[Federal Register Volume 60, Number 149 (Thursday, August 3, 1995)]
[Proposed Rules]
[Pages 39665-39668]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-19137]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 60, No. 149 / Thursday, August 3, 1995 /
Proposed Rules
[[Page 39665]]
DEPARTMENT OF THE TREASURY
31 CFR Part 103
RIN 1506-AA07
Financial Crimes Enforcement Network; Proposed Amendments to the
Bank Secrecy Act Regulations Regarding Tribal Gaming
AGENCY: Financial Crimes Enforcement Network, Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Financial Crimes Enforcement Network (``FinCEN'') is
proposing to amend the regulations implementing the statute generally
referred to as the Bank Secrecy Act to include certain gaming
establishments operated by or on behalf of Indian tribes within the
definition of financial institution subject to those regulations. The
amendments would extend the reporting and recordkeeping requirements
and anti-money laundering safeguards of the Bank Secrecy Act to such
gaming establishments.
DATES: Written comments on all aspects of the proposed regulation are
welcome and must be received on or before November 1, 1995.
ADDRESSES: Written comments should be submitted to: Office of
Regulatory Policy and Enforcement, Financial Crimes Enforcement
Network, Department of the Treasury, 2070 Chain Bridge Road, Vienna,
Virginia 22182, Attention: NPRM--Tribal Gaming. Submission of comments.
An original and four copies of any comment must be submitted. All
comments will be available for public inspection and copying, and no
material in any such comments, including the name of any person
submitting comments, will be recognized as confidential. Accordingly,
material not intended to be disclosed to the public should not be
submitted. Inspection of comments. Comments may be inspected at the
Department of Treasury between 10:00 a.m. and 4:00 p.m., in the
Treasury Library, which is located in room 5030, 1500 Pennsylvania
Avenue NW., Washington, D.C. 20220. Persons wishing to inspect the
comments submitted should request an appointment at the Treasury
Library at (202) 622-0990.
FOR FURTHER INFORMATION CONTACT: Leonard C. Senia, Compliance
Specialist, Office of Regulatory Policy and Enforcement, Financial
Crimes Enforcement Network, (703) 905-3931, or Joseph M. Myers,
Attorney-Advisor, Office of Legal Counsel, Financial Crimes Enforcement
Network, (703) 905-3557.
SUPPLEMENTARY INFORMATION:
Introduction
This document proposes (i) to amend the definition of ``casino'' in
31 CFR 103.11(i)(7)(i), (ii) to amend or add other definitions in 31
CFR 103.11, and (iii) to make a conforming change to the specification
in 31 CFR 103.36(b)(7) of certain records required to be maintained by
casinos. The proposed changes reflect the terms of section 409 of the
Money Laundering Suppression Act of 1994 (the ``Money Laundering
Suppression Act''), Title IV of the Riegle Community Development and
Regulatory Improvement Act of 1994, Pub. L. 103-325.
Background
The statute popularly known as the ``Bank Secrecy Act,'' Pub. L.
91-508, as amended, codified at 12 U.S.C. 1829b, 12 U.S.C. 1951-1959,
and 31 U.S.C. 5311-5330, authorizes the Secretary of the Treasury,
inter alia, to issue regulations requiring financial institutions to
(i) keep records and file reports that are determined to have a high
degree of usefulness in criminal, tax, and regulatory matters, (ii)
implement counter-money laundering programs and compliance procedures,
and (iii) report potentially suspicious transactions to the federal
government. Regulations implementing Title II of the Bank Secrecy Act
(codified at 31 U.S.C. 5311-5330), appear at 31 CFR Part 103. The
authority of the Secretary to administer the Bank Secrecy Act has been
delegated to the Director of FinCEN.
