27230 Federal Register / Vol. 63, No. 95 / Monday, May 18, 1998 / Proposed Rules

announced in the April 27, 1998,

Federal Register (63 FR 20561).

During the course of its review, OSM

determined that the required

amendments at 30 CFR 917.16(b)(1) and

in the first sentence of (b)(2), which

mandate a staffing level of 408 for

Kentucky, and (b)(3), which requires

that Kentucky provide a report to OSM

describing the actions taken to achieve

the staffing level, could possibly be

removed based on the additional

documentation Kentucky provided.

Specifically, the Director proposes to

remove the entire required amendment

at 917.16(b) because Kentucky appears

to have met all the requirements in 30

CFR 917.16(b) (1), (2), and (3). The

comment period is being reopened

because this proposed action was not

specified in the two earlier

announcements.

III. Public Comment Procedures

In accordance with the provisions of

30 CFR 732.17(h), OSM is seeking

comments on whether the proposed

amendment satisfies the applicable

program approval criteria of 30 CFR

732.15. If the amendment is deemed

adequate, it will become part of the

Kentucky program.

Written Comments

Written comments should be specific,

pertain only to the issues proposed in

this rulemaking, and include

explanations in support of the

commenter’s recommendations.

Comments received after the time

indicated under DATES or at locations

other than the Lexington Field Office

will not necessarily be considered in the

final rulemaking or included in the

Administrative Record.

IV. Procedural Determinations

Executive Order 12866

This rule is exempted from review by

the Office of Management and Budget

(OMB) under Executive Order 12866

(Regulatory Planning and Review).

Executive Order 12988

The Department of the Interior has

conducted the reviews required by

section 3 of Executive Order 12988

(Civil Justice Reform) and has

determined that, to the extent allowed

by law, this rule meets the applicable

standards of subsections (a) and (b) of

that section. However, these standards

are not applicable to the actual language

of State regulatory programs and

program amendments since each such

program is drafted and promulgated by

a specific State, not by OSM. Under

sections 503 and 505 of SMCRA (30

U.S.C. 1253 and 1255) and 30 CFR

730.11, 732.15, and 732.17(h)(10),

decisions on proposed State regulatory

programs and program amendments

submitted by the States must be based

solely on a determination of whether the

submittal is consistent with SMCRA and

its implementing Federal regulations

and whether the other requirements of

30 CFR Parts 730, 731, and 732 have

been met.

National Environmental Policy Act

No environmental impact statement is

required for this rule since section

702(d) of SMCRA (30 U.S.C. 1292(d))

provides that agency decisions on

proposed State regulatory program

provisions do not constitute major

Federal actions within the meaning of

section 102(2)(C) of the National

Environmental Policy Act (42 U.S.C.

4332(2)(C)).

Paperwork Reduction Act

This rule does not contain

information collection requirements that

require approval by OMB under the

Paperwork Reduction Act (44 U.S.C.

3507 et seq.).

Regulatory Flexibility Act

The Department of the Interior has

determined that this rule will not have

a significant economic impact on a

substantial number of small entities

under the Regulatory Flexibility Act (5

U.S.C. 601 et seq.). The State submittal

which is the subject of this rule is based

upon counterpart Federal regulations for

which an economic analysis was

prepared and certification made that

such regulations would not have a

significant economic effect upon a

substantial number of small entities.

Accordingly, this rule will ensure that

existing requirements previously

promulgated by OSM will be

implemented by the State. In making the

determination as to whether this rule

would have a significant economic

impact, the Department relied upon the

data and assumptions for the

counterpart Federal regulations.

Unfunded Mandates

This rule will not impose a cost of

$100 million or more in any given year

on any governmental entity or the

private sector.

List of Subjects in 30 CFR Part 917

Intergovernmental relations, Surface

mining, Underground mining.

Dated: May 8, 1998.

Michael K. Robinson,

Acting Regional Director, Appalachian

Regional Coordinating Center.

[FR Doc. 98–13079 Filed 5–15–98; 8:45 am]

BILLING CODE 4310–05–M

DEPARTMENT OF THE TREASURY

31 CFR Part 103

RIN 1506–AA22

Proposed Amendment to the Bank

Secrecy Act Regulations; Requirement

That Casinos and Card Clubs Report

Suspicious Transactions

AGENCY: Financial Crimes Enforcement

Network, Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: The Financial Crimes

Enforcement Network (‘‘FinCEN’’) is

proposing to amend the Bank Secrecy

Act regulations to require casinos and

card clubs to report suspicious

transactions involving at least $3,000 in

funds or other assets, relevant to a

possible violation of law or regulation;

reports would be made on a reporting

form specifically designed for use in the

gaming industry. The proposed

amendments to the Bank Secrecy Act

regulations would also require casinos

and card clubs to establish procedures

designed to detect occurrences or

patterns of suspicious transactions and

would make certain other changes to the

requirements that casinos maintain

Bank Secrecy Act compliance programs.

The proposal is a further step in the

creation of a comprehensive system (to

which banks are already subject) for the

reporting of suspicious transactions by

financial institutions. Such a system is

a core component of the counter-money

laundering programs of the Department

of the Treasury.

DATES: Written comments on all aspects

of the proposal are welcome and must

be received on or before September 15,

1998.

ADDRESSES: Written comments should

be submitted to: Office of Chief Counsel,

Financial Crimes Enforcement Network,

Department of the Treasury, Suite 200,

2070 Chain Bridge Road, Vienna,

Virginia 22182–2536, Attention:

NPRM—Suspicious Transaction

Reporting—Casinos. Comments also

may be submitted by electronic mail to

the following Internet address:

‘‘regcomments@fincen.treas.gov,’’ with

the following caption in the body of the

text: ‘‘Attention: NPRM—Suspicious

Transaction Reporting—Casinos’’. For

additional instructions on the

submission of comments, see

SUPPLEMENTARY INFORMATION under the

heading ‘‘Submission of Comments.’’

Inspection of Comments: Comments

may be inspected, between 10:00 a.m.

and 4:00 p.m., at FinCEN’s Washington

office, in the Franklin Court Building,

1099 14th Street, N.W., Fourth Floor,
Federal Register / Vol. 63, No. 95 / Monday, May 18, 1998 / Proposed Rules 27231

1As used hereafter in this document, the phrase

‘‘casino’’ when used singly includes a reference

both to casinos and to card clubs, as the latter term

is defined in 31 CFR 103.11(n)(8), unless the

context clearly indicates otherwise. See 31 CFR

103.11(n)(7)(iii). 31 CFR 103.11(n)(7)(iii) and (n)(8)

were added to the Bank Secrecy Act Regulations by

the final rule published at 63 FR 1919 (January 13,

1998).

2The suspicious transaction reporting rules for

banks are at present found at 31 CFR 103.21, which

is proposed to be renumbered as 301 CFR 103.18

as part of the pending rulemaking relating to the

reporting of suspicious transactions by money

transmitters and other money services businesses

(discussed immediately below in the text).

3Bank Secrecy Act provisions relating

specifically to gaming establishments are discussed

at paragraph B, below.

4Subsection (g) of section 5318(g) was added to

the Bank Secrecy Act by section 1517 of the

Annunzio-Wylie Anti-Money Laundering Act

(‘‘Annunzio-Wylie Act’’), Title XV of the Housing

and Community Development Act of 1992, Pub. L.

102–550; it was expanded by section 403 of the

Money Laundering Suppression Act of 1994, to

require designation of a single government recipient

for reports of suspicious transactions.

5This designation is not to preclude the authority

of supervisory agencies to require financial

institutions to submit other reports to the same

agency or another agency ‘‘pursuant to any other

applicable provision of law.’’ 31 U.S.C.

5318(g)(4)(C).

6Casinos whose gross annual gaming revenue did

not exceed $1 million were, and continue to be,

excluded from Bank Secrecy Act coverage.

7 In 1985, these provisions were numbered 31

U.S.C. 5312(a)(2)(X) and (Y). The numbering

changed with the addition to section 5312(a)(2) of

a new subparagraph (X), described in the text,

dealing with gaming establishments, by the Money

Laundering Suppression Act of 1994.

Washington, D.C. 20005. Persons

wishing to inspect the comments

submitted should request an

appointment by telephoning (202) 216–

2870.

FOR FURTHER INFORMATION CONTACT:

Leonard C. Senia, Senior Financial

Enforcement Officer, Office of Program

Development, FinCEN, (703) 905–3931

or Cynthia L. Clark, Deputy Chief

Counsel, Office of Chief Counsel,

FinCEN, (703) 905–3758.

