[Federal Register Volume 61, Number 37 (Friday, February 23, 1996)]
[Rules and Regulations]
[Pages 7054-7056]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-3888]




[[Page 7053]]

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Part II





Department of the Treasury





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31 CFR Part 103



Amendments to the Bank Secrecy Act; Regulations Regarding Tribal 
Gaming; Final Rule and application to Tribal Gaming; Final Rule and 
Application to Tribal Casinos; Notice

  Federal Register / Vol. 61, No. 37 / Friday, February 23, 1996 / 
Rules and Regulations   

[[Page 7054]]


DEPARTMENT OF THE TREASURY

31 CFR PART 103

RIN 1506-AAO7


Amendments to the Bank Secrecy Act; Regulations Regarding Tribal 
Gaming

AGENCY: Financial Crimes Enforcement Network, Treasury.

ACTION: Final rule.

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SUMMARY: The Financial Crimes Enforcement Network (``FinCEN'') is 
amending the regulations implementing the Bank Secrecy Act to include 
casinos operated by or on behalf of Indian tribes within the definition 
of financial institution set forth in those regulations. The amendments 
extend the reporting and recordkeeping requirements and anti-money 
laundering safeguards of the Bank Secrecy Act to tribal casinos.

EFFECTIVE DATE: The final rule is effective August 1, 1996.

FOR FURTHER INFORMATION CONTACT: Leonard C. Senia, Senior Financial 
Enforcement Officer, Office of Regulatory Policy and Enforcement, 
FinCEN, (703) 905-3931, or Joseph M. Myers, Attorney-Advisor, Office of 
Legal Counsel, FinCEN, (703) 905-3590.
SUPPLEMENTARY INFORMATION:
Background
    This final rule amends the regulations implementing 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. The final rule: (i) amends the definition of 
``casino'' in 31 CFR 103.11(n)(7)(i) to include explicitly casinos 
operating on Indian lands; (ii) amends the regulatory definitions of 
``person'' and ``United States'' in 31 CFR 103.11(z) and 103.11(nn), 
respectively; (iii) adds definitions of the terms ``Indian Gaming 
Regulatory Act,'' ``State,'' and ``Territories and Insular 
Possessions'' in 31 CFR 103.11(rr), 103.11(ss), and 103.11(tt), 
respectively; and (iv) makes a conforming change to the recordkeeping 
and retention requirements of 31 CFR 103.36(b)(7) to reflect the 
regulatory system contemplated by the Indian Gaming Regulatory Act 
(IGRA). The amendments reflect the terms of section 409 of the Money 
Laundering Suppression Act of 1994 (the ``MLSA''), Title IV of the 
Riegle Community Development and Regulatory Improvement Act of 1994, 
Pub. L. 103-325.
    FinCEN published a notice of proposed rulemaking (the ``Notice'') 
in the Federal Register on August 3, 1995 (60 FR 39665) proposing the 
amendments to the Bank Secrecy Act regulations that are the subject of 
this final rule. Only four comments were submitted in response to the 
Notice. These comments were submitted, respectively, by a staff 
attorney at the National Indian Gaming Commission, by the governments 
of two states within which tribal lands are located, and by one tribal 
casino.
    The only substantive change made to the rule is the postponement of 
the rule's effective date until August 1, 1996. FinCEN believes that 
the delayed effective date will provide tribes and tribal casino 
management companies with a reasonable amount of time to implement 
operating and staff training programs for Bank Secrecy Act compliance. 
In this connection, FinCEN is publishing in today's Federal Register a 
notice of a tribal casino Bank Secrecy Act compliance conference to be 
held in April of this year.
Explanation of Provisions
A. Definition of ``Casino''

    The definition of casino is amended to include explicitly casinos 
operating on Indian lands. Under this amendment, the term ``casino'' 
now includes any casino duly licensed or authorized to do business 
under the IGRA or other federal, state, or tribal law or arrangement 
affecting Indian lands.