The range of financial institutions to which the Bank Secrecy Act
applies includes not only banks and other depository institutions, but
also securities brokers and dealers, money transmitters, and the other
non-bank businesses that offer customers one or more financial
services. Gambling casinos were made subject to the Bank Secrecy Act as
of May 7, 1985, by regulation issued early that year, see 50 FR 5065
(February 6, 1985). Treasury has issued three sets of rules relating to
the application of the Bank Secrecy Act to casino gaming
establishments. See 50 FR 5064-5069 (February 6, 1985); 54 FR 1165-1167
(January 12, 1989); and 59 FR 61660-61662 (December 1, 1994) (modifying
and putting into final effect the rule originally published at 58 FR
13538-13550 (March 12, 1993)).
Legalized casino gaming in the United States has grown greatly
since 1985. An important component of that growth has been the opening
of casinos and other gaming establishments on Indian lands, primarily
under the procedures established by the Indian Gaming Regulatory Act
(Pub. L. 100-497, codified at 18 U.S.C. 1166-1168, and 25 U.S.C. 2701-
2721). State gaming regulators and staff members of the National Indian
Gaming Commission (the ``NIGC''), established pursuant to the Indian
Gaming Regulatory Act, have indicated that there were approximately 120
tribal casinos, of various sizes and types, operating during 1994 in a
total of 16 states. Industry statistics for 1993 (the last year for
which statistics are readily available) indicate that wagering at
tribal casinos exceeded $27 billion in that year, a steep rate of
increase from prior years' results.
Section 409 of the Money Laundering Suppression Act codified the
application of the Bank Secrecy Act to gaming activities by adding
casinos and other gaming establishments to the list of financial
institutions specified in the Bank Secrecy Act itself.1 The
statutory specification reads:
\1\ The 1985 action initially making casinos subject to the Bank
Secrecy Act had been based on Treasury's statutory authority to
designate as financial institutions (i) businesses that engage in
activities ``similar to'' the activities of the businesses listed in
the Bank Secrecy Act, as well as (ii) other businesses ``whose cash
transactions have a high degree of usefulness in criminal, tax, or
regulatory matters.'' See 31 U.S.C. 5312(a)(2)(Y) and (Z) (as
renumbered by the Money Laundering Suppression Act).
(2) financial institution means--
(X) a casino, gambling casino, or gaming establishment with an
annual gaming revenue of more than $1,000,000 which--
(i) is licensed as a casino, gambling casino, or gaming
establishment under the laws of
[[Page 39666]]
any State or any political subdivision of any State; or
(ii) is an Indian gaming operation conducted under or pursuant
to the Indian Gaming Regulatory Act other than an operation which is
limited to class I gaming (as defined in section 4(6) of such Act) *
* *.
31 U.S.C. 5312(a)(2)(X). As discussed more fully below, this notice is
part of the broader process of rethinking the application of the Bank
Secrecy Act to casinos that began with the issuance of burden-reducing
amendments to the Bank Secrecy Act regulations governing casinos in
December 1994.
See 59 FR 61660-61662 (December 1, 1994).
Explanation of Provisions
A. Overview. The proposed regulations would amend the definition of
``casino'' to include explicitly casinos operated on Indian lands; make
related changes to the regulatory definitions of ``person'' and
``United States'' in 31 CFR 103.11(n) and 103.11(s), respectively; and
add definitions of the terms ``Indian Gaming Regulatory Act'',
``State'', and ``Territories and Insular Possessions'', as proposed in
31 CFR 103.11 (v), (w), and (x), respectively. A related amendment is
proposed to the record retention requirements found in 31 CFR
103.36(b)(7), to reflect the regulatory system contemplated by the
Indian Gaming Regulatory Act.
B. Definition of Casino. The definition of casino is proposed to be
amended to include explicitly casinos operated on Indian lands. Under
the proposed amendment, the term casino would include, inter alia, any
casino or gambling casino duly licensed or authorized to do business
under the Indian Gaming Regulatory Act or other federal, state, or
tribal law or arrangement affecting Indian lands. The term would thus
include casinos that are doing business on Indian lands on a basis
other than that specified in the Indian Gaming Regulatory Act. For
example, a casino that operates on Indian lands under a view that
compliance with the Indian Gaming Regulatory Act is unnecessary or
inconsistent with inherent tribal rights would not for that reason be
exempted from the terms of the Bank Secrecy Act, to the extent that
those terms would otherwise apply to the casino's operations.2
\2\ The authority for the application of the Bank Secrecy Act to
casinos that are neither licensed by state or local authorities nor
operated on Indian Lands pursuant to the Indian Gaming Regulatory
Act is found in 31 U.S.C. 5312(a)(2)(Y) and (Z), cited above, which
as noted were the basis for application of the Bank Secrecy Act to
casinos prior to the enactment of the Money Laundering Suppression
Act.