SUPPLEMENTARY INFORMATION:

I. Introduction

This document proposes to add a new

§ 103.21 to 31 CFR part 103, to require

casinos and card clubs to report to the

Department of the Treasury suspicious

transactions to the extent provided in

such section relevant to a possible

violation of law or regulation.1 The

proposal would extend to casinos and

card clubs the suspicious transaction

reporting regime to which the nation’s

banks, thrift institutions, and credit

unions have been subject since April 1,

1996.2 Related changes are made to the

provisions of 31 CFR 103.54 relating to

casino compliance programs. FinCEN

has previously proposed a rule that

would require suspicious transaction

reporting by (i) money transmitters, (ii)

issuers, sellers, and redeemers of money

orders, and (iii) issuers, sellers, and

redeemers of traveler’s checks, see 62

FR 27900, which is a part of the set of

rules proposed at 62 FR Part V (May 21,

1997). It intends in the near future to

propose a rule extending the suspicious

transaction reporting requirement to

brokers or dealers in securities.

II. Background

A. Statutory Provisions

The Bank Secrecy Act, Pub. L. 91–

508, as amended, codified at 12 U.S.C.

1829b, 12 U.S.C. 1951–1959, and 31

U.S.C. 5311–5330, authorizes the

Secretary of the Treasury, inter alia, to

issue regulations requiring financial

institutions to keep records and file

reports that are determined to have a

high degree of usefulness in criminal,

tax, and regulatory matters, and to

implement counter-money laundering

programs and compliance procedures.

Regulations implementing Title II of the

Bank Secrecy Act (codified at 31 U.S.C.

5311–5330), appear at 31 CFR part 103.3

The authority of the Secretary to

administer the Bank Secrecy Act has

been delegated to the Director of

FinCEN.

The provisions of the Bank Secrecy

Act relating to the reporting of

suspicious transactions are contained in

31 U.S.C. 5318(g).4 That subsection

grants the Secretary of the Treasury the

authority to require the reporting of

such transactions by financial

institutions subject to the Bank Secrecy

Act, and contains provisions protecting

reporting institutions from liability to

customers on account of the making of

such reports. Subsection (g)(1) states

generally:

The Secretary may require any financial

institution, and any director, officer,

employee, or agent of any financial

institution, to report any suspicious

transaction relevant to a possible violation of

law or regulation.

Subsection (g)(2) provides further:

A financial institution, and a director,

officer, employee, or agent of any financial

institution, who voluntarily reports a

suspicious transaction, or that reports a

suspicious transaction pursuant to this

section or any other authority, may not notify

any person involved in the transaction that

the transaction has been reported.

Subsection (g)(3) provides that neither

a financial institution, nor any director,

officer, employee, or agent.

That makes a disclosure of any possible

violation of law or regulation or a disclosure

pursuant to this subsection or any other

authority * * * shall * * * be liable to any

person under any law or regulation of the

United States or any constitution, law, or

regulation of any State or political

subdivision thereof, for such disclosure or for

any failure to notify the person involved in

the transaction or any other person of such

disclosure.

Finally, subsection (g)(4) requires the

Secretary of the Treasury, ‘‘to the extent

practicable and appropriate,’’ to

designate ‘‘a single officer or agency of

the United States to whom such reports

shall be made.’’ 5 The designated agency

is in turn responsible for referring any

report of a suspicious transaction to

‘‘any appropriate law enforcement or

supervisory agency.’’ Id., at subsection

(g)(4)(B).

The provisions of 31 U.S.C. 5318(h)

grant the Secretary authority to

Require financial institutions to carry out

anti-money laundering programs, including

at a minimum,

(A) the development of internal policies,

procedures, and controls,

(B) the designation of a compliance officer,

(C) an ongoing employee training program,

and

(D) an independent audit function to test

programs.

These provisions, enacted at the same

time as the explicit provisions relating

to reporting of suspicious transactions,

complement the latter provisions.

B. Application of the Bank Secrecy Act

to Gaming Businesses

State licensed gambling casinos were

generally made subject to the Bank

Secrecy Act as of May 7, 1985, by

regulation issued early that year. See 50

FR 5065 (February 6, 1985).6 The 1985

action was based on Treasury’s statutory

authority to designate as financial

institutions for Bank Secrecy Act

purposes (i) businesses that engage in

activities ‘‘similar to’’ the activities of

the businesses listed in the Bank

Secrecy Act, as well as (ii) other

businesses ‘‘whose cash transactions

have a high degree of usefulness in

criminal, tax, or regulatory matters.’’ See

31 U.S.C. 5312(a)(2)(Y) and (Z) 7. Special

Bank Secrecy Act regulations relating to

casinos were issued in 1987, and

amended in 1989 and (more

significantly) in 1994. See 52 FR 11443

(April 8, 1987), 54 FR 1165 (January 12,

1989), and 59 FR 61660 (December 1,

1994) (modifying and putting into final

effect the rule originally published at 58

FR 13538 (March 12, 1993)). These

actions reflect the continuing

determination not only that casinos are

vulnerable to manipulation by money

launderers and tax evaders but, more

generally, that gaming establishments

provide their customers with a financial

product—gaming—and as a corollary

offer a broad array of financial services,
27232 Federal Register / Vol. 63, No. 95 / Monday, May 18, 1998 / Proposed Rules

8 Generally card clubs would be subject to the

same rules as casinos, unless a specific provision

of the rules in 31 CFR part 103 applicable to casinos

explicitly requires a different treatment for card

clubs. As in the case of casinos, card clubs whose

gross annual gaming revenue is $1 million or less

are excluded from Bank Secrecy Act coverage. See

31 CFR 103.11(n)(8).

9At present, the use of the form is required only

for casinos that file reports subject to Nevada

Gaming Commission Regulation 6A. A more

thorough discussion of the current status of Form

TD F 90–22.49 appears below, under the heading

‘‘Paperwork Reduction Act Notices.’’

10The Financial Action Task Force, commonly

referred to as the ‘‘FATF,’’ is an inter-governmental

body whose purpose is development and promotion

of policies to combat money laundering. Originally

created by the G–7 nations, its membership now

includes Australia, Austria, Belgium, Canada,

Denmark, Finland, France, Germany, Greece, Hong

Kong, Iceland, Ireland, Italy, Japan, Luxembourg,

the Kingdom of the Netherlands, New Zealand,

Norway, Portugal, Singapore, Spain, Sweden,

Switzerland, Turkey, the United Kingdom, and the

United States, as well as the European Commission

and the Gulf Cooperation Council.

such as customer deposit or credit

accounts, facilities for transmitting and

receiving funds transfers directly from

other institutions, and check cashing

and currency exchange services, that are

similar to those offered by depository

institutions and other financial firms.

In recognition of the importance of

the application of the Bank Secrecy Act

to the gaming industry, section 409 of

the Money Laundering Suppression Act

of 1994 (the ‘‘Money Laundering

Suppression Act’’), Title IV of the Riegle

Community Development and

Regulatory Improvement Act of 1994,

Pub. L. 103–325, codified the

application of the Bank Secrecy Act to

gaming activities by adding casinos and

other gaming establishments to the list

of financial institutions specified in the

Bank Secrecy Act itself. The statutory

specification reads:

(2) financial institution means—

* * * * *

(X) a casino, gambling casino, or gaming

establishment with an annual gaming

revenue of more than $1,000,000 which—

(i) is licensed as a casino, gambling casino,

or gaming establishment under the laws of

any State or any political subdivision of any

State; or

(ii) is an Indian gaming operation

conducted under or pursuant to the Indian

Gaming Regulatory Act other than an

operation which is limited to class I gaming

(as defined in section 4(6) of such Act)

* * *.

31 U.S.C. 5312(a)(2)(X). Gambling

casinos authorized to do business under

the Indian Gaming Regulatory Act

became subject to the Bank Secrecy Act

on August 1, 1996. See 61 FR 7054

(February 23, 1996), and the class of

gaming establishments known as ‘‘card

clubs’’ will become subject to the Bank

Secrecy Act on August 1, 1998.8 See 63

FR 1919 (January 13, 1998).

Casinos in Nevada were exempted

from direct coverage under the Bank

Secrecy Act as a result of Treasury

action taken in 1985 at the request of

state authorities. See 50 FR 5064

(February 6, 1985). The exemption

carries with it a continuing requirement

that Nevada casinos must be subject to

a state ‘‘regulatory system [that]

substantially meets the reporting and

recordkeeping requirements’’ of 31 CFR

part 103, in the judgment of the

Department of the Treasury, see 31 CFR

103.45(c)(1), and that meets certain

additional conditions specified in 31

CFR 103.45(c)(2).

Nevada Gaming Commission

Regulation 6A, Cash Transactions

Prohibitions, Reporting, and

Recordkeeping, has required Nevada

casinos to report currency transactions

in excess of $10,000 as part of its

continuing responsibilities pursuant to a

May 1985 cooperative agreement

between the State of Nevada and the

U.S. Department of the Treasury that

implements the exemption. As a result

of a recent Treasury review of Nevada’s

regulatory system, Regulation 6A was

amended, inter alia, to enhance the

counter-money laundering rules to

which casinos are subject. The

enhanced state rules require casinos to

report directly to the Department of the

Treasury both: (i) Large currency

transactions (on Internal Revenue

Service Form 8852, Currency

Transaction Report by Casinos—

Nevada), and (ii) potentially suspicious

transactions and activities (under rules

reflecting the same concerns, in the

context of Nevada’s state regulatory

system, as the rules contained in 31 CFR

103.21 as proposed in this document,

and as reflected in Treasury Form TD F

90–22.49 (Suspicious Activity Report by

Casinos)).9

C. Importance of Suspicious

Transaction Reporting in Treasury’s

Counter-Money Laundering Programs

The Congressional mandate to require

reporting of suspicious transactions

recognizes two basic points that are

central to Treasury’s counter-money

laundering and counter-financial crime

programs. First, it is to financial

institutions that money launderers must

go, either initially, to conceal their

illegal funds, or eventually, to recycle

those funds back into the economy.

