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What happens in Vegas
Is reported to the IRS
Agents of the Internal Revenue Service are meeting informally with casino
employees, asking them to voluntarily report suspicious activity.
Liz Benston broke the story in the August 5, 2010 Las Vegas Sun. But, so
far, the idea that the IRS would ask casinos to turn in some of their best
customers has received little national attention. Perhaps this is because
gaming operators are already required to spy and report on their high-
rollers.
Tax authorities dislike legal gambling. They know that many players will not
voluntarily report their winnings. So, they enacted laws and regulations to
require casinos, race tracks, Bingo halls, card clubs and state lotteries to
become agents of the federal government. The U.S. Congress passed
laws requiring gaming operators to withhold and forward to the IRS part of
certain big winnings, to make sure taxes get paid.
But the IRS went even further, requiring operators to report certain big
winners, even when no taxes were withheld.
Tax revenue is still the number one priority of the IRS. But federal
prosecutors and investigators also know that businesses that routinely
deal with large cash transactions can also be useful for spotting criminal
activity.
Over the last 25 years, the federal government has greatly expanded the
duty of casinos to report large or suspicious transactions. The result has
been a turning on its head of American law.
Unlike many European countries, the United States does not have a history
of “good Samaritan” laws. Just as Americans are normally under no duty to
rescue a person in trouble, they are not required to report crimes being
committed, even when they can do so with no danger to themselves.
American law normally does not require sellers to know where their buyers
got their money. Without a special statute or regulation, a casino is under
no duty to verify that a player is gambling with honestly obtained funds. In
fact, a casino executive would normally not be required to report a
customer even if he knew the player was using ill-gotten gains.
Of course, intentionally helping a criminal is another matter.
It has always been against the law for a casino employee to help a high-
roller launder money. The crime is called conspiracy, usually a felony, and
consists of agreeing with another person to commit some other crime.
There must be an actual agreement, although it need not be words on
paper, or even words at all. Certainly, a nod of the head would be enough.
The law also imposes criminal liability on anyone who intentionally helps
another commit a crime. This is commonly known as aiding and abetting,
accomplice liability or complicity. But where conspiracy is a separate crime,
aiding and abetting is merely a way of making the accomplice liable for
crimes someone else has committed. So, helping a crook launder money
makes the accomplice guilty of the crime of money laundering.
The feds sometimes have trouble separating true money laundering from
gambling. The examples used to impose currency reporting requirements
on casinos included Antonio Cruz Vasquez, a major heroin distributor, who
“lost almost $3 million at the gambling tables during a two-year period that
ended in December, 1977.” As I wrote in my 1986 book, Gambling and the
Law, “Losing $3 million shows that he was gambling: a money launderer
only makes token bets to cover his exchange of dirty money for clean.”
Ironically, it was the Administration of conservative Republican Ronald
Reagan, who campaigned on getting government off the backs of citizens,
which imposed those currency reporting requirements on casinos, in,
appropriately, 1984.
So, casinos have been required to file CTRCs, Currency Transaction
Reports Casinos, on cash transactions over $10,000 for 25 years. For a
while, Nevada had an exemption, Regulation 6A, which still required
reports be filed with state officials. Nevada’s representatives were able to
convince the Reagan Administration that if a patron won, say, a $20,000
jackpot, then we know it is not drug money.
After 9/11, the feds took over completely. It took years for Treasury to get
rid of CTRCs on large slot machine jackpots, even though these were
already being reported to the IRS for tax withholding. And government
investigators realized data from legal gaming could be mined for even
more information. The federal Financial Crime Enforcement Network
(FINCen) imposed a requirement that casinos act as police officers, and
report mere suspicions that a crime had taken place.
The form is SARCs, Suspicious Activities Report by Casinos, and it differs
significantly from CTRCs. CTRCs require casinos to ask the patron for two
forms of identification. It is actually against the law for a casino to tell a
patron that a SARC has been filed on him.
CTRCs are triggered by an actual cash transaction of more than $10,000.
There is normally a minimum of $5,000 for SARCs. But the casino is
required to file a SARC if it knows, or suspects, or even has reason to
suspect, that a transaction involves funds derived from illegal activities.
A casino will be fined if no SARC is filed when an executive has an actual
suspicion, or with 20/20 hindsight when the casino employee should have
had a suspicion.
The IRS is now pushing for more. A SARC does not have to be filed for 30
days. The IRS wants casino employees to call, now, when they think a
patron is playing with stolen money.
Obviously, there is a conflict of interest, especially with casino hosts,
whose livelihood depends on keeping high-rollers happy. Reporting your
best customers to the IRS is not a way to make friends. But failure to do so
could lead to being fired by casino bosses who don’t want fines, or even
heat, from Treasury.
About the only good news for casino executives is that a federal law gives
whistle-blowers complete protection from civil suits, even when they are
wrong. So, at least making that call on the whale with bundles of cash won’t
result in a nasty lawsuit by the actually innocent high-roller. It just means
he will take his business to Macau or Singapore.
© I. Nelson Rose, Encino, California. All rights reserved worldwide.
Gambling and the Law® is a registered trademark of Professor I.
Nelson Rose. His latest books, Internet Gaming Law (1st and 2nd
editions), Blackjack and the Law and Gaming Law: Cases and
Materials, are available through his website, www.
GamblingAndTheLaw.com.
