Casino money laundering regulations – Macao and USA

Published date03 January 2017
DOIhttps://doi.org/10.1108/JMLC-04-2016-0015
Pages52-69
Date03 January 2017
AuthorCarlos Siu Lam,Malcolm Greenlees
Subject MatterAccounting & Finance,Financial risk/company failure,Financial compliance/regulation,Financial crime
Casino money laundering
regulations – Macao and USA
Carlos Siu Lam
Gaming Teaching and Research Center, Macao Polytechnic Institute,
Taipa, Macao, and
Malcolm Greenlees
Lineld College, McMinnville, Oregon, USA
Abstract
Purpose Apart from presenting an overview and background on anti-money laundering (AML) rules and
procedures for casinos in both Macao and the USA, this paper aims to examine the differences in their
regulatory approaches with regard to their existing AML reporting processes and discusses possible
weaknesses in their respective regulatory regime.
Design/methodology/approach Given that the regulations and statistics on the AML issues may
not all be publicly available, the authors managed to secure some data from the bureaus concerned
through published reports and interviews with government ofcials. Regarding the AML procedures in
casinos, the authors attempted to go over the annual reports published by the casinos for submission to
the Hong Kong Stock Exchanges and Clearing Limited because all these casinos are listed companies in
Hong Kong.
Findings This paper analyzes the trends in reporting numbers and the categorization of the types of
suspicious activity reports led both in Macao and the USA. While the US suspicious activity reporting
focuses on efforts to avoid currency reporting, Macao emphasizes improper or inadequate documentation and
identication.
Originality/value Thispaper is one of the few articles comparing the AML rules and procedures between
casinos in the USA and Macao. It seeks to highlight the differences in their regulatory approaches and
discusses the expected future direction of AML legislation.
Keywords Casino, Anti-Money laundering, Reporting procedure, Suspicious activity
Paper type Technical paper
Macao’s gambling liberalization and the introduction of some US-based casino
operators, namely, Las Vegas Sands, MGM and Wynn Resorts, have made it the world’s
largest gambling capital. The US casinos operate from mass-market casino oor,
whereas Macao’s VIP rooms are unique and have always contributed to more than 60
per cent of its total casino gaming revenue (Siu Lam, 2013). The nature of these VIP
rooms and junket operators, as well as their patrons’ cultural inclination to anonymity in
their dealings, has brought concern over the possibilities of a wide range of criminal
types to launder money in Macao (Sharman, 2011).
This article is aimed to compare the anti-money laundering (AML) reporting
requirements in these two gaming markets and analyze how the requirements in the
USA can be harmonized for casinos with sister properties in Macao for their future AML
rules. This paper is one of the few articles comparing the AML rules and procedures
between casinos in two of the most inuential gaming markets in the world – the USA
and Macao.
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1368-5201.htm
JMLC
20,1
52
Journalof Money Laundering
Control
Vol.20 No. 1, 2017
pp.52-69
©Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-04-2016-0015
Overview of money laundering and casinos
A wide variety of criminal activity can produce large prots and create the incentive to make
them appear legitimate. Money laundering is the process used by criminals to move, conceal
and legitimize the proceeds of crime. According to Rider (1992), the purpose of money
laundering is “to render it almost impossible for evidence to be obtained which allows a court
to establish the derivation of the money”. Based upon the above, “dirty” money is put
through a cycle of transactions or washed and is turned into untraceable, possibly legal and
“clean” money. The money launderer can subsequently use the proceeds for future legal or
illegal activities without fear of criminal or civil sanction. In fact, money laundering is
regarded as the world’s third largest industry after international oil trade and foreign
exchange (Robinson, 1995), and the value of money laundering worldwide is estimated to be
2 to 5 per cent of global gross domestic product (Camdessus, 1998).
For the casino industry, Atkinson et al. (2000) argue that the expansion of gambling leads
to increased competition. To provide an environment in which gambling can ourish and tax
revenue can increase, this often results in an increased willingness for regulators to reduce
regulatory standards to meet the challenge of new competition. Apart from offering
gambling games for entertainment, casinos also undertake various nancial activities
including sending and receiving funds via wire transfer, conducting money exchange,
extending gaming credit and cashing checks, 24 h a day in most of the cases. In a casino, the
variety, frequency and volume of transactions make casino operations particularly
vulnerable to money laundering.
Accordingly, regulatory authorities have promulgated rules and reporting requirements
in an attempt to track transactions of larger sizes to track suspicious transactions and deter
would-be money launderers. However, AML regulations differ widely among jurisdictions,
which create problems for corporations operating casinos in multiple jurisdictions. This may
result in less than effective AML controls.
Background in the USA
The USA has started its effort to create a money-laundering control regime from an initial
focus on banks in the early 1970s with the passage of the original Bank Secrecy Act (BSA) by
the Congress (31 CFR 1010.310 – formerly 31 CFR 103.10). Several AML acts, including
provisions in Title III of the US Patriot Act of 2001, have been enacted to amend and expand
the BSA reporting requirements (see 31 USC 5311 – 5330 and 31 CFR Chapter X – formerly
31 CFR Part 103).
Since May 7, 1985, the denition of a “nancial institution” in the original act was
broadened to include casinos as “money service businesses”, thus requiring compliance from
the emerging number of casinos outside of Nevada (Nelson and Bliss, 2014). The title of the
Federal Rules on casino AML reporting was “Title 31”. This title has become both the formal
and informal name of all AML rules for casinos in the USA. Initially, Nevada was successful
in carving out an exception from the Federal rules by passing their own AML rules under the
provisions of Nevada Gaming Regulation 6A (Magaw, 2004).
This duality continued until 2007, when a variety of factors such as the spread of tribal
casino gaming and the increasing costs faced by Nevada-based casino groups which were by
that time operating in multiple jurisdictions effectively necessitating two parallel compliance
systems. The second factor, however, was the implementation of the new “suspicious
activity reporting” at that time. Nevada authorities were reluctant to expand their
regulations in this area. Faced with a potentially difcult hybrid system for Nevada casinos,
state rules for currency transactions and federal rules for suspicious activity reporting, the
Nevada authorities chose to simply cancel the state requirements and rely fully on the federal
53
Casino money
laundering
regulations

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