Second, the employees and officers of

those institutions are often more likely

than government officials to have a

sense as to which transactions appear to

lack commercial justification (or in the

case of gaming establishments,

transactions that appear to lack a

reasonable relationship to legitimate

wagering activities) or that otherwise

cannot be explained as constituting a

legitimate use of the casino’s financial

services. Moreover, because money

laundering transactions are designed to

appear legitimate in order to avoid

detection, the creation of an effective

system for detection and prevention of

money laundering is impossible without

the cooperation of financial institutions,

including, in this case, gaming

establishments. Indeed, many nonbanks have come increasingly to

recognize the increased pressure that

money launderers have come to place

upon their operations and the need for

innovative programs of training and

monitoring necessary to counter that

pressure.

The provisions of the AnnunzioWylie and Money Laundering

Suppression Acts recognize that the

traditional reliance of Treasury countermoney laundering programs on the

reporting of currency transactions

between financial institutions and their

customers and the reporting of the

transportation of currency and certain

monetary instruments into or out of the

United States, is not adequate to prevent

or detect money laundering activities.

This document is thus one of a group of

proposed rule changes that signals a

move from reliance solely on currency

transaction reporting to reliance as well

upon the timely reporting of

information equally, if not more, likely

to be of use to law enforcement officials

and financial regulators, namely,

information about suspicious

transactions and activities. Suspicious

transaction reporting is a key

component of a flexible and effective

compliance system required to prevent

the use of the nation’s financial system

for illegal purposes.

The reporting of suspicious

transactions is also a key to the

emerging international consensus on the

prevention and detection of money

laundering. One of the central

recommendations of the Financial

Action Task Force—recently updated

and reissued—is that:

If financial institutions suspect that funds

stem from a criminal activity, they should be

required to report promptly their suspicions

to the competent authorities.

Financial Action Task Force Annual

Report (June 28, 1996), 10 Annex 1

(Recommendation 15). The

recommendation, which applies equally

to banks and non-banks, revises the

original recommendation, issued in

1990, that required institutions to be
Federal Register / Vol. 63, No. 95 / Monday, May 18, 1998 / Proposed Rules 27233

11The Organization of American States (OAS)

reporting requirement is linked to the provision of

the Model Regulations that institutions ‘‘shall pay

special attention to all complex, unusual or large

transactions, whether completed or not, and to all

unusual patterns of transactions, and to

insignificant but periodic transactions, which have

no apparent economic or lawful purpose.’’ OAS

Model Regulation, Article 13, section 1.

12U.S. v. Marks, 97 CR 20069 (District Court

Western District of Louisiana), June 1997

(defendants indicted for laundering drug proceeds

by buying and cashing casino tokens); U.S. v.

Zottola (District Court Western District of

Pennsylvania) and U.S. v. Zottola, 97 CR 0953T

(District Court Southern District of California),

April 1997 (defendants indicted for laundering $2.1

million in organized crime proceeds to open a

casino on tribal lands); New Jersey Division of

Gaming Enforcement v. Freedman, October 1996,

96–0609–RC NJ–DGE (defendants charged with

structuring transactions to avoid reporting by

cashing $20,000, in increments of $1,000, in casino

chips); U.S. v. Vacanti, 96 CR 593(SMO) (District

Court New Jersey), September 1996 (structuring

token purchases to avoid transaction reporting

requirements); U.S. v. McClintock, 96 CR 91(JEI)

(District Court New Jersey), February 1996

(structuring transactions totalling $124,000); U.S. v.

Baxter, 95 CR 116 (District Court Eastern District of

Louisiana), August 1995 (president of a casino

laundered $200,000 by manipulating the books of

the casino to show the funds were from legitimate

gambling); U.S. v. Grittini, 1:95 CR 17GR (District

Court Southern District of Mississippi), May 1995

(rigged blackjack games used to launder $520,000

for organized crime); New Jersey Division of Gaming

Enforcement v. Meyerson, 96–0393–RC (casino

employee advised gamblers to structure $360,000

and assisted in structuring $30,000 to avoid

transaction reporting requirements); U.S. v.

Freapane, 94 CR 287 (District Court Eastern District

of Louisiana), November 1994, (owner of illegal

video slot machine business indicted for laundering

profits from the business through casino slot

machines in another state).

13The General Accounting Office cites in its

January 1996 report on money laundering that ‘‘the

proliferation of casinos, together with the rapid

growth of the amounts wagered, may make these

operations highly vulnerable to money laundering.’’

General Accounting Office, Report to the Ranking

Minority Member, Permanent Subcommittee on

Investigations, Committee on Governmental Affairs,

U.S. Senate, Money Laundering: Rapid Growth of

Casinos Makes Them Vulnerable GAO/GGD–96–28.

According to International Gaming and Wagering

Business (August 1997), the amount of money

legally wagered in casinos exceeded $480 billion in

1996. This is a substantial increase from the $101

billion wagered in casinos in 1982. Casino gaming

accounts for 82 percent of the total amount of

money wagered for all gaming activities throughout

the United States. Similarly, according to

International Gaming and Wagering Business

(August 1997), the amount of money legally

wagered in card rooms constituted an additional

$9.8 billion in 1996 (i.e., 1.7 percent of the total

amount of money wagered). It is estimated that 125

million people visit government licensed casinos

each year.

either ‘‘permitted or required.’’

(Emphasis supplied.) The revised

recommendation reflects the

international consensus that a

mandatory suspicious transaction

reporting system is essential to an

effective national counter-money

laundering program and to the success

of efforts of financial institutions

themselves to prevent and detect the use

of their services or facilities by money

launderers and others engaged in

financial crime.

Similarly, the European Community’s

Directive on prevention of the use of the

financial system for the purpose of

money laundering calls for member

states to—

Ensure that credit and financial

institutions and their directors and

employees cooperate fully with the

authorities responsible for combating money

laundering * * * by [in part] informing those

authorities, on their own initiative, of any

fact which might be an indication of money

laundering.

EC Directive, O.J. Eur. Comm. (No. L

166) 77 (1991), Article 6. Accord, the

Model Regulations Concerning

Laundering Offenses Connected to Illicit

Drug Trafficking and Related Offenses

of the Organization of American States,

OEA/Ser. P. AG/Doc. 2916/92 rev. 1

(May 23, 1992), Article 13, section 2. 11

All of these documents recognize the

importance of extending the countermoney laundering controls to ‘‘nontraditional’’ financial institutions, not

simply to banks, both to ensure fair

competition in the marketplace and to

recognize that non-banks as well as

depository institutions are an attractive

mechanism for, and are threatened by,

money launderers. See, e.g., Financial

Action Task Force Annual Report,

supra, Annex 1 (Recommendation 8).

The FATF’s research and national

mutual evaluation projects have

expanded in recent years the degree of

attention paid to non-banks, including

gaming establishments. The Caribbean

Financial Action Task Force (or

‘‘CFATF’’), a 24 nation regional

counterpart of the FATF, has also paid

special attention to the vulnerability of

the gaming industry in the Caribbean to

penetration by money launderers.

D. Importance of Suspicious

Transaction Reporting by Casinos and

Card Clubs

Billions of dollars of U.S. currency are

laundered each year, through many

different types of financial institutions

and businesses. The corrosive effects of

money laundering are well understood.

Growing government knowledge about

the way illegally-obtained proceeds are

laundered has led to a more

sophisticated understanding of the steps

that can and should be taken to counter

this crime.

The placement of illegally-derived

currency into the financial system and

the smuggling of such currency out of

the country remain two of the most

serious issues facing financial law

enforcement efforts in the United States

and around the world. But as financial

institutions have responded to the

challenges posed by money laundering,

it has become far more difficult than in

the past to pass large amounts of

currency unnoticed directly into the

nation’s financial system and far easier

to identify and isolate those institutions

and officials that remain willing to

assist or turn a blind eye to money

launderers.

Moreover, the placement of currency

into the financial system is at most only

the first stage in the money laundering

process. The money launderer’s

objective is to integrate the funds into

the financial system, passing the funds

through multiple transactions, financial

instruments, or layers of formal

ownership, so that they can be used for

consumption or reinvestment in either

legitimate or criminal activity without

calling attention to their origin. While

many currency transactions are not

indicative of money laundering or other

violations of law, many non-currency

transactions can indicate illicit activity,

especially in light of the breadth of the

statutes that make money laundering

itself a crime. See 18 U.S.C. 1956 and

1957.

