January 21, 2016
By Brett Wolf

More than two thirds of casinos that participated in a study commissioned by theAmerican Gaming Association reported their anti-money laundering compliance budgets grew during the past five years, according to a report the trade group will make public later today. The added money has been spent on new hires, training, and technology aimed at improving due diligence and transaction monitoring, the report states.

Budget increases averaged about 74 percent during the past half decade and nearly two thirds of study participants expected their AML budgets to grow – by an average of 13 percent – during the coming year, an advance copy of the survey report provided to Thomson Reuters Regulatory Intelligence, states.

“The numbers are staggering in terms of the industry’s commitment to protecting its licenses, to satisfying regulators, and to ensuring that the industry can continue to thrive in the years ahead,” Geoff Freeman, president and chief executive of the American Gaming Association (AGA), said in an interview on Wednesday.

Freeman added that the casino industry is recovering from the downturn it experienced in 2008 and 2009 and that the added revenue is “perhaps helping support some of these (compliance) investments that are being made.”

The 40 page report does not state the specific amount of money study participants reported spending on AML compliance, and in response to a request for those figures, an AGA spokesman said “specific dollar figures” were not collected as part of the study.

The study was conducted by Ernst & Young LLP and involved online surveys and in-person interviews with compliance executives from 23 commercial and tribal gaming companies representing 245 properties with more than $30 billion in combined revenues, the report states. The AGA is the largest national trade group representing the $240 billion U.S. casino industry.

Survey respondents used their increased AML budgets “in a variety of manners that best suited their needs, including increased staff or for personnel with different skills, increased training, or improved data systems,” the report states.

Companies with over $3 billion in gaming revenue reported employing an average of 60 fulltime compliance employees, 40 of who were dedicated to AML, the report states. It adds that companies with $1 billion to $3 billion in gaming revenue reported having on average 26 fulltime employees, with 16 dedicated to AML.

Some 88 percent of survey respondents reported increases in spending on continuing education for AML compliance employees during the past five years, and nearly as many said they planned to spend more on AML training during the coming year, the report states.

More than 80 percent of respondents cited adoption of risk-based patron due diligence policies, procedures, and processes as their top AML compliance challenge, the report states. This accounts for – on average – 15 percent of respondents’ total AML spending, nearly twice the level of spending five years ago.

“All respondents indicated that their due diligence programs are event-driven, risk-based approaches versus universal due diligence measures applied across their patron base,” the report states.

The compliance report comes on the heels of a year in which the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued civil penalties totaling $93 million to casinos accused of operating with anti-money laundering weaknesses.

And FinCEN has notified at least a half dozen California card clubs that they may soon face fines over anti-money lapses, a fact not previously reported, a source familiar with the matter told Thomson Reuters Regulatory Intelligence.

The regulator’s aggressive approach has been driven by FinCEN Director Jennifer Shasky Calvery, who since taking the Treasury bureau’s reins in 2012 has prioritized a push to make the casino industry better comply with the Bank Secrecy Act, the primary U.S. AML law.

Discussions with FinCEN over the past several years have helped casinos understand and begin reacting to regulatory expectations, Freeman said.

“As we became more informed, you also saw a coinciding increase in resources dedicated to anti-money laundering,” Freeman said. “Many of the enforcement actions are based on situations that may have happened years ago.

“As an industry we are demonstrating a steadfast commitment to anti-money laundering compliance and we expect that to continue in the years ahead.”

The AGA study report comes as the global anti-money laundering standard setting Financial Action Task Force (FATF) is in the early stages of an onsite assessment of the U.S. AML regime. That effort began Tuesday and is expected to take months to complete.

In a 2006 report evaluating the U.S. AML program, FATF recommended that U.S. regulators require casinos to step up customer due diligence and adopt a risk-based approach to compliance where resources are directed to the most serious risks.

The AGA report states that the industry is increasingly embracing the riskbased approach with “risk assessments and other metrics to drive AML-related policy enhancements and process improvements” becoming more common.

AGA plans to share the report with the FATF, Freeman said.