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Feds target casino money laundering
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Feds target casino money laundering

The river of cash flowing through casinos can attract drug traffickers looking to launder their profits, but authorities in Southern Arizona and across the country are stepping up efforts to keep dirty money from mixing with clean.

In one recent case, a Tucson man is suspected of laundering nearly $250,000 in drug-sale proceeds at the Desert Diamond Casino on South Nogales Highway. Over 17 trips from February to August, the man — whom the Star is not naming because police have not charged him with a crime — put as much as $35,000 at a time into gaming machines.

On Sept. 24, Drug Enforcement Administration agents executed a search warrant at the man’s west-side residence that netted an undisclosed amount of cash, numerous casino receipts, a stash of suspected heroin and a firearm.

Money laundering — the process by which criminals get rid of bills that can be tied to a crime by trading them for money that has not been used for illicit purposes — is big business in the United States. The U.S. Treasury estimates the total at $300 billion a year, including $64 billion laundered by drug traffickers. There is no way to know how much of that money is laundered at casinos or through banks, liquor stores, bars or taxi companies.

“The ways to launder money are limited only by the imagination of the person doing it,” said Kerry Myers, a retired forensic accountant with the FBI who now teaches at the University of South Florida. However, “Because there is so much cash moving through casinos, casinos are an obvious target for money launderers.”

Federal regulators are giving renewed scrutiny to casinos across the country and levying multimillion-dollar fines for not having sufficient controls in place.

The DEA partners with Southern Arizona casinos and their staff, many of whom can spot suspicious activity simply by looking at a person’s betting history or how much money is going in and out of a bettor’s account, said agency spokeswoman Erica Curry.

The agency’s efforts alongside state authorities led to a 2013 bust of a $1.6 million drug-trafficking ring that laundered money at a Tucson casino.

“The geographic location of casinos in Southern Arizona probably makes it ideal for anybody coming from south of the border to exploit,” she said.

Origins stay secret

For traffickers, casinos offer the advantage of not requiring them to disclose the origin of the money, Curry said.

“You can walk into a casino with a 100 grand and turn it into chips,” she said. In contrast, a produce stand owner who walks into a bank with $100,000 will face sharp questions from bank employees about where so much money came from.

The disadvantage for money launderers is that casinos are required to report suspicious activity, she said.

The federal Bank Secrecy Act requires financial institutions — which include casinos if they do more than $1 million in business annually — to put anti-money-laundering controls in place and to file reports with federal regulators.

In order to catch money launderers, everyone from the pit boss to cage cashiers and floor personnel have to be on the lookout, said Leonard Senia, a retired money-laundering specialist who spent more than two decades with the Treasury’s Financial Crimes Enforcement Network.

“Detection really requires individuals noticing what’s happening and looking at stuff that has been in the player tracking system that stands out as activity that could be suspicious,” he said.

Treasury statistics indicate that the most-common form of suspicious activity is known as “minimal gambling,” in which a person walks into a casino with a large amount of money, bets for a short time and then cashes out.

Minimal gambling accounts for just shy of 14 percent of the casino filings. Another 28 percent of reports are various forms of “structuring” payouts, by which gamblers stay under the $10,000 threshold that requires reporting to authorities.

One structuring tactic is known as “smurfing,” in which a chunk of money is broken into pieces and several players launder it at different casinos, Senia said.

“Casinos keep an eye out for minimal gamblers, but it’s hard for casinos to know that it is a group that is doing this because they’re only seeing what’s in front of them,” Senia said.

Casinos are victims

Most casinos are victims, not accomplices, of money launderers, Myers said.

“I don’t think the casinos are complicit at all with the money launderers, but because they operate with so much money, they draw in the launderers,” he said.

Andy Asselin, CEO of the Tohono O'odham Gaming Enterprise, said in a statement the Star received after press time for Sunday's edition that Arizona casinos are subject to regulation at the federal, state, and tribal levels. 

"Under one such regulatory process, the United States has enacted laws and regulations that impose duties on financial institutions, including banking institutions and casinos, to track and report certain cash transactions to federal authorities," he said. 

"Desert Diamond Casinos takes these responsibilities seriously and has developed systems that fully meet the requirements of the federal regulatory scheme relating to tracking cash transactions," Asselin said.

Casino del Sol Resort CFO Paul Feltman said in an emailed statement that the resort works with experts to develop strict, research-based programs that fully comply with federal anti-money-laundering laws.

“Every gaming property in the country must institute anti-money-laundering programs to protect its customers, and Casino del Sol is no different,” Feltman said.

If casinos fail to report suspicious activity, they face steep fines.

The Treasury Department levied $4.2 million in fines on casinos from 1999 to 2012. That total was dwarfed in 2013 by a $47 million settlement with the Sands casino in Las Vegas that allowed the casino to avoid charges connected with money laundering by a Mexican drug trafficker.

Last year, Treasury banned an employee of the Tinian Dynasty Hotel and Casino in the Mariana Islands from working in the gaming industry. In June, the casino was assessed a $75 million penalty for “willful and egregious violations of the Bank Secrecy Act,” such as not filing a stack of 2,000 transactions that exceeded reporting thresholds.

In March, the Trump Taj Mahal Casino Resort in New Jersey was fined $10 million for “willful and repeated violations of the Bank Secrecy Act.” Six months later, the Caesars Palace casino in Las Vegas agreed to pay $8 million and undergo periodic audits to settle allegations of “systemic and severe” violations of anti-money- laundering laws.

As the fines have grown, so have the suspicious activity reports filed by casinos.

Casinos sent about 20,000 reports to federal regulators in 2012. By 2014, that number had jumped to more than 46,000, Treasury Department records show. In Arizona, the number of reports filed by the 23 licensed casinos rose slightly from 230 to 259 during that period. The most recent data available showed casinos in Pima County filed nine reports in the first three months of 2015.

“What happens in Vegas no longer stays in Vegas,” U.S. Attorney André Birotte Jr. said after the 2013 Sands settlement.

“All companies, especially casinos, are now on notice that America’s anti-money-laundering laws apply to all people and every corporation, even if that company risks losing its most profitable customer.”

Contact Curt Prendergast at 573-4224 or On Twitter @CurtTucsonStar

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