Owing in part to different business

and transactional patterns, non-banks

have historically not been subject to the

same counter-money laundering

controls as depository institutions. As

government and industry programs have

made it more difficult for customers to

launder money at banks and other

depository institutions, the interest of

money launderers in moving funds into

the financial system through non-bank

financial services providers has

increased.

Gaming establishments have not been

spared from this trend.12 The experience

of law enforcement and regulatory

officials suggests that the gambling

environment can attract criminal

elements involved in a variety of illicit

activities, including fraud, narcotics

trafficking, and money laundering. With

large volumes of currency being

wagered by legitimate gaming customers

from throughout the United States (and,

indeed, from around the world), the

fast-paced environment of casino

gaming can create an especially valuable

‘‘cover’’ for money launderers. The

explosive growth of casino gaming in

the United States in the last decade

vastly increases the ‘‘targets of

opportunity’’ for such criminals, as

casino sites, amounts wagered, and

casino attendance have multiplied.13
27234 Federal Register / Vol. 63, No. 95 / Monday, May 18, 1998 / Proposed Rules

14Several casinos have already voluntarily

reported suspicious transactions and activities by

filing on Form TD F 90–22.47, Suspicious Activity

Report (SAR), which is the form required for banks

and other depository institutions. Other casinos

have reported such transactions by telephone to

local offices of federal law enforcement or gaming

regulatory agencies.

15 Because proposed § 103.21 reflects the terms

of the reporting rule for banks, readers of this

document may wish to consult the notice of

proposed rulemaking and the document containing

the final reporting rule for banks, at 60 FR 46556

(September 7, 1995) (proposed rule) and 61 FR 4326

(February 5, 1996) (final rule). The bank rule is

found at § 103.21, but is proposed by this notice to

be renumbered as § 103.18.

E. Coordinated System for Reporting

Suspicious Transactions

The proposed rule is one of a series

of rulemakings designed to extend

suspicious activity reporting to

institutions subject to the Bank Secrecy

Act.14 As in the case of the other rules,

this proposed rule is designed to permit

creation of a unified system for all

reports of suspicious casino and card

club transactions and activities. Under

that system, all such reports will be

filed with FinCEN and made available,

in a single data base, to federal and state

law enforcement authorities and gaming

regulators nationwide. The single data

base will not only permit rapid

dissemination of reports to appropriate

law enforcement agencies, but will

facilitate more thorough analysis and

tracking of those reports, and, in time,

the provision to the financial

community of information about trends

and patterns gleaned from the

information reported. The single filing

location will also facilitate development

of procedures for magnetic and

ultimately electronic filing of such

reports.

FinCEN is developing a form, the

Suspicious Activity Report by Casinos

(‘‘SARC’’), that will be used by casinos

and card clubs around the nation to

report a suspicious transaction or

activity under the proposed rule. A

variant of that form is already in use by

casinos in Nevada that (as described

above) became subject to a state

requirement to report suspicious

transactions to FinCEN on October 1,

1997. See 62 FR 44032 (August 18,

1997) (Paperwork Reduction Act Notice

for Form TD F 90–22.49 to be used

initially by casinos in Nevada).

No system for the reporting of

suspicious transactions can be effective

unless information flows from as well as

to the government. FinCEN anticipates

working on an ongoing basis with

gaming establishments and state

regulatory officials in their efforts to

detect suspicious activities.

Treasury ultimately must rely on the

creation of a working partnership with

the gaming industry that will assist

gaming establishments to apply their

knowledge of both their customers and

business patterns to identify and report

suspicious activity and permit the

implementation of suspicious activity

reporting by gaming establishments in

an efficient and cost-effective manner.

Joint efforts will include exchanges of

information, training, and advisory

guidance as to examples and patterns of

potentially suspicious casino

transactions and activities. (Of course

no list of potentially suspicious

activities will apply with equal force to

all gaming establishments or all

jurisdictions in which gaming is

permitted, due in part to differences in

the range of gaming activities permitted

in various areas.)

In addition, FinCEN intends to hold

several public meetings, which will be

announced by notice published in the

Federal Register, to provide additional

opportunities for the industry and other

interested parties to discuss the various

provisions of this proposed rule. During

such meetings, FinCEN will also

welcome discussion of a new advisory

entitled ‘‘Guidance for Detecting and

Reporting Suspicious Casino

Transactions and Activities,’’ which is

in preparation.

III. Specific Provisions 15

A. 103.11(ii)—Transaction

The definition of ‘‘transaction’’ in the

Bank Secrecy Act regulations for

purposes of suspicious transaction

reporting conforms generally to the

definition Congress added to 18 U.S.C.

1956 when it criminalized money

laundering in 1986. See Pub. L. 99–570,

Title XIII, 1352(a), 100 Stat. 3207–18

(Oct. 27, 1986). This notice proposes to

amend that definition to include

explicit references to ‘‘the purchase or

redemption of casino chips or tokens, or

other gaming instruments,’’ to eliminate

any question of the application of the

definition to transactions of a sort

common to gaming establishments.

These changes are necessary so that the

reporting rules will cover all activity

that should be reported under the

proposed rule.

B. 103.21—Reports of Suspicious

Transactions

General

Proposed § 103.21 contains the rules

setting forth the obligation of casinos

and card clubs to report suspicious

transactions. The rule itself does not

contain a separate reference to card

clubs, since 31 CFR 103.11(n)(7)(iii)

generally provides that ‘‘[a]ny reference

in [31 CFR part 103] . . . to a casino

shall also include a reference to a card

club, unless the provision in question

contains specific language varying its

application to card clubs or excluding

card clubs from its application.’’ See 63

FR 1919, 1923 (January 13, 1998). No

such varying provision is contained in

the proposed rule.

Proposed paragraph (a)(1) contains a

general statement of the obligation to

file a suspicious activity report, as well

as language designed to encourage the

reporting of transactions that appear

relevant to violations of law or

regulation, even in cases in which the

rule does not explicitly so require, for

example in the case of a transaction

falling below the $3,000 threshold in the

rule. The Department of the Treasury

continues to believe that such a

voluntary report (that is, the report of a

suspicious transaction relevant to a

possible violation of law or regulation,

in circumstances not required by the

rule proposed in 31 CFR 103.21(a)(1)) is

fully covered by the rules against

disclosure and protections against

liability specified in 31 U.S.C.

5318(g)(2) and (g)(3) and in proposed 31

CFR 103.21(d).

Proposed paragraph (a)(2) provides

that with respect to casinos, a

transaction requires reporting under 31

CFR 103.21 if it is conducted or

attempted by, at, or through the casino,

involves or aggregates at least $3,000 in

funds or assets, and the casino knows,

suspects, or has reason to suspect that

the transaction is one that must be

reported.

Proposed paragraph (a)(2) embodies

two important points. First, FinCEN is

proposing a $3,000 threshold to the

reporting of suspicious casino and card

club transactions and activities, so that

reports will be required for a transaction

(or a pattern of transactions of which the

transaction is a part) that involves at

least that amount in funds or assets and

that otherwise satisfies the terms of the

proposed rule. The proposed language

makes it clear that related suspicious

transactions ‘‘aggregating’’ $3,000 or

more in funds or assets are also

reportable under the Bank Secrecy Act.

Transactions are reportable under

proposed paragraph (a) whether or not

they involve currency.

The proposed $3,000 threshold is

intended to focus attention on

customers who are conducting

suspicious transactions at a level that

warrants attention and, at the same

time, to limit the application of the

reporting requirement to a small, but

important percentage of total customer

transactions that occur at a casino each

day. Casino regulations in several
Federal Register / Vol. 63, No. 95 / Monday, May 18, 1998 / Proposed Rules 27235

States, namely, Colorado, Illinois,

Indiana, Missouri and Nevada, already

require the recording and scrutiny of

currency transactions occurring at this

threshold on the gaming floor or at the

cage. Moreover, in other States, such as

Louisiana and Mississippi, and at some

tribal casinos, customer activity is

typically recorded at or slightly below

this threshold on cage action control

logs and gaming floor multiple currency

transaction logs. And, as noted above,

Nevada casinos have been subject to a

$3,000 threshold for the filing of

suspicious activity reports since October

1997.

Second, the use of the term ‘‘knows,

suspects, or has reason to suspect’’ is

intended to introduce a concept of due

diligence into the reporting procedures.

Casino officials who monitor a

customer’s gaming activity or conduct

transactions with a customer are in a

unique position to recognize

transactions and activities which appear

to have no legitimate purpose, are not

usual for a specific player or type of

players, or have no apparent business

explanation. The suspicious nature of

the transaction may first be detected by

an employee conducting the transaction,

a supervisor observing the transaction,

or a surveillance department employee

monitoring the transaction. The scrutiny

needed to identify suspicious

transactions highlights the importance

of casinos knowing their customers.

