[Federal Register Volume 59, Number 230 (Thursday, December 1, 1994)]
[Unknown Section]
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From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-29662]
[[Page Unknown]]
[Federal Register: December 1, 1994]
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Part III
Department of the Treasury
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31 CFR Part 103
Regulations Regarding Reporting and Recordkeeping Requirements by
Casinos; Bank Secrecy Act Amendments; Final Rule
DEPARTMENT OF THE TREASURY
31 CFR Part 103
Amendments to the Bank Secrecy Act Regulations Regarding
Reporting and Recordkeeping Requirements by Casinos
AGENCY: Financial Crimes Enforcement Network, Treasury.
ACTION: Final rule.
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SUMMARY: The Bank Secrecy Act authorizes the Secretary of the Treasury
to require financial institutions to file reports and keep records that
the Secretary determines have a high degree of usefulness in criminal,
tax, and regulatory matters, and to implement anti-money laundering
programs and compliance procedures and report potentially suspicious
transactions to the federal government. The authority of the Secretary
to administer the Bank Secrecy Act has been delegated to the Director
of the Financial Crimes Enforcement Network. As a result of a review of
Treasury's anti-money laundering requirements, this final rule
substantially modifies changes to the Bank Secrecy Act reporting and
recordkeeping requirements for casinos that were contained in a Final
Rule published on March 12, 1993, and withdraws a number of provisions
contained in that Rule. The withdrawn provisions include the
requirements that casinos record and verify the identification of any
customer whose transactions in currency on a gaming day have reached
$3,000; maintain a list of customers who are known by aliases; obtain
missing customer information with respect to multiple transactions
which, when aggregated, exceed $10,000 in currency; and establish a
chronological imprest system. The withdrawn provisions were scheduled
to become effective on December 1, 1994.
DATES: Effective Date: The Final Rule is effective December 1, 1994.
Compliance Date: Mandatory compliance is required by June 1, 1995.
ADDRESSES: Peter G. Djinis, Office of Financial Enforcement, Financial
Crimes Enforcement Network, Department of the Treasury, room 3210
Annex, 1500 Pennsylvania Avenue, NW., Washington, DC 20220.
FOR FURTHER INFORMATION CONTACT: Leonard C. Senia, Compliance
Specialist, Office of Financial Enforcement, Financial Crimes
Enforcement Network, (202) 622-0400.
SUPPLEMENTARY INFORMATION: Casinos are designated generally as
``financial institutions'' for purposes of the Bank Secrecy Act
(``Act''). Under the Act's implementing regulations, casinos are
subject to particular reporting and recordkeeping requirements, see,
e.g., 31 CFR sections 103.11(i)(7), 103.22(a)(2) and 103.36.
On March 12, 1993, Treasury published in the Federal Register, 58
FR 13538-13550, a Final Rule (the ``March 12, 1993 Rule'') involving
nineteen amendments to the Bank Secrecy Act regulations affecting
casinos. The purpose of the amendments was to enhance compliance with
Bank Secrecy Act requirements, Public Law 91-508 (codified at 12 U.S.C.
1829b, 12 U.S.C. 1951-1959, and 31 U.S.C. 5311-5329), and to provide
Bank Secrecy Act examiners with ``audit trails'' to determine the
adequacy of compliance.
The original effective date of the March 12, 1993 Rule was
September 8, 1993. On August 27, 1993, Treasury delayed the effective
date of the March 12, 1993 Rule until March 1, 1994, to give affected
casinos an additional six months to comply with the rule (see 58 FR
45263). On February 25, 1994, Treasury announced a second delay of the
effective date of the March 12, 1993 Rule, from March 1, 1994, to
December 1, 1994 (see 59 FR 9088). The second delay permitted Treasury
to consider the treatment of casinos in the course of an ongoing
comprehensive review of Treasury's anti-money laundering enforcement
policies and programs. That review was initiated to set the course for
implementation of the Annunzio-Wylie Anti-Money Laundering Act of 1992
(Public Law 102-550, 106 Stat. 3672, 4044 (1992), codified as amended
in scattered sections of Titles 12, 18, 22, 28, 31, and 53, U.S.C.) and
the legislation that ultimately became the Money Laundering Suppression
Act of 1994 (Public Law 103-325). Two of the key objectives of the
Treasury review were the need to balance accurately costs and benefits
in framing compliance rules and the extent to which emphasis in
administration of the Bank Secrecy Act should be placed on anti-money
laundering programs and the reporting of suspicious transactions by
financial institutions.
