Win big or small, casinos ask more questions

By Liz Benston

Saturday, July 14, 2007 | 7:04 a.m.

Let's say you get lucky at craps - you're up by more than $5,000 - and you decide to cash out.

But the casino says not so fast, Charlie. You're going to have to fill out this form for the IRS. Oh, and we're going to need your Social Security number, too.

That's what gamblers are discovering this month as new federal rules take effect to crack down on money laundering and keep track of big winnings.

Some gamblers say casinos are getting nosier than ever - maybe too nosy - into their affairs, on behalf of Uncle Sam.

And what was supposed to be little more than a brief administrative headache for casinos - and virtually undetectable to gamblers - is causing tension between cautious cash handlers and players.

"I'm starting to get questioned over small amounts of money," said Patrick Reznak, a Las Vegas resident who recently bumped up against the rule. "What are they going to do, turn me over to the IRS?"

Like many gamblers, Reznak knows that casinos are required to seek identification for transactions of $10,000 or more. But this month, a casino wanted his identification before he could cash out his $3,500 - presumably because by day's end he might have reached that $10,000 threshold.

Casinos have been subject to federal cash-reporting rules - normally applied to banks and other big cash-handling institutions - for decades. But the process got more serious for Nevada casinos in the mid-1980s, when the state adopted guidelines to mirror, and some would say, improve on, federal cash-reporting rules.

Until this month, Nevada was exempt from so-called Title 31 federal reporting rules because the state rule, called Regulation 6A, was sufficient in the eyes of the feds. Cash transactions of $10,000 or more were reported to the state, then passed on to an Internal Revenue Service database center in Detroit. Nevada also prohibited cash-for-cash, cash-for-check and cash-for-wire transactions of $3,000 or more - the kinds of transactions typically employed by money launderers .

After Congress passed the Patriot Act, the Treasury Department accelerated plans to implement new rules governing so-called suspicious transactions.

Nevada, which already had a suspicious-activity rule for casinos, initially wanted to remain in charge of tracking big cash transactions, but the federal government prevailed. State regulators decided that was OK, because state money and resources were freed up for other matters.

During the past few months casino employees across the state have been trained in the new federal guidelines. Casinos outside of Nevada had been following the federal reporting rules for years.

But those rules have some peculiarities that are more than a little annoying for Nevada casinos.

For one thing, about 135 smaller casinos previously exempt from Nevada's cash-handling rules now have to comply under the federal system, which applies to all casinos that generate at least $1 million in revenue per year , rather $10 million under Nevada's threshold. Unlike most big casinos, these small to midsize casinos (which include more - profitable slot bars) don't have a staff person, let alone a team, specializing in cash reporting compliance.

The problem may be compounded for bigger players at larger casinos. Unlike Nevada's old rules, under which a player's activity needed to be recorded only if he cashed out $10,000 or more at any one time, the feds now want player transactions tracked all day long because of the possibility that, by day's end, the aggregate amount may eclipse $10,000.

It's a task that may have been impossible before recent advancements in player tracking software and is now merely difficult: keeping tabs on the player who cashes out smaller chunks of cash at various games - whether bingo, blackjack, baccarat or a Betty Boop slot machine - but exceeds the threshold overall. Woe to the casino that receives a federal audit for letting slip a player who cashed out for more than $10,000 over 24 hours. "Title 31 was originally written for Atlantic City-type casinos inside four square walls. Here, under one hotel roof , you may have four or five different casinos and players moving from one area to another," said Paul Larsen, a Las Vegas attorney who represents Strip casinos and specializes in cash handling regulations. "It becomes quite a task to track their play."

It's also a heck of a way to launder money. But locals such as Larsen say that's not the point. Although the Treasury's Financial Crimes Enforcement Network, which oversees cash reporting by businesses nationwide, has invoked the specter of terrorist money-laundering operations post 9/11, casino executives think other motives are at play.

Untaxed gambling winnings have long been a thorn in the side of the IRS. What better way to capture a piece of those billions of dollars than to document winnings? The federal rules, after all, don't specifically prohibit any classic money-laundering type of transaction , as Nevada's old rules did.

The feds also more loosely define "suspicious activity."

That means casinos - fearing government audits - may choose to be more aggressive in collecting information for the IRS' benefit.

Which brings us to our craps player's Social Security number.

The federal reporting form reserves a space for a Social Security number. Nevada previously required casino workers to attempt to secure the number , but the customer had the right to refuse.

Under the new federal rule, the customer is required to disclose his Social Security number if he hopes to cash out more than $10,000 - in one transaction or multiple ones - by day's end.

That means gamblers who were rarely, if ever, asked for the number are being more frequently asked for it - maybe several times a day at that, as they cash out in different parts of the casino.

A gambler who refuses to disclose his Social Security number because he is cashing out less than $10,000 can be written up in a "suspicious activity" report that goes to the IRS - and not know it, because casinos are prohibited from disclosing when such reports are filed.

"The player may think he's being very clever (by refusing) when he's really shooting himself in the foot," Larsen said.

Reznak, who was asked for his Social Security number when trying to cash out his $3,500, said he balked - and then rattled off a phony number with a laugh and a smile.

A cat and mouse game ensued - but he got his money in the end.

"I asked the (casino worker), 'Do I look suspicious to you?' She said, 'Not at all.' "

Like many other gamblers, Reznak prefers to fly under the radar, refusing the personal information requested by casinos for marketing purposes and avoiding player tracking systems.

Collecting information for the IRS may not be such a bad thing for casinos, which already collect personal and financial details on their loyal players. Unless, of course, it starts to deter gamblers from gambling.

Nevada casinos, once a business as private as a confessional, have begun a new chapter in corporate compliance.