Understanding & Applying Title 31 to Tribal Casinos

Thoughtware Alert Published: Nov 18, 2019
Building exterior outside of the GFOA Annual Conference.

It’s no secret that money laundering is a serious offense—and the IRS has thousands of cases to prove it. But what should your organization do about it?

To prevent criminals from using financial institutions to facilitate money laundering and terrorist financing activities, the IRS implemented the Bank Secrecy Act (BSA), also known as Title 31. This allows the Secretary of the Treasury to impose precautionary regulations on financial institutions to help prevent financial crime.

U.S. casinos that generate more than $1 million in gross annual gaming revenues are classified as financial institutions and subject to Title 31 requirements. All Title 31 casinos are required by law to have an effective anti-money laundering (AML) program and comply with federally mandated reporting expectations.

Implementing an AML Program

If your institution is subject to Title 31, you need a customized AML program. The IRS doesn’t issue standard plans for adoption, so each casino must develop its own program based on risks associated with its specific products and services. If your tribe has multiple casinos, each casino needs its own customized program. If you’re not sure if you fall under Title 31 guidelines, reach out to your BKD trusted advisor or reference IRS guidance on 31 CFR Chapter X.

According to the IRS, you should include these items in your AML program:

  1. Internal controls policies and procedures to ensure Title 31 compliance
  2. Casino employee training
  3. Independent compliance testing
  4. A compliance officer responsible for BSA compliance and the AML program
  5. Procedures for using all available information to determine and confirm a person’s identity, e.g., Social Security number, driver’s license, etc.
  6. Procedures for using all available information to determine suspicious activity
  7. Procedures for using technology to aid in assuring compliance (for casinos using computerized systems)

Reporting Requirements

Currency Transaction Report (CTR)

All financial institutions must file a CTR on any cash transactions exceeding $10,000. This allows the IRS to track high-volume cash transactions and prevent money laundering.

Types of transactions that require CTR (if exceeding $10,000) include:

  • The purchase or redemption of chips, plaques and tokens
  • Front money withdrawals and deposits
  • Safekeeping withdrawals and deposits
  • Payment or advances on any form of credit, including markers and counter checks
  • Bets of currency
  • Payments on bets (excluding video and slot terminal jackpots)
  • Currency received by the casino via wire transfers
  • Payments by the casino to a customer via wire transfers
  • The purchase or cashing of checks or other negotiable instruments
  • Currency exchanges, including exchanges for foreign currency
  • Travel or entertainment reimbursements to customers

If a customer processes multiple cash transactions during a single day, it should be considered one transaction. If the individual transactions exceed $10,000 when combined, the casino must file a CTR. In addition, casinos should consider deposits and withdrawals separately and file all CTRs within 15 days of a transaction.

Suspicious Activity Report (SAR)

The BSA’s final requirement is the SAR. Title 31 states that a SAR should be used on all suspicious transactions exceeding $5,000. Criminals may attempt tactics like “structuring” (processing transactions in a pattern that avoids reporting) to cover up illegal activity. An example of structuring is strategically cashing in or out at less than $10,000 to avoid a CTR. All activities like this should be classified as suspicious and result in a SAR.

Source of Funds

Another important facet of your Title 31 program is identifying sources of funds to help detect and prevent money laundering. Although FinCEN hasn’t set forth specific guidelines, your BKD trusted advisor can help you structure a risk-based approach on conducting this type of due diligence.

Questions about complying with Title 31? Reach out to your BKD trusted advisor or use the Contact Us form below.

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