Treasury has determined that it should modify the March 12, 1993
Rule in light of its intention to promulgate regulations requiring
financial institutions, including casinos, to report suspicious
transactions and establish anti-money laundering measures including
``know your customer'' policies and programs. The modifications should
reduce the regulatory burden that would otherwise have been imposed on
the casino industry without unduly diminishing the value of the
information that casinos are required to maintain or report, and, more
importantly, without reducing the level of Bank Secrecy Act compliance
by casinos.
The modifications should not be misinterpreted. Treasury remains
concerned about the potential use of casinos to further the commission
of financial crime and as an avenue for transmission of funds generated
by such crimes. The casino industry is vulnerable to such use because
casinos engage in a fast-paced cash intensive business and can provide
their customers with financial services nearly identical to those
generally provided by depository institutions. Federal law enforcement
organizations have documented the use of casinos as surrogate ``banks''
for individuals. They have also documented instances of misuse of
casino facilities to avoid proper identification of customers, for
example, through submission of false identification by individuals who,
for a fee, are cashing out casino chips for anonymous ``high rollers''.
The Internal Revenue Service continues to believe that a high volume of
untaxed currency passes through casinos.
A number of the provisions of the March 12, 1993 Rule will become
effective on December 1, 1994. Equally important, Treasury intends in
the near future to propose comprehensive ``know your customer'' and
suspicious transaction reporting requirements that will apply to all
financial institutions, including casinos. The provisions of the March
12, 1993 Rule that will become effective on December 1, 1994 include
the requirement that each casino develop and implement a compliance
program; the details of that program have been refined to include terms
that anticipate Treasury's adoption of suspicious transaction reporting
requirements.
The compliance program provisions also reflect the already-existing
protection for financial institutions against liability for ``a
disclosure of any possible violation of law or regulation'' contained
in 31 U.S.C. section 5318, as amended by the Annunzio-Wylie Anti-Money
Laundering Act of 1992. Banks and other sectors of the financial
community have already taken steps voluntarily to identify and report
such transactions, and Treasury would be interested in observing what
steps the casino industry could take, even in advance of the suspicious
transaction reporting regulations, to do the same, that is, to identify
and report unusual or suspicious transactions that involve possible
violations of law or regulation.
In the event that casinos are unable to establish effective ``know
your customer'' and suspicious transaction reporting programs, Treasury
will re-evaluate the need for additional casino-specific recordkeeping
practices, possibly including requirements withdrawn from the March 12,
1993 Rule at this time.
A summary of Treasury's determinations with respect to the March
12, 1993 Rule follows.
(1) Definition of Casino. The definition of casino remains
unchanged. Treasury intends to propose rules in the near future which
would (i) raise the ``gross annual gaming revenue'' threshold to a
level as high as $15,000,000 for subjecting a casino to the reporting
and recordkeeping requirements of the Bank Secrecy Act and (ii)
designate Indian gaming operations as financial institutions subject,
as are other casinos, to the Bank Secrecy Act under authority granted
to Treasury by the Money Laundering Suppression Act. It is contemplated
that such an increase in the threshold would relieve or eliminate many
Bank Secrecy Act requirements for casinos falling under the threshold.
Such relief may be reasonable since small casino establishments
typically have limited stakes gaming or cater to customers who wager in
such small amounts that very few currency transaction reports are filed
with the Internal Revenue Service. However, Treasury intends to require
in a future regulation that these casinos--as well as those above the
threshold--be required to report suspicious transactions. Also, those
casinos falling below the threshold would then become subject to
Section 6050I of the Internal Revenue Code, which mandates the
reporting of cash in (i.e., cash received) transactions exceeding
$10,000. Those casinos falling below the threshold would remain subject
to other appropriate provisions of the Bank Secrecy Act.
(2) General Currency Reporting Requirements. The provisions of 31
CFR section 103.22(a)(2) as amended by the March 12, 1993 Rule are
modified in two ways. First, the de minimis rule of section
103.22(a)(2)(iv) (which provided a safe harbor, in certain instances,
from aggregating casino transactions involving less than $500 in
currency) is removed since it is no longer needed in light of other
changes made in this Final Rule. Second, Treasury modified the
knowledge requirement for filing a currency transaction report based
upon multiple transactions by the same customer. Language clarifying
the pre-existing requirement that ``cash in'' and ``cash out''
transactions be separately aggregated, together with examples of such
``cash in'' and ``cash out'' transactions, remains. (Amendment #2).
