A federal grand jury is probing a Los Angeles-area casino following allegations by state authorities the business allowed some players to evade transaction reporting requirements and possibly launder money, a source said.
The grand jury is probing the operations of the Gardena-based Normandie Casino, the source said.
Authorities suspect many of California’s roughly 90 casinos known as “card clubs” are not fully complying with laws requiring they report when customers use more than $US10,000 in cash to buy poker chips, the source said.
Organised crime figures linked to drug trafficking and other crimes may use the clubs to spend, or to disguise the source of their gains, the source added, speaking under condition of anonymity.
Lauren Miller, general manager and spokeswoman for Normandie Casino, said in a written statement that federal prosecutors in Los Angeles informed the casino it was under investigation in August 2014. She declined to comment on the grand jury probe. A spokesman for the U.S. Attorney’s office in Los Angeles declined comment.
While many customers “bristle” at having cash transactions reported to the government, and there may be “one-off scenarios” where a card room obliges a customer’s request to remain anonymous, “to suggest it’s a widespread practice, I think that’s really overstating it,” said Kyle Kirkland.
Kirkland, who is president of the California Gaming Association, a trade group for the state’s card rooms, added: “It violates federal law, people aren’t inclined to do that.”
It was not always that way, said Bill Zender, a consultant who has helped the Normandie and other card clubs better comply with anti-money laundering rules.
While compliance has improved in the past few years thanks to federal pressure, card clubs once commonly helped players evade reports on cash transactions, he said.
He added that “Asian games” operations that offer games tailored to Asian or Asian-American players were particularly vulnerable because players insist on privacy and there was stiff competition to attract them.
“I would suggest that of all the card rooms in California that dealt to Asian players, there wasn’t a one of them that wasn’t in violation,” Zender said.
Card clubs, also known as “card rooms,” are a relatively small part of the gaming industry, generating an estimated $US1 billion in revenue per year, compared with about $US6.4 billion at Las Vegas strip casinos. By law, card rooms can only feature card games, and many are family owned.
The United States is cracking down on casinos of all types. The U.S. Attorney’s office in Los Angeles targeted Las Vegas Sands Corp over alleged failures to detect and report suspicious transactions involving high-roller Zhenli Ye Gon, a Mexican pharmaceutical executive. Ye Gon is currently fighting extradition to Mexico, which has charged him with drug trafficking.
In August 2013, Sands agreed to pay the Justice Department more than $US47 million to settle the matter.
The following month, Jennifer Shasky Calvery, the director of the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) gave a speech in Las Vegas where she warned the gaming industry to step-up compliance.
A month after her speech, Caesars Entertainment Corp publicly disclosed that its flagship Las Vegas casino, Caesars Palace, was under investigation by FinCEN and the Justice Department over alleged anti-money laundering lapses. Earlier this month, Caesars said it appeared it might have to pay a penalty of between $US12 million and $US20 million to settle the matter.
Unlike casinos across the country, California card rooms – for many years the only legal form of gambling in the state – were not required to report cash transactions to authorities until 1998. That is when FinCEN began requiring the businesses to comply with Bank Secrecy Act regulations designed to help trace criminals’ money, and when California’s Gambling Control Act came into force.
“Card clubs are at least as vulnerable to use by money launderers as other gaming establishments, both because of their size and because those institutions often lack the controls found at casinos,” Stanley Morris, the then director of FinCEN, said at the time.
(Reporting by Brett Wolf of Thomson Reuters Accelus; Editing by Andre Grenon)
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