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GT Alert

USA Patriot Act - Final Regulations that apply to Casinos and Card Clubs

September 2002
By Alan B. Horn, Carl A. Fornaris, and Ileana Gomez, Greenberg Traurig

Click for information on Adobe Acrobat.  View or download the PDF version of this Alert here.


On September 18, 2002, the United States Department of the Treasury issued a final regulation related to the suspicious transaction reporting regime to which the nationís banks, thrift institutions, credit unions, broker-dealers, and certain money services businesses are already subject. The final regulation will require casinos and card clubs whose gross annual gaming revenue is more than $1 million to file a suspicious activity report by casinos ("SARC") with the Treasuryís Financial Crimes Enforcement Network on all transactions of at least $5,000 that the casino "knows, suspects, or has reason to suspect" fall into specific categories.

The final regulation becomes effective 30 days after the date of its publication in the Federal Register.

Background

Under the Bank Secrecy Act, as amended by the USA PATRIOT Act, the Secretary of the Treasury was granted the authority to require financial institutions to report suspicious transactions. The statutory definition of "financial institution" includes a casino, gambling casino, or gaming establishment with an annual gaming revenue of more than $1,000,000 which:

  1. is licensed as a casino, gambling casino, or gaming establishment under the laws of any state or local government; or
  2. is an Indian gaming operation conducted under or pursuant to the Indian Gaming Regulatory Act other than an operation which is limited to class gaming.

Final Regulation

Reporting Requirements. The regulation requires that every casino file a SARC for any transaction conducted or attempted by, at or through a casino, that involves or aggregates at least $5,000 in funds or other assets, and that the casino knows, suspects or has reason to suspect that the transaction:

  1. involves funds derived from illegal activity or is intended to hide or disguise funds or assets derived from illegal activity as part of a plan to violate or evade federal law;
  2. is designed to evade any requirements of these SARC reporting requirements or any other regulations promulgated under the Bank Secrecy Act;
  3. has no business or apparent lawful purpose or is not the sort in which the particular customer would normally be expected to engage, and the casino knows of no reasonable explanation for the transaction after examining the available facts, including the background and possible purpose of the transaction; or
  4. involves use of the casino to facilitate criminal activity.

Throughout the comment period, commenters expressed their concerns that the objective reporting standard required by the regulation would be overly burdensome on the fast-paced casino industry. The Treasury Department, however, opted against making changes to the standard because they found the standard to be a critical component to the imposition of a due diligence requirement on reporting entities.

Confidentiality of Reports/Limitation of Liability. The regulation prohibits any casino, director, officer, employee, or agent of any casino, who files a SARC to notify any person involved in the transaction that the transaction has been reported.

Additionally, the regulation grants those who file a SARC, whether voluntarily or as required by the final regulation, broad protection from liability for filing the report. The final regulation provides that a casino that files a SARC is protected from liability for any disclosure made in the SARC or for failure to disclose the fact that such report was filed.

The Treasury press release and final regulation are available on the Treasury website at http://www.treasury.gov/press/releases/po3436.htm

 

© 2002 Greenberg Traurig


Additional Information:

For more information, please review our Corporate & Securities Practice description, or feel free to contact one of our attorneys.


This GT ALERT is issued for general purposes only and is not intended to be construed or used as legal advice. Greenberg Traurig attorneys provide practical, result-oriented strategies and solutions tailored to meet our clientsí individual legal needs. The Firmís responsive approach to client service often cuts across legal subject matter, applying the right experience and resources to provide cost-effective solutions.