Lake Elsinore Hotel and Casino FinCEN $900,000 Penalty: Card Club AML Lessons

Not every FinCEN case involves a global bank. In October 2024 the US Financial Crimes Enforcement Network (FinCEN) assessed a $900,000 civil money penalty against Sahara Dunes Casino, LP, which operates the Lake Elsinore Hotel and Casino in California, a medium-sized card club with 22 tables. The order is useful for anyone who works with gaming or cash-intensive businesses because it shows the Bank Secrecy Act (BSA) applied to a small operator: a risk assessment that was a random list of factors, cash cage procedures dated 2005, no anti-money laundering (AML) training for years, and no suspicious activity reports (SARs) filed for about three years. To build your AML knowledge, see our CPD courses.

This guide is based on FinCEN consent order number 2024-03. We read it through a summarising tool, so check every figure against the order before you quote it.

The penalty and the period

The civil money penalty is $900,000, of which $50,000 is suspended pending compliance with the undertaking, so $850,000 is payable. The relevant period is 7 September 2014 to 11 February 2019. The order cites the AML programme rule for card clubs (31 U.S.C. 5318(h)(1) and 31 C.F.R. 1021.210), currency transaction reporting (31 U.S.C. 5313 and 31 C.F.R. 1021.311 and 1010.306), SARs (31 U.S.C. 5318(g) and 31 C.F.R. 1021.320), recordkeeping (31 C.F.R. 1021.410) and FinCEN's penalty authority (31 U.S.C. 5321(a)). The text we read does not give the signing date; FinCEN's enforcement list shows 22 October 2024.

The order cites the thresholds that matter in a card club: a currency transaction report is needed for cash in or out above $10,000 per gaming day, a SAR for suspicious activity of $5,000 or more, and a negotiable instruments log for transactions of $3,000 or more. Our guide to casino and gambling clients and AML explains how these rules reach accountants who advise the sector.

What FinCEN found

Internal controls on paper only

The 2018 risk assessment, according to the order, "consisted primarily of a random list of factors". Cash cage procedures were dated January 2005. The compliance committee's meetings were undocumented, and it was unclear whether it ever met. Until early 2017 no information was collected to decide whether transactions were suspicious, and the gaming floor's log of multiple currency transactions contained no entries when inspected.

Testing that was not independent

There was no independent testing before 2016. One annual test in August 2016 and two quarterly tests in 2017 had limited documentation, none was independent, and none included transaction testing.

No training and no real compliance officer

As of 2017 no employee had received AML training as a new hire or annually since at least September 2014. No one was assigned day-to-day BSA responsibility before late 2017, and the firm relied on an ad hoc consultant. The 2017 chief compliance officer was also the chief operations officer and initially had no BSA training.

SARs and CTRs not filed

No SARs were filed from September 2014 until after a 2017 examination by the state gambling regulator. "Dozens of instances" of structuring or chip walking in the first half of 2016 went unreported, and a small number of SARs drafted in 2017 were never filed. FinCEN found more than ten instances in part of 2017 where a required currency transaction report was not filed or was filed late. A review of 2017 registers found that records for all qualifying transactions were missing at least one required item. A 2017 employee email noted that bartenders were cashing out chips without a way of knowing whether the patron was being tracked. Our suspicious activity reporting guide explains the reporting duty.

Cooperation, remediation and undertakings

The operator submitted materials promptly and voluntarily, signed several tolling agreements and cooperated with the state regulator, but it did not voluntarily disclose the violations to FinCEN. It adopted a new AML programme, added staff and technology, trained staff, hired outside parties and completed independent reviews including a transactional analysis. FinCEN observed higher CTR and SAR filing volumes after the period. A separate state proceeding in September 2023 included allegations of AML and reporting violations.

The undertaking requires an independent consultant, approved by FinCEN and paid for by the operator, to be hired within 60 days of the effective date. The scope is proposed within 30 days of retention, the report is due within 60 days after the review ends and no later than nine months after the effective date, the operator adopts the recommendations or proposes alternatives within 30 days, and a written implementation report follows within 60 days.

Practical lessons

• Size does not exempt you. A medium-sized card club had the same duties as a large casino.
• Date your procedures. A cash cage procedure from 2005 is evidence that no one reviewed it.
• Test independently, with transaction testing. A test with no sample of transactions proves little.
• Train from day one. No training for years is the sort of fact that regulators quote.
• Look for structuring and chip walking. Floor staff need to know what to report and to whom.
• Keep records complete. Missing fields in registers are a violation on their own.

For a bank-scale illustration of weak governance, see our TD Bank guide.

Frequently asked questions

Is a card club covered by the BSA?

Yes. FinCEN treats card clubs as casinos for BSA purposes, so they need an AML programme, CTRs and SARs.

How much did the operator pay?

The penalty is $900,000, with $50,000 suspended, so $850,000 is payable.

What period does the order cover?

7 September 2014 to 11 February 2019.

What we could not confirm

We read FinCEN's consent order through a summarising tool. The signing date is blank in the text we read, and no individual customers or specific transaction values are named. Please check all figures against the original document.