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Suspicious Activity Report Filings Within the Casino and Card Club Industries

This section will discuss one facet of the casino industry, a particular type of casino referred to as racinos.

?Racinos?

?Racinos? generally are thought of as racetracks with slot machines. In practice, racetracks may be authorized by state law to engage in or offer a variety of collateral gaming operations, including slot machines, video lottery, video poker or card clubs. For example, subject to other applicable statutes and regulations, the Delaware State Lottery Office may license agents to operate video lottery machines within the confines of a racetrack licensed by the Delaware Thoroughbred Racing Commission.

The term ?racino? has not been separately defined nor included specifically in the definition of casino for purposes of the Bank Secrecy Act. Instead, FinCEN relies on the state, territory or tribal characterization to determine whether an entity or operation will be >
FinCEN has identified nine states that have authorized collateral gaming operations (such as those listed above) at racetracks: Delaware, Iowa, Louisiana, Maine, New Mexico, New York, Pennsylvania, Rhode Island, and West Virginia. Twenty-three ?racinos? were identified operating in some of those nine states. It is estimated that approximately $2.66 billion was wagered at racinos in 2003.22

For entities identified as ?racinos,? FinCEN queried the Bank Secrecy Act database for Suspicious Activity Reports filed from 1996 to September 30, 2004. Of the 14,060 Suspicious Activity Reports by Casinos and Card Clubs filed during that period, the query identified 74 reports filed by ten ?racinos? and two racetracks with card clubs. The following charts depict the twelve entities? filings by states.



Suspicious Activities Reported by ?Racinos?

Currency exchange was one of the most frequently reported activities and was identified as suspicious in 16 reports, as follows:

  • Exchanging small denominations of currency ($1s, $5s, $10s and $20s) for $100 bills (nine reports).
  • Exchanging currency for casino chips or feeding currency into slot machines followed by cashing out with little or no gaming play (three reports).
  • Exchanging large quantities of quarters from non-gaming proceeds for paper currency (three reports).
  • Customer requesting to add cash to casino winnings and then exchanging the combined cash and winnings for a single check issued by the casino.



Refusal to provide identification and use of false identification or Social Security numbers were identified in nine reports, as follows:

  • Using false or multiple Social Security numbers (six reports).
  • Refusing to provide required identification (two reports).
  • Failure of one suspect to claim winnings totaling more than $30,000 over a three-year period claiming difficulty in obtaining a valid driver?s license. The suspect did not produce any other type of identification, and provided a name that may have been false.



Racinos reported structuring, apparently for the purpose of avoiding reporting requirements, in six reports, as follows:

  • Customers using agents to cash winnings (five reports).
  • Customer requesting payment by three separate checks of $5,000 each (according to the customer it would be difficult to deposit a $15,000 check at the bank).



Fraud was reported in six reports, as follows:

  • Tampering with the slot machines, causing them to pay out more winnings than they should have dispensed (three reports).
  • A scam described as a ?stringing? involving $100 bills in the self-service betting machines used at some racetracks to place bets (two reports). 25
  • Check alteration.



Suspicious Activities Reported by Racetracks with Card Clubs

Structuring was the most common activity reported by racetracks with card clubs. This activity was identified in eleven reports, as follows:

  • Customers incrementally presented winnings for payout to avoid filing a Currency Transaction Report by a Casino (nine reports).26
  • Two customers attempted to use agents to claim their winnings.
  • One customer used multiple checks at different times to purchase casino chips in order to avoid the filing of a Currency Transaction Report by a Casino.



Refusal to provide identification and the use of false identification or Social Security numbers were identified in eleven reports, as follows:

  • Customers refused to provide identification (seven reports).
  • Customers using false identification (two reports).
  • Customers using false Social Security numbers (two reports).



Money laundering was suspected when a customer deposited money with the casino and then cashed out without any play. This activity was identified in two reports.

The following fraudulent activities were also reported:

  • Counterfeit currency used to purchase casino chips.
  • Employee theft - A casino employee paid funds to an individual who had not played at the casino.



FinCEN continues to provide information to the regulated industries relevant to assessing risks facing the financial system, including information about trends and patterns that are being discovered. FinCEN has provided guidance to assist the casino industry in identifying transactions that may be considered ?suspicious? for purposes of suspicious activity reporting through several means, including The SAR Activity Review. 27 FinCEN will continue to monitor the growth of ?Racinos? and other types of gaming operations and will provide guidance or engage in additional rulemaking as appropriate.

Excerpted from SAR Activity Review Issue 8, page 19

First published on 04/01/2005

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