Regulatory Updates

BSA/Title 31 Update and Refresher

Joe Oprosko
Joe Oprosko

Joe Oprosko, Engagement Manager
Jefferson Wells International

Many questions have arisen lately regarding the Bank Secrecy Act (BSA) and Anti-Money Laundering Programs (AMLP) or Title 31 as it is also called. People have heard or read somewhere that there have been a few revisions to forms lately as well as a few changes to the requirements themselves and are concerned that they may need to revise their policies and procedures to remain in compliance with the BSA. This may be old news for some of you, but it never hurts to hear these things again. For others this is new information that will need to be evaluated to see how it affects your particular operation. Either way there will be information that you can use to revise your policies and procedures and avoid any unpleasant surprises come audit time. There have been some amendments made recently to the BSA as well as some common errors that have been showing up on suspicious activity reports.

The most recent memo (August 2008) to come out of the Financial Crimes Enforcement Network (FinCEN) addresses the newly revised FinCEN Form 103 or the Currency Transaction Reporting by Casinos (CTRC) and related instructions for electronic filing of FinCEN Form 103. These new forms and instructions cannot be used prior to September 1, 2008 and for all operations that file electronically, the new format and guidelines must be implemented by February 28, 2009. Some changes to look for on the face of the form are:

• Box #6 – This box is used to record the business name that someone is doing business under or their DBA. (This was also added as Box 6 on page two of Form 103 - Multiple Persons or Multiple Agents.)

• Part II Box 31 line h – This is a new line to record bills inserted into gaming devices.

• Part II Box 32 line a – Ticket in- Ticket out (TITO) was added to the ticket description.

• Part II Box 32 line d – The verbiage on this line was revised to include race book and OTB or sports pool.

Now that there is a new form to use once September 1, 2008 gets here, it’s evident why there was a revision in the first place. The revised CTRC has come about to assist casinos in properly reporting information pertaining to amendments to the reporting requirements that were made to the BSA (Title 31) back on June 26, 2007. The reporting requirements that were amended were:

Slot jackpots – Slot and video lottery terminal jackpots are no longer required to be reported in line 31d or anywhere else on the report. It was determined after some extensive discussion that jackpots paid out by slot machines would be exempt from reporting under the BSA as they resulted from winnings of a random nature. The intent of the BSA is to detect and prevent money-laundering and if someone has randomly won a jackpot from a slot machine or video lottery terminal, the likelihood that it resulted from money laundering would be minimal.

Money plays – Money play bets, or bets that customers make at a table game with cash instead of chips, are required to be reported on line 31d as a currency wager if they meet the reporting thresholds. Any cash that is bet on a table is subject to the cash-in rules of the BSA and would therefore need to be recorded appropriately. Any cash bets that are left on the table for a subsequent bet, such as if the original bet was won, and it was left there to ride for a second bet, would not be recorded again for BSA purposes as it has already been accounted for as a cash-in transaction.

Bill validators – The amount of all paper currency inserted into a bill validator on a slot machine, video lottery terminal, or any other electronic gaming device that is used by a customer is required to be tracked and reported by the casino provided that the casino has knowledge of the transactions through the slot monitoring system. If the customer used their player account and the paper currency that was inserted is aggregated and posted in the casino’s gaming monitoring system, then the casino is required to report the transactions if reporting threshold requirements are met. As identified above, the CTRC form will now have a specific line for casinos to record bills inserted into a gaming device.

Having covered the amendments that have been made recently to the reporting requirements of the BSA, it’s necessary to review some of the common errors that have been showing up on suspicious activity reports for casinos and card clubs (SARC). As we all know, no discussion on the BSA can be complete if suspicious activity reporting doesn’t come up.

The first area where there seems to be many errors or omissions relates to the SARC narratives. The main objective of the SARC narrative is to explain why you feel the transaction is suspicious. The rest of the form will cover the “who, what, when, and where” of the transaction, but the “why” is very dependent on the narrative. There have been three common, recurring errors relating to the SARC narrative. First is a completely empty narrative field which doesn’t do anything at all to help explain why the transaction is deemed suspicious. Second, there is a failure to explain the information that is contained in the supporting documents that are retained in your files. As a reminder, it is prohibited to attach supporting documents to the SARC filing as they can not be uploaded into the FinCEN database. Therefore you cannot attach supporting documents to the SARC as a substitute for a narrative. The third common mistake is an inadequate narrative. Many narratives simply restate or repeat the information contained elsewhere in the report. An adequate narrative will accurately and completely explain the nature and circumstances of the suspicious activity.

The second area where many common errors and omissions occur are in the responses to what FinCEN considers “fields of critical value,” which are marked by an asterisk (*) on the SARC form. The most common mistakes on these responses are:

• Inaccurate special response – specific responses are required when data is unavailable so make sure you follow the instructions for this response. Incorrect responses like “N/A” or “see above” create data upload issues.

• Missing or incomplete filer ID and telephone numbers - Many times the “EIN” and telephone
numbers of the filing casino are missing or incomplete

• Invalid subject SSN/EIN – There are numerous instances where the social security number or employer identification number is entered in an invalid format. You need to verify in the instructions as to what the proper entry format should be.

• Incomplete Government issued ID info – If a driver’s license or passport is used for identification, you need to record both the number from the document and who the issuer is. For example, if a driver’s license is used for ID, record both the number and the state that issued it.

One other area that filers seem to struggle with is properly identifying the category and character of the suspicious activity. The category, type, or characterization of suspicious activity field should never be blank. If none of the available options seems correct then you should use the other option and a brief explanation included in the text box with a more descriptive explanation in the narrative.

For more information and to stay up to date on happenings within FinCEN and relating to the BSA, you can go to the FinCEN website at www.fincen.gov. You can review requirements, get forms, or see some commonly asked questions there as well.

Joe Oprosko is a CPA and an Engagement Manager with the Minneapolis Office of Jefferson Wells International. He can be reached by calling (612) 968-5028 or email joe.oprosko@jeffersonwells.com.