[Federal Register Volume 63, Number 8 (Tuesday, January 13, 1998)]
[Rules and Regulations]
[Pages 1919-1924]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-743]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Financial Crimes Enforcement Network
31 CFR Part 103
RIN 1506-AA18
Amendments to the Bank Secrecy Act Regulations Regarding
Reporting and Recordkeeping by Card Clubs
AGENCY: Financial Crimes Enforcement Network, Treasury.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Financial Crimes Enforcement Network (``FinCEN'') is
amending the regulations implementing the statute generally referred to
as the Bank Secrecy Act to include certain gaming establishments,
commonly called ``card clubs,'' ``card rooms,'' ``gaming clubs,'' or
``gaming rooms'' within the definition of financial institution subject
to those regulations.
EFFECTIVE DATE: August 1, 1998.
FOR FURTHER INFORMATION CONTACT: Leonard C. Senia, Senior Financial
Enforcement Officer, Office of Program Development, Financial Crimes
Enforcement Network, (703) 905-3931, or Cynthia L. Clark, Acting Deputy
Legal Counsel, Financial Crimes Enforcement Network, (703) 905-3590.
SUPPLEMENTARY INFORMATION:
Introduction
This final rule (i) adds a definition of ``card club,'' in a new
paragraph (8) of 31 CFR 103.11(n), as a component of the definition of
``financial institution'' for purposes of the Bank Secrecy Act rules,
(ii) provides, by means of a new paragraph (7)(iii) in section
103.11(n), for treatment of card clubs generally in the same manner as
casinos under the Bank Secrecy Act, (iii) renumbers paragraphs (8) and
(9) of section 103.11(n) as paragraphs (9) and (10), respectively, and
(iv) adds a new paragraph (11), applicable only to card clubs, to 31
CFR 103.36(b), to require retention by card clubs of records of a
customer's currency transactions, and of records of all activity at
card club cages or similar facilities, maintained in the ordinary
course of a club's business. The changes reflect the authority
contained in 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.
In December 1996, FinCEN published a notice of proposed rulemaking
(the ``Notice'') in the Federal Register proposing the amendments to
the Bank Secrecy Act regulations that are the subject of this final
rule (61 FR 67260, December 20, 1996). One comment was received in
response to this Notice.1 Based on this response, the Notice
is being adopted as a final rule with only minor editorial changes, and
as explained below, a new effective date later than the date proposed
in the Notice.
---------------------------------------------------------------------------
\1\ The comment received was from a large card club and was
generally favorable to the changes proposed.
---------------------------------------------------------------------------
Background
The statute popularly known as the ``Bank Secrecy Act,'' Titles I
and II of 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 keep records and file reports that are determined to
have a high degree of usefulness in criminal, tax, and regulatory
matters, and to implement counter-money laundering programs and
compliance procedures. 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
[[Page 1920]]
been delegated to the Director of FinCEN.
The range of financial institutions to which the Bank Secrecy Act
applies is not limited to banks and other depository institutions. It
also includes securities brokers and dealers, money transmitters, and
the other non-bank businesses that offer customers one or more
financial services.2
---------------------------------------------------------------------------
\2\ FinCEN has proposed classifying money transmitters, retail
currency exchangers, check cashers, and issuers, sellers, and
certain redeemers of money orders, traveler's checks, and stored
value, as ``money services businesses'' for purposes of the Bank
Secrecy Act, subject to their own suspicious activity reporting and
special currency transaction reporting rules. See, 62 FR 27890, 62
FR 27900, and 62 FR 27909, May 21, 1997. Finalization of those rules
would require the renumbering of the definitional provisions in this
final rule.
---------------------------------------------------------------------------
State licensed gambling casinos were generally 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).3 Gambling casinos
authorized to do business under the Indian Gaming Regulatory Act became
subject to the Bank Secrecy Act on August 1, 1996. See 61 FR 7054-7056
(February 23, 1996). 4
---------------------------------------------------------------------------
\3\ Casinos with gross annual gaming revenue of $1 million or
less were, and continue to be, excluded from coverage.
\4\ Treasury has issued four sets of rules in all relating
specifically to the application of the Bank Secrecy Act to casino
gaming establishments. See, in addition to the two rules cited in
the text, 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)).
