FinCEN Director On Why Casino Cooperation Is Central To Fighting Financial Crime

Cooperation in an environment that is rapidly advancing on many technological fronts was the theme when FinCEN Director Kenneth A. Blanco took to the stage at the 12th Annual Las Vegas Anti-Money Laundering Conference yesterday (August 13).

On the topic of technology, Blanco is specifically interested in — and concerned about — two main areas. The first is the rise of mobile gaming and gambling. The second is the rise of cryptocurrency (though during his remarks he tended to refer to it as Convertible Virtual Currency or CVC).

More broadly, however, Blanco’s theme was the interconnectedness of the financial system — and how diligence and transparency are the keys to combating money laundering and other financial crimes in the U.S. and around the world.   The data that casinos have the power to feed into the system under Banking Secrecy Act reporting requirements in the form of suspicious activity reports (SARS), he noted, can do more than just keep the work of legal gambling a transparent and compliant space.  In the era of advanced AI, it also has the power to be a tool across all of law enforcement, applicable to uses ranging from fighting the opioid epidemic to taking on terrorism.

“In the case of using ‘big data,’ FinCEN is able to apply machine learning and other tools to all the reports and other information available to us to identify and build out illicit finance networks and identify new financial crime trends, which we can share with law enforcement, our OFAC colleagues, regulators, and the private sector,” Blanco noted.

He worries, he said, about the areas where they have expected to see more data reporting and haven’t, as well as indications that casinos have been taking their foot off the gas pedal of late when it comes to their compliance activities.

“It concerns me when I hear about some compliance budgets being cut by casinos looking to trim costs and retain gamblers,” he noted.

The security of the financial services markets, he noted, relies on everyone being team players in the digital age — and those not fully playing their positions, he noted, could be facing enforcement action in the future.

Mobile gaming and digital currency

Much has changed, Blanco noted, in the gaming landscape since a 2018 Supreme Court Decision drastically lifted many of the legal curtailments on mobile gambling and sports betting in the United States.  And while the decision opened the floodgates on digital gambling transactions, one thing has not changed in the slightest in the new gaming landscape, he noted: the responsibility of casinos managing all of those new transactions.

“Sports betting, and other mobile gaming services run through your casino, are no different than other products and services. FinCEN expects that your casino or card club is monitoring your sports betting programs for potentially suspicious activity. This includes offering sports betting through a mobile app.”

He went on to note that casinos’ AML obligation and suspicious activity reporting obligations remained unchanged, and that to aid in their efforts at enhanced compliance, FinCEN has recently updated its SAR reporting forms to include “cyber-indicators”  of potentially problematic transactions.

Blanco further noted that the expansion of mobile gambling ties into the rise of convertible virtual currency, particularly in digital casinos on the web that allow payouts and pay-ins in digital currency.  Blanco noted the unique compliance issues digital currency creates, including processes for conducting due diligence on digital currency; blockchain analytics to determine the source of the CVC; and mechanisms for identifying “red flags” for “money laundering, sanctions evasion, and other illicit financing purposes.”

FinCEN, he noted, has offered various forms of guidance to casinos for meeting their expanding compliance obligations.  Despite that, however, he expressed concern about a gap in reporting in this area by casinos.

“While FinCEN has received some filings from casinos regarding cyber-enabled crimes, CVC-related SAR filings by casinos have not been as robust as expected since the May CVC guidance and advisory were published,” he noted.

That lack of robustness in response is particularly worrisome, he said, given the nature to which detecting and preventing modern financial crime is increasingly a data-driven team effort.

The team-oriented nature of compliance

In general, Blanco said, FinCEN has been worried to see that casinos in some cases are dialing back their compliance departments and mechanisms at precisely the moment they need to be ratcheting them up. Data silos within casino organizations between marketing, legal, compliance and operations need to be busted so that organizations can better see their own internal data patterns holistically — and react to them appropriately.

Moreover, he noted, the data that casinos gather and have unique access to are useful beyond their own internal obligations — they have value in securing the entirety of the global financial system as a whole. Compliance is not just a money issue, but a national security issue, he said, referring to a situation where casino data was used to break a case that involved the seizure of more than 2,500 kilograms of cocaine, 25 kilograms of heroin, 8.5 kilograms of methamphetamines and more than $5.5 million.

“Again, it was the reporting of six casinos that made this successful prosecution possible. Make no mistake: The work you are doing makes a profound difference in peoples’ lives,” Blanco said. “What you do saves lives.”

And while Blanco was happy to appeal to casino operators’ better nature — and remind them of all the good for the world properly reporting data can do — he also seemed willing to remind them that they have a legal obligation to provide good, transparent and proactive reports of relevant data.  And that FinCEN is watching them to make sure they are actively living up to that obligation.

“There is a misconception that just because FinCEN has not publicly issued an enforcement action against a casino or card club since last year, FinCEN is not looking at this financial sector. Let me assure you, this is not the case. FinCEN is continually looking at compliance across all financial institutions and will not hesitate to act when it identifies financial institutions that violate the BSA.”