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The general need for and appropriateness of treatment of casinos as
financial institutions for purposes of the Bank Secrecy Act have been
accepted, as indicated above, since the mid-1980s. Treasury made clear
in its first formal statements on this subject the need to prevent
casinos, which both deal in cash and cash-equivalent chips and can
offer a variety of other financial services to customers, from being
used to avoid the effect of the Bank Secrecy Act.3 There is no
reason to expect that the potential risk of such activity in casinos on
Indian lands, if those casinos were not subject to the Bank Secrecy
Act, is any less (or any greater) than for state-licensed casinos.
Prior to the enactment of the Money Laundering Suppression Act, the
issue whether the Bank Secrecy Act could be applied to gaming
operations on Indian lands was unsettled in light of the language of
section 20(d) of the Indian Gaming Regulatory Act, 25 U.S.C. 2719(d),
and the disinclination to apply general federal legislation to the
affairs of Indian tribes without clear Congressional authorization.
Section 409 of the Money Laundering Suppression Act grants direct
authority to the Secretary of the Treasury to apply the Bank Secrecy
Act to most tribal gaming operations and is backed by a strong
expression of Congressional intent, in the legislative documents
accompanying the statute, ``* * * to eliminate confusion about which
currency reporting system applies to Indian casinos.'' See H.R. Rep.
No. 652, 103d Cong., 2d Sess. 193 (1994). (The other currency reporting
system is that created, for trades or businesses not subject to the
Bank Secrecy Act, by section 6050I of the Internal Revenue Code of
1986.)
\3\ The preamble to the final rule bringing casinos within the
Bank Secrecy Act stated that
[i]n recent years Treasury has found that an increasing number
of persons are using gambling casinos for money laundering and tax
evasion purposes. In a number of instances, narcotics traffickers
have used gambling casinos as substitutes for other financial
institutions in order to avoid the reporting and recordkeeping
requirements of the Bank Secrecy Act.
Inclusion of casinos in the definition of financial
institution[s] in 31 CFR Part 103 was among the specific
recommendations in the October 1984 report of the President's
Commission on Organized Crime, `The Cash Connection: Organized
Crime, Financial Institutions, and Money Laundering'. The problem
was also the subject of hearings in 1984 before the House Judiciary
Subcommittee on Crime entitled `The Use of Casinos to Launder the
Proceeds of Drug Trafficking and Organized Crime'.
In order to prevent the use of casinos in this fashion, Treasury
is amending the regulations in 31 CFR Part 103 to require gambling
casinos to file the same types of reports [and maintain the same
types of records] that it requires from financial institutions
currently covered by the Bank Secrecy Act.
50 FR 5065, 5066, (February 6, 1985); see also 49 FR 32861,
32862 (August 17, 1984) (corresponding language in notice of
proposed rulemaking).
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The retention in the proposed regulation of the term ``casino'',
rather than substitution in 31 CFR 103.11(i)(7)(i) of the broader
authorizing language of 31 U.S.C. 5312(a)(2)(X), is intentional. The
Department of the Treasury has generally sought to apply the Bank
Secrecy Act to gaming establishments that provide their customers with
a financial product--gaming--and as a corollary offer a broad array of
financial services, such as customer deposit or credit accounts,
facilities for transmitting and receiving funds transfers directly from
other institutions, and check cashing and currency exchange services,
that are similar to those offered by depository institutions and other
financial firms.