---------------------------------------------------------------------------
In recognition of the importance of application of the Bank Secrecy
Act to the gaming industry, 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.5 The statutory specification reads:
---------------------------------------------------------------------------
\5\ 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 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). Treasury has previously indicated that it is
in the process of rethinking the application of the Bank Secrecy Act to
gaming establishments. See 59 FR 61660-61662 (December 1, 1994) and 61
FR 7054, 7055 (February 23, 1996). This final rule is a step in that
process. 6
---------------------------------------------------------------------------
\6\ On August 18, 1997, a Paperwork Reduction Act Notice
appeared in the Federal Register soliciting comments concerning a
proposed Treasury Form TD F 90-22.49, Suspicious Activity Report by
Casinos (SARC). Pursuant to Nevada State Regulation 6A, this form
(in the version cited in the Notice) is being used, effective
October 1, 1997, to file with FinCEN reports of suspicious
transactions and activities that may occur by, at, or through a
Nevada casino. Treasury intends to issue a notice of proposed
rulemaking that will require all casinos or card clubs subject to
the requirements of the Bank Secrecy Act and its implementing
regulations (31 CFR Part 103) to report suspicious activity. Until a
final rule takes effect, casinos and card clubs in jurisdictions
other than Nevada are encouraged, but not yet required, to file the
SARC to report suspicious activity. (Treasury issued a notice of
proposed rulemaking on May 21, 1997 (62 FR 27900) that would require
money transmitters and issuers, sellers, and redeemers, of money
orders and traveler's checks, to report suspicious transactions
involving at least $500 in funds or other assets.)
---------------------------------------------------------------------------
Public Comment
FinCEN received one written comment on the proposed regulations.
The comment, which was generally favorable, addressed the following
areas: (1) footnote 11 in the preamble concerning future regulations
that would extend suspicious activity reporting to non-bank financial
institutions, (2) the questions for which FinCEN specifically invited
comment, and (3) FinCEN's estimate of the total annual recordkeeping
burden imposed by the proposed rule.
Footnote 11 in the preamble of the proposed regulations states that
Treasury intends to issue regulations to require classes of non-bank
financial institutions, including gaming establishments, to file
reports of suspicious transactions. The commenter recommended that the
future regulations include specific examples of instances when
suspicious activity reports would be required. FinCEN anticipates that
when it issues rules requiring casinos to file suspicious activity
reports, it will provide examples that may require reporting.
The preamble to the proposed regulations specifically invited
comment on (1) whether particular parts of the Bank Secrecy Act
regulations for casinos should not be applied to card clubs, (2) what
types of financial services other than gaming are offered by card
clubs, (3) whether special rules were needed for tribal card clubs, and
(4) how to examine and enforce tribal card clubs' compliance with the
Bank Secrecy Act.
The commenter addressed each of the four questions. The commenter
did not recommend that card clubs be exempted from any parts of the
Bank Secrecy Act regulations for casinos, but it did state that the
exclusion of card clubs with gross annual gaming revenue of $1 million
or less was appropriate. The commenter stated that its business
provided the following financial services in addition to provision of
gaming facilities and services: check cashing, cash advances, credit,
and safekeeping services to certain customers, and automated teller
machines operated by an outside commercial institution. The commenter
did not believe that special rules were needed for tribal card clubs,
and suggested that compliance with the rules would be enhanced by
measures that it used in its own business, such as internal auditors, a
compliance officer, controller supervision, and an annual compliance
audit performed by an outside expert.
The Notice estimated that the annual recordkeeping burden of the
regulations would be 686 hours. The commenter stated that its estimated
average time was higher (an estimated 4160 hours). FinCEN recognizes
that some businesses may have annual recordkeeping burdens that are
higher or lower than FinCEN's estimated annual burden because some
businesses may have a volume of transactions that is greater or less
than FinCEN's estimated average. Moreover, FinCEN's estimate builds on
the fact that the records required to comply with the regulations
generally are already prepared in the normal course of business and
reflects only the additional time required to retain the records. The
commenter's estimate appears, however, to reflect activities in
addition to record retention that a card club may become subject as a
result of being defined as a casino. FinCEN will do an inventory
correction for existing paperwork requirements to reflect the
additional results of including card clubs within the definition of
casinos.
