from posting information placards at its cages. However, casinos and card clubs should avoid conduct (such as coaching customers on how to avoid the filing of a currency transaction report), which could be viewed as assisting customers in structuring transactions.32

Question 21: How does a casino or card club get notices about upcoming FinCEN updates on compliance with the regulations?

Answer 21: To ensure that a casino or card club is kept abreast of FinCEN news, rulemakings, advisories, and other developments specific to the gaming industry, a casino or card club can subscribe to electronic notifications from FinCEN. Through FinCEN's free e-mail subscription management service, subscribers can have FinCEN Updates sent immediately, daily, weekly, or monthly to their email accounts or to a wireless device. Casinos and card clubs can subscribe directly at:
http://service.govdelivery.com/service/multi_subscribe.html?code=USFINCEN.

*****

Questions or comments regarding the contents of this Guidance should be addressed to the FinCEN Regulatory Helpline at 800-949-2732.


1 See 31 C.F.R. Parts 1010 - 1028.
2If the bingo hall engages in any of the activities described in 31 C.F.R. 1010.100(ff), then the bingo hall would qualify as a "money services business" under that provision and a "financial institution" under 31 C.F.R. 1010.100(t).
3See FinCEN Ruling 2005-5 - Definition of Money Services Business (Casinos as Money Services Businesses) issued on July 6, 2005.
4 See 31 C.F.R. 1021.410(b)(11). The provision applies only to card clubs. The provision standing alone requires only that a card club retain the records, as opposed to creating the records and obtaining the information necessary to create them. However, a separate provision states that "if no record is made in the ordinary course of business of any transaction with respect to which records are required to be retained [under BSA regulations], then the record shall be prepared in writing by the financial institution." See 31 C.F.R. 1010.430(b).
5Kum Kum betting allows customers to move, add, subtract, or pool/co-mingle their bets with another customer's hand around a table or at different player positions to form one wager that is played against a player/dealer for a specific hand. Generally, the individual with the highest wager (among the seated player, backline bettors, or Kum Kum bettors) is the only one to see the cards dealt. Kum Kum banking is the practice of players (known to each other or who are strangers) and a player/banker pooling or co-mingling their funds to form one bank (a banker's roll then is owned by them all), which is used to bet against the other players at a table game. Only California card clubs offer kum kum betting and kum kum banking.
6See 31 C.F.R. 1021.311.
7It is a nine-digit number that begins with the number 9 and has a 7 or 8 in the fourth digit, (e.g., 9XX-7X-XXXX).
8See 31 C.F.R. 1010.312.
9See 31 C.F.R. 1010.315. A casino or card club is a "non-bank financial institution." Non-bank financial institutions are not required to report transactions in currency with commercial banks.
10When a customer increases the amount of currency wagered in the money play, the increase would represent a new "bet of currency" and a cash-in transaction that is not subject to the exemption.
11FinCEN is aware of vulnerabilities in the operation of slot machines and video lottery terminals. In one prosecution, an individual pled guilty to 2nd degree promotion of prostitution and money laundering for operating an escort service while at the same time playing at a casino's electronic gaming devices, where she inserted $3,361,876 in currency, received cash out machine tickets worth $3,172,120, and then redeemed the tickets, with a total loss of only $189,756 (or approximately 6 percent). See Superior Court of the State Of Washington v. Cheryl Mae Larson, No. 07-1 -00724-6, July 2007. In a second prosecution, an individual stole $1.1 million from an international marketing firm by inflating payments mailed to recipients, and with an accomplice laundered more than $500,000 at casino high limit slot machines with minimal gaming activity during a 10 month period. See Superior Court of the State of New Jersey v. Jamine Alabre and Mathurin Ambroise, No. 07-01-00007-S, January 2007. In a third prosecution, a court found that during a 2 year period: (i) an individual promoting a fraudulent viatical insurance scheme, deposited nearly $11 million in cashier's checks at two casinos, plus used an estimated $14 million in additional investor funds, to play high-stakes slot machines, and (ii) some casinos had built a special $500-token slot machine to accept larger bets from this individual. See United States v. David Laing No. 97-0638 (District Court, Southern District of New York), September 1998. In a related matter the Court Of Appeals, Ninth Circuit, stated that ". . . Laing transferred money to the casinos when he gambled and lost money to them. . . . See FAC [First Amended Complaint] at 20 (alleging $26 million worth of deposits by Laing into defendants' slot machines)." See Fisher v. Las Vegas Hilton Corporation, 47 Fed. Appx. 824 (9th Cir. 2002).
12See 31 C.F.R. 1021.210(b)(2)(i), (v)(B), and (vi).
