Post by blackcrowheart on Jul 20, 2006 13:07:21 GMT -5
Money laundering risks facing Indian casinos
Guest commentary
MUSTANG OK
David Landrum, Jr. 7/18/2006
www.nativetimes.com/index.asp?action=displayarticle&article_id=80\
09
<http://www.nativetimes.com/index.asp?action=displayarticle&article_id=8\
009>
I have been involved in the investigation of financial crimes, including
money laundering, for over 30 years, and put many defendants in jail for
these violations. After retiring as a special agent for the IRS, the
last few years of my career have been spent as a consultant in the
Anti-Money Laundering arena assisting banks who have become entangled in
violations of the Bank Secrecy Act. The Indian casino industry should
take notice of what has happened to numerous banks for violating these
regulations, since that can be a lesson on how to avoid regulatory
problems and save huge sums of money. Individual banks and bankers have
been prosecuted for violation of these laws with fines up to $50
million, not including the cost to correct the problem. The regulators
are on their way to your casino if they have not already been there and
you should be prepared.
The term money laundering is said to have originated from the
investigation of Al Capone whom was prosecuted for income tax
violations. This is a good example where "following the money"
resulted in bringing down criminals that seemed untouchable. The Capone
organization was apparently using laundromat businesses to conceal their
true revenue which was generated from illegal sources, hence the term
"money laundering".
The new age of money laundering has grown into many different forms
today: From simple structuring of transactions to the formation of
complex offshore entities in countries with strong bank secrecy
regulations. Technology today makes laundering funds almost
instantaneous and sometimes out of the reach of the government. The U.S.
Patriot Act and the Bank Secrecy Act were designed to address money
laundering and other financial crimes and strengthen the
prosecution's efforts. None of this seems like it would effect
Oklahoma Indian casino operations, but it is looming on our doorsteps
and in some cases may already be inside our casinos. Large amounts of
cash usually attract unsavory characters and sometimes cause otherwise
good people to "look the other way". Both of these situations
should put casinos on high alert, because either can be costly in both
time in investigating the problems and loss of money through seizures or
fines, not to mention bad press or even jail time.
While an agent for the IRS Criminal Investigation Division part of my
duties were to work as an undercover agent in money laundering
investigations. My cover was that of a person who needed to launder
illegal money. I cannot tell you how many times I heard the same
response from defendants who said "I don't care where you got
your money" and then took it anyway. This attitude got many of them
lengthy jail terms when they accepted funds which appeared to be from
illegal sources and they should have known better. There is a legal term
called "willful blindness" which is being used more and more
today as proof of knowledge of the underlying event in criminal
prosecutions for money laundering violations. It is well settled in a
number of cases that willful blindness is the conscious avoidance of the
truth and can be used to prove knowledge of a crime. With that being
said, failure to conduct proper due diligence as required by law or
acceptance of funds that "appear suspicious" may subject you to
both civil and criminal actions with jail time of up to 20 years in
Federal prison.
The money laundering laws and related regulations were designed to
assist the government in certain regulatory and law enforcement efforts
relating to financial institutions, including the war on terrorism.
Because of the large amount of cash in a casino it is ripe for money
laundering and fraud schemes and if you have lax controls you will be
exploited by criminals. Indian casinos, just like banks are defined as
financial institutions and compliance with these laws is mandatory.
These regulations create a number of requirements for Indian casinos
including the following:
1.) Establish internal procedures and controls which assist in
identifying money laundering
2.) Designation of a compliance officer
3.) Establishment of an ongoing employee-training program
4.) An independent audit function to test the program.