Explanation of Provisions
A. Overview
The final regulations expand the range of gaming establishments to
which the Bank Secrecy Act applies to include card clubs. Generally
card clubs become subject to the same rules as casinos, unless a
specific provision of
[[Page 1921]]
the rules in 31 CFR Part 103 applicable to casinos explicitly requires
a different treatment or an additional requirement for card clubs.
B. Definition of Card Club
The definition of card club itself is added as a component of the
definition of ``financial institution'' in a new paragraph 31 CFR
103.11(n)(8).7 Under the amendment, the term includes, inter
alia, any establishment of the type commonly referred to as a ``card
club,'' ``card room,'' ``gaming club'' or ``gaming room,'' that is duly
licensed or authorized to do business either under state law, under the
laws of a particular political subdivision within a state, or under the
Indian Gaming Regulatory Act or other federal, state, or tribal law or
arrangement affecting Indian lands. Card clubs licensed by U.S.
territories or possessions also fall within the definition.
---------------------------------------------------------------------------
\7\ As indicated, no language in the financial institution
definition is being deleted; present paragraphs 103.11(n)(8) and
(n)(9) simply become paragraphs (n)(9) and (n)(10), respectively.
---------------------------------------------------------------------------
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 has made
clear 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.8
---------------------------------------------------------------------------
\8\ 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).
---------------------------------------------------------------------------
Although application of the Bank Secrecy Act to gaming
establishments has heretofore been limited to casinos, that limitation
is not a statutory one. As noted, the statutory definition of financial
institution includes any establishment licensed as a ``gaming
establishment,'' whether the licensing authority is a state, a
municipality or other state subdivision, or one of the licensing
authorities recognized by the Indian Gaming Regulatory Act. See 31
U.S.C. 5311(a)(2)(X) (quoted above).
Card clubs are a fast-growing segment of the gaming industry,
primarily in California. Although card club operations differ, the
establishments generally offer facilities for gaming by customers who
bet against one another, rather than against the establishment. Most
large card clubs run the games, but the clubs earn their revenue by
receiving a fee from customers (for example a per table charge) rather
than from, as in a classic casino, running games and effectively
``banking'' the games offered so that customers bet against the house.
While the scope of casinos and card club operations may have
differed in the past, they no longer necessarily do so. California and
some other states in which card clubs operate do not permit casino
gaming (or only permit such gaming in limited forms). But, for example,
customers at California card clubs wagered about $9.1 billion in 1996.
Against that background, there are two primary reasons that card clubs,
like other gaming establishments, require coverage under the Bank
Secrecy Act.
First, many card clubs, like casinos, now offer their customers a
wide range of financial services (a fact amply documented by the
commenter to the Notice). As it indicated when it proposed extension of
the Bank Secrecy Act to tribal casinos, 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. The fact that the
gaming at card clubs does not directly involve the wagering of house
monies in no way alters the fact that vast sums of currency and other
funds pass through such establishments, or the fact that card clubs are
coming to offer their customers corollary financial services to
facilitate the movement of funds.
Second, card clubs are at least as vulnerable as other gaming
establishments to use by money launderers and those seeking to commit
tax evasion or other financial crimes, both because of their size and
because those institutions lack many of the controls found at casinos.
Given their growth, their prevalence in the nation's most populous
state, and their potential for expansion, there is no basis for
distinguishing card clubs from casinos for purposes of the Bank Secrecy
Act.9
---------------------------------------------------------------------------
\9\ Federal and state law enforcement authorities have
expressed concern for several years about card clubs as venues for
criminal activity. See, e.g., Asian Organized Crime, Part I, S. Rep.
102-346, 101st Cong., 1st Sess. (1991); Asian Organized Crime: the
New International Criminal, S. Rep. 102-940, 101st Cong., 2nd. Sess.