13An automated slot monitoring system is a computerized system for slot players whereby plastic cards with magnetic strips and customer names are issued to players who then insert them into a slot machine or video lottery terminal so that a computer can keep track of a player's gambling activity or "action" (e.g., how much the player bets, for how long), which is used to establish a level of play that may make a player eligible for additional "comps."
14By the term gaming device bill validator file, FinCEN means a file that includes the detail transactions of bills inserted for each slot machine and video lottery terminal. The bill validator has a computer program that produces a report, exportable to a spreadsheet, that includes terminal serial/slot machine number (also known as a manufacturer's serial number), location, customer identification number, bills currency in, amount played/wagered, dollars dropped (i.e., dollars counted), and stacker dollars (i.e., dollars placed in sequential order).
15FinCEN understands that many casino management systems can link a TITO ticket to a customer via the ticket's 18-digit validation number and unique bar code as long as a customer is using a slot club account card.
16FinCEN is aware that a casino knows a customer's slot handle for any slot club account holder who uses a slot club card during play, which gives it the ability to detect suspicious transactions. In one case, a court found that two individuals inserted $24,000 in small bills at various slot machines (the proceeds of which were from narcotics transactions), "cashed out" with $1,000 tickets without playing, and exchanged the tickets for $100 bills at a casino cage. See United States v. Roman A. Dunnigan, No. 09-CR-363-S (District Court, Western District of New York), May 2010. Additionally, suspicious transactions involving TITO tickets and slot ticket redemption reports can be conducted by employees. For example, in one case, a court found that, during a six-month period, several slot technicians were involved in creating over $1.5 million worth of fraudulent tickets in denominations of only $1,000. See State of Nevada vs. Sutherland et al., Eighth Judicial District Court of Clark County No. 07F10879 (August 2007).
17Kiosk-slot ticket redemption detail report is a detail transaction file report containing all available data from kiosk slot redemptions. Typically, this file contains the following information: number of the slot machine that issued the ticket, ticket issued date and time, ticket number, amount of the ticket, redemption date and time, and name/number/location of the redemption machine.
18See 31 C.F.R. 1021.410(a), (b)(1) - (3), and (6).
19A casino would need to identify the junket representative in any event. Recordkeeping requirements at 31 CFR 1021.410(a) state that "with respect to each deposit of funds or account opened, the casino shall, at the time the funds are deposited or the account is opened, secure and maintain a record of the name, permanent address, and social security number of the person involved."
20Since a passport does not contain an individual's permanent address, when a customer provides a passport as a form of identification, a casino or card club would need to review additional identification having a current address (e.g., a foreign driver's license). If none is available, the casino should have policies, procedures, and internal controls to mitigate the risk of not being able to verify a customer's current address.
21See 31 C.F.R. 1010.312, 1021.410(a), and 1021.410(b)(1).
22See 31 C.F.R. 1021.410(b)(5) and FinCEN's Frequently Asked Questions - Casino Recordkeeping, Reporting and Compliance Program Requirements (FIN-2009-G004, September 30, 2009), Question and Answer 20.
23See 31 C.F.R. 1021.210(b)(2)(v)(B).
24See 31 C.F.R. 1010.430 and 1021.410(b)(8).
25See 31 C.F.R. 1021.410(b)(7).
26See 31 C.F.R. 1010.306 and 1021.410. Also, see FIN-2007-G005, Nov. 14, 2007, Question and Answer 20, pertaining to not deleting or destroying specific computerized customer gaming activity information (prior to the end of the five-year retention period), such as player rating records.
27Personal checks that "evidence credit granted by the casino strictly for gaming, such as markers" are excluded.
28However, 31 C.F.R. 1021.410(b)(9) does not apply to situations when a voided personal or business check is used merely to substantiate a depository institution's nine-digit ABA Routing Number or a customer's account number.
29The requirement does not apply to a personal check held as collateral for a marker. However, if a personal check is used to pay a marker, requirements under 31 C.F.R. 1021.410(b)(9) would apply.
30A casino will encode a Magnetic Ink Character Recognition Line ("MICR") with an American Banking Association routing number and a personal checking account number for a customer.
31A customer can redeem a marker with currency, cash equivalents, a personal check, or a funds transfer. If a customer does not redeem the marker, a casino is authorized to complete the credit instrument and debit an account of a customer at a depository institution.
32See FIN-2009-A003, Structuring by Casino Patrons and Personnel (July 1, 2009).



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