Casinos seen as terrorist target for money laundering

Suzanne Struglinski

Wednesday, Sept. 29, 2004 | 11:11 a.m.

WASHINGTON -- Casinos need to be certain they are following federal policies aimed to prevent money laundering by terrorists, members of the Senate Banking Committee said Tuesday.

Problems with the Mirage resort in Las Vegas not filing certain financial reports should not happen again and be detected sooner, members said.

"The fact that a Las Vegas casino did not submit their reports, and the fact that (the Financial Crimes Enforcement Network) did not realize they suddenly stopped reporting is very disconcerting," said Sen. Jim Bunning, R-Ky.

The Mirage failed to file about 14,900 cash transaction reports with the federal government in 2001, 2002 and 2003, a violation of state law that was ultimately blamed on a Mirage compliance officer who said he lied to supervisors in order to cover up the fact that he was behind in mailing the reports.

The officer, Christopher Morishita, was the first person in state history to be prosecuted under the state law governing cash transaction reports, which are required of all casinos and are designed to prevent money laundering. The officer was sentenced to three years of probation and the Mirage was ordered to pay a $5 million fine to state regulators, the largest-ever fine for a Nevada casino.

Committee Chairman Richard Shelby, R-Ala., said "banks are easy" and his committee knows how to prevent money laundering through banks, but money-wiring services such as Western Union, casinos, and even post offices that issue money orders pose a bigger problem recognized by the 9/11 Commission.

"Money service businesses and casinos present problems of a scale that dwarf anything else," Shelby said. "How we ensure that the explosion in legalized gambling is not abused by those seeking to launder the proceeds of crime or to finance criminal or terrorist activity is the challenge before us."

Kevin Brown, commissioner of the Small Business and Self-Employed Divsion of the Internal Revenue Service, said 9 percent of casinos are currently under examination.

But Frank Fahrenkopf, president of the American Gaming Association, told the panel that casinos are doing their best to watch their money for potential money-laundering schemes and other suspicious activity but that they could use more guidance for employees.

Fahrenkopf said the Mirage report or any other problems with financial reporting so far has not been linked to terrorists.

"To my knowledge there really has not been any terrorism-related cases that have come down," Fahrenkopf said.

He stressed that none of the violations was intentional or connected to money laundering. He pointed out that Mirage executives found and pointed out the company's own mistake to regulators.

William Fox, director of the Financial Crimes Enforcement Network, said casinos do not pose the same type of money laundering risks as other money businesses. He said the challenge for the network and the Internal Revenue Service is how to have casino examinations deal with new issues and how to handle new companies in the industry.

Fox called the Mirage incident "a terrible mistake."

"We're certainly hoping not to make anymore and be sure we get a flag that pops up," Fox said.