Title 31 of The Bank Secrecy Act: Casino & Card Club Compliance

In a Nutshell: What is Title 31?

Title 31 refers to 31 CFR Chapter X - Financial Crimes Enforcement Network (FinCEN), the codified regulation that enforces the Bank Secrecy Act (BSA).(The “Bank Secrecy Act” is actually a nickname for the Currency and Foreign Transactions Reporting Act.) The BSA is often referred to as either an anti-money laundering law (AML) or “BSA/AML”.

The Director of the Financial Crimes Enforcement Network (FinCEN) is responsible for enforcing compliance with the BSA. FinCEN was established by the Secretary of the Treasury in 1990 and became an official bureau of the Department of the Treasury in 2002.

Although Title 31 applies to a variety of industries, it is most commonly associated with the Casino and Gaming Industry; this page addresses how Title 31 applies specifically to the Casino and Gaming Industry.

One of the main and most well-known Title 31 requirements is that casinos and card clubs must record and report the identity of individuals who conduct more than $10,000 in a transaction or transactions during a 24-hour period by obtaining a current photo ID and Social Security number.

 

 

Why does Title 31 exist?

 

The Bank Secrecy Act (BSA) was enacted in 1970 to prevent financial crime by establishing an anti-money laundering and counter-terrorism financing statute. In other words, the BSA is legislation aimed at thwarting criminals and terrorists from using U.S. banks as vehicles to financially drive their illicit activities by requiring banks (and other financial institutions) to comply with recordkeeping and reporting requirements.

“It is important for employees to understand that the BSA is not some arbitrary rule that has to be followed. The BSA exists to protect them, their families, and the country.…The bottom line is Title 31 was developed not to occupy your time, but to prevent harmful financial crimes, such as money laundering and identity theft, because these types of crimes fund larger criminal activity”

The Secretary of the Treasury has the authority to issue regulations that enforce this statute. Initially only banks had to comply with BSA regulations, but in 2001, compliance extended to all financial institutions, including casinos and card clubs.

For more information on the Bank Secrecy Act, please click here.

On November 7, 2008, FinCEN proposed a restructuring of 31 CFR §103, in an effort to increase the efficiency and effectiveness of its regulatory oversight. Through this proposal, the regulations codified at 31 CFR §103 (to be clear, §103 refers to “Part 103” of Chapter I) was moved to an entirely new chapter within Title 31: Chapter X (Chapter 10). This move and restructuring provided FinCEN the ability to clarify and make more accessible the regulatory obligations of industries that need to comply with the BSA. As of March 1, 2011, the codified regulation for the BSA is housed at 31 CFR Chapter X.

31 CFR Chapter X restructured and renumbered the regulations from 31 CFR §103 such that each regulation can be distinguished as either a regulation that applies to a specific industry or a regulation that applies to all industries that fall under BSA compliance.

The majority of industries that need to comply with BSA regulations are banks, financial institutions, and the like. One of the industries that do not neatly fall into these categories is the casino/card club industry; the purpose of this page is to address how Title 31 specifically affects casinos and card clubs.

The specific BSA regulations that govern the casino/card club industry are codified at 31 CFR §1021.

The reason why casinos and card clubs are subject to Title 31 compliance is that casinos and card clubs provide certain banking services for large sums of money that are advantageous to criminals looking to launder money or carry out other financial crimes; such services include:

• deposit accounts
• credit extensions
• wire transfers
• check issuances
  safe deposit boxes

“Enforcement agencies believe these services, combined with the large amount of money that patrons wager, create a high risk for money laundering.”

 

 

The Details: Title 31 Requirements & Compliance for Casinos and Card Clubs

 

If a casino or card club has a gross annual gaming revenue (GARA) more than $1,000,000, it is required to comply with Title 31 requirements. In other words, if casino or card club has a GARA less than $1,000,000, Title 31 compliance is not necessary; these casinos and card clubs are subject to another rule – Title 26.