    The general need for and appropriateness of treatment of casinos as 
financial institutions for purposes of the Bank Secrecy Act have been 
accepted since the mid-1980s. The Department of the Treasury has made 
clear the need to prevent casinos, which offer to their customers a 
variety of financial services such as deposit or credit accounts, check 
cashing and currency exchange services, from being used as a vehicle 
for money laundering. The potential risk of money laundering in casinos 
on Indian lands is not any less than the risk of money laundering in 
state-licensed casinos. Thus, this final rule makes casinos operating 
on Indian lands subject to the full set of reporting and recordkeeping 
provisions, and anti-money laundering safeguards, of the Bank Secrecy 
Act to which other casinos in the United States are subject.
    The amendments make it clear that the term ``casino'', as applied 
to tribal lands, includes not only tribal casinos created in conformity 
with IGRA. The term also includes casinos operating on Indian lands 
under a view that compliance with the Indian Gaming Regulatory Act is 
unnecessary or inconsistent with inherent tribal rights; such non-IGRA 
sanctioned tribal casinos are not exempted from the terms of the Bank 
Secrecy Act. In its comments, the State of California specifically 
noted its approval of this language in the amendments, and cited the 
fact that a significant number of casinos on Indian lands within its 
borders were operating Class III gaming without the tribal-state 
compact required by IGRA.
    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.
    Recognizing 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, the Notice specifically sought comment about whether any 
part of the Bank Secrecy Act applicable to casinos generally did not 
accurately reflect the way tribal casinos operate. Few comments were 
received on this issue; the comments that were received indicated that 
tribal casinos operate similarly to non-tribal casinos, and that both 
tribal and non-tribal casinos should be treated uniformly under the 
Bank Secrecy Act.
    The State of California commented that the term ``casino'' should 
be defined to include Indian gaming establishments engaging in bingo, 
lotteries, and pari-mutuel wagering. As outlined in the Notice, the 
retention at this time of the term ``casino,'' rather than substitution 
in 31 CFR 103.11(n)(7)(i) of the broader authorizing language of 31 
U.S.C. 5312(a)(2)(X), is intentional. The Department of the Treasury 
generally has sought to apply the Bank Secrecy Act to gaming 
establishments that provide both gaming and an array of financial 
services for their patrons. Activities such as bingo, lotteries, and 
pari-mutuel wagering, are not generally offered in casino-like settings 
and may create different problems for law enforcement, tax compliance, 
and anti-money laundering programs than do full-scale casino 
operations. Consequently, although the MLSA 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 intends at this 
time to concentrate on taking the initial step of extending the 
existing Bank Secrecy Act structure to true casino-like establishments 
operating on Indian 

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lands. (Of course, a full-scale casino that happens to offer, inter 
alia, pari-mutuel wagering, for example, is included within the 
definition of ``casino'' with respect to all of its gaming activities.)
    FinCEN also sought comment on how compliance by tribal casinos with 
the requirements of the Bank Secrecy Act could best be examined and 
enforced. Aside from a suggestion from the one tribal casino commenter 
that external auditors were best suited to examine for compliance with 
the Bank Secrecy Act, FinCEN received no other responses to this 
question. The Internal Revenue Service is generally responsible for 
auditing the Bank Secrecy Act compliance by casinos and has full 
authority to audit such compliance by tribal casinos.
    FinCEN also received comments seeking: (i) clarification of the 
terms ``gross annual gaming revenue'' and ``gaming day'' in the casino 
definition; (ii) an increase in the $1 million threshold in the 
definition of casino; and (iii) reconsideration of certain casino 
recordkeeping and verification rules withdrawn on March 12, 1993. 
Because the scope of these comments goes beyond the scope of the 
Notice, these comments are not addressed in this final rule.
    As outlined in the Notice, the uniform treatment of state-licensed 
and tribal casinos is a necessary prelude to the consideration of 
broader issues affecting the application of the BSA to the entire 
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 1), whether special rules should be formulated for 
small casinos, and how best to implement with respect to casinos the 
suspicious transaction reporting and anti-money laundering program 
rules authorized in the amendments made to the Bank Secrecy Act 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 by 
the Money Laundering Suppression Act.