By way of contrast, the Indian Gaming Regulatory Act defines
classes of gaming establishments with reference to specific games that
may be offered by those establishments. States or the NIGC may
authorize and regulate under that Act tribal gaming activities, such as
bingo, lotteries, and pari-mutuel betting, that are not generally
offered in casino settings. These types of gaming may create different
problems for law enforcement, tax compliance, and counter-money
laundering programs than do full-scale casino operations. Although the
Money Laundering Suppression Act grants the Department of the Treasury
authority to extend the Bank Secrecy Act to the full range of gaming
establishments in the United States, FinCEN wishes to concentrate at
this time on resolving the issues raised by extending the existing Bank
Secrecy Act structure to true casino-like establishments operating on
Indian lands.
The other changes in the definition of casino are designed simply
to list explicitly the three classes of government authorities that can
authorize or license casinos subject to the Bank Secrecy Act. The
changes are intended neither to expand nor contract the coverage of the
Bank Secrecy Act to casinos operating under State authority or under
the authority of various United States territories or possessions.
C. Treatment of Casinos Under the Bank Secrecy Act. Thus, under the
proposed regulations, casinos operating on Indian lands would become
subject not simply to the Bank Secrecy Act's currency transaction
reporting rules but to the full set of provisions (described by the
Congress as ``a comprehensive currency reporting and detailed
recordkeeping system with numerous
[[Page 39667]]
anti-money laundering safeguards'') to which other casinos in the
United States are subject. See H.R. Rep. No. 652, supra.
The Bank Secrecy Act generally imposes several sets of requirements
on casinos. First, each casino is required to file with the Department
of the Treasury a report of each receipt or disbursement of more than
$10,000 in currency in its gaming operations; aggregation of multiple
transactions is required in a number of situations. See 31 CFR
103.22(a)(2). In addition, later this year, Treasury will issue
regulations to require financial institutions, including casinos, to
file reports of suspicious transactions. See 31 U.S.C. 5318(g)(1).
Each casino is also required by the Bank Secrecy Act to maintain
certain records relating to the casino's operation, including records
identifying account holders (see 31 CFR 103.36(a)), or showing
transactions for or through each customer's account (see, generally, 31
CFR 103.36(b)), and transactions involving persons, accounts or places
outside the United States, (see 31 CFR 103.36(b)(5)); records which are
prepared or used by a casino to monitor a customer's gaming activity or
records of purchases of more than $3,000 worth of checks or other
monetary instruments are also among the types of records that must be
maintained (see 31 CFR 103.36(b)(8) and (b)(9)). Finally, casinos must
institute training and internal control programs to assure and monitor
compliance with the Bank Secrecy Act (see 31 CFR 103.36(b)(10) and
103.54(a)).
Gaming establishments within the scope of the proposed rule will
remain subject to the filing requirements of section 6050I of the
Internal Revenue Code, with respect to their gaming and financial
services operations, until this proposed rule becomes effective. See
section 6050I of the Internal Revenue Code, 26 U.S.C. 6050I(a) and (c);
Treas. Reg. 1.6050I-1(d)(2). Gaming establishments, whether non-tribal
or tribal, that are not included within the definition of casino in the
Bank Secrecy Act remain fully subject to the currency reporting rules
of section 6050I of the Internal Revenue Code; section 6050I of the
Code will also continue to apply to non-gaming and non-financial
services operations, for example hotel accommodations, at casinos that
are subject to the Bank Secrecy Act.
D. Request for Comments on Specific Subjects. FinCEN recognizes
that the circumstances of tribal gaming are not uniform throughout the
United States, and it is keenly aware of the need to proceed
thoughtfully in adopting the rules of the Bank Secrecy Act to the
realities of the operation of casinos on Indian lands. FinCEN
specifically seeks comment on the following questions:
1. Are there particular parts of the Bank Secrecy Act regulations
applicable to casinos generally that do not accurately reflect the way
tribal casinos operate?
2. What types of financial services, other than gaming, are offered
by tribal casinos or by other financial businesses operating at such
casinos?
3. How can compliance with the Bank Secrecy Act by tribal casinos
best be examined and enforced?
4. How should compliance by tribal casinos with the Bank Secrecy
Act be integrated with the regulatory regimes created by the Indian
Gaming Regulatory Act and the tribal-state compacts required by that
statute for authorization of Class III gaming?
