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

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FIN-2012-G004
Issued Date
Guidance Subject
Frequently Asked Questions Casino Recordkeeping, Reporting, and Compliance Program Requirements

This document provides guidance interpreting the requirements of the Bank Secrecy Act ("BSA") regulations1 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 DefinitionsQuestion 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 RequirementsQuestion 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:

  • Certain domestic banks;9 or
  • Dealers in foreign exchange or check cashers, so long as the transactions are conducted pursuant to a contractual or other arrangement covering the financial services described in 31 C.F.R. §§ 1021.311(a)(8), (b)(7), and (b)(8).

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

  • Cash-ins to the extent the same physical currency was wagered previously in a money play on the same table game without leaving the table;19
  • Bills inserted into electronic gaming devices in multiple transactions (unless a casino has knowledge pursuant to 31 C.F.R. § 1021.313);
  • Cash outs won in a money play, to the extent it is the same physical currency wagered; or
  • Jackpots from slot machines or video lottery terminals.

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.

Financial Institution
Casinos