FinCEN Nails California Card Room for Failing to Prevent Money Laundering
If you’re going to run a casino, it goes without saying that you need to be extraordinarily responsible about what is going on in your establishment. There is so much money floating around the premises at any given time that it is really tempting for people to engage in all sorts of illicit behavior. Artichoke Joe’s Casino (AJC), one of California’s 90 licensed card rooms, found this out the hard way. Late last week, the Financial Crimes Enforcement Network (FinCEN) announced that it was slapping AJC with an $8 million civil money penalty for violating anti-money laundering laws for the past decade.
In a press release, Jamal El-Hindi, Acting Director of FinCEN, explained:
For years, Artichoke Joe’s turned a blind eye to loan sharking, suspicious transfers of high-value gaming chips, and flagrant criminal activity that occurred in plain sight. FinCEN’s $8 million civil penalty results from the card club’s failure to establish adequate internal controls and its willful violations of the Bank Secrecy Act. Casinos, card clubs and others in the gaming industry should consider their risk of exploitation by criminal elements, and understand that they will be held accountable if they disregard anti-money laundering and illicit finance laws. This significant action highlights the need for all entities, including those in the gaming industry, to build a robust culture of compliance into their policies and procedures to ensure they are not facilitating illicit activities.
As one might be able to tell, FinCEN is tasked with fighting illegal activities within the country’s financial system, with money laundering specifically being highlighted in its mission. FinCEN is a bureau under the umbrella of the U.S. Department of the Treasury.
It does not appear that FinCEN is saying that Artichoke Joe’s management or ownership was explicitly involved in any shady dealings. However, from October 2009 to this month, AJC, according to FinCEN, knew very well what was going on on the card room floor and didn’t feel the need to do anything about it.
FinCEN pointed out that federal law enforcement agents raided Artichoke Joe’s in March 2011, eventually resulting in the conviction of two customers for “loan-sharking and other illicit activities conducted at AJC.”
Senior-level staff of the card room knew about the activity – these loan sharks actually transacted business with AJC patrons with employees watching – but never filed the required Suspicious Activity Reports.
FinCEN also reported that even if someone at Artichoke Joe’s wanted to go about doing the right thing, it seems there weren’t any internal controls to help prevent criminal activity like money laundering.
“In particular,” the press release said, “AJC failed to adopt adequate policies and procedures to address risks associated with gaming practices that allow customers to pool or co-mingle their bets with relative anonymity.”
Now, if a husband and wife combine a few stacks of five-dollar chips to play some blackjack or a few frat bros pool their money for a big bet, nobody is going to care. But when there are clearly criminal elements doing business in the card room, commingling bets is a problem. The entire point of money laundering is to conceal the source of money by “washing” it through a legitimate vehicle. In this case, criminals may pool their money, use it to gamble, and then cash out chips on the other end. Now their money is just gambling proceeds, rather than ill-gotten funds.
Artichoke Joe’s also never set up a system so that its prop players and employees could report suspicious activity in an organized way, and the room never reported large-volume chip redemptions by people who never gambled or originally exchanged cash for chips.
Basically, Artichoke Joe’s management did not care one bit if people engaged in criminal activity in the card room. And even if it did care, it didn’t have the proper systems in place to report anything. This went on for years.
“FinCEN’s Assessment of $8 million recognizes the duration and severity of AJC’s violations, the size and sophistication of the card club, AJC’s awareness of criminal activity on its premises, and its deficient culture of compliance,” FinCEN reported.
Artichoke Joe’s operators deny any wrongdoing.
The card room’s publicist relayed a message from Artichoke Joe’s president Dennis Sammut to the San Francisco Chronicle, saying that it “is fully committed to upholding all laws and complying with all regulations. A lot of effort has gone into and continues to go into compliance with the many laws and regulations applicable to cardrooms, and we will continue to dedicate all resources needed to achieve compliance with FinCEN and all other governing agencies.”
Cover image credit: WLART via DeviantArt