In seeking guidance on these and other issues raised by this notice
of proposed rulemaking, FinCEN is interested in hearing from all
parties potentially affected by the proposed rules, including Indian
tribes on whose lands gaming is conducted, tribal or non-tribal
enterprises that manage casinos on such lands, and officials of state
and local governments within whose boundaries such lands are located.
FinCEN will consider holding a public hearing on the proposed rule if
comments suggest that a public hearing would be productive.
Equalization of the treatment of state-licensed and tribal casinos
is necessary as a prelude to the consideration of broader issues
affecting the application of the Bank Secrecy Act to the gaming
industry. Those issues include whether clarifications should be made in
the definition of casino as new types of gaming develop (or whether the
term ``casino'' is sufficiently elastic to encompass such developments,
\4\) whether special rules should be applicable to small casinos, and
how best to implement the provisions added to the Bank Secrecy Act
generally with respect to gaming establishments by the Annunzio-Wylie
Anti-Money Laundering Act of 1992, Title XV of the Housing and
Community Development Act of 1992, Pub. L. 102-550, and the Money
Laundering Suppression Act.
\4\ For example, an establishment that claimed to be a gambling
``club'' rather than a casino because it simply offered customers an
opportunity to gamble with one another, but that in practice funded
certain customers so that other customers were in effect gambling
against ``house'' money, and that offered its customers financial
services of various kinds, is arguably a casino under present law.
Thus, for example, if such a ``club'' failed to file currency
transactions reports or allowed a customer to deposit funds in a
player bank account in the name of the customer without requiring
the customer to provide identifying information, the club would
arguably be operating in violation of the Bank Secrecy Act.
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E. Other Changes in ``Meaning of Terms''. Changes are also proposed
to be made to the definitions of ``person'' and ``United States'' in 31
CFR 103.11(n) and (s), and definitions of the terms ``Indian Gaming
Regulatory Act'', ``State'', and ``Territories and Insular
Possessions'' are proposed to be added to Sec. 103.11 as new paragraphs
(v), (w), and (x), respectively. As explained immediately above, these
definitions are proposed to permit efficient application of 31 CFR Part
103 to tribal casinos. The proposed definitions of terms ``State'' and
``Territories and Insular Possessions'' will be repeated in the rules
published to implement the provisions of section 402 of the Money
Laundering Suppression Act relating to the mandatory exemption of
certain transactions with depository institutions from the currency
transaction reporting requirements of 31 U.S.C. 5313 and 31 CFR
103.22.\5\
\5\ The numbering scheme used in this notice of proposed
rulemaking reflects the July 1, 1994 edition of the Code of Federal
Regulations; the definitions contained in 31 CFR 103.11 will
automatically be renumbered as of January 1, 1996, when the rules
relating to funds transfers and transmittals of funds by financial
institutions take effect. FinCEN intends to issue in the near future
a notice of proposed rulemaking reordering all of the provisions of
31 CFR 103.11 as well as proposing changes in certain of those
provisions; the terms dealt with in this notice will appear in that
notice of proposed rulemaking without further changes relating to
tribal casinos.
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F. Additions to Record Maintenance Requirements. The requirement of
31 CFR 103.36(b)(7) that casinos retain all records, documents or
manuals required to be maintained under state and local laws or
regulations is proposed to be amended to recognize that tribal casinos
are required to retain records in many cases either by tribal governing
authorities or under the terms of tribal-state compacts authorizing
Class III gaming on Indian lands under the Indian Gaming Regulatory
Act. The proposed change simply conforms the record retention
requirements to reflect the fact that a casino on tribal lands will
retain certain documents because tribal rules or tribal-state compacts,
rather than state regulation, require their retention.
Proposed Effective Date
The amendments to 31 CFR Part 103 proposed in this notice of
proposed rulemaking will become effective 90 days following publication
in the Federal Register of the final rule to which this notice relates.