Casinos are also required to report "suspicious transactions"
which can sometimes be a difficult task in identifying what is
qualifying as suspicious. Failure to identify the "appearance of
suspicious transactions" could cause you regulatory problems if your
investigators do not have the proper background to make these
identifications. This could be resolved by a standard in your policies
and procedures of requiring proper training and experience. Many people
say "if it looks like a duck, and quacks like a duck, then it is
probably a duck" and this is true in identifying suspicious
transactions. The first thing you should understand is that Federal law
[31 U.S.C. Section 5318 (g)(3)] provides complete protection from civil
liability for those filing reports of suspicious activity. The law
states that the financial institution and its directors, officers,
employees and agents, "shall not be liable to any person under any
law or regulation" for disclosure of information in the reports to
the proper authorities. However, you cannot disclose the existence of a
suspicious activity report to anyone other than the government.
Generally, most crime is about money and if you "follow the
money" you will undoubtedly solve many crimes. The real purpose of
the Currency Transaction Report (CTR-C) and Suspicious Activity Report
(SAR) is to provide the regulator and investigator a "money
trail". The regulations state that a transaction requires reporting
as suspicious if it involves at least $5000 (including aggregation) and
the casino knows, suspects, or has reason to suspect (sounds like
willful blindness) that the transaction contains funds from an illegal
source or is intended to conceal or disguise as part of a plan to
violate or evade any federal law or reporting requirement. Also included
are transactions that appear to have been structured or have no apparent
lawful purpose or reasonable explanation or transactions that involve
the use of the casino to facilitate criminal activity.
As you can see, a number of transactions conducted at a casino could
fall within these definitions and identifying all your customers
conducting these could be a serious problem unless you were prepared.
This is why you should have a comprehensive anti money laundering
program and competent compliance personnel who can make sound
professional decisions based on experience and training. Some in the
banking industry chose to avoid or delay implementing these programs as
too burdensome or too expensive and ending up paying that cost plus much
more. Further, many banks promoted front line tellers into the
compliance and investigative positions, which while they mean well, just
do not have the investigative background to accurately identify and
report the required transactions. You should have professional
investigators with financial investigative backgrounds as your
"responsible personnel" and who will be acceptable to the
regulators and help keep your casino off the regulator's list of
"assessment of civil penalties" and off the prosecutors list of
indictments. Protection of your casino should be paramount in your
decisions and business plan.
There are many "red flags" or identifiers of possible money
laundering transactions. Some to keep in mind include questions about
the reporting threshold by customers, unusual identification documents,
use of offshore transactions and entities, several individuals seeming
to divide their funds, transactions near the reporting amount, and
deposit of funds in the form of cash then requests for return of the
funds via a check or wire transfer. Again these are just a few of the
red flags you may encounter and your training program should include new
ones as they arise.
Most casinos have some sort of data mining software (or should have)
that identifies red flags of suspicious transactions that need to be
further examined for investigation and reporting. Those suspicious
transactions need to be fully documented and if necessary properly
reported on the Suspicious Activity Reports (SAR). It is imperative that
these reports be accurate and complete containing all relevant
information. The government will use these reports to initiate or
corroborate an investigation and may request the file documents used to
prepare the SAR so they should be safely stored. The government receives
millions of these reports, and for agents to properly and timely
identify schemes and individuals, the reports must be accurate.
Additionally, inaccurate reports although filed could result in
regulatory fines.
Furthermore, it is just as important to document those transactions
deemed not to be suspicious. Regulators will also review those files and
make a determination about your investigative and documenting process
and related decisions. You will need to show why you believe the
transaction is not suspicious and the process you used in making that
determination. Again, this is why you need professional financial
investigators to assist in making these decisions.
Failure to comply with the Bank Secrecy Act is no longer an option nor
is it something that can only be given lip service or the attitude that
we will get to it later. Some in the banking industry tried that and
paid the price, and the industry is still paying the price today. The
Indian casino industry is now under review and public scrutiny, so do
not give the government a reason to further regulate you, but comply
with the law and set an example for the industry. You do not want to be
the one used by either foreign or domestic terrorists to facilitate
their agenda nor do you want to be exploited by criminals, so you must
set up an effective anti money laundering program with competent
personnel and operate it like your casino's life depends on it,
because it does.
