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Know your odds with anti-money laundering gaming compliance
By Jason Grasso, Solutions Architect, SAS Security Intelligence Practice
Within the gaming industry, anti-money laundering compliance is a priority with C-level executives. Rightfully so, since personal and corporate accountability is continuing to increase. In June 2015, Stephanie Brooker, Associate Director of Enforcement with FinCEN (the US Department of Treasury’s Financial Crimes Enforcement Network), reiterated that “the Bank Secrecy Act provides FinCEN with broad supervisory and enforcement authority, allowing FinCEN to impose civil penalties not only against domestic financial institutions, but also against partners, directors, officers and employees of such entities who themselves participate in misconduct."
FinCEN is not just talking the talk but walking the walk. In the past 18 months, there have been numerous fines to the tune of tens of millions of dollars and barring of individuals from the financial industry – as well as casinos – due to lack of anti-money laundering (AML) controls. The regulatory pressure and fines will continue to increase until the industry finally has robust AML systems in place to prove to the regulators that it is effectively identifying, reporting and mitigating AML risk.
Banks realized that with automated processes, including the use of analytics, there were other noncompliance benefits seen from having all of their customer and transactional data in one place.
Challenges specific to casinos
Now let’s consider some of the AML challenges that the casinos are facing:
- An incomplete view of the patron.
- A lack of enterprise knowledge of risk tolerance across multiple areas within a property. For example, compliance wants to de-risk a patron as marketing is rewarding that same patron.
- The enormous amount of time spent on manual detection, investigation and documentation of potential suspicious activity.
- An inability to provide management with a view of risk trends over time.
These challenges weren’t born from a lack of effort. Casinos, like financial institutions, have compliance teams that want to protect the firm against reputational risk and regulatory scrutiny. These teams are very experienced in the gaming field – especially regarding AML. But they’re also hindered by the manual processes that have been the status quo for years. This isn’t dissimilar to how banks operated their AML programs before the adoption of the USA Patriot Act. Casinos and banks may have different business models; however, banks have found out the hard way that using manual AML processes is not an effective way to detect money laundering.
What casinos can learn from banks about AML
Casinos can learn from banks without the growing pains that the banks experienced. Banks realized that with automated processes, including the use of analytics, there were other noncompliance benefits seen from having all of their customer and transactional data in one place.
As banks and other financial institutions have discovered, the use of automated detection systems and analytics can:
- Greatly increase the detection of potential suspicious activity.
- Reduce the investigation time spent by aggregating patron and transactional data.
- Allow the compliance staff to document and prove what actions were taken regarding patrons.
- Allow management to measure performance regarding risk profiles, portfolio trends and other previously unknown indicators and trends.
How to reduce your risk
As the regulatory compliance pressure and fines continue to increase, casinos will make policy changes to reduce their risk. We’re already seeing this with certain casinos requiring that players no longer play with cash at the poker tables.
If policies prevent money derived from criminal proceeds from entering the property, then the bad actors will find other properties to launder their money. Therefore, to stay ahead of criminals, you’ll need to anticipate and adapt to those changes.
Without strong analytics and operational rigor, casinos may have far more risks then they’re even aware of. The question of whether casinos will need to modernize their AML programs – including the use of automated AML detection systems – is not a matter of if, but of when. Like Benjamin Franklin once said, “an ounce of prevention is worth a pound of cure.”
Jason Grasso provides domain expertise for our Security Intelligence practice’s financial crime banking solutions. He has over 14 years of experience in the anti-money laundering industry including holding senior management level positions such as BSA/AML Officer at a top 25 U.S. based financial institution. Prior to joining SAS, Grasso’s experience focused on management of regulatory exams, enhancement of risk methodologies, governance and oversight, merger and acquisition due-diligence, investigative practices, and operational efficiency.