For casinos and card clubs that have a GARA more than $1,000,000, they must comply with the following Title 31 requirements:

1. File and keep records of Currency Transaction Reports (CTRs) and Suspicious Activity Reports (SARs)
   • A Currency Transaction Report (CTR) – FinCEN Form 112 – is a report that needs to be filled out and filed electronically through the BSA E-Filing System by all financial institutions, not just casinos/card clubs, whenever $10,000 or more is used for the certain transactions; more on when to file CTRs below
   • A Suspicious Activity Report (SAR) – FinCEN Form 111 – is a report that needs to be filled out and filed electronically through the BSA E-Filing System by all financial institutions, not just casinos/card clubs, whenever $5,000 or more is used to conduct a transactions that is deemed ‘suspicious’; more on what constitutes a transaction as ‘suspicious’ below
2. Keep records of certain transactions as listed under Title 31; more on what these recordkeeping requirements are below
3. Develop and implement a written Anti-Money Laundering (AML) program
4. An anti-money laundering (AML) program is used to assess money laundering and terrorist financing risks assumed by a casino/card and to prevent the casino/card club from being subject to those risks. Each AML is unique to each casino/card club; more on what constitutes a compliant AML program below

 

Currency Transaction Report (CTR): FinCEN Form 112

A Currency Transaction Report (CTR) is a form that needs to be filled out and submitted online whenever a certain transaction or aggregate transactions involving either the cash-in or cash-out of more than $10,000 in a single gaming day by, or on behalf of, any person.

CTRs, at the very minimum, need the following information about such persons:

• permanent address¹
• Social Security number (SSN) or tax identification number (TIN)¹

Examples of Cash-In Transactions

• the purchase of chips, tokens, and/or plaques
  front money deposits
  safekeeping deposits
  payments on any form of credit, including markers and counterchecks
  bets of currency
  currency received by a casino for transmittal of funds through wire transfer for customer
  purchases of a casino’s check
  currency exchanges, including exchanges for foreign currency

Examples of Cash-Out Transactions
the redemption of chips, tokens, and/or plaques
front money withdrawals
safekeeping withdrawals
advances on any form of credit, including markers and counterchecks
payments on bets, excluding slot and video lottery terminal jackpots
payments by a casino to a customer based on receipts of funds through wire transfer for credit to a customer
cashing of checks or other negotiable instruments
currency exchanges, including exchanges for foreign currency
reimbursements for customers’ travel and entertainment expenses by the casino

Cash-in transactions and cash-out transactions should be aggregated separately; in other words, it is when either the aggregate of cash-in transactions or the aggregate of cash-out transactions hit the $10,000 mark that a CTR needs to be filed.

CTRs need to be filled out and submitted electronically through the BSA E-Filing system within 15 calendar days from the day after the $10,000 threshold is reached.

 

Suspicious Activity Report (SAR): FinCEN Form 111

A Suspicious Activity Report (SAR) is a form that needs to be filled out and submitted online whenever there is reason to suspect that a certain transaction or aggregate transactions, or an attempt of a transaction or aggregate transactions, of at least $5,000 may be a possible violation of any law or regulation.

• Examples of reasonably suspicious transactions:
  • transactions that may involve funds derived from illegal activity or may be intended to hide or disguise funds or assets derived from illegal activity, such as money laundering
  • transactions that may be designed to evade BSA reporting and/or recordkeeping requirements
    • an example of this would be a structured transaction, which describes a series of transactions - that could have been conducted as one transaction but was instead broken down into more than one transaction – that are conducted with the purpose of circumventing BSA reporting requirements
  • transactions that may have no business, have no apparent lawful purpose, or not be the type that a particular customer would normally be expected to make that leads the casino/card club to conclude that these is no reasonable explanation for the transaction after an examination of the facts
  • transactions that may involve the use of the casino to facilitate criminal activity
  • transactions that are discontinued once a form of I.D. is requested

SARs need to be filled out and filed electronically within 30 calendar days of the date the suspicious transaction(s) or activity was initially detected. However, if the person conducting the suspicious transaction(s) or activity is unable to be identified, an additional 30 calendar days are given to electronically file the SAR. In other words, a casinos and card clubs have an absolute maximum of 60 calendar days to file the SAR.

 

Recordkeeping

There are several BSA requirements that are related to recordkeeping. This recordkeeping requirement is intended to help regulatory agencies as well as law enforcement agencies to investigate financial crimes, such as money laundering.

When you submit forms to through the BSA E-Filing system, the forms you submit are not kept on file by the system, it is simply transmitted to FinCEN – it is your responsibility to make sure that you have saved a copy of each submitted form. The BSA E-Filing system actually will not let you submit a form until it has been saved; forms submitted through the BSA E-Filing system can be saved onto a secured computer, network, or another appropriate storage device. Forms can also be stored as paper filings or on magnetic media.