The proposed rule designates three

classes of transactions as requiring

reporting by casinos. The first class,

described in proposed paragraph

(a)(2)(i), includes transactions involving

funds derived from illegal activity or

intended or conducted in order to hide

or disguise funds or assets derived from

illegal activity. The second class,

described in proposed paragraph

(a)(2)(ii), involves transactions designed

to evade the requirements of the Bank

Secrecy Act. The third class, described

in proposed paragraph (a)(2)(iii),

involves transactions that appear to

have no business purpose or that vary

so substantially from normal

commercial activities or activities

appropriate for the particular customer

or type of customer as to have no

reasonable explanation.

The determination as to whether a

suspicious report is required must be

based on all the facts and circumstances

relating to the transaction and the

customer in question. Suspicious

transactions and activities will often

take place at a casino cage, gaming table

or slot machine, but they can occur

anywhere in the casino. Suspicious

transaction reporting is not limited to

transactions in currency such

transactions may also involve monetary

instruments or credit cards, or may

involve funds transfers into, out of, or

through casinos. In some situations

casinos may be used in an attempt

initially to place illegally-obtained

funds into the financial system; in other

situations, passage of funds through a

casino may follow the initial placement

of illegal proceeds at another financial

institution, as part of the ‘‘placement’’

or ‘‘integration’’ stages of the money

laundering cycle.

Paragraph (a)(2)(iii) includes in the

rule a requirement for the reporting of

transactions that vary so substantially

from normal practice that they

legitimately can and should raise

suspicions of possible illegality. Unlike

many criminal acts, money laundering

involves the taking of apparently lawful

steps—opening deposit and credit

accounts, wiring funds, or cashing

checks—for an unlawful purpose. Thus,

in attempting to appear to be wagering

customers, persons may be willing to

lose a nominal amount of chips by

making small bets or offsetting larger

bets and then exchanging their

remaining chips for currency, a check or

a wire transfer. They may attempt to

structure deposits or withdrawals of

funds from a casino account to avoid

recordkeeping or reporting thresholds or

to move substantial funds through a

casino’s facilities with little or no

related gaming activity, or to provide

false documents or identifying

information to casino officials. A skillful

money launderer will often split the

movement of funds among different

parts of a casino so that no one single

person has a complete picture of the

transactions or movement of funds

involved, and may use agents to

conduct multiple transactions for an

anonymous individual, layering the

transactions to disguise their source.

A casino may also detect suspicious

or suspected illegal activity pertaining

to transactions involving a check

cashing operator, junket operator,

gambling tour company, supplier,

vendor, etc. with which it has a

contractual relationship. For example, a

casino may observe a customer (other

than an established junket operator)

directly supplying large amounts of

currency to individuals who then use

the currency to make a deposit,

purchase of chips, exchange of

currency, etc.

Finally, a determination whether a

suspicious activity report is required to

be filed may not result from face-to-face

transactions between customers and

casino personnel or from a review of the

account of a customer, but instead may

be discovered by information contained

in the casino’s own internal accounts

and financial or other records. For

instance, patterns of funds transfers by

seemingly unrelated customers to a

third party account, followed by little or

no gaming activity and withdrawal of

the consolidated funds, may raise

questions that examination of no one

transaction would reveal. Such patterns

of suspicious activity may be detected

during an unrelated review of a casino’s

internal records, as part of an

independent audit of a casino’s

compliance systems, or as a result of a

suspicious activity monitoring program

designed to detect the occurrence of

potentially suspicious transactions

generally.

Proposed paragraph (a)(2)(iii)

recognizes the emerging international

consensus that efforts to deter,

substantially reduce, and eventually

eradicate money laundering are greatly

assisted by the reporting of unusual

financial transactions for which no

lawful purpose can be determined. The

requirements of this section comply

with the recommendations adopted by

the FATF and the OAS, and are

consistent with the European

Community’s directive on preventing

money laundering through financial

institutions.

Given the breadth of the reporting

requirement, and the variety of

transactions conducted in or through

gaming establishments, it is impossible

to avoid the need for judgment in

administering or applying the reporting

standards to particular situations.

Different fact patterns will require

different types of judgments. In some

cases, the facts of the transaction may

clearly indicate the need to report. For

example, the fact that a customer: (i)

Furnishes an identification document

which the casino believes is false or

altered in connection with the

completion of a Currency Transaction

Report by Casinos (CTRC), or the

opening of a deposit, credit account, or

check cashing account; (ii) tries to

influence, bribe, corrupt, or conspire

with an employee not to file CTRCs; or

(iii) converts large amounts of currency

from small to large denomination bills;

would all clearly indicate that a SARC

should be filed.

In other situations a more involved

judgment may be needed to determine

whether a transaction is suspicious

within the meaning of the rule. The

need for such judgments may arise, for

example, in the case of transactions in

which a customer (i) wires out of a

casino funds not derived from gaming

proceeds, or wires funds to financial

institutions located in a country which

is not his or her residence or place of
27236 Federal Register / Vol. 63, No. 95 / Monday, May 18, 1998 / Proposed Rules

16The deposit and credit accounts track customer

deposits and casino extensions of credit. Casino

customers can draw down on either account to fund

their gaming, purchase chips and conduct other

activities on casino properties. The player rating

account tracks gaming activity and is designed

primarily to award complimentary perquisites to

volume players, and to serve as a marketing tool to

identify customers and to encourage continued

patronage.

17 References to ‘‘appropriate law enforcement

and regulatory agencies’’ naturally include the

Examination Division of the Internal Revenue

Service, to which authority to examine, inter alia,

gaming establishments for compliance with the

Bank Secrecy Act has been delegated. See 31 CFR

103.46(b)(8).

business; (ii) transmits or receives funds

transfers without normal identifying

information or in a manner that may

indicate an attempt to disguise or hide

the country of origin or destination or

the identity of the customer sending the

funds or the beneficiary to whom the

funds are sent; (iii) repeatedly uses an

account as a temporary resting place for

funds from multiple sources; (iv) makes

continuous payments or withdrawals of

currency in amounts each below the

currency transaction reporting threshold

applicable under 31 CFR 103.22; or (v)

inserts currency into a slot machine

validator, accumulates credits with

minimal or no gaming activity, and then

cashes out the tokens or credits at the

cage (or slot booth) for large

denomination bills or a casino check.

The judgments involved will also

extend to whether the facts and

circumstances and the institution’s

knowledge of its customer provide a

reasonable explanation for the

transaction that would remove it from

the suspicious category. Again, it is

crucial to recognize that suspicious

transactions and activities are reportable

under this rule and 31 U.S.C. 5318(g)

whether or not they involve currency.

For all of these reasons, casinos must

know their customers to make an

informed decision as to whether certain

customer transactions are suspicious.

Many casinos already maintain and rely

for business purposes on a great deal of

information about their customers from

data routinely obtained through deposit,

credit, check cashing, and player rating

accounts. These accounts generally

require casinos to obtain basic

identification information about the

accountholders, at the time the accounts

are opened, and to inquire into the

kinds of wagering activities the

customer is likely to conduct.16 Also, in

certain instances, casinos use credit

bureaus to verify information obtained

from their customers. All of these

sources of information can help a casino

to better understand its customer base

and to evaluate specific customer

transactions that appear to lack

justification or otherwise cannot be

explained as falling within the usual

methods of legitimate business.

Filing Procedures

Paragraph (b) sets forth the filing

procedures to be followed by casinos

making reports of suspicious

transactions. Within 30 days after a

casino becomes aware of a suspicious

transaction, the casino must report the

transaction by completing a SARC and

filing it in a central location, to be

determined by FinCEN.

Supporting documentation relating to

each SARC is to be collected and

maintained separately by the casino and

made available to FinCEN and any

appropriate law enforcement or gaming

regulatory agency upon request. Special

provision is made for situations

requiring immediate attention, in which

case casinos are to immediately notify,

by telephone, the appropriate law

enforcement authority in addition to

filing a SARC.

Reports filed under the terms of the

proposed rule will be lodged in a central

data base (on the model of the data base

used to process, analyze, and retrieve

bank suspicious activity reports).

Information will be made automatically

available to federal and state law

enforcement and gaming regulatory

agencies, to enhance the ability of those

agencies to carry out their mandates to

fight financial crime.

