Attributing observed deficiencies to a lack of a culture of compliance, FinCEN has again targeted a casino for willful violations of the anti-money laundering (“AML”) provisions of the Bank Secrecy Act (“BSA”). This time the casino in FinCEN’s sights is the Sparks Nugget, Inc. d/b/a John Ascuaga’s Nugget (“Sparks Nugget”), located in Sparks, Nevada. In resolving this matter with FinCEN, Sparks Nugget entered into a consent agreement that, among other things, provided for a civil penalty of $1 million.
Sparks Nugget admitted to a number of flaws in its AML compliance program, including:
- “Routine” disregard of the employee responsible for compliance by gaming personnel;
- Failure to file SARs, including those completed and deemed worthy of reporting by a former BSA compliance officer – in fact between September 2007 and May 2011 Sparks Nugget filed no SARs;
- Inadequate collection of patron information as required by the BSA;
- Employment of data systems to improve customer service and minimize business risk but not to assess and minimize AML compliance risk; and
- Exhibition of a “blatant disregard” for AML compliance, with Sparks Nugget employees describing to IRS auditors during its 2010 examination that “they did not need to monitor for suspicious activity because nothing suspicious ever happened at the Casino” – a sentiment FinCEN found remarkable given that a county official had been convicted of embezzling over $2 million and “gambling half of that at the Casino.”
The conduct cited in the consent agreement was largely detected during the 2010 IRS audit. As FinCEN has described in other consent agreements, the state of casino compliance prior to that time was deficient industry-wide and uncovering conduct of the sort described in the consent agreement likely contributed to FinCEN’s stepped-up enforcement activity. However, recidivism has also played a part. As the Sparks Nugget consent agreement notes, even though the 2010 IRS examination cited deficiencies, as “recently as 2013, the Casino had failed to make changes to its operations to address many of the AML program and reporting failures identified.” While casinos cannot change the past culture of compliance and AML deficiencies, they must invest the time and resources to address known gaps lest they be the next target of an enforcement action.