Federal law considers casinos financial institutions, like banks and requires them to have stringent anti-money-laundering programs in place. That’s nothing new—what is a recent development is that the rules now extend to the legal marijuana trade. Casinos may prohibit individuals associated with legal marijuana operations from gambling; and if they are permitted to play, casinos must file the same suspicious activity reports that banks do when handling funds derived from pot profits.
Stephen Hank, public affairs director at the U.S. Department of the Treasury’s Financial Crimes Enforcement Network, said in February FinCEN announced that banks could work with legal marijuana businesses, but it only recently realized the requirements also apply to casinos.
Former White House adviser Jim Dowling, a consultant on money laundering, said, “There are a number of ways money laundering can occur in a casino and keeping track of this is very labor-intensive.” He said casinos, like banks, must “know their customer” and have some knowledge of their source of funds. “Casinos most comply with the government’s guidance on filing suspicious activity reports. Their alternative is to not conduct a financial transaction with these individuals who were involved directly, or indirectly in the marijuana business,” Dowling said.
Casinos’ reports to FinCEN now must reflect that clients are in states where marijuana sales are allowed; identify the marijuana sales business or employee as legally operating under appropriate guidelines, as conducting suspicious activity or as having ended its banking relationship “in order to maintain an effective anti-money-laundering” compliance program. FinCEN also lists several “red flag” scenarios that would require a bank or casino to file a suspicious activity report, including a customer “depositing cash that smells like marijuana.”
Dowling added “chip walking” is a well-known problem at casinos. He said a marijuana business without a bank account could choose to pay its employees with casino chips, which are then redeemed for cash, which is, by definition, now laundered. Furthermore, Dowling said, chips purchased with marijuana-derived funds also can be redeemed for cash or a casino’s check, which then could be deposited into a personal bank account. There is no limit on how many chips a customer can purchase, but FinCEN rules require a casino to file SARs when it “knows, suspects, or has reason to suspect” a transaction is suspicious, but only when a buy-in or cash-out is at least $5,000 at once or in a single day.
Currently, 22 states have legalized medical marijuana sales, and Colorado and Washington have legalized recreational marijuana sales.