Maintenance of Records

Paragraph (c) provides that filing

casinos must maintain copies of SARCs

and the original related documentation

for a period of five years from the date

of filing; the relevant records may

include not only paper or electronic

accounting or other entries but also

(without limitation) appropriate

segments of video or audio tapes

recorded by the casino as part of its

operations. Even though not required to

be filed with the SARC, the supporting

documentation is deemed to be a part of

the SARC and is required to be held by

the casino (in effect as agent for

FinCEN). This provision is intended to

relieve casinos of the need to transmit

supporting documentation immediately

to FinCEN without lessening the utility

or availability of the supporting

documentation. Thus, identification of

supporting documentation must be

made at the time the SARC is filed, and

such supporting documentation is

deemed filed with a SARC in

accordance with paragraph (c); as such,

FinCEN, law enforcement authorities

and appropriate gaming regulatory

agencies need not make their access

requests through subpoena or other legal

processes.17

Prohibition From Disclosing SARCs;

Safe Harbor From Civil Liability

Paragraph (d) incorporates the terms

of 31 U.S.C. 5318(g)(2) and (g)(3). This

paragraph thus specifically prohibits

persons filing SARCs from making any

disclosure, except to law enforcement

and regulatory agencies, about either the

fact of the filing of the reports or the

reports themselves, the information

contained therein, or the supporting

documentation. The non-disclosure

provisions of section 5318(g)(2) are

intended to ensure that suspicious

activity report information is restricted

to appropriate law enforcement and

regulatory personnel and are not

otherwise made public. It is also

designed to prevent the subject of a

report from learning that his suspicious

conduct has been reported to the

government. SARC information, like

other reports required to be filed under

the Bank Secrecy Act, are not subject to

disclosure to the public without the

express authorization of FinCEN.

Auditing and Enforcement

Finally, paragraph (e) notes that

compliance with the obligation to report

suspicious transactions will be audited,

and provides that failure to comply with

the rule may constitute a violation of the

Bank Secrecy Act and the Bank Secrecy

Act regulations, which may subject noncomplying casinos to an enforcement

action.

C. 103.54—Related Changes to Casino

Compliance Program Requirements

General

31 CFR 103.54 contains special

compliance program rules for casinos,

adopted by Treasury in 1994. See 59 FR

61660 (December 1, 1994). The

compliance program requirement

contained in the 1994 final rule was

revised to include procedures to

determine the occurrence of unusual or

suspicious transactions.

As noted above, the compliance

program and suspicious transaction

reporting rules are complementary, and

FinCEN believes that it is appropriate to

propose modification of those rules in

light of the projected commencement of

suspicious transaction reporting for

casinos. Two specific modifications are

proposed.

a. Testing for compliance. 31 CFR

103.54(a)(2)(ii) requires that casino

compliance programs include

‘‘[i]nternal and/or external independent
Federal Register / Vol. 63, No. 95 / Monday, May 18, 1998 / Proposed Rules 27237

18H.R. Rep. No. 438, 103d Cong., 2d Sess. 15

(1994).

19 ‘‘It is indisputable that as banks have been more

active in prevention and detection on money

laundering, money launderers have turned in

droves to the financial services offered by a variety

of [non-bank financial institutions].’’ Id., at 19.

testing for compliance.’’ FinCEN

proposes to modify the requirement so

that (i) the necessary testing must occur

at least annually, and (ii) must include

a specific determination whether

programs at the casino are working

effectively to: (i) detect and report

suspicious transactions of $3,000 or

more, and currency transactions of more

than $10,000, to proper authorities, and

(ii) comply with recordkeeping and

compliance program standards. The

change would emphasize a casino’s

responsibility to comply with all Bank

Secrecy Act requirements and assure

ongoing evaluation of the adequacy of

casino compliance programs.

b. Occurrence or patterns of

suspicious transactions. 31 CFR

103.54(a)(2)(v)(B) requires casinos to

maintain procedures to determine

‘‘[w]hen required by [31 CFR part 103]

the occurrence of unusual or suspicious

transactions.’’ FinCEN proposes to

modify the requirement to make clear

that the necessary procedures extend to

analysis not only of customer accounts

but also of the casino’s own records

derived from or used to record, track, or

monitor casino activity. FinCEN

believes that casinos should utilize

available information, including

information in existing computerized

systems that monitor a customer’s

account activity to assist in identifying

transactions, activities and patterns

which appear to have no legitimate

purpose, are not usual for a specific

player or type of players, or have no

apparent business explanation. This

will encompass activity occurring

through deposit and credit accounts,

player rating accounts, as well as any

other account that may be feasible.

The proposal does not specify the

method that must be used by a casino

to determine the occurrence of or

patterns of suspicious transactions that

may be occurring nor does it require

that all such activity be monitored at

such establishments. Rather, it permits

flexibility by allowing each casino to

rely on its existing information systems

and operational characteristics to

determine how to identify such

transactions and activities. The

procedures developed by a casino

should be designed to identify not only

flagrant attempts to defeat the casino’s

counter-money laundering controls, but

also to determine if customers are using

more sophisticated schemes and

techniques to the same end.

IV. Submission of Comments

An original and four copies of any

written hard copy comment (but not of

comments sent via E-Mail), must be

submitted. All comments will be

available for public inspection and

copying, and no material in any such

comments, including the name of any

person submitting comments, will be

recognized as confidential. Accordingly,

material not intended to be disclosed to

the public should not be submitted.

V. Regulatory Flexibility Act

FinCEN certifies that this proposed

regulation will not have a significant

economic impact on a substantial

number of small entities. The Bank

Secrecy Act authorizes Treasury to

require financial institutions to report

suspicious activities. 31 U.S.C. 5313(g).

However, the Bank Secrecy Act

excludes casinos or gaming

establishments with annual gaming

revenue not exceeding $1 million from

the definition of ‘‘financial institution.’’

31 U.S.C. 5312(a)(2)(X). Thus, certain

small casinos and card clubs are

excluded by statute from the operation

of the proposed regulation. Other

casinos, namely those in Colorado and

South Dakota, are subject to state law

limitations on the size of wagers that

may be made at those casinos. In

casinos such as these, the burden to

establish procedures to detect

suspicious activity should be

substantially reduced since the low

dollar amount of the limits makes it

unlikely that customers would engage in

transactions at these casinos large

enough to trigger a reporting

requirement under the proposed

regulation.

As to the remaining casinos and card

clubs, many of the requirements of the

proposed regulation may be satisfied, in

large part, using existing business

practices and records. For example,

many casinos already obtain a great deal

of data about their customers from

information routinely collected from

casino established deposit, credit, check

cashing and player rating accounts. This

existing data can assist casinos in

making decisions about whether a

transaction is suspicious. Many casinos

also already have policies and

procedures in place and have trained

personnel to detect unusual or

suspicious transactions, as part of their

own risk prevention programs. In

addition, it is common in the casino

industry to perform annual, and in some

cases quarterly, testing of their

compliance programs. Further, a

number of casinos have already begun

voluntarily reporting suspicious

transactions to Treasury.

In drafting the proposed regulation,

FinCEN carefully considered the

importance of suspicious activity

reporting to the administration of the

Bank Secrecy Act. In light of the fact

that Congress considers suspicious

activity reporting a ‘‘key ingredient in

the anti-money laundering effort,’’ 18

there is no alternative mechanism for

the government to obtain this key

information other than by requiring

casinos and card clubs to set up

procedures to detect and report

suspicious activity. The legislative

history of the Bank Secrecy Act

demonstrates that money launderers

will shift their activities away from

more regulated to less regulated

financial institutions. 19

FinCEN has met with the casino

industry to discuss issues relevant to

suspicious transaction reporting and, as

indicated in the preamble, plans to

conduct a series of public meetings

across the country to provide the

members of the industry the

opportunity to discuss the proposed

regulation. In addition, FinCEN is

preparing an industry guide to explain

suspicious activity reporting.

VI. Paperwork Reduction Act Notices

A. Suspicious Activity Report by

Casinos

In accordance with requirements of

the Paperwork Reduction Act of 1995,

44 U.S.C. 3506(c)(2)(A), and its

implementing regulations, 5 CFR 1320,

the following information concerning

the collection of information on the

Suspicious Activity Report by Casinos is

presented to assist those persons

wishing to comment on the information

collection.

FinCEN anticipates that this proposed

rule, if adopted as proposed, would

result in the annual filing of a total of

3,000 Suspicious Activity Report by

Casinos forms. This result is an

estimate, based on a projection of the

size and volume of the industry.

Title: Suspicious Activity Report by

Casinos.

OMB Number: 1506–0006.

Description of Respondents: All

casinos and card clubs subject to this

rule.

Estimated Number of Respondents:

550.

Frequency: As required.

Estimate of Burden: Reporting average

of 36 minutes per response;

recordkeeping average of three hours

per response, which includes internal

review of records and other information

to determine whether the activity

warrants reporting under the rule.
27238 Federal Register / Vol. 63, No. 95 / Monday, May 18, 1998 / Proposed Rules

Estimate of Total Annual Burden on

Respondents: 3,000 responses.

Reporting burden estimate = 1,800

hours; recordkeeping burden estimate =

9,000 hours. Estimated combined total

of 10,800 hours.

Estimate of Total Annual Cost to

Respondents for Hour Burdens: Based

on $20 per hour, the total cost to the

public is estimated to be $216,000.

Estimate of Total Other Annual Costs

to Respondents: None.

