Caesars Fined $9.5 Million Over Lax Money-Laundering Controls

Caesars Fined $9.5 Million Over Lax Money-Laundering Controls

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Caesars Fined $9.5 Million

Caesars Fined $9.5 Million

Casino company admits wealthy patrons gambled anonymously at its flagship Las Vegas casino

U.S. and Nevada regulators have fined Caesars Entertainment Corp.’s bankrupt unit a total of $9.5 million for deficient anti-money-laundering controls at its Caesars Palace VIP rooms, which cater mainly to Chinese high-rollers.

Caesars agreed to pay an $8 million civil penalty to federal regulators after admitting that it had openly allowed wealthy patrons to gamble anonymously in private rooms at its flagship casino in Las Vegas, the U.S. government said in a written statement Tuesday. The casino company also admitted it had failed to properly monitor transactions at international marketing offices in Hong Kong and elsewhere that recruited the players, according to the settlement with the U.S. Treasury’s Financial Crimes Enforcement Network, or FinCEN.

In conjunction with the federal enforcement action, Nevada regulators said Tuesday that the casino operator also agreed to pay an additional $1.5 million civil penalty for violating state laws.

A Caesars representative said: “The entire Caesars organization is committed to full compliance with the requirements applicable to casinos and to taking effective risk-based measures to prevent and detect money laundering,” adding that Caesars Palace has already made substantial improvements to its anti-money-laundering program.

U.S. regulators have sharpened their focus on anti-money-laundering controls at the nation’s casinos, which get a growing amount of business from Asia. China, worried about cash pouring out across its borders as its economy slows, has cracked down on casinos in Macau, which are widely believed to allow gamblers to move cash out of the country.

Caesars, which has no operations in Macau, has long used its marketing offices in cities such as Hong Kong to bring Chinese gamblers to its VIP rooms, and Caesars Palace has long been a favorite among high-rollers.

According to the settlement, one foreign customer’s US$50,000 cash deposit into Caesars’ Hong Kong bank account wasn’t flagged as suspicious, as U.S. regulations require, and the s188 casino didn’t inquire about the source of the funds. FinCEN s188 also identified lax oversight at Caesars’ Singapore, Tokyo and Monterey Park, Calif., branch offices.

The settlement covers a period when Caesars was struggling with a heavy debt load after its 2008 leveraged buyout. The company’s largest unit filed for bankruptcy in January. The settlement must be approved by bankruptcy court, after which the fine will be considered a general unsecured claim, according to FinCEN.

Caesars still faces a criminal investigation by the Internal Revenue Service over its anti-money-laundering operations.

The crackdown on casinos comes after FinCEN Director Jennifer Shasky Calvery warned those that operate overseas to be especially diligent about customer cash. Of the 10 enforcement actions brought this year by FinCEN, which oversees the entire U.S. financial industry, three have been against casinos.

“We definitely feel a special obligation” to monitor casinos, Ms. Calvery said in an interview. “We’re the only federal civil enforcement agency when it comes to casinos and anti-money-laundering,” she said, adding that banks, for example, are accountable to multiple U.S. regulators.

Earlier this year, FinCEN fined the Tinian Dynasty Hotel & Casino on the Northern Mariana Islands, a U.S. commonwealth in the Pacific Ocean, and the Trump Taj Mahal Casino Resort in Atlantic City, N.J.

Caesars’ admission that it violated federal laws meant that it violated Nevada state laws too, which require compliance with U.S. regulations in addition to the state’s own record-keeping, said Nevada Gaming Control Board Chairman A.G. Burnett in an interview. “When you violate U.S. federal law, we’re not going to let that harm our reputation,” he said.

FinCEN found particular fault with controls at Caesars Palace’s private VIP rooms, reserved for gamblers with deposits or credit lines of at least $300,000. The lavish rooms, catering mainly to Chinese gamblers who might wager millions during a visit, are located off the main s188 casino floor in the “Palace Court,” whose entrance is marked by seminude female statues wielding fans.

“Caesars allowed a blind spot to exist in its compliance program—private gaming salons—enabling some of the most lucrative, and riskiest, financial transactions to avoid the scrutiny of Caesars’ compliance program,” FinCEN said in a settlement document pertaining to activity dating to 2012. The casino let players use associates’ accounts to gamble, enabling them to conceal their identity and transactions, the settlement said. Like banks, casinos must report currency transactions of more than $10,000 in cash by any person in a single day. They also have to file reports on suspicious activity.

Abroad, regulators criticized controls at Caesars’ Hong Kong marketing office in particular. The office is critical to Caesars’ marketing efforts in neighboring mainland China, the source of the global gambling industry’s most coveted VIPs. At that branch, Caesars often allowed marker payments to be made with third-party checks without trying to verify the relationship between that party and the patron receiving the funds, according to the settlement.

Marketing executives at these branch offices “rarely, if ever” referred suspicious activity to Caesars’ compliance department, said the settlement. “They also lacked a basic understanding of the types of activity that should be considered suspicious,” the settlement said. During the period analyzed by the IRS in 2012, FinCEN said, Caesars failed to file more than 100 reports on a variety of suspicious activities.

Source: http://goo.gl/6HDh8R

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