The Cost of Non-Compliance
The U.S. government has been cracking down on non-compliant casino and gambling operations in recent years and levying history-making fines. The message government officials are sending is crystal clear: Skirt the law and you will pay a hefty price. Non-compliance issues are an industry-wide problem, and technological advances in the last 20 years have made it almost impossible to get away with not filing the proper paperwork without the authorities noticing. Conversely, because of technology, non-compliance is largely preventable. A large number of fines are incurred because someone forgot to file a form or report. Of course, there are cases of blatant disregard for the law, like what happened at a prominent Las Vegas Resort that involved sex, drugs, and well, some rock n’ roll. That case resulted in a $500,000 fine. However, since the majority of casinos aim to stay in business and remain profitable it is in their best interest to stay in compliance or pay the consequences. Clear trends arise when recent cases of casino non-compliance are examined, and it has to really burn casinos when they realize that the situation was completely preventable.
In the News
In 2015, the U.S. government fined the Tinnian Dynasty Hotel and Casino a record $75 million. The casino which is located in the Northern Mariana Islands, a U.S. commonwealth, was slapped with the largest civil fine ever against a casino for its “willful and egregious” disregard for anti-money-laundering laws. Officials said the violations date back to 2008. Casinos are especially vulnerable to money laundering due to their cash heavy operations. Money laundering is a systemic problem that occurs across the industry worldwide.
A perhaps more well-known case is Donald Trump’s Taj Mahal casino in Atlantic City, New Jersey, which has been on the Treasury Department’s radar due to money laundering suspicions since they opened in the early 1990s. The Taj Mahal has been a preferred spot for Russian gangsters from New York since it opened, because it was a convenient location for cleaning their cash quickly.
In 2016, the government filed charges against the Sands Casino in Las Vegas. The charges focused on poor record keeping and failure to submit a suspicious activity report on gambler Zhenli Ye Gon. The Sands had to fork over $47.4 million worth of wagers that Ye Gon made to the U.S. Treasury.
Whether the money laundering and the shelter offered to criminals was intentional or not, these major cases had a series of similar issues leading up to their ultimately being fined in a very big way. Infractions such as not reporting $10,000 cash outs to the IRS and not filing CTRs seem to be commonplace in the lead up to much bigger problems.
Other smaller fines show that no casino operation is immune to the government’s watchful eye. It seems they are sending a message that big or small, a casino must be 100% compliant. There is no room for mistakes, or there will be a price to pay quite literally. And many of the violations seem to be exactly that: mistakes. Mistakes that could have been avoided. For example, allowing players on the banned gambler list to play happens often because an employee didn’t realize who they were. A casino in Iowa allowed a banned player to obtain a player’s card and start playing, before they realized their mistake and removed him from the premises.
The Hawaiian Gardens Casino in Los Angeles was fined $2.8 million in 2017 for a “culture of non-compliance.” The casino is now in jeopardy of losing its license to operate which would be a disaster for the local economy. FinCEN also cited repeated AML violations and failure to report suspicious activity and transactions as contributing factors to the charges.
How to Prevent Non-Compliance
It’s hard to determine when looking in from the outside if these activities were malicious or not, and whether or not top casino executives knew what was going on. Regardless, casinos have to do everything possible to be compliant, even if there are a few bad apples in their organizations committing illegal acts. The message from the government is that casinos will be held responsible no matter the circumstances. Creating a strong organizational plan for compliance and putting it into action is the key to staying out of hot water.
Train employees to take compliance seriously.
Every employee in a casino operation needs to understand the strict regulations that the industry operates under. Whether they are serving drinks on the casino floor, or working in the compliance department filing reports with the IRS, they need to know that non-compliance can not only result in the loss of their jobs, but also jail time. Teaching employees the seriousness of every decision they make, big or small, is vital to compliance. Even the most insignificant of tasks has an effect on the entire organization. Not teaching employees about the importance of the jobs they do is what can eventually lead to a culture of non-compliance within the company and it is a slippery slope from there.
Standard Operating Procedures
Casinos have lots of SOPs, but they can become a jumbled, ineffective mess if not properly reviewed and updated on a regular basis. There should be company-wide SOPs that reflect the culture of compliance necessary for a successful operation. Working that compliance thread into every written SOP, though tedious, will save casinos from disastrous legal and financial consequences in the long run. Using a policy management tool is the best way to make sure everyone understands the SOPs and that they are being implemented correctly.
Just preparing for government audits and trying to stay off their radar is not enough. Conducting internal audits frequently could save the company from a lot of headaches. There are a variety of software options for doing this quickly and efficiently. Cennix has a full auditing tool that provides full auditing on narrative contributions and document uploads with an audit trail.
This seems like a no brainer, but bad communication has led to many collapses in history. The space shuttle Challenger exploded because of a communication problem between NASA engineers. Putting systems in place for open, honest communication is what makes the difference between healthy and dysfunctional organizations. Once again, this will help build a culture of compliance. Systems such as the policy management tool can provide ways to make sure that everyone is on the same page. In addition, creating a platform for employees to report suspicious behavior without fear of retribution is a way to further encourage legal, compliant behavior.
When all is said and done, every casino needs to embrace the use of compliance software in order to remain in compliance. Today’s casino operations are too vast and fast-paced to stay out of trouble without it. It is evident when looking at recent cases that many violations can be attributed to mistakes. That’s why the software used needs to be comprehensive enough to handle the demands of a full-scale casino operation. Cennix offers a full suite of compliance software in one package that will tame the web of documents and procedures that exist within the compliance landscape. It includes compliance automation, policy management, process management and financial tags.
Cennix has every tool necessary to be in full compliance with state and federal authorities. Are you ready to talk about how Cennix can keep your compliance ship tidy? Call us for a free consultation.