(3) Additional Recordkeeping Requirements. Treasury has decided to
withdraw the requirements added by amendatory instructions 4, 5, 6, 7,
11, 12, 13, 16, 17, and 18 of the March 12, 1993 Rule. Those
requirements, to a large part, dealt with a number of additional
recordkeeping procedures for casinos. The withdrawn procedures include
the requirements that casinos (i) record and verify the identification
of any customer whose transactions in currency on a gaming day have
reached $3,000, (ii) maintain a list of customers who are known by
aliases, (iii) obtain missing customer information with respect to
multiple transactions which, when aggregated, exceed $10,000 in
currency, and (iv) establish a chronological imprest system. As
indicated above, Treasury does not believe it is appropriate or
necessary, in light of its intention to require the establishment of
comprehensive ``know your customer'' programs and suspicious
transaction reporting requirements to impose these additional
recordkeeping procedures for casinos at this time. (Amendment #3).
(4) Obtaining and Verifying Customer Identification. The provisions
of 31 CFR 103.36(a) are unchanged, except for a citation change. Those
provisions require casinos to obtain and verify customer identification
when a customer deposits funds or opens an account or establishes a
line of credit. (Amendment #4.)
(5) Recording Monetary Instruments. The changes to the March 12,
1993 Rule necessitate redesignating the requirement that casinos record
transactions of $3,000 or more involving monetary instruments as
Section 103.36(b)(9). This record will provide an effective means of
determining whether or not large transactions have been accounted for
as currency transactions. (Amendment #5).
(6) Bank Secrecy Act Compliance Programs for Casinos. The
requirement that casinos establish Bank Secrecy Act compliance programs
generally remains unchanged. However, the specific requirement that
such programs determine the point at which multiple currency
transactions will be treated as a single transaction (contained in sub-
sub paragraph (B) of 31 CFR 103.54(a)(2)(v)) is removed, and replaced
by a requirement relating to the occurrence of unusual or suspicious
transactions. Also, Treasury modified the training requirement to
include such transactions. The requirement that casinos make and retain
a copy of their compliance program of the March 12, 1993 Rule, remains,
but is redesignated as Section 103.36(b)(10). (Amendments #5, #6 and
#7).
As discussed in the preamble to the March 12, 1993 Rule, the
required compliance programs must provide for (i) internal controls to
assure ongoing compliance with the provisions of the Bank Secrecy Act
and its implementing regulations, (ii) independent testing for
compliance, (iii) training of casino personnel in Bank Secrecy Act
rules and compliance, and (iv) the designation of specific personnel
responsible for day-to-day compliance. Similar programs have been
required of banks since 1987. See, e.g., 12 C.F.R. 21.21 and 208.14 and
Treasury's authority in 31 U.S.C. 5318(h) to require anti-money
laundering compliance programs generally.
The provisions relating to Bank Secrecy Act compliance programs
also make it clear that casinos must ensure use of all available
information to assemble and verify required customer identifications,
and to make and retain records required by the Act. In addition,
casinos which have automated data processing systems shall provide for
their use to aid in assuring Bank Secrecy Act compliance.
Casinos need to ensure that their compliance programs address the
full range of currency transactions cited in 31 CFR 103.22(a)(2) (i)
and (ii). For example, casino compliance procedures should, as one
matter, assure that all available information is used to distinguish
accurately between cash and chips transactions. Treasury is aware that
casinos do not always distinguish between chip transactions and
currency transactions at the cage, because chips and currency
transactions are interchangeable in casinos. As a result, casinos do
not always create records of certain currency transactions (e.g., chip
redemptions and currency exchanges), making it easy to misrepresent or
accidently misidentify recordable or reportable currency transactions
as non-reportable chip transactions. In addition, casino compliance
procedures should assure that all available information is used in any
existing system that identifies currency transactions, including
information on such records as player rating cards, multiple currency
transaction logs, etc. Lastly, Treasury expects that casinos will use
inexpensive and compatible procedures that could improve greatly their
compliance efforts, such as the recording of the amount of the cash
buy-in on player rating cards. Treasury will ask its Bank Secrecy Act
compliance examiners to ascertain whether casinos have established
effective compliance programs.
(7) Transactional Imprest System. Treasury has decided to withdraw
the imprest system requirement reflected in 31 CFR 103.54(b). The
additional burdens such a system would impose on the casino industry
are unnecessary at this time in light of the hoped for satisfaction of
law enforcement needs by other means in this and pending regulations.
(Amendment #8).
(8) Special Casino Terms. Other changes necessitate redesignating
section 103.54(c) as 103.54(b) pertaining to special casino terms
contained in the March 12, 1993 Rule. Also, Treasury decided to
withdraw Section 103.54(d), pertaining to ongoing identification
requirements, as a consequence of the other changes made to the March
12, 1993 Rule. (Amendment #8).
