Testimony Before the U.S. Senate Committee on Banking, Housing and Urban Affairs

Mr. Chairman, I am very pleased to be able to appear before this committee on the important subject of anti-money-laundering programs.  For the last nineteen years, the commercial casino industry has spent millions of dollars and has devoted untold hours of effort to ensure the strictest possible compliance with the requirements of the Bank Secrecy Act, and to prevent the use of our facilities by money launderers.  This industry takes very seriously these obligations to our nation, our customers, our employees, and the communities in which we operate.  Our industry has always been — and always will be — highly regulated by our host states, and we have always recognized our duty to ensure maximum possible legal compliance.  Since the American Gaming Association was founded in 1995, we have helped our industry and the Department of the Treasury form an effective partnership in meeting these obligations.

The American Gaming Association represents the commercial casino industry, consisting primarily of publicly held hotel-casinos listed on the New York and NASDAQ stock exchanges, including most of the names consumers are most familiar with in our industry:  Harrah’s Entertainment, MGM MIRAGE, Caesars Entertainment.  Commercial casinos currently operate in eleven states and directly employ more than 350,000 people, who earned more than $11 billion in 2003.  Our segment of the industry generated at least an equal number of additional jobs in construction and related businesses.  State regulations control the industry’s financial and business practices through exacting conditions of licensing.  Board members and senior executives are subject to exhaustive background investigations and must be found suitable for a gaming license. Our gaming employees, and in many cases our vendors, also must have background checks by state regulators before they can work in the industry. 

Beginning in 1985, our casinos have been subject to currency reporting obligations under the Bank Secrecy Act (BSA).  In the nearly two decades since then, commercial casinos have filed millions of CTRCs (Currency Transaction Reports for Casinos), and currently submit them at a rate of several hundred thousand per year.  The industry itself has expanded substantially over the same period.  In 1985 commercial casinos operated only in Nevada and New Jersey.  When the Department of the Treasury first applied currency-reporting obligations to casinos, the department exercised its powers under the BSA to enter into a memorandum of understanding with Nevada gaming regulators under which Nevada casinos reported currency transactions exceeding $10,000 through a state-administered program that was supervised and approved by the Treasury.  That memorandum has been revised since 1985, to the point where the Nevada requirements closely track the federal program.  All non-Nevada casinos have always been subject to direct federal supervision for CTRC compliance.

A major challenge for federal and state regulators, and for the casino industry, has been adapting BSA requirements to an entertainment venue like a casino floor.  The BSA was designed to apply to business settings like banks and brokerage offices, where customers expect to have to document their activities.  A casino offers a very different environment.  For example, rarely (if ever) will a visit to a bank or stock brokerage include a Mardi Gras parade, a Cirque du Soleil performance, or food and beverage service.  Similarly, we provide cash services twenty-four hours a day, seven days a week — well more than any other business regulated under the BSA.  In the fast-paced atmosphere of a casino, at all times of the day or night, our members have to acquire good identification documentation from customers so we can report both cash transactions and suspicious activity.  We also have to effectively track the activity of customers who play a number of different casino games during a visit or who play at different tables throughout an evening.  Although these are difficult tasks to perform, we think, on balance, we are meeting these challenges.

That is not to say that individual companies have not sometimes missed filing currency reports that they should have filed.  Any such violation is one violation too many.  Still, like banks and brokerage houses and money businesses, the gaming industry has found that its systems and its people occasionally have failed to meet the daunting technological and administrative challenges posed by anti-money-laundering requirements.  I want to stress that none of these violations has been found to be intentional, or to involve some form of collusion with a money laundering enterprise.  Indeed, the more recent situations of this type largely have been discovered by the gaming companies themselves and self-reported to regulators.  Like the other financial institutions, we have to learn from these failures and make sure we do a better job every day, and that’s exactly what we are committed to doing.

Seven years ago the anti-money-laundering effort in the industry moved to a new level when Nevada required that its casinos file “suspicious activity reports” concerning customer activity that might constitute money laundering or other illegal activity.  Seven months after Nevada acted, Treasury proposed such an obligation for the rest of the industry.  At that time, a number of our members began filing suspicious activity reports for non-Nevada casinos on a purely voluntary basis.  New Jersey imposed mandatory suspicious activity reporting on casinos in that state in October 2000, and Treasury’s suspicious activity rule for casinos took effect some thirty months later, on March 25, 2003.

The AGA applauds this move toward suspicious activity reporting, and away from the previous reliance on CTRCs.  That move places the knowledge and observations of our experienced employees in the service of the government’s anti-money laundering efforts.  I’d like to note a few statistics relating to suspicious activity reporting by casinos:

• Between August 1, 1996 and December 31, 2003, casinos filed 9,866 suspicious activity reports (SARs), with over half of those being filed in 2003, when Treasury’s mandatory rule took effect. 
• Almost 90 percent of the suspicious activity reports filed by casinos and card clubs have been filed by the commercial casino industry.
• About one-third of the suspicious activity reports have concerned possible “structuring” activity by customers, while fifteen percent concerned large cash transactions with “minimal gaming,” which could be a sign of money laundering.  By way of comparison, roughly half of the SARs filed by U.S. banks through June 2003 concerned suspected money laundering and structuring.

We also have worked with Treasury, and our state gaming regulators, in the fight against money laundering.  For over ten years, a representative of the commercial casino industry has participated in the efforts of the Bank Secrecy Act Advisory Group.  On two recent occasions, we have organized a series of government-industry conferences across the country on money laundering issues.  The first round of conferences was designed to help Treasury gather information about anti-money-laundering efforts at casinos.  The second round involved a series of workshops on Treasury’s new suspicious activity regulations for casinos.  We also have organized numerous “back of the house” tours of casino facilities, as well as other meetings with industry participants, to help Treasury officials evaluate anti-money-laundering programs in our industry.

The gaming industry will continue to do its part in this heightened security environment.  Because we handle many cash transactions and must comply with comprehensive state regulations, our properties already have extensive security measures in place.  The nature of our business demands that we meet a safety standard that other industries now strive to reach. 

Although new legal duties will often present challenges, we have confidence that we will be able to work with our federal and state regulators to develop effective implementation plans.  We recognize the paramount importance of taking meaningful steps to ensure the safety of our employees, our customers, and our communities, and to minimize any potential for terrorist or criminal activity involving our businesses.