|#66 ©2000, all rights
reserved worldwide. Gambling and the Law™ is a registered trademark of
Professor I. Nelson Rose, Whittier Law School, Costa Mesa, CA.
Casinos As Spies For The Federal Government
The following notice has not been approved
by any government official. (In fact, some of them would probably
be unhappy to see this warning published)
WARNING TO ALL CASINO
If you win big, are a high
roller, or do anything that a casino or the government regards as suspicious,
you will be reported to the U.S. Treasury Department's Financial Crimes
Enforcement Network, commonly known as FinCEN.
The information will be made
available to the IRS and your local law enforcement agency. Expect
your taxes to be audited.
If you are ever involved
in a messy lawsuit, your opponent may be able to obtain some of this information
by subpoena, to show, for example, how much cash you used for gambling.
The casino will not always
tell you when it files these reports; in fact, under some circumstances,
it is not allowed to let you know that you have been reported to FinCEN.
Scary, isn't it?
All businesses are supposed to report
cash transactions over $10,000. But only "financial institutions"
are required to file detailed reports and have compliance programs in place
to make sure the reports get filed. And only "financial institutions" have
to report "suspicious activities" involving more than $3,000 to FinCEN.
It may come as a surprise to most players
and even executives in the gaming industry that large casinos and card
clubs have been defined as "financial institutions."
It will certainly be a shock to most
players to learn that they may be the subject of secret reports filed by
casinos with the federal government.
All casinos and card clubs with gross
annual gaming revenues in excess of $1 million must file Currency Transactions
Reports (CTRs) with the federal government every time a player has a cash
transaction of more than $10,000. This includes players using currency
to buy chips, deposit front money, pay off markers, make large wagers or
collect large winning bets.
The last is particularly interesting,
because the original purpose of CTRs was to track crooks who were using
casinos for money laundering, like a drug dealer who bought gaming chips
with $25,000 in small bills, made a few token bets, and then asked for
a cashier's check for his remaining chips.
In the mid-1980s Nevada officials, including
its then-powerful Republican senators, convinced the federal government
that there was no need for casinos to file CTRs when the cash was paid
by casinos. Nevada enacted Regulation 6A, which required casinos to file
CTRs only with the state, and only for transactions that might involve
dirty money, like cash buy-ins or marker payments.
But Nevada gaming officials, apparently
at the request of the federal government, changed the rules in 1997.
All currency transactions of more than $10,000, even slot jackpots paid
out in cash, now have to be reported. And today CTRs are filed with
the IRS, not with the state.
The U.S. Congress, which is supposedly
the body that actually makes the laws, had established complicated rules
for withholding taxes of gambling winnings, but only under special circumstances.
For example, a sports book has to withhold 28 percent of the amount won,
but only if it is more than $5,000 and at least 300 times as large as the
For years the IRS has gone further by
requiring casinos to report big wins at bingo, slot machines and keno,
even though no money was withheld for taxes.
Today, a CTR must be filed on every
patron who cashes out for more than $10,000 in currency -- no matter what
the game and even if the player has lost money gambling.
The regulations also used to require
that casinos obtain identification from the player before filing a CTR.
Today, a casino does not have to ask
for a player's i.d. if it already has the patron's name, address and similar
information. This eases the casinos workload and prevents disruptions.
But it also means high-rollers do not have to be told when the casino files
CTRs with the IRS.
The reason for the changes is simple:
The Treasury Department has admitted that one of its primary goals is to
go after untaxed cash transactions that have nothing to do with money laundering.
But Treasury still wants to catch drug
dealers. So, it has taken the next step: Suspicious Activity
Reports - Casinos or SARCs, to be filed with FinCEN.
As this is being written, only Nevada
casinos have to file SARCs, although FinCEN intends to require all casinos
and card clubs to report suspicious activities.
What exactly is a "suspicious activity"?
The amount does not have to be more
than $10,000; a total of $3,000 or less can trigger a report. Nor
does it have to involve any currency.
FinCEN likes to say the standard is
"know your patron." But the actual regulation is more vague, including
phrases like a casino employee "has reason to suspect" that the transaction
"has no business or apparent lawful purpose."
Casinos face large fines if they fail
to report suspicious transactions, and they cannot be sued for filing SARCs
when players were doing nothing wrong. So, when in doubt, casinos
will err on the side of filing reports on their patrons.
It is against the law for a casino to
tell a player that it has reported his suspicious activity to FinCEN.
This might catch more crooks.
But it is hard to picture casino executives as secret police.
Professor Rose can be reached
at his Web Site: www.GamblingAndTheLaw.com