In 
early June 2015, FinCEN assessed a civil money penalty on the Tinian Dynasty Hotel & Casino, located in the Northern Mariana Islands, an archipelago to the east of the Philippines (don’t feel bad if you click here to learn a little more). Being a U.S. territory, the Northern Marianas are subject to federal regulation.
The civil money penalty was surprising for two reasons: first, that FinCEN would investigate and fine a casino unfamiliar even to analysts who cover the gaming industry, on an island chain few knew existed; and second, for its sheer size. FinCEN assessed a civil penalty of $75 million, the largest it had ever imposed on a casino and the fourth largest in the agency’s history.
Granted, the conduct complained of is egregious and utterly dismissive of the mandates of the Bank Secrecy Act (BSA). FinCEN found that Tinian Dynasty had willfully violated the BSA when it failed to (1) develop (at all) or implement an anti-money laundering (AML) program; (2) report transactions in currency greater than $10,000; and (3) detect and adequately report suspicious activities in a timely manner. In short, Tinian Dynasty ignored the core requirements of Title 31, the enabling regulations of the BSA.
The specifics of the case demonstrate just how willful the misconduct was. Tinian Dynasty did not have a compliance officer, nor did it develop policies to ensure compliance with the BSA, submit to independent compliance testing, or train its personnel in identifying and reporting suspicious activity. FinCEN witnessed in person this noncompliance when it sent in undercover agents on a number of occasions. Upon request by the agents, a Tinian Dynasty “VIP Manager” did not file reports of transactions in currency (CTRs) and counseled the agents on avoiding BSA scrutiny. Equally as troubling, according to the assessment, “Tinian Dynasty had never filed a single Suspicious Activity Report” before being indicted in April 2013. The casino had been in existence since 1998.
On July 23, 2015, the U.S. Department of Justice resolved the criminal proceeding through a nonprosecution agreement that included a $3.04 million forfeiture, the largest ever collected by the U.S. in the Northern Marianas.
A closer analysis reveals why the U.S. authorities were scrutinizing a casino in a remote stretch of the Pacific Ocean: Tinian Dynasty has been backed by Macau junket operators, middlemen who organize and facilitate high-stakes gambling trips. U.S. authorities have long deemed junkets to pose money laundering risks. But since the junket activities have been centered in Macau, they have posed jurisdictional challenges to FinCEN and DOJ. Those challenges don’t exist in a U.S. territory.
This case is important for several reasons. First, it underscores yet again how active FinCEN has been in overseeing and taking corrective action against casinos. Second, casinos must have in place checks and balances that limit a single individual’s contact with and control over high-stakes players. In the case of Tinian Dynasty, clearly there were institutional failures. However, every casino relies on – and therefore must adequately train – its personnel to detect and report suspicious activity. Finally, it is a reminder that regulatory action can ripen into criminal investigation. In light of these enforcement actions, casinos should consider performing internal or independent third-party reviews of their compliance programs. And, to the extent a casino has connections to the junket trade, it should look carefully at how those connections are treated by the casino’s compliance program.