Casino Record-keeping, Reporting, and Compliance Program Requirements for Casinos
Casinos are one of the world’s most heavily regulated and controlled business sectors in the world. To combat financial crime, gaming and financial institutions must comply with the legal requirements of the federal Bank Secrecy Act (BSA) and associated anti-money laundering (AML) statutes and regulations. Developing an effective AML program that focuses on risk management is critical to ensuring your casino’s compliance with legislative requirements.
AML compliance programs are designed to ensure that casinos have the ability to detect suspicious activities associated with money laundering, including tax evasion, fraud, and terrorist financing, and report them to the appropriate authorities. While the vast majority of patrons who visit casinos do so for entertainment and leisure, those engaged in illegal activity may attempt to use the casino’s financial services to conceal or transfer illicit wealth. AML compliance programs should implement effective internal systems and controls that are designed to detect money laundering and the risk posed by the activities of its customers.
The framework for a casino’s AML program should be based on a strong understanding of regulatory requirements. Senior management sets the stage by endorsing a set of policies and procedures that work for the unique needs of their organization. The program should be overseen by personnel who are experienced, knowledgeable, and focused on creating a culture of compliance at every level of the organization.
While a variety of factors affect the parameters of a strong AML compliance program, the key criteria by which a program should be built include the following:
A crucial first step in creating an effective AML program is conducting a risk assessment. A risk assessment will identify general and specific financial crime risks and determine how these risks can be mitigated. Every casino has its own set of AML risks based on the products and services that are offered, customers, clients, and the casino’s geographic location. The results of a risk assessment can be used to identify gaps or opportunities for improvement in AML policies, procedures, and processes.
Another component of an AML compliance program is an analysis of internal controls and systems that are designed to mitigate the risks of financial crime. Policies, procedures, and organizational processes are tailored to the casino and based on its specific risks. To that end, larger gaming organizations will have more sophisticated or detailed programs. All financial institutions seek to address the same types of concerns, including identifying products, services, customers, third parties, and locations that are vulnerable to money laundering.
Once an AML compliance program is in place, it’s important to implement an independent testing program to ensure that the controls and processes are working as designed. Independent testing should be routinely scheduled every 12-18 months. Larger casinos or those in particularly high-risk areas may audit more frequently. An independent testing program should ensure proper documentation of the scope of testing, the review process, weaknesses identified, and the corrective actions to be addressed.
Even with the best programs and processes, casino employees will always be the first line of defense. To this end, effectively training staff to identify, mitigate, and suspicious document activity can help mitigate potential risk. Employees should receive ongoing training on their own roles and responsibilities within the system, how to conduct due diligence on business interests, and how to navigate policies and procedures that ensure compliance on an ongoing basis. The extent and intensity of employee training will be contingent on an employee’s responsibilities. For example, employees who bear greater responsibility for AML compliance may have more targeted training. All training should address the AML program and reporting guidelines. Similar to creating an auditing schedule, casinos should create a training schedule to ensure annual training.
As required by federal regulations, at least one employee at a casino must be designated as responsible for AML requirements. The AML compliance officer should be fully knowledgeable of AML and the relevant BSA regulations, and understand the casino’s products, services, customers, geographic locations, and risk factors. AML compliance officers have experience and authority within the casino to ensure they can perform their duties effectively. Those duties include communicating with authorities and auditors, briefing senior management, and making AML policy recommendations based on audits and reports.
Given the increased regulatory scrutiny, designing and implementing a risk-based AML program is more important than ever. Once in place, independent testing programs will help to ensure that appropriate controls and processes are effectively working. Casino employees, who are on the front line, must be equipped with the knowledge and tools they need to identify money laundering risks. Taken together, these functions provide a robust risk management foundation and ensure regulatory compliance to support the long-term success of your casino.