Caesars fined $9.5 million over lax money-laundering controls

U.S. and Nevada regulators have fined Caesars Entertainment Corp.’s bankrupt unit a total of $9.5 million for deficient anti-money-laundering controls at its Caesars Palace VIP rooms, which cater mainly to Chinese high-rollers.

Caesars agreed to pay an $8 million civil penalty to federal regulators after admitting that it had openly allowed wealthy patrons to gamble anonymously in private rooms at its flagship casino in Las Vegas, the U.S. government said in a written statement Tuesday. The casino company also admitted it had failed to properly monitor transactions at international marketing offices in Hong Kong and elsewhere that recruited the players, according to the settlement with the U.S. Treasury’s Financial Crimes Enforcement Network, or FinCEN.

In conjunction with the federal enforcement action, Nevada regulators said Tuesday that the casino operator also agreed to pay an additional $1.5 million civil penalty for violating state laws.

A Caesars representative said: “The entire Caesars organization is committed to full compliance with the requirements applicable to casinos and to taking effective risk-based measures to prevent and detect money laundering,” adding that Caesars Palace has already made substantial improvements to its anti-money-laundering program.

U.S. regulators have sharpened their focus on anti-money-laundering controls at the nation’s casinos, which get a growing amount of business from Asia. China, worried about cash pouring out across its borders as its economy slows, has cracked down on casinos in Macau, which are widely believed to allow gamblers to move cash out of the country.

Caesars, which has no operations in Macau, has long used its marketing offices in cities such as Hong Kong to bring Chinese gamblers to its VIP rooms, and Caesars Palace has long been a favorite among high-rollers.

According to the settlement, one foreign customer’s US$50,000 cash deposit into Caesars’ Hong Kong bank account wasn’t flagged as suspicious, as U.S. regulations require, and the casino didn’t inquire about the source of the funds. FinCEN also identified lax oversight at Caesars’ Singapore, Tokyo and Monterey Park, Calif., branch offices.

The settlement covers a period when Caesars was struggling with a heavy debt load after its 2008 leveraged buyout. The company’s largest unit filed for bankruptcy in January. The settlement must be approved by bankruptcy court, after which the fine will be considered a general unsecured claim, according to FinCEN.

Caesars still faces a criminal investigation by the Internal Revenue Service over its anti-money-laundering operations.

The crackdown on casinos comes after FinCEN Director Jennifer Shasky Calvery warned those that operate overseas to be especially diligent about customer cash. Of the 10 enforcement actions brought this year by FinCEN, which oversees the entire U.S. financial industry, three have been against casinos.

“We definitely feel a special obligation” to monitor casinos, Ms. Calvery said in an interview. “We’re the only federal civil enforcement agency when it comes to casinos and anti-money-laundering,” she said, adding that banks, for example, are accountable to multiple U.S. regulators.

Earlier this year, FinCEN fined the Tinian Dynasty Hotel & Casino on the Northern Mariana Islands, a U.S. commonwealth in the Pacific Ocean, and the Trump Taj Mahal Casino Resort in Atlantic City, N.J.

Caesars’ admission that it violated federal laws meant that it violated Nevada state laws too, which require compliance with U.S. regulations in addition to the state’s own record-keeping, said Nevada Gaming Control Board Chairman A.G. Burnett in an interview. “When you violate U.S. federal law, we’re not going to let that harm our reputation,” he said.

Read Original Story ->