B. Notification to Law Enforcement in

Cases Requiring Immediate Attention

In accordance with requirements of

the Paperwork Reduction Act of 1995,

44 U.S.C. 3501 et seq., and its

implementing regulations, 5 CFR part

1320, the following information

concerning proposed § 103.21(b)(3) is

presented to assist those persons

wishing to comment on the information

collection. Section 103.21(b)(3) would

require respondents, in cases requiring

immediate attention, to notify a law

enforcement agency by telephone of

suspicious activity required to be

reported under section 103.21.

FinCEN estimates that this provision,

if adopted as proposed, would result in

casinos and card clubs making 100

telephone notifications of suspicious

activity to law enforcement per year.

This estimate is based on FinCEN’s

experience with financial institutions

(other than casinos) which have

provided similar telephone notice of

suspicious activity to law enforcement.

Title: Notification to Law Enforcement

in Cases Requiring Immediate Attention.

OMB Number: To be determined.

Description of Respondents: All

casinos and card clubs subject to this

rule.

Estimated Number of Respondents:

550.

Frequency: As required.

Estimate of Burden: Average of 15

minutes per telephone call to law

enforcement.

Estimate of Total Annual Burden on

Respondents: 100 responses per year.

Reporting burden estimate = 25 hours

annually.

Estimate of Total Annual Cost to

Respondents for Hour Burdens: Based

on $20 per hour, the total cost to the

public is estimated to be $500 annually.

Estimate of Total Other Annual Costs

to Respondents: None.

C. Notification to FinCEN of a Request

To Disclose SARC Information

In accordance with requirements of

the Paperwork Reduction Act of 1995,

44 U.S.C. 3501 et seq., and its

implementing regulations, 5 CFR part

1320, the following information

concerning proposed 103.21(d) is

presented to assist those persons

wishing to comment on the information

collection. Proposed 103.21(d) would

require notice to FinCEN when a casino

or card club has been requested to

disclose a SARC form or the information

contained in the form to anyone other

than FinCEN or a law enforcement or

regulatory agency authorized under the

proposed rule.

FinCEN estimates that this provision,

if adopted as proposed, would result in

less than 10 such reports annually. This

estimate is based on FinCEN’s

experience with financial institutions

(other than casinos) which have

provided similar notice of requests for

suspicious activity report information

filed with FinCEN.

Title: Notice to FinCEN of Request for

Suspicious Activity Report Information.

OMB Number: To be determined.

Description of Respondents: All

casinos and card clubs subject to this

rule.

Estimated Number of Respondents:

550.

Frequency: As required.

Estimate of Burden: 30 minutes per

notice to FinCEN.

Estimate of Total Annual Burden on

Respondents: 10 responses per year.

Reporting burden estimate = 5 hours.

Estimate of Total Annual Cost to

Respondents for Hour Burdens: Based

on $20 per hour, the total cost to the

public is estimated to be $100.

Estimate of Total Other Annual Costs

to Respondents: None.

D. Suspicious Transaction Compliance

Testing and Monitoring

In accordance with requirements of

the Paperwork Reduction Act of 1995,

44 U.S.C. 3501 et seq., and its

implementing regulations, 5 CFR part

1320, the following information

concerning Suspicious Transaction

Recordkeeping and Reporting is

presented to assist those persons

wishing to comment on the information

collection. The proposed rule would

amend: (i) § 103.54(a)(2)(ii) to specify,

among other things, that required casino

internal, and/or external compliance

testing be done, at a minimum, annually

and result in an annual statement

whether internal control standards and

procedures are working effectively to

detect and report suspicious

transactions, as required by this part;

and (ii) § 103.54(a)(2)(v)(B) to require

casinos to establish procedures designed

to detect the occurrence of any

transaction or patterns of transactions

required to be reported by this part,

including any transactions or patterns of

transactions indicated by accounts or

records maintained by a casino to record

or monitor customer activity.

FinCEN estimates that these

provisions, if adopted as proposed,

would result in a total of 500 hours per

respondent annually. Given the fact that

the gross annual gaming revenue of

casinos and card clubs covered by this

part can vary between $1 million and

several hundred million dollars,

FinCEN’s estimate is based on an

average casino or card club expending

about 500 hours annually complying

with the proposed testing and

monitoring requirements. (This number

is an average; FinCEN recognizes that

because there is a wide disparity

between the size of casinos in the

United States, the number could well be

higher or lower than 500 for a particular

casino.) This estimate is based on

estimates developed for the banking

industry for its suspicious transaction

program, and takes into account the fact

that the banking industry was subject to

a criminal referral system prior to the

suspicious transaction program. This

500 hour estimate does not include

existing casino internal, and/or external

Bank Secrecy Act compliance testing

already required by § 103.54(a)(2)(ii).

Title: Suspicious Transaction

Compliance Testing and Monitoring.

OMB Number: 1506–0009 (formerly

control number 1505–0063).

Description of Respondents: All

casinos and card clubs subject to this

rule.

Estimated Number of Respondents:

550.

Frequency: As required.

Estimate of Burden: Annual testing

and monitoring of 500 hours per

respondent.

Estimate of Total Annual Burden on

Respondents: Testing and monitoring

program burden estimate = 275,000

hours.

Estimate of Total Annual Cost to

Respondents for Hour Burdens: Based

on $20 per hour, the total cost to the

public is estimated to be $5,500,000.

Estimate of Total Other Annual Costs

to Respondents: None.

FinCEN specifically invites comments

on the following subjects: (a) whether

the proposed collection of information

is necessary to further the purposes of

the Bank Secrecy Act, including

whether the information retained shall

have practical utility; (b) the accuracy of

FinCEN’s estimate of the burden of the

proposed collection of information; (c)

ways to enhance the quality, utility, and

clarity of the information to be retained;

and (d) ways to minimize the burden of

the collection of information on the

affected industry, including through the

use of automated storage and retrieval
Federal Register / Vol. 63, No. 95 / Monday, May 18, 1998 / Proposed Rules 27239

techniques or other forms of information

technology.

In addition, the Paperwork Reduction

Act of 1995, supra, requires agencies to

estimate the total annual cost burden to

respondents or recordkeepers resulting

from the information collection. Thus,

FinCEN also specifically requests

comments to assist with this estimate. In

this connection, FinCEN requests

commenters to identify any additional

costs associated with the information

collection covered by the requirement.

These comments on costs should be

divided into two parts: (i) any

additional costs associated with

recordkeeping and reporting; and (ii)

any additional costs associated with

testing and monitoring.

VII. Executive Order 12866

The Department of the Treasury has

determined that this proposed rule is

not a significant regulatory action under

Executive Order 12866.

VIII. Unfunded Mandates Act of 1995

Statement

Section 202 of the Unfunded

Mandates Reform Act of 1995, Pub. L.

104–4 (Unfunded Mandates Act), March

22, 1995, requires that an agency

prepare a budgetary impact statement

before promulgating a rule that includes

a federal mandate that may result in

expenditure by state, local and tribal

governments, in the aggregate, or by the

private sector, of $100 million or more

in any one year. If a budgetary impact

statement is required, section 202 of the

Unfunded Mandates Act also requires

an agency to identify and consider a

reasonable number of regulatory

alternatives before promulgating a rule.

FinCEN has determined that it is not

required to prepare a written statement

under section 202 and has concluded

that on balance this proposal provides

the most cost-effective and least

burdensome alternative to achieve the

objectives of the rule.

List of Subjects in 31 CFR Part 103

Authority delegations (Government

agencies), Banks and banking, Currency,

Investigations, Law enforcement,

Reporting and recordkeeping

requirements.

Proposed Amendments to the

Regulations

For the reasons set forth above in the

preamble, 31 CFR part 103 is proposed

to be amended as follows:

PART 103—FINANCIAL

RECORDKEEPING AND REPORTING

OF CURRENCY AND FOREIGN

TRANSACTIONS

1. The authority citation for part 103

continues to read as follows:

Authority: 12 U.S.C. 1829b and 1951–1959;

31 U.S.C. 5311–5330.

2. Section 103.11(ii)(1) is revised to

read as follows:

§ 103.11 Meaning of terms.

* * * * *

(ii) Transaction. (1) Except as

provided in paragraph (ii)(2) of this

section, transaction means a purchase,

sale, loan, pledge, gift, transfer, delivery

or other disposition, and with respect to

a financial institution includes a

deposit, withdrawal, transfer between

accounts, exchange of currency, loan,

extension of credit, purchase or sale of

any stock, bond, certificate of deposit, or

other monetary instrument or

investment security, purchase or

redemption of any money order,

payment or order for any money

remittance or transfer, purchase or

redemption of casino chips or tokens, or

other gaming instruments, or any other

payment, transfer, or delivery by,

through, or to a financial institution, by

whatever means effected.

* * * * *

§§ 103.20 and 103.2 [Redesignated as

§§ 103.15 and 103.18]

3. Sections 103.20 and 103.21 are

redesignated as §§ 103.15 and 103.18,

respectively, and a new § 103.21 is

added to read as follows:

§ 103.21 Reports by casinos of suspicious

transactions.

