Just in 
time for Christmas, the Financial Crimes Enforcement Network (FinCEN), the financial industry (including casinos and card clubs) regulator, announced its first-ever enforcement action against a card club, California’s Oaks Card Club (Oaks).
The enforcement action, which carried a penalty of $650,000, is the latest in a string of actions against gaming enterprises and is yet another reminder of the importance of implementing and maintaining an effective anti-money laundering (AML) compliance program. As FinCEN has demonstrated time and again, a failure to do so will result in often substantial penalties and enhanced regulator supervision. Also, in keeping with FinCEN policy, resolution through a consent order will require an admission to a willful violation of the Bank Secrecy Act (BSA).
In this case, FinCEN found (and Oaks agreed) that Oaks willfully violated the BSA in the following ways:
Failure to update AML policies and procedures. The Oaks compliance manual had not been updated between June 10, 2005, and 2011. As a result, the manual in place had “numerous inaccuracies and misstatements.” Among other concerns, the manual contained the following “problematic” advice: Employees should ask customers approaching the currency transaction report (CTR) threshold whether they were aware of Oaks’ responsibility to report transactions to the IRS, thus suggesting customers should structure transactions.
Failure to conduct independent testing. Though required by the AML regulations in Title 31, prior to March 2011 Oaks had not performed an independent test of its AML program.
Ineffective training. Oaks did not adequately train its employees in BSA / AML obligations. FinCEN highlighted that the training Oaks did provide did not include identification of unusual or suspicious transactions, or the obligation to report them.
Failure to File SARs. Finally, FinCEN observed that despite ample public information of “extensive criminal activity” occurring on premises, Oaks “failed to file a single suspicious activity report” before it was raided by state and federal law enforcement in March 2011.
Given the stipulated facts, this enforcement action is unsurprising. Over the past two years, FinCEN’s oversight of gaming operations has demonstrated that Title 31 compliance must command the attention of senior management. If any doubts exist as to the effectiveness of the AML compliance program, the gaming operation should seek, as Title 31 compels, a competent independent assessment of the program to confirm its effectiveness or obtain recommendations for improvements to become compliant.