Is reported to the IRS
Agents of the Internal Revenue Service are meeting informally with casino
employees, asking them to voluntarily report suspicious activity.
Liz Benston broke the story in the August 5, 2010 Las Vegas Sun. But, so
far, the idea that the IRS would ask casinos to turn in some of their best
customers has received little national attention. Perhaps this is because
gaming operators are already required to spy and report on their high-
rollers.
Tax authorities dislike legal gambling. They know that many players will not
voluntarily report their winnings. So, they enacted laws and regulations to
require casinos, race tracks, Bingo halls, card clubs and state lotteries to
become agents of the federal government. The U.S. Congress passed
laws requiring gaming operators to withhold and forward to the IRS part of
certain big winnings, to make sure taxes get paid.
But the IRS went even further, requiring operators to report certain big
winners, even when no taxes were withheld.
Tax revenue is still the number one priority of the IRS. But federal
prosecutors and investigators also know that businesses that routinely
deal with large cash transactions can also be useful for spotting criminal
activity.
Over the last 25 years, the federal government has greatly expanded the
duty of casinos to report large or suspicious transactions. The result has
been a turning on its head of American law.
Unlike many European countries, the United States does not have a history
of “good Samaritan” laws. Just as Americans are normally under no duty to
rescue a person in trouble, they are not required to report crimes being
committed, even when they can do so with no danger to themselves.
American law normally does not require sellers to know where their buyers
got their money. Without a special statute or regulation, a casino is under
no duty to verify that a player is gambling with honestly obtained funds. In
fact, a casino executive would normally not be required to report a
customer even if he knew the player was using ill-gotten gains.
Of course, intentionally helping a criminal is another matter.
It has always been against the law for a casino employee to help a high-
roller launder money. The crime is called conspiracy, usually a felony, and
consists of agreeing with another person to commit some other crime.
There must be an actual agreement, although it need not be words on
paper, or even words at all. Certainly, a nod of the head would be enough.
The law also imposes criminal liability on anyone who intentionally helps
another commit a crime. This is commonly known as aiding and abetting,
accomplice liability or complicity. But where conspiracy is a separate crime,
aiding and abetting is merely a way of making the accomplice liable for
crimes someone else has committed. So, helping a crook launder money
makes the accomplice guilty of the crime of money laundering.
The feds sometimes have trouble separating true money laundering from
gambling. The examples used to impose currency reporting requirements
on casinos included Antonio Cruz Vasquez, a major heroin distributor, who
“lost almost $3 million at the gambling tables during a two-year period that
ended in December, 1977.” As I wrote in my 1986 book, Gambling and the
Law, “Losing $3 million shows that he was gambling: a money launderer
only makes token bets to cover his exchange of dirty money for clean.”
Ironically, it was the Administration of conservative Republican Ronald
Reagan, who campaigned on getting government off the backs of citizens,
which imposed those currency reporting requirements on casinos, in,
appropriately, 1984.
So, casinos have been required to file CTRCs, Currency Transaction
Reports Casinos, on cash transactions over $10,000 for 25 years. For a
while, Nevada had an exemption, Regulation 6A, which still required
reports be filed with state officials. Nevada’s representatives were able to
convince the Reagan Administration that if a patron won, say, a $20,000
jackpot, then we know it is not drug money.
After 9/11, the feds took over completely. It took years for Treasury to get
rid of CTRCs on large slot machine jackpots, even though these were
already being reported to the IRS for tax withholding. And government
investigators realized data from legal gaming could be mined for even
more information. The federal Financial Crime Enforcement Network
(FINCen) imposed a requirement that casinos act as police officers, and
report mere suspicions that a crime had taken place.
The form is SARCs, Suspicious Activities Report by Casinos, and it differs
significantly from CTRCs. CTRCs require casinos to ask the patron for two
forms of identification. It is actually against the law for a casino to tell a
patron that a SARC has been filed on him.
CTRCs are triggered by an actual cash transaction of more than $10,000.
There is normally a minimum of $5,000 for SARCs. But the casino is
required to file a SARC if it knows, or suspects, or even has reason to
suspect, that a transaction involves funds derived from illegal activities.
A casino will be fined if no SARC is filed when an executive has an actual
suspicion, or with 20/20 hindsight when the casino employee should have
had a suspicion.
The IRS is now pushing for more. A SARC does not have to be filed for 30
days. The IRS wants casino employees to call, now, when they think a
patron is playing with stolen money.
Obviously, there is a conflict of interest, especially with casino hosts,
whose livelihood depends on keeping high-rollers happy. Reporting your
best customers to the IRS is not a way to make friends. But failure to do so
could lead to being fired by casino bosses who don’t want fines, or even
heat, from Treasury.
About the only good news for casino executives is that a federal law gives
whistle-blowers complete protection from civil suits, even when they are
wrong. So, at least making that call on the whale with bundles of cash won’t
result in a nasty lawsuit by the actually innocent high-roller. It just means
he will take his business to Macau or Singapore.
© I. Nelson Rose, Encino, California. All rights reserved worldwide.
Gambling and the Law® is a registered trademark of Professor I.
Nelson Rose. His latest books, Internet Gaming Law (1st and 2nd
editions), Blackjack and the Law and Gaming Law: Cases and
Materials, are available through his website, www.
GamblingAndTheLaw.com.