In addition to having a recordkeeping system of all submitted forms, there are several other BSA regulations related to recordkeeping compliance that need to be followed:

• Copies of CTRs and SARs, as well as any supporting documents, need to be retained for at least five years from the date of each report
• A record of each $10,000+ extension of credit, unless the extension of credit is secured by an interest in real property. Credit extension records need to include the following:
  • the name of the individual to whom the extension of credit is made
  • the address of the individual to whom the extension of credit is made
  • the amount of the credit extension
  • the date of the credit extension
  • the nature/purpose of the credit extension
• A record of any advice, request, or instruction either received or given in regards to information about transactions, actual transactions, or cancelled transactions of the transfer of the following in an amount of more than $10,000 to or from any person, account, or place outside of the United States
  • currency
  • funds
  • checks
  • investment securities
  • credit
  • other monetary instruments

Considering CTR compliance requires a method to aggregate the cash-in and cash-out transactions by individuals, a Multiple Transaction Log (MTL) – or Action Control Log (ACL) – should be kept. As a general rule of thumb, transactions that are $2,500 - $3,000 are recorded in these logs. These logs are typically kept and used near the Pit, Cage, or Slot areas so that patrons’ transactions can easily be recorded. Logs should be kept for at least a 24-hour period, at the end of which the logs should be turned over to the accounting department for analysis and maintenance.

Each entry on a MTL should contain, at a minimum, the following information:

• A description and, if known, the name of the person who is conducting the transaction
• The table number where the transaction occurred (if it occurred in the Pit)
• The time and date of the transaction
• The type of transaction (bets of currency, cash-out of chips, etc.)
• The amount of the transaction
• The signature of the casino/card club personnel who recorded the entry

MTLs are not explicitly required by Title 31 – but casinos and card clubs incorporate MTLs in their recordkeeping procedures so that they are compliant with the aggregates requirement. After all, if the transactions of an individual are not tracked over a 24-hour period, how will the casino/card club know when the $10,000 CTR threshold has been met?

MTLs, or another similar log that aggregates transactions, when made, must be retained for recordkeeping for at least 5 years.

 

 

Anti-Money Laundering (AML) Program

In order for each casino and card club to be fully compliant with Title 31, each employee should be aware of what compliance requirements are which is why an Anti-Money Laundering (AML) program is needed for each casino and card club. To be clear, CTR and SAR procedures, as well as MTL procedures, are included within the ATL program.

The AML needs to be written and developed based upon the casino or card club’s unique risks for money laundering and/or terrorist financing. Since no casino or card club is exactly the same, the AML program from one casino/card club to another may be similar but not exactly word-for-word.

At a minimum, a compliant AML program needs to include the following:

1. an reasonable internal control system that is designed to prevent money laundering and terrorist financing as well as be compliant with BSA regulations
2. a system for frequent testing, either internally or externally, for BSA compliance on a large enough scale such that it is proportional to the risks of money laundering and terrorist financing induced by product and service offerings
3. instructions of casino personnel training
4. the designation of an individual or individuals who are responsible for ensuring daily AML & BSA compliance
5. the procedures that are to be used in order to determine and validate the following identity information about an 
   individual
   name
   address
   Social Security number or tax identification number
   any other identity information determined as pertinent
6. the procedures that are to be used to identify and report suspicious transactions or suspicious patterns of transactions
7. (for casinos that use computer systems) an automated program or programs that aids with insuring BSA compliance

To be clear, in order to validate the identity of individuals (step 5), a form of I.D. must be presented. The following lists the acceptable forms of I.D.; at least one of these must be presented by individuals:

state-issued driver's licenses
state-issued I.D. cards
U.S. Citizenship/Immigration Services (USCIS) photo I.D.
resident alien 'green card'
passport

Additionally, individuals must do one of the following to verify their Social Security number²:

present a Social Security card
fill out a W-9 with their Social Security number (or tax identification number)

If an individual is unable to or refuses to show I.D., no transaction – even cashing-in chips – should be allowed by the individual.

As of July 1, 2012, CTRs and SARs must be filed electronically through the BSA E-Filing system; click here to access the BSA E-Filing website. Prior to this date, CTRs and SARs could be filled out and filed manually.

In essence, Title 31 requirements for casinos and card clubs can be broken down into two main components: recordkeeping and reporting. Make sure you’re correctly doing both – the penalties can be severe!