A “card room” is a seemingly quaint term for a place where people mix, mingle, and play cards. One California card room got a fast lesson in financial reporting that resulted in a Consent Order and a $900,000 fine.
Billing itself as “California’s Friendliest Cardroom,” Lake Elsinore Casino operates 24/7 and is medium-sized as card clubs go. According to the Consent Order to which the casino agreed, the club has 22 tables that offer live cash poker games, weekly poker tournaments, and other table games like Texas Hold Em and Let it Ride and several others. Amenities include a sports grill and the opportunity for off-track betting.
Lake Elsinore is licensed by the California Gambling Control Commission. As part of that license, the club functions as a card room and a financial institution as envisioned by the Bank Secrecy Act (BSA). The criminal investigation and enforcement unit of the Internal Revenue Service (IRS) is IRS:CI. The unit focuses on financial institution fraud, like money laundering, gaming, and BSA compliance, among other interests. Together, those issues put Lake Elsinore square in the sights of an IRS criminal tax investigation.
Requirements of the BSA
As part of the BSA, card clubs must create and support a written Anti-Money Laundering (AML) policy that dictates monitoring and enforces compliance with the BSA. Some of the features of an AML policy include personnel training, compliance testing, authorized staff providing daily compliance monitoring, and other internal regulations.
The BSA also requires a card club to report currency transactions of more than $10,000 that involve “cash-in” or “cash out” during one day. Additionally, the club is required to submit “suspicious activity reports (SARs)” with FinCen (the Financial Crimes Enforcement Network). And last, as could be expected, the BSA requires careful recordkeeping through a “negotiable instruments log” that must list specific transactions between the casino and its customers with a face value of $3,000 or more.
To prevent tax crime, money laundering, and onshore and offshore tax fraud, the BSA tries to prevent “the misuse of our nation’s financial institutions.”
What went wrong at Lake Elsinore?
In the FinCen press release announcing the $900,000 penalty against Lake Elsinore, the message was pretty blunt, noting, “Lake Elsinore admitted to willful violations of the BSA, including failing to implement and maintain an effective AML program, failing to file currency transaction reports (CTRs) and suspicious activity reports (SARs), and certain recordkeeping failures. Lake Elsinore’s willful violations of the BSA, which continued for over four and a half years, resulted from decisions made by the card club’s management."
Basically, the card club had few to no BSA compliance measures in place—and is paying a hefty price as a result.
Financial institutions, banks, federal savings organizations, or card clubs—If you are not compliant with the BSA, talk to an experienced IRS attorney soon.
Concerned about offshore tax, money laundering or compliance? Speak with our tax legal group today
Serving local and international clients from offices in Chicago and Cleveland, the legal team at Robert J. Fedor, Esq., LLC delivers strategic representation and guidance with compliance questions, tax litigation, or criminal tax defense. Call 440-250-9709 or contact us online today.
