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 moneylaundering to card club establishments.

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

"Card clubs are at least as vulnerable to use by money launderers as other gamingestablishments, both because of their size and because those institutions often lack thecontrols 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 taxevasion -- to include card clubs under the regulatory definition of financialinstitutions.

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

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

Since 1985, Treasury, through its BSA regulations, has required recordkeeping andreporting of large cash transactions occurring at state licensed casinos with gross annualgaming revenue in excess of $1 million. This information preserves a financial trail forinvestigations or proceedings. In addition to state licensed casinos, tribal casinos havebeen 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 ofcard 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 overninety percent of the national card room gaming market - to impose state licensing andcurrency transaction reporting and recordkeeping requirements on the industry. TheCalifornia and BSA requirements will be coordinated (as in other situations when BSA andstate 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 effectAugust 1, 1998.