Pubdate: Tue, 24 Jun 2014
Source: Denver Post (CO)
Copyright: 2014 The Denver Post Corp
Author: David Migoya
Page: 1A


Colorado's 40 casinos - and hundreds of others, including in the 
gaming mecca in Las Vegas - are bound by the same money-reporting 
rules that have made banks reluctant to let legal marijuana 
businesses open bank accounts, federal authorities now say.

That means casinos can keep anyone associated with legal weed 
enterprises-from dispensary to grow operations - away from gaming 
tables anywhere in the country.

And if they do allow them to play, casinos must file the same 
suspicious activity reports banks must file whenever they handle 
money derived from pot profits, according to the Financial Crimes 
Enforcement Network, a division of the U.S. Department of the Treasury.

"FinCEN's guidance applies to all financial institutions covered 
under FinCEN regulations, including casinos," FinCEN's public affairs 
director Stephen Hudak told The Denver Post.

Because the government says casinos are financial institutions, like 
banks, they must have stringent anti money-laundering programs in place.

Filing suspicious activity reports, or SARs, to crack down on money 
laundering by criminal and terrorist organizations is not new for casinos.

What is new is that it now extends to the legal marijuana trade.

While FinCEN in February announced how banks could work with legal 
marijuana businesses, the government only now realized it extends to casinos.

That's in any casino in the country - whether in Colorado, Atlantic 
City or Las Vegas-on land, on water or on sovereign American-Indian 
soil. So a casino on the Las Vegas strip would, by law, have to pay 
attention to the owner of a marijuana dispensary in Colorado who 
heads there to gamble.

Currently, 22 states have legalized the sale of medical marijuana and 
two- Colorado and Washington - have legalized recreational sales. 
Colorado and 41 other states have some form of legal casino gambling.

The news-revealed June 12 at a Las Vegas conference directed at 
curtailing money laundering - has stopped state regulators and the 
casino industry in its tracks.

"The (Colorado) Division of Gaming was unaware of the FinCEN 
guidance," spokeswoman Cameron Lewis told The Post. "Division 
management will be taking this matter under discussion."

Similarly, the Colorado Gaming Association, the trade group that 
represents the state's casinos, was unaware of the requirement.

"To my knowledge, we have not been contacted by FinCEN regarding any 
issues dealing with ... marijuana suppliers," executive director Lois 
Rice said.

Like banks, casinos must "know their customer" and have some 
knowledge of their source of funds. The casino industry keeps close 
track of gamblers through a variety of methods including high-roller 
clubs, frequent-player programs and other in-house incentives.

"Casinos most comply with the government's guidance on filing 
suspicious-activity reports" said Jim Dowling, an 
anti-money-laundering consultant.

"Their alternative is to not conduct a financial transaction with 
these individuals who were involved directly, or indirectly in the MJ 
business," said Dowling, a former IRS agent who was also an adviser 
on money-laundering issues to the White House.

Because marijuana is illegal under federal law, FinCEN's requirements 
for doing business with the marijuana industry modified how financial 
institutions are to file SARs.

The reports must now reflect that clients are in states where 
marijuana sales are allowed.

Although the pot industry saw it as a first step in obtaining banking 
services - and more recent efforts have included the theoretical 
creation of a marijuana financial cooperative - Colorado banks have 
mostly shied from opening the door too widely.

The marijuana-specific reports would either identify the 
cannabis-related businessor employee as legally operating under 
appropriate guidelines, identify them as one conducting suspicious 
activity, or as one where the casino has ended its banking 
relationship "in order to maintain an effective 
anti-money-laundering" compliance program.

The seven-page guidance also notes a number of "red-flag" scenarios 
that would require a bank or casino to file a SAR, including for a 
customer "depositing cash that smells like marijuana" who might be 
trying to conceal involvement in marijuana-related business activity.

"There are a number of ways money laundering can occur in a casino," 
Dowling said, "and keeping track of this is very labor-intensive."

FinCEN Director Jennifer Shasky Calvery told attendees at the Las 
Vegas conference that it's no secret casinos are targets of organized crime.

"Illicit actors are also looking to game the system so that they can 
move or hide funds among the many cash and non-cash transactions you 
conduct daily," she said. "Think about what happens each time a 
customer enters your casino. Often, the first thing a customer does 
is conduct a financial transaction-they buy chips. And the last 
action a customer takes is usually also a financial transaction-they 
cash out those chips."

Casinos, like banks, must know who is bringing them money, she said, 
and meeting that obligation relies on the casino's ability to 
understand with whom it is doing business.

"It's one thing when it's organized crime or terrorist money 
laundering, when the individuals might be unknown," Dowling said. 
"It's quite another matter when it's a licensed business and the 
individuals associated with it are indeed known."

With a dispensary's difficulty in obtaining a banking relationship, 
casinos could become an easy substitute.

For instance, "chip walking" - when chips are not redeemed-is a 
well-known problem at casinos. A marijuana business without a bank 
account could choose to pay its employees with casino chips, which 
are redeemed for cash, a transactions that is, by definition, now laundered.

Chips purchased with marijuana-derived funds also can be redeemed for 
cash or a casino's check, which could then be deposited into a 
personal bank account.

Though Colorado has a $100 limit on the size of a bet, there is no 
limit on how many chips a customer can purchase. FinCEN's rules 
require casinos to file SARs when it "knows, suspects, or has reason 
to suspect" a transaction is suspicious, but only when the amount of 
money involved-typically buy-ins or cash-outs-is at least $5,000, at 
once or in a single day.
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MAP posted-by: Jay Bergstrom