About the author: David Landrum, a member of the Cherokee Nation of
Oklahoma, is the owner of Ronin Resources in Mustang, OK
Guest commentary
MUSTANG OK
David Landrum, Jr. 7/18/2006
www.nativetimes.com/index.asp?action=displayarticle&article_id=80\
09
<http://www.nativetimes.com/index.asp?action=displayarticle&article_id=8\
009>
I have been involved in the investigation of financial crimes, including
money laundering, for over 30 years, and put many defendants in jail for
these violations. After retiring as a special agent for the IRS, the
last few years of my career have been spent as a consultant in the
Anti-Money Laundering arena assisting banks who have become entangled in
violations of the Bank Secrecy Act. The Indian casino industry should
take notice of what has happened to numerous banks for violating these
regulations, since that can be a lesson on how to avoid regulatory
problems and save huge sums of money. Individual banks and bankers have
been prosecuted for violation of these laws with fines up to $50
million, not including the cost to correct the problem. The regulators
are on their way to your casino if they have not already been there and
you should be prepared.
The term money laundering is said to have originated from the
investigation of Al Capone whom was prosecuted for income tax
violations. This is a good example where "following the money"
resulted in bringing down criminals that seemed untouchable. The Capone
organization was apparently using laundromat businesses to conceal their
true revenue which was generated from illegal sources, hence the term
"money laundering".
The new age of money laundering has grown into many different forms
today: From simple structuring of transactions to the formation of
complex offshore entities in countries with strong bank secrecy
regulations. Technology today makes laundering funds almost
instantaneous and sometimes out of the reach of the government. The U.S.
Patriot Act and the Bank Secrecy Act were designed to address money
laundering and other financial crimes and strengthen the
prosecution's efforts. None of this seems like it would effect
Oklahoma Indian casino operations, but it is looming on our doorsteps
and in some cases may already be inside our casinos. Large amounts of
cash usually attract unsavory characters and sometimes cause otherwise
good people to "look the other way". Both of these situations
should put casinos on high alert, because either can be costly in both
time in investigating the problems and loss of money through seizures or
fines, not to mention bad press or even jail time.
While an agent for the IRS Criminal Investigation Division part of my
duties were to work as an undercover agent in money laundering
investigations. My cover was that of a person who needed to launder
illegal money. I cannot tell you how many times I heard the same
response from defendants who said "I don't care where you got
your money" and then took it anyway. This attitude got many of them
lengthy jail terms when they accepted funds which appeared to be from
illegal sources and they should have known better. There is a legal term
called "willful blindness" which is being used more and more
today as proof of knowledge of the underlying event in criminal
prosecutions for money laundering violations. It is well settled in a
number of cases that willful blindness is the conscious avoidance of the
truth and can be used to prove knowledge of a crime. With that being
said, failure to conduct proper due diligence as required by law or
acceptance of funds that "appear suspicious" may subject you to
both civil and criminal actions with jail time of up to 20 years in
Federal prison.
The money laundering laws and related regulations were designed to
assist the government in certain regulatory and law enforcement efforts
relating to financial institutions, including the war on terrorism.
Because of the large amount of cash in a casino it is ripe for money
laundering and fraud schemes and if you have lax controls you will be
exploited by criminals. Indian casinos, just like banks are defined as
financial institutions and compliance with these laws is mandatory.
These regulations create a number of requirements for Indian casinos
including the following:
1.) Establish internal procedures and controls which assist in
identifying money laundering
2.) Designation of a compliance officer
3.) Establishment of an ongoing employee-training program
4.) An independent audit function to test the program.
Casinos are also required to report "suspicious transactions"
which can sometimes be a difficult task in identifying what is
qualifying as suspicious. Failure to identify the "appearance of
suspicious transactions" could cause you regulatory problems if your
investigators do not have the proper background to make these
identifications. This could be resolved by a standard in your policies
and procedures of requiring proper training and experience. Many people
say "if it looks like a duck, and quacks like a duck, then it is
probably a duck" and this is true in identifying suspicious
transactions. The first thing you should understand is that Federal law
[31 U.S.C. Section 5318 (g)(3)] provides complete protection from civil
liability for those filing reports of suspicious activity. The law
states that the financial institution and its directors, officers,
employees and agents, "shall not be liable to any person under any
law or regulation" for disclosure of information in the reports to
the proper authorities. However, you cannot disclose the existence of a
suspicious activity report to anyone other than the government.