[[Page 39668]]
Special Analyses
It has been determined that this notice of proposed rulemaking (i)
is not subject to the ``budgetary impact statement'' requirement of
section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4)
and (ii) is not a significant regulatory action as defined in Executive
Order 12866. It is not anticipated that this proposed rule, if adopted
as a final rule, will have an annual effect on the economy of $100
million or more. Nor will it, if so adopted, affect adversely in a
material way the economy, a sector of the economy, productivity,
competition, jobs, the environment, public health or safety, or state,
local or tribal governments or communities. The proposed rule is
neither inconsistent with, nor does it interfere with, actions taken or
planned by other agencies. Finally, it raises no novel legal or policy
issues.
Because this rule affects Indian gaming establishments with gross
annual gaming revenues in excess of $1 million, it is hereby certified
that this proposed rule is not likely to have a significant economic
impact on a substantial number of small entities.
Drafting Information
Several individuals in FinCEN's Office of Legal Counsel and its
Office of Regulatory Policy and Enforcement participated in the
development of these regulations.
List of Subjects in 31 CFR Part 103
Authority delegations (Government agencies), Banks and banking,
Currency, Foreign banking, Investigations, Law enforcement, Reporting
and recordkeeping requirements, Taxes.
Proposed Amendments to the Regulations
Accordingly, 31 CFR Part 103 is proposed to be amended as follows:
PART 103--FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND
FOREIGN TRANSACTIONS
1. The authority citation for Part 103 continues to read as
follows:
Authority: Pub. L. No. 91-508, Title I, 84 Stat. 1114 (12 U.S.C.
1829b, 1951-1959); and the Currency and Foreign Transactions
Reporting Act, Pub. L. No. 91-508, Title II, 84 Stat. 1118, as
amended (31 U.S.C. 5311-5330).
2. Section 103.11 is amended by revising paragraphs (i)(7)(i), (n),
and (s), and adding paragraphs (v), (w), and (x) to read as follows:
Sec. 103.11 Meaning of terms.
* * * * *
(i) * * *
(7) (i) Casino. A casino or gambling casino that (A) is duly
licensed or authorized to do business as such in the United States,
whether under the laws of a State or of a Territory or Insular
Possession of the United States, or under the Indian Gaming Regulatory
Act or other federal, state, or tribal law or arrangement affecting
Indian lands (including, without limitation, a casino operating on the
assumption or under the view that no such authorization is required for
casino operation on Indian lands) and that (B) has gross annual gaming
revenue in excess of $1 million. The term includes the principal
headquarters and every domestic branch or place of business of the
casino.
* * * * *
(n) Person. An individual, a corporation, a partnership, a trust or
estate, a joint stock company, an association, a syndicate, joint
venture, or other unincorporated organization or group, an Indian Tribe
(as that term is defined in the Indian Gaming Regulatory Act), and all
entities cognizable as legal personalities.
* * * * *
(s) United States. The States of the United States, the District of
Columbia, the Indian lands (as that term is defined in the Indian
Gaming Regulatory Act), and the Territories and Insular Possessions of
the United States.
* * * * *
(v) Indian Gaming Regulatory Act. The Indian Gaming Regulatory Act
of 1988, codified at 25 U.S.C. 2701 et seq.
(w) State. The States of the United States and, wherever necessary
to carry out the provisions of this Part, the District of Columbia.
(x) Territories and Insular Possessions. The Commonwealth of Puerto
Rico, the United States Virgin Islands, Guam, the Commonwealth of the
Northern Mariana Islands, American Samoa, and all other territories and
possessions of the United States other than the Indian lands and the
District of Columbia.
Sec. 103.36 [Amended]
3. Section 103.36(b)(7) is amended by adding after the words
``state and local laws or regulations'' the words ``, regulations of
any governing Indian tribe or tribal government, or terms of (or any
regulations issued under) any Tribal-State compacts entered into
pursuant to the Indian Gaming Regulatory Act, with respect to the
casino in question''.
Dated: July 26, 1995.
Stanley E. Morris,
Director, Financial Crimes Enforcement Network.
[FR Doc. 95-19137 Filed 7-31-95; 3:30 pm]
BILLING CODE 4820-03-P