New Bank Secrecy Act Rules, Implications for Tribal and other Casinos

By Andrea Lord Goldstein of Smith, Shelton and Ragona www.ssr-lawyers.com

 On July 21, 2011, the Financial Crimes Enforcement Network (“FinCEN”) released new regulations relating to Money Services Businesses (“MSB”). FinCEN is part of the Department of Treasury that focuses on preventing and detecting money laundering.  The new rules are in addition to the existing requirements for Casinos and Card Clubs found at 31 U.S.C. Part 1021. Indian tribal casinos should be knowledgeable about the new regulations so that they can determine if compliance with the new rule is necessary and so that they can design future promotions and programs in a manner that avoids triggering the applicability of the regulations.

      A casino may qualify as an MSB if it is a provider of pre-paid access to funds in exchange for a check, monetary instrument, or other instrument (i.e., cash, credit or debit card, traveler’s check, foreign currency). 31 U.S.C. § 1010.100(ff)(2)(ii)(A).  If a Casino allows players to place funds on their player rewards card and use the card to play in the Casino or make purchases at local restaurants or retailers, this could qualify.  Gift cards could also qualify.  MSBs need to register with FinCEN and keep records of transactions for five years, including identifying information about the purchaser, among other requirements.[1]

      Fortunately, there are exceptions to the prepaid program provisions.  If the program is a “closed loop” that only allows the user to access the funds at limited locations and the amount of funds that can be accessed in a day is under $2,000, it is exempted from being a prepaid program, so the casino would not be a prepaid program provider and therefore would not be an MSB.[2]  This exception also applies if the casino provides prepaid access to funds for salaries and incentives, employee benefits, pre-tax flexible spending arrangements for health care and dependent care expenses, or for health reimbursement arrangements for health care expenses.[3]

      This is a brief summary of the most likely aspects of the new regulations to affect tribal casinos, not a full restatement of the rule. We recommend consulting with an attorney before beginning any new programs involving gift cards or allowing patrons to preload their players cards with funds for play of gaming machines or purchases so that you may determine how best to proceed. 

 

If a proposed program triggers the MSB regulations and cannot be revised to avoid doing so, the Casino’s anti-money laundering program and training would need to be updated and other steps taken to ensure compliance with federal law.

 You can review the new regulations here: http://www.regulations.gov/#!documentDetail;D=FINCEN_FRDOC_0001-0009.

Smith, Shelton and Ragona is available to help you evaluate your anti-money laundering protections should you so desire.

 

 


[1] 31 U.S.C. § 1022.420. 

[2] 31 U.S.C. §§ 1010.100(ff)(2)(ii)(A), 1010.100(ff)(4), 1010.100(ff)(4)(iii).

[3] Id.