Generally, most crime is about money and if you "follow the
money" you will undoubtedly solve many crimes. The real purpose of
the Currency Transaction Report (CTR-C) and Suspicious Activity Report
(SAR) is to provide the regulator and investigator a "money
trail". The regulations state that a transaction requires reporting
as suspicious if it involves at least $5000 (including aggregation) and
the casino knows, suspects, or has reason to suspect (sounds like
willful blindness) that the transaction contains funds from an illegal
source or is intended to conceal or disguise as part of a plan to
violate or evade any federal law or reporting requirement. Also included
are transactions that appear to have been structured or have no apparent
lawful purpose or reasonable explanation or transactions that involve
the use of the casino to facilitate criminal activity.
As you can see, a number of transactions conducted at a casino could
fall within these definitions and identifying all your customers
conducting these could be a serious problem unless you were prepared.
This is why you should have a comprehensive anti money laundering
program and competent compliance personnel who can make sound
professional decisions based on experience and training. Some in the
banking industry chose to avoid or delay implementing these programs as
too burdensome or too expensive and ending up paying that cost plus much
more. Further, many banks promoted front line tellers into the
compliance and investigative positions, which while they mean well, just
do not have the investigative background to accurately identify and
report the required transactions. You should have professional
investigators with financial investigative backgrounds as your
"responsible personnel" and who will be acceptable to the
regulators and help keep your casino off the regulator's list of
"assessment of civil penalties" and off the prosecutors list of
indictments. Protection of your casino should be paramount in your
decisions and business plan.
There are many "red flags" or identifiers of possible money
laundering transactions. Some to keep in mind include questions about
the reporting threshold by customers, unusual identification documents,
use of offshore transactions and entities, several individuals seeming
to divide their funds, transactions near the reporting amount, and
deposit of funds in the form of cash then requests for return of the
funds via a check or wire transfer. Again these are just a few of the
red flags you may encounter and your training program should include new
ones as they arise.
Most casinos have some sort of data mining software (or should have)
that identifies red flags of suspicious transactions that need to be
further examined for investigation and reporting. Those suspicious
transactions need to be fully documented and if necessary properly
reported on the Suspicious Activity Reports (SAR). It is imperative that
these reports be accurate and complete containing all relevant
information. The government will use these reports to initiate or
corroborate an investigation and may request the file documents used to
prepare the SAR so they should be safely stored. The government receives
millions of these reports, and for agents to properly and timely
identify schemes and individuals, the reports must be accurate.
Additionally, inaccurate reports although filed could result in
regulatory fines.
Furthermore, it is just as important to document those transactions
deemed not to be suspicious. Regulators will also review those files and
make a determination about your investigative and documenting process
and related decisions. You will need to show why you believe the
transaction is not suspicious and the process you used in making that
determination. Again, this is why you need professional financial
investigators to assist in making these decisions.
Failure to comply with the Bank Secrecy Act is no longer an option nor
is it something that can only be given lip service or the attitude that
we will get to it later. Some in the banking industry tried that and
paid the price, and the industry is still paying the price today. The
Indian casino industry is now under review and public scrutiny, so do
not give the government a reason to further regulate you, but comply
with the law and set an example for the industry. You do not want to be
the one used by either foreign or domestic terrorists to facilitate
their agenda nor do you want to be exploited by criminals, so you must
set up an effective anti money laundering program with competent
personnel and operate it like your casino's life depends on it,
because it does.
About the author: David Landrum, a member of the Cherokee Nation of
Oklahoma, is the owner of Ronin Resources in Mustang, OK