Know Your Customer: Compliance with Source of Funds Requirements

– By Sheryl L. Ashley

At various conferences over the past year, the Financial Crimes Enforcement Network (FinCEN) has discussed their expectations for casinos in complying with new interpretations of the source of funds requirements. Based on FinCEN’s interpretations of their regulations, these requirements will have a significant impact on virtually all properties within Indian Country and will warrant extensive discussion and strategic planning within tribal gaming organizations. To understand the driving factors behind these recent interpretations, current trends in the casino industry must first be examined. Based on this, casinos can then determine what information to collect and how, a timeframe within which to collect such information, sources of obtaining the information, and retention and storage of the information that has been obtained.

The driving factor behind these interpretations stems from recent headlines showcasing current money laundering and embezzlement schemes in casinos. The extensive news coverage within the last several months about casino arrests involving monetary penalties, embezzlement, and fraud has triggered significant discussion regarding a customer’s source of funds and the casino’s responsibility to be aware of such information. Perhaps the most infamous is the Sands Corporation and their mammoth $47 million non-prosecution agreement. Their largest all-cash gambler was being prosecuted by the Mexican government for being a “drug kingpin.” Other casinos were recently in the news for allegations of customers laundering money through their casinos. However, the news articles don’t report if the customers used loyalty club cards or whether the casinos had identified their transactions as suspicious. As a result of these recent impactful headlines, FinCEN has readdressed the requirements that casinos must gather information regarding its customers and their sources of funds so as to preclude more of the aforementioned occurrences, whether that is through players club cards or via additional information gathering.

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