Administrative Procedure Act
Because this document merely removes previously published
regulatory requirements, notice and public comment are unnecessary and
contrary to the public interest pursuant to 5 U.S.C. 553(b)(B).
Executive Order 12866
This Final Rule reduces regulatory burdens as contemplated by
Executive Order 12866 and is not a ``significant'' rule for purposes of
that Executive Order. It withdraws the transactional imprest system and
many recordkeeping requirements to which casinos would have been
subject had the applicable provisions of the March 12, 1993 Rule gone
into effect. This Final Rule is not anticipated to have an annual
effect on the economy of $100 million or more and will not affect
adversely in a material way the economy, a sector of the economy,
productivity, competition, jobs, the environment, public health or
safety, or state, local or tribal governments or communities. It is not
inconsistent with, nor does it interfere with actions taken or planned
by other agencies. Finally, it raises no novel legal or policy issues.
A cost and benefit analysis, therefore, is not required.
Regulatory Flexibility Act
Because no notice of proposed rulemaking is required, the
provisions of the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., do
not apply.
Paperwork Reduction Act
The collection of information requirements contained in this Final
Rule has been reviewed and approved previously by the Office of
Management and Budget (OMB) for review in accordance with the Paperwork
Reduction Act (under OMB control number 1505-0063).
Drafting Information
The principal author of this document is the Financial Crimes
Enforcement Network's Office of Financial Enforcement.
List of Subjects in 31 CFR Part 103
Authority delegations (Government agencies), Banks and banking,
Currency, Foreign banking, Investigations, Law enforcement, Reporting
and recordkeeping requirements, Taxes.
Amendment
For the reasons set forth above in the preamble, the Final Rule
published in the Federal Register of March 12, 1993 (58 FR 13538-
13550), amending 31 CFR Part 103, is further amended, effective
December 1, 1994, as set forth below:
PART 103--FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND
FOREIGN TRANSACTIONS
1. The authority citation for Part 103 continues to read as
follows:
Authority: Pub. L. No. 91-508, Title I, 84 Stat. 1114 (12 U.S.C.
1829b, 1951-1959); 31 U.S.C. 5311-5329.
2. Section 103.22 is amended by removing paragraph (a)(2)(iv) and
revising paragraph (a)(2)(iii) to read as follows:
Sec. 103.22 Reports of currency transactions.
* * * * *
(a) * * *
(2) * * *
(iii) Multiple currency transactions shall be treated as a single
transaction if the casino has knowledge that they are by or on behalf
of any person and result in either cash in or cash out totalling more
than $10,000 during any gaming day. For purposes of this paragraph
(a)(2), a casino shall be deemed to have the knowledge described in the
preceding sentence, if: any sole proprietor, partner, officer,
director, or employee of the casino, acting within the scope of his or
her employment, has knowledge that such multiple currency transactions
have occurred, including knowledge from examining the books, records,
logs, information retained on magnetic disk, tape or other machine-
readable media, or in any manual system, and similar documents and
information, which the casino maintains pursuant to any law or
regulation or within the ordinary course of its business, and which
contain information that such multiple currency transactions have
occurred.
* * * * *
3. Amendatory Instructions 4, 5, 6, 7, 11, 12, 13, 16, 17, and 18
are withdrawn.
Sec. 103.36 [Amended]
4. Section 103.36(a) is amended by removing ``103.28(a)'' which
appears twice in the fourth sentence and adding ``103.28'' in both
places.
5. Section 103.36, paragraphs (b)(11) and (b)(12) are redesignated
as paragraphs (b)(9) and (b)(10).
6. Section 103.54 is amended by revising paragraph (a)(2)(iii) to
read as follows:
Sec. 103.54 Special rules for casinos.
* * * * *
(a) * * *
(2) * * *
(iii) Training of casino personnel, including training in the
identification of unusual or suspicious transactions, to the extent
that the reporting of such transactions is hereafter required by this
part, by other applicable law or regulation, or by the casino's own
administrative and compliance policies;
* * * * *
7. Section 103.54 is further amended by revising paragraph
(a)(2)(v)(B) to read as follows:
Sec. 103.54 Special rules for casinos.
* * * * *
(a) * * *
(2) * * *
(v) * * *
(B) When required by this part, the occurrence of usual or
suspicious transactions; and
* * * * *
8. Section 103.54 is further amended by removing paragraphs (b) and
(d) and redesignating paragraph (c) as paragraph (b).
Dated: November 28, 1994.
Stanley E. Morris,
Director, Financial Crimes Enforcement Network.
[FR Doc. 94-29662 Filed 11-29-94; 11:43 am]
BILLING CODE 4810-25-P