Lake Elsinore Casino Fined for Major Violations of Bank Secrecy Act

Posted on: October 28, 2024, 08:31h
Last updated on: October 28, 2024, 09:48h

A significant development has emerged within the California gambling scene as the Lake Elsinore Hotel and Casino, located between Los Angeles and San Diego, faces a hefty $900,000 fine. This penalty comes as a result of allegations regarding serious violations of federal banking laws, specifically the Bank Secrecy Act (BSA), enforced by the Financial Crimes Enforcement Network (FinCEN).

The Lake Elsinore Hotel and Casino in California has been fined by the Financial Crimes Enforcement Network for failing to adhere to federal banking laws. (Image: The Salt Lake Tribune)

Nature of the Violations

According to the consent order issued by FinCEN, Sahara Dunes Casino, LP, the parent company of Lake Elsinore, acknowledged "years of failures" in completing necessary Currency Transaction Reports (CTRs) and Suspicious Activity Reports (SARs). These reports are critical in maintaining financial integrity, particularly within establishments that handle large sums of cash. FinCEN Director Andrea Gacki was particularly vocal about the casino’s lack of adequate anti-money laundering (AML) controls, noting that such negligence not only endangers customers but also compromises the entire U.S. financial system.

“Lake Elsinore operated for years without the most basic anti-money laundering controls, putting its customers and the U.S. financial system at risk and denying law enforcement information on suspicious activity,” she expressed.

The Role of FinCEN

FinCEN, part of the U.S. Treasury Department, plays a significant role in monitoring financial institutions to combat money laundering, terrorist financing, and other forms of financial crime. The agency’s enforcement action against Lake Elsinore is particularly notable; it marks the first time in six years that a casino has faced such scrutiny and penalties from FinCEN.

“This action should serve as a reminder that all financial institutions — regardless of their type or size — must comply with their obligations under the BSA and FinCEN’s regulations,” Gacki added.

The Backstory of Compliance Issues

Lake Elsinore operates as one of 82 commercial cardrooms licensed by the California Gambling Control Commission (CGCC). The cardroom offers non-house-banked table games where players either take turns acting as the dealer or employ a third-party proposition player. The violations in question persisted from at least September 2014 to February 2019, as detailed in FinCEN’s consent order. During that time, Lake Elsinore failed to adhere to the mandatory requirements of the BSA.

For instance, federal law mandates that establishments file CTRs for transactions exceeding $10,000 within a 24-hour period. Additionally, any suspicious transactions exceeding $5,000 necessitate an SAR filing, both of which were reportedly neglected by the casino.

Implications and Required Changes

The fallout from these violations goes beyond the hefty fine. Lake Elsinore must now implement a series of corrective measures to bolster its AML procedures. Specifically, FinCEN has mandated the hiring of an independent AML consultant, who will be responsible for reviewing and recommending improvements to the casino’s anti-money laundering program.

If the casino satisfactorily upgrades its AML practices and achieves compliance with the BSA, FinCEN has indicated it will reduce the total fine by $50,000, enabling Lake Elsinore to settle for $850,000.

Conclusion

The $900,000 penalty imposed on Lake Elsinore Hotel and Casino serves as a stark reminder of the importance of compliance with federal regulations in the gambling industry. As gambling establishments continue to grow and evolve, the enforcement of financial regulations will remain vital in preserving integrity within the sector. For both operators and patrons, this incident underscores the necessity of transparent and responsible gambling practices that protect not only the industry but also the broader financial landscape of the United States. As the situation develops, all eyes will be on Lake Elsinore to ensure that it takes the necessary steps to rectify its oversight and implement a robust compliance framework moving forward.