Kenneth A. Blanco, the Director of the Financial Crimes Enforcement Network (FinCEN), gave a speech on August 13th at the 12th Annual Las Vegas Anti-Money Laundering Conference. We have previously written extensively about the issues that the gaming sector faces in complying with anti-money laundering (AML) and Bank Secrecy Act (BSA) regulations. This iplt20 match post will provide a concise overview of Director Blanco’s remarks, focusing on the main points he made in his prepared address.
Director Blanco provided a concise summary of the main subjects he discussed:
Initially, I will present my viewpoint on the influence of emerging technologies on anti-money laundering and countering the financing of terrorism, specifically in the domains of sports betting and mobile gaming;
Next, I will address the significance of FinCEN’s latest guidance on Convertible Virtual Currency and its relevance to casinos.
Furthermore, I will reexamine the significance of fostering a robust culture of adherence to regulations within casinos.
Finally, I will give a summary of our current efforts regarding regulatory reform, innovation, and the importance of BSA.
Director Blanco emphasized that FinCEN anticipates casinos and card clubs to diligently oversee their sports betting and mobile gaming operations for any signs of suspicious behavior, in accordance with their customary anti-money laundering responsibilities.
Director Blanco also discussed online casinos that deal with convertible virtual currency (CVC), as well as traditional casinos and card clubs that accept CVC for gambling purposes. He mentioned the May 2019 Guidance issued by FinCEN on the subject of CVC, and then expressed:
Internet gaming sites that operate online without proper licensing or authorization to function as casinos in the United States are not considered “casinos” according to the regulations implementing the BSA. Instead, it is probable that they are functioning as money transmitters. Money transmitters are required to fulfill their own responsibilities under the Bank Secrecy Act (BSA) and its accompanying rules, which involves completing a formal registration process with the Financial Crimes Enforcement Network (FinCEN). This rule applies without distinction to both domestic and foreign money transmitters that conduct business either entirely or to a significant extent within the United States.
When it comes to casinos and card clubs collecting CVC from clients, whether in person or through mobile applications, it is important to incorporate this into your policies, procedures, internal controls, and risk assessments. Additionally, it is important to contemplate the methods by which you will assess and carry out thorough investigations on transactions using CVC. What methodology will you employ to perform blockchain analytics and ascertain the origin of the CVC? How will you integrate CVC-related indicators into your SAR filings, when deemed suitable?
Regarding the recurring issue of a “culture of compliance” in AML, Director Blanco made the following statement:
There is a mistaken belief that FinCEN is not monitoring the financial sector of casinos or card clubs simply because they have not officially taken any enforcement actions against them since last year. I can guarantee you that this is not true. FinCEN consistently monitors compliance in all financial institutions and will promptly take action against any financial institutions found to be in violation of the BSA. It is worth mentioning that not all enforcement actions are made public. FinCEN frequently resolves issues by sending warning letters to financial institutions or by referring cases to our authorized examiners for further examinations.
Director Blanco then proceeded to discuss, maybe as a means of protecting himself, the continuing problem of reforming BSA regulations and legislation. Particularly, he emphasized the significance of BSA reporting:
In January 2019, FinCEN initiated a comprehensive study to document the worth of BSA reporting throughout the whole process of its development and utilization. The initiative aims to provide a thorough and measurable comprehension of the overall Betinexchange significance of BSA reporting and other BSA information for all categories of information users.
The BSA data is crucial in maintaining the strength of our nation, ensuring the security of our financial system, and protecting our families from harm. FinCEN is utilizing the BSA Value Project to enhance the communication of the valuation and utilization of BSA information. Additionally, it aims to establish metrics for monitoring and assessing the ongoing value of its use. The study has conducted several interviews with various stakeholder groups, including casinos.
Thus far, the study has verified that there are widespread and highly diverse applications of BSA information among all parties involved, including the commercial sector, in alignment with their respective objectives.
Reporting by the Boy Scouts of America (BSA) is crucial for these operations. It is well acknowledged that the contributions of your proficient analysts and investigators, as well as frontline staff, such as those working in the money cages at your casinos, considerably enhance the value of BSA reporting. Stakeholders have emphasized the significant value that can be obtained from both individual fields within a single BSA report, even if it was filed in the past, as well as from the consolidation of all the information in FinCEN’s database.
Director Blanco presented compelling evidence in defense of the BSA reporting regime, which has faced growing criticism about its efficacy.
The names of all subjects under investigation by the FBI are cross-referenced with the BSA database. Over 21 percent of FBI investigations rely on BSA data, and for certain categories of crime, such as organized crime, nearly 60 percent of FBI investigations make use of BSA data. Approximately 20 percent of FBI international terrorist cases make use of BSA data.
Annually, the Internal Revenue Service-Criminal Investigation branch carries out around 126,000 inquiries into the BSA database. Up to 24 percent of its investigations related to criminal tax, money laundering, and other BSA crimes are immediately started by, or linked to, a BSA report.