    \1\ 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, could well be a casino under present law. 
If so, such a ``club'' would violate the Bank Secrecy Act now (that 
is, without the need for further regulatory changes) if it failed to 
report currency transactions in excess of $10,000, or allowed a 
customer to deposit funds in a player bank account without requiring 
customer identifying information.
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B. Conforming Changes in ``Meaning of Terms''

    Changes are made to the definition of ``person'' and ``United 
States'' in 31 CFR 103.11 (z) and (nn), and definitions of the terms 
``Indian Gaming Regulatory Act'', ``State'', and ``Territories and 
Insular Possessions'' are added to Sec. 103.11 as new paragraphs (rr), 
(ss), and (tt), respectively. These definitions are added as required 
corollaries to the new casino definition.

C. Additions to Record Maintenance Requirements

    Conforming language is added to 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. 
The new language recognizes that a casino on tribal lands will retain 
certain documents because tribal rules or tribal-state compacts, rather 
than state regulation, require their retention. The amendment simply 
conforms the recordkeeping and retention requirements to this fact.

D. Effective Date

    Compliance with the reporting and recordkeeping provisions, and 
anti-money laundering safeguards of the Bank Secrecy Act, will depend 
in large part on the operating and staff training programs put in place 
at tribal casinos. The amendments made by the final rule will become 
effective on August 1, 1996, to allow tribes and their management 
enterprises a reasonable amount of time to train their staff members 
and to establish programs designed to comply with the requirements of 
the Bank Secrecy Act. As noted above, FinCEN also is publishing in 
today's Federal Register a notice of a tribal casino compliance 
conference to be held in April of this year.

Special Analyses

    It has been determined that this final rule (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 final rule will have an annual effect on 
the economy of $100 million or more. Nor will it 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 final rule is neither 
inconsistent with, nor does it interfere with, actions taken or planned 
by other agencies. Finally, the final rule raises no novel legal or 
policy issues.
    Because this final rule affects only Indian gaming establishments 
with gross annual gaming revenues in excess of $1 million, it is hereby 
certified that this final rule is not likely to have a significant 
economic impact on a substantial number of small entities.

List of Subjects in 31 CFR Part 103

    Administrative practice and procedure, Authority delegations 
(Government agencies), Banks, banking, Currency, Foreign banking, 
Investigations, Law enforcement, Reporting and recordkeeping 
requirements, Taxes.

Adoption of Amendments to the Regulations

    For the reasons set forth above in the preamble, 31 CFR Part 103 is 
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: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5330.

    2. Section 103.11 as amended at 60 FR 228, 60 FR 44144, and 61 FR 
4331 effective April 1, 1996, is further amended by revising paragraphs 
(n)(7)(i), (z), and (nn), and adding paragraphs (rr), (ss), and (tt) to 
read as follows:


Sec. 103.11  Meaning of terms.

* * * * *
    (n) * * *
    (7)(i) Casino. A casino or gambling casino that: 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 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.
* * * * *
    (z) Person. An individual, a corporation, a partnership, a trust or 
estate, a joint stock company, an 

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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.
* * * * *
    (nn) 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.
* * * * *
    (rr) Indian Gaming Regulatory Act. The Indian Gaming Regulatory Act 
of 1988, codified at 25 U.S.C. 2701-2721 and 18 U.S.C. 1166-68.
    (ss) State. The States of the United States and, wherever necessary 
to carry out the provisions of this part, the District of Columbia.
    (tt) Territories and Insular Possessions. The Commonwealth of 
Puerto Rico, the United States Virgin Islands, Guam, the Commonwealth 
of the Northern Mariana Islands, 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: February 14, 1996.
Stanley E. Morris,
Director, Financial Crimes Enforcement Network.
[FR Doc. 96-3888 Filed 2-22-96; 8:45 am]
BILLING CODE 4820-03-P