Another Land-based Casino Accused Of Exercising Lax Controls

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Tuesday, September 29th, 2015 | Written by Stephen Smith

One of the biggest arguments that people make against iGaming is that it could be used to launder money by allowing players to gamble anonymously. People who make those types of arguments usually state that land-based casinos are better able to prevent these types of activities, but earlier this month that stance was shown to be blatantly misinformed after Tim James recorded an undercover video showing Las Vegas Sands Corporation casinos, namely the Palazzo and the Venetian, inadvertently allowing two underage persons to gamble at its casinos.

Needless to say, this situation suggests that land-based casinos may suffer from more lax security arrangements than their online counterparts, and recently another major casino operator, Caesars Entertainment Corporation, also landed in hot water after the Financial Crimes Enforcement Network (FinCEN) ordered Caesars Palace to pay $9.5 million for failing to stop money laundering operations.

Risky Financial Transactions

The investigation into money laundering at Caesars Palace began in 2013. Prior to that time, the casino operator set up private gaming parlors in locations around the world and invited high rollers to travel to these exclusive, invitation-only venues. Once there, players were allowed to gamble anonymously, and large wire transfers and other potentially suspicious transactions were apparently ignored by the company. As a result, FinCEN alleges that Caesars Palace did not follow due diligence requirements to prevent money laundering, stating that the casino operator turned “a blind eye” to it, and since the players were specifically invited to play, FinCEN rejected the argument that Caesars Palace simply didn’t have the ability to know about the transactions. Commenting on the issue, FinCEN Director Jennifer Shasky Calvery said:

“Caesars knew its customers well enough to entice them to cross the world to gamble and to cater to their every need. But, when it came to watching out for illicit activity, it allowed a blind spot in its compliance program. Every business wants to impress its customers, but that cannot come at the risk of introducing illicit money into the U.S. financial system.”

Details of the Fine

After the FinCEN investigation came to a close, Caesars was ordered to pay $8 million to the Treasury Department’s Financial Crimes Enforcement Network and an additional $1.5 million to the state of Nevada State Gaming Control Board. Caesars has also been ordered to make changes to their policies regarding anti-money laundering compliance. In addition to having to pay the steep fines, the casino operator will be required to submit proof that they have implemented new policies and procedures and improved training for staff in order to prevent money laundering both in its public casinos and its private gaming parlors. A spokesperson for Caesars has confirmed that the casino operator was already making these changes since the start of the investigation, stating:

“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.”

Caesars Files For Bankruptcy

The agreement for payment of the fine will not become finalized until after the bankruptcy court approves Caesars bankruptcy petition. However, the situation has become extremely messy, though, as Caesars Entertainment Operating Company (CEOC) entered Chapter 11 in January, but the global casino operator, Caesars Entertainment Corp, has so far managed to avoid bankruptcy. Nevertheless, CEOC bondholders are extremely upset by the development, and have accused its non-debtor parent, Caesars, of trying to duck out of honoring billions of dollars in debt accrued by CEOC. At the end of July, Chicago Bankruptcy Judge A. Benjamin Goldgar then furnished an opinion stating that Caesars could not use its subsidiary’s bankruptcy to skip its debt bills, but Caesars has since warned it may have to file its own bankruptcy petition if Judge Goldgar refuses to stop the litigation.

Part of a Larger Problem

While the FinCEN ruling does look bad for Caesars Palace, it’s important to note that the casino operator isn’t the only big name in the industry that has had to pay big fines for money laundering. The Las Vegas Sands Corp paid a whopping $47.4 million in fines back in 2013 for similar charges. What’s clear is that casino operators in general need to do more to ensure that they are complying with federal and state money laundering laws, even when it concerns their high rollers.