(a) General. (1) Every casino (for

purposes of this section, a ‘‘reporting

casino’’), shall file with the Treasury

Department, to the extent and in the

manner required by this section, a

report of any suspicious transaction

relevant to a possible violation of law or

regulation. A casino may also file with

the Treasury Department, by using the

Suspicious Activity Report by Casinos

specified in paragraph (b)(1) of this

section, or otherwise, a report of any

suspicious transaction that it believes is

relevant to the possible violation of any

law or regulation but whose reporting is

not required (whether because of its

dollar amount, or otherwise) by this

section.

(2) A transaction requires reporting

under the terms of this section if it is

conducted or attempted by, at, or

through a casino, and involves or

aggregates at least $3,000 in funds or

other assets, and the casino knows,

suspects, or has reason to suspect that

the transaction (or a pattern of

transactions of which the transaction is

a part):

(i) Involves funds derived from illegal

activity or is intended or conducted in

order to hide or disguise funds or assets

derived from illegal activity (including,

without limitation, the ownership,

nature, source, location, or control of

such funds or assets) as part of a plan

to violate or evade any federal law or

regulation or to avoid any transaction

reporting requirement under federal law

or regulation;

(ii) Is designed, whether through

structuring or any other means, to evade

any requirements of this part or of any

other regulations promulgated under the

Bank Secrecy Act, Pub. L. 91–508, as

amended, codified at 12 U.S.C. 1829b,

12 U.S.C. 1951–1959, and 31 U.S.C.

5311–5330; or

(iii) Has no business or apparent

lawful purpose or is not the sort in

which the particular customer would

normally be expected to engage, and the

casino knows of no reasonable

explanation for the transaction after

examining the available facts, including

the background and possible purpose of

the transaction.

(b) Filing procedures—(1) What to file.

A suspicious transaction shall be

reported by completing a Suspicious

Activity Report by Casinos (‘‘SARC’’),

and collecting and maintaining

supporting documentation as required

by paragraph (c) of this section.

(2) Where to file. The SARC shall be

filed with FinCEN in a central location,

to be determined by FinCEN, as

indicated in the instructions to the

SARC.

(3) When to file. A reporting casino is

required to file each SARC no later than

30 calendar days after the date of the

initial detection by the reporting casino

of facts that may constitute a basis for

filing a SARC under this section. If no

suspect is identified on the date of such

initial detection, a casino may delay

filing a SAR for an additional 30

calendar days to identify a suspect, but

in no case shall reporting be delayed

more than 60 calendar days after the

date of such initial detection. In

situations involving violations that

require immediate attention, such as

ongoing money laundering schemes, the

reporting casino shall immediately

notify by telephone an appropriate law

enforcement authority in addition to

filing a SARC.

(c) Retention of records. A reporting

casino shall maintain a copy of any

SARC filed and the original or business

record equivalent of any supporting

documentation for a period of five years
27240 Federal Register / Vol. 63, No. 95 / Monday, May 18, 1998 / Proposed Rules

from the date of filing the SARC.

Supporting documentation shall be

identified as such and maintained by

the reporting casino, and shall be

deemed to have been filed with the

SARC. A reporting casino shall make all

supporting documentation available to

FinCEN and any other appropriate law

enforcement agencies or federal, state,

local, or tribal gaming regulators upon

request.

(d) Confidentiality of reports;

limitation of liability. No casino, and no

director, officer, employee, or agent of

any casino, who reports a suspicious

transaction under this part, may notify

any person involved in the transaction

that the transaction has been reported.

Thus, any person subpoenaed or

otherwise requested to disclose a SARC

or the information contained in a SARC,

except where such disclosure is

requested by FinCEN or another

appropriate law enforcement or

regulatory agency, shall decline to

produce the SARC or to provide any

information that would disclose that a

SARC has been prepared or filed, citing

this paragraph and 31 U.S.C. 5318(g)(2),

and shall notify FinCEN of any such

request and its response thereto. A

reporting casino, and any director,

officer, employee, or agent of such

reporting casino, that makes a report

pursuant to this section (whether such

report is required by this section or

made voluntarily) shall be protected

from liability for any disclosure

contained in, or for failure to disclose

the fact of, such report, or both, to the

extent provided by 31 U.S.C. 5318(g)(3).

(e) Compliance. Compliance with this

section shall be audited by the

Department of the Treasury, through

FinCEN, or by delegees of the

Department of the Treasury under the

terms of the Bank Secrecy Act. Failure

to satisfy the requirements of this

section may constitute a violation of the

reporting rules of the Bank Secrecy Act

and of this part.

4. Section 103.54 is amended by:

a. Revising paragraph (a)(2)(ii),

b. Removing the word ‘‘hereafter’’ in

paragraph (a)(2)(iii); and

c. Revising paragraph (a)(2)(v)(B).

The revised paragraphs read as

follows:

§ 103.54 Special rules for casinos.

(a) Compliance programs. * * *

(2) * * *

(ii) Annual internal and/or external

independent testing of compliance,

including, without limitation, an annual

statement whether internal controls and

procedures are working effectively to

detect and report suspicious

transactions of $3,000 or more, and

currency transactions of more than

$10,000, to the proper authorities, as

required by this part, and to comply

with the recordkeeping and compliance

program standards of this part;

* * * * *

(v) * * *

(B) The occurrence of any transactions

or patterns of transactions required to be

reported pursuant to § 103.21,

including, without limitation, any

transactions or patterns of transactions

indicated by accounts or records

maintained by a casino to record or

monitor customer activity.

* * * * *

Dated: May 12, 1998.

William F. Baity,

Acting Director, Financial Crimes

Enforcement Network.

[FR Doc. 98–13053 Filed 5–15–98; 8:45 am]

BILLING CODE 4820–03–P

DEPARTMENT OF TRANSPORTATION

Coast Guard

33 CFR Part 117

[CGD01–97–134]

RIN 2115–AE47

Drawbridge Operation Regulations;

Passaic River, NJ

AGENCY: Coast Guard, DOT.

ACTION: Notice of proposed rulemaking.

SUMMARY: The Coast Guard proposes to

change the operating rules for the I–280

Bridge (Stickel Memorial), mile 5.8, over

the Passaic River at Harrison, New

Jersey, to allow the bridge to remain

closed to navigation. The District

Commander, upon six months notice,

may require that the bridge be restored

to full operational status.

The bridge owner, the New Jersey

Department of Transportation (NJDOT),

has requested that the Coast Guard

consider a change to the operating

regulations for the Route 280 Bridge.

There have been only 8 requests to open

the Route 280 Bridge since 1987;

therefore, the Coast Guard proposed to

change the operating regulations for this

bridge under § 117.39, which allows

closure of a drawbridge due to

infrequent use.

Additionally, as part of this proposal,

the Coast Guard is correcting an error in

this regulation regarding the mile point

of the Route 7 (Rutgers Street) Bridge.

The Route 7 Bridge Listed at mile 6.9 in

the existing regulation should be listed

at mile 8.9.

This proposed rule, if adopted, is

expected to relieve NJDOT of the

requirement to crew the Route 280

Bridge and correct an error in this

regulation.

DATES: Comments must be received by

the Coast Guard on or before July 17,

1998.

ADDRESSES: You may mail comments to

Commander (obr), First Coast Guard

District, 408 Atlantic Avenue, Boston,

MA. 02110–3350, or deliver them to the

same address between 7 a.m. and 4

p.m., Monday through Friday, except

Federal holidays. The telephone number

is (617) 233–8364. The First Coast

Guard District Bridge Branch maintains

the public docket for this rulemaking.

Comments and documents as indicated

in this preamble will become part of this

docket and will be available for

inspection or copying at the above

address 7 a.m. to 3 p.m. Monday

through Friday, except Federal holidays.

FOR FURTHER INFORMATION CONTACT: John

W. McDonald, Project Officer, First

Coast Guard District, (617) 223–8364.

Request for Comments

The Coast Guard encourages

interested persons to participate in this

matter by submitting written data,

views, or arguments. Persons submitting

comments should include their names

and addresses, identify this rulemaking

(CGD01–97–134) and specific section of

this proposal to which their comments

apply, and give reasons for each

comment. Please submit two copies of

all comments and attachments in an

unbound format, no larger than 81⁄2 by

11 inches, suitable for copying and

electronic filing. Persons wanting

acknowledgment of receipt of comments

should enclose a stamped, selfaddressed postcard or envelope.

The Coast Guard will consider all

comments received during the comment

period. It may change this proposal in

response to comments received. The

Cost Guard does not plan to hold a

public hearing; however, persons may

request a public hearing by writing to

the Coast Guard at the address listed

under ADDRESSES. The request should

include the reasons why a hearing

would be beneficial. If it is determined

that the opportunity for oral

presentations will aid this rulemaking,

the Coast Guard will hold a public

hearing at a time and place announced

by a subsequent notice published in the

Federal Register.

Background

The Route 280 Bridge, mile 5.8, at

Harrison, New Jersey, has a vertical

clearance of 35 feet at mean high water

and 40 feet at mean low water.