California Casino Fined $900K for Violating Anti-Money Laundering Laws
Posted on: October 28, 2024, 08:31h.
Last updated on: October 28, 2024, 09:48h.
In a significant enforcement action, the Lake Elsinore Hotel and Casino, situated in Southern California, has been hit with a staggering civil monetary penalty of $900,000 due to serious violations of the Bank Secrecy Act (BSA). This settlement with the Financial Crimes Enforcement Network (FinCEN) comes after revelations regarding extensive deficiencies in the cardroom’s compliance with federal financial regulations.
Image: The Lake Elsinore Hotel and Casino in California has been fined by FinCEN for failing to uphold federal banking laws. (Image: The Salt Lake Tribune)
The Allegations and Compliance Failures
The investigation by FinCEN highlighted that the owners of the Lake Elsinore Hotel and Casino, Sahara Dunes Casino, LP, admitted to numerous failures over a significant period. The cardroom was found not to have completed crucial Currency Transaction Reports (CTRs) or Suspicious Activity Reports (SARs) as mandated by federal law. Specifically, the casino failed to adhere to these requirements from September 2014 through February 2019, putting both its customers and the U.S. financial system at considerable risk.
Andrea Gacki, the director of FinCEN, emphasized the gravity of the situation, stating, “Lake Elsinore operated for years without the most basic anti-money laundering controls, putting its customers and the U.S. financial system at risk and denying law enforcement information on suspicious activity.”
FinCEN, a bureau within the U.S. Treasury Department, is tasked with collecting and analyzing data about the movement of money to combat financial crimes, including money laundering and terrorist financing. The organization underlines the importance of compliance across all financial institutions, regardless of size or nature.
A Long-Awaited Enforcement Action
The fine imposed on Lake Elsinore is particularly noteworthy as it marks FinCEN’s first enforcement action against a casino in six years. Gacki remarked that this case serves as a reminder of the critical need for compliance with BSA regulations by all financial entities. The severity of the situation is compounded by the fact that the actions (or lack thereof) by Lake Elsinore potentially allowed illicit activities to go unchecked.
Sahara Dunes Casino, LP, is controlled by the Kingston family, who are known members of a Utah polygamous sect. This connection raises further questions about the governance and oversight within the casino’s operations.
The Scope of Violations
Lake Elsinore is one of 82 commercial cardrooms licensed by the California Gambling Control Commission (CGCC). It features 22 non-house-banked table games, where players act as dealers or employ third-party proposition players (TPPPs). The BSA mandates that cardrooms must file CTRs when cash transactions exceed $10,000 within a 24-hour window. Additionally, casinos are required to report any suspicious transactions involving $5,000 or more.
The lack of a designated compliance officer and the inadequacy of the casino’s Compliance Committee—staffed only by individuals without requisite training or expertise—were among the key areas highlighted in the investigation. This oversight further exacerbated the risks associated with the casino’s operations.
Immediate Remediation Measures
In light of the violations, the Lake Elsinore Hotel and Casino has been directed to engage an independent anti-money laundering (AML) consultant approved by FinCEN. This consultant will be responsible for reviewing the casino’s existing AML program and proposing enhancements to ensure compliance with federal regulations.
As part of the resolution, Lake Elsinore has been ordered to pay $850,000 immediately. However, there is an incentive for compliance: if the casino updates its AML framework adequately, FinCEN will reduce the total fine by $50,000.
Conclusion
The Lake Elsinore Hotel and Casino’s hefty fine underscores the critical importance of regulatory compliance within the gambling industry. As financial transactions in casinos can often involve significant sums of cash, maintaining rigorous anti-money laundering programs is vital. The situation serves as a cautionary tale to other establishments in the sector, emphasizing that lax adherence to regulations can lead to severe financial and legal consequences. The continued scrutiny from agencies like FinCEN is essential to safeguarding the financial system against illicit activities.
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