The Tribune

By DEREK SMITH

Casinos are high-risk institutions when it comes to exploitation by money launderers due to the volume of cash transactions, their global clientele, and the ease of blending legitimate funds with illicit proceeds. To mitigate these risks, regulators in jurisdictions such as The Bahamas and the US emphasise robust compliance programmes.

This article examines common money laundering typologies in casinos, and outlines steps for building an effective compliance programme.

Types of money laundering in casinos

• Structuring Transactions

To deposit amounts below the threshold for reporting, money launderers often use structuring. According to The Bahamas’ Financial Transactions Reporting Act (FTRA), casinos must report suspicious transactions and maintain detailed customer records. Similarly, in the US, casinos must file Currency Transaction Reports (CTRs) if their transactions exceed $10,000.

• Chip Walking

Using illicit funds, criminals can purchase casino chips, gamble minimally and redeem them for cash or cheques. By using this process, it appears as if gambling winnings are legitimate. Chip walking has been flagged as a significant money laundering risk by FinCEN (the Financial Crimes Enforcement Network).

• Casino accounts and credit lines

It is easier for criminals to move funds into and out of casinos when they open accounts or use credit lines. To prevent abuse, the Bahamas Gaming Act 2014and its subsequent regulations, together with the US anti-money laundering (AML) guidelines for casinos, require robust Know Your Customer (KYC) measures.

• Use of third parties

In order to disguise the origin of funds, money launderers may use third parties. By placing bets, cashing in chips and making deposits, these proxies disguise the primary launderer’s identity.

• Cross-border transfers

Gambling’s global nature facilitates cross-border funds transfers, which are often used to launder money through trade. As with the US cross-border reporting requirements, The Bahamas requires scrutiny of international transactions.

Building a compliance programme to mitigate risks

• Risk assessment and governance

A comprehensive risk assessment should be conducted to identify weaknesses in casino operations. Regulatory authorities in The Bahamas and the US require risk-based compliance programmes tailored to the institution’s size and operations. Additionally, governance structures must demonstrate senior management’s commitment.

• Enhanced Know Your Customer and due diligence

Implement enhanced KYC protocols to verify all customers’ identities and sources of funds. Casinos must apply additional due diligence measures for high-risk customers, such as politically exposed persons (PEPs). Technology, like biometric verification and artificial intelligence (AI), can streamline these processes.

• Transaction monitoring systems

Deploy automated systems to detect suspicious activity, including unusual betting patterns, chip purchases or frequent cash-ins. Effective systems incorporate thresholds and alerts customised to local regulatory standards.

• Employee training

Regular anti-money laundering (AML) training ensures employees understand typologies and their role in detecting suspicious activity. The Bahamas Gaming Board mandates that casinos maintain training records that align with similar US requirements.

Unfortunately, according to the recently-released Commonwealth of The Bahamas report on the 2022 Money Laundering Risk Assessment’s summary of key findings, a lack of consistent and comprehensive training was identified as a vulnerability within the gaming sector of The Bahamas.

• Independent audits

Conduct regular audits to evaluate programme effectiveness. Audits should assess compliance with The Bahamas’ Financial Transactions Reporting Act and the US Bank Secrecy Act requirements, record-keeping and reporting adequacy.

Conclusion

Casinos remain attractive targets for money launderers, but proactive compliance measures backed with a robust regulatory regime can mitigate these risks. By aligning with local and international anti-money laundering regulations, casinos in The Bahamas and the US can safeguard their operations and contribute to global financial integrity.

• NB: About Derek Smith Jr

Derek Smith Jr. has been a governance, risk and compliance professional for more than 20 years with a leadership, innovation and mentorship record. He is the author of ‘The Compliance Blueprint’. Mr Smith is a certified anti-money laundering specialist (CAMS) and the assistant vice-president, compliance and money laundering reporting officer for CG Atlantic’s family of companies (member of Coralisle Group Ltd) for The Bahamas, St Vincent & The Grenadines, St Lucia and Curaçao.