(1992); Office of the Attorney General of California, ``Status of
Cardroom Gambling in California and the Proposed Gambling Control
Act'' (Public Document, February 1995); cf. Permanent Subcommittee
on Investigations, Senate Committee on Governmental Affairs,
Hearings: Asset Forfeiture Program--A Case Study of the Bicycle Club
Casino, 104th Cong., 2nd. Sess. (March 19, 1996).
---------------------------------------------------------------------------
There is also some indication that the line between card clubs and
casinos may be blurring in practice. Thus, FinCEN noted in the preamble
to the final rule extending the Bank Secrecy Act to tribal casinos
that:
[A]n 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.
61 FR 7055 note 1.
Given the growth of card clubs and their potential for offering a
venue for money launderers, the application of the Bank Secrecy Act to
such establishments should not depend on whether games are banked or
otherwise backed with house funds.10 Similarly,
[[Page 1922]]
the fact that some card clubs operating under the terms of the Indian
Gaming Regulatory Act, 25 U.S.C. 2701 et seq, may be Class II rather
than Class III establishments for purposes of the regulatory provisions
of that legislation (so that card clubs are subject to tribal
regulation rather than to regulation pursuant to state-tribal compact),
does not provide a relevant distinction for Bank Secrecy Act
purposes.11 (As was the case with tribal casinos, a card
club that operates on Indian lands under a view that compliance with
the Indian Gaming Regulatory Act is unnecessary or inconsistent with
inherent tribal rights is not for that reason exempted from the terms
of the Bank Secrecy Act, to the extent that those terms otherwise apply
to the card club's operations.)
---------------------------------------------------------------------------
\10\ Before the effective date of these amendments, the receipt
of cash in excess of $10,000 by card clubs in a single transaction
(or multiple related transactions) is required to be reported under
section 6050I of the Internal Revenue Code. The limited cash
transaction reporting rules of section 6050I (which apply to
currency received by all non-financial trades or businesses) are not
as extensive as the reporting rules of the Bank Secrecy Act (which
apply both to receipts and payments of currency) and are not matched
by recordkeeping, suspicious transaction reporting, and anti-money
laundering compliance program rules authorized under the Bank
Secrecy Act. As explained below in C. Treatment of Card Clubs Under
the Bank Secrecy Act, upon the effective date of these amendments,
section 6050I will continue to apply only to certain transactions at
card clubs.
\11\ The National Indian Gaming Commission has taken the
position that games banked by players, rather than the house, are
nonetheless ``banked card games'' whose operation is required to
occur in an authorized Class III facility. Thus it appears that some
percentage of card clubs or rooms on tribal lands will be, or will
be operated within, Class III facilities that generally became
subject to the Bank Secrecy Act on August 1, 1996. See National
Indian Gaming Commission Bulletin 95-1 (April 10, 1995). FinCEN
understands that certain Asian card games (whose rules employ a
betting formula in which a player does not offer to take on all
competitors), may be permitted to be offered in Class II facilities
for purposes of the Indian Gaming Regulatory Act.
---------------------------------------------------------------------------
Card clubs, like casinos, only become subject to the Bank Secrecy
Act once they generate more than $1 million in ``gross annual gaming
revenue.'' As applied to card clubs the term includes revenue derived
from or generated by customer gaming activity (whether in the form of
per-game or per-table fees, fees based on winnings, rentals, or
otherwise) and received by an establishment.
C. Treatment of Card Clubs Under the Bank Secrecy Act
Under the final regulations, card clubs are treated under the Bank
Secrecy Act in the same manner as casinos unless specific provisions of
the rules in 31 CFR Part 103 explicitly require a different treatment.
Thus, card clubs 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 anti-money laundering
safeguards'' 12) to which casinos in the United States are
subject.
---------------------------------------------------------------------------
\12\ See H.R. Rep. No. 652, 103rd Cong., 2nd Sess. 193 (1994).
---------------------------------------------------------------------------
Treatment of card clubs on a par with casinos generally imposes on
such clubs the Bank Secrecy Act rules that apply to casinos. Thus, each
card club 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 operations during any gaming day; aggregation of multiple
currency transactions is required in a number of situations. See 31 CFR
103.22(a)(2). The requirement applies to all receipts or disbursements
of currency in connection with gaming activities at the card club,
including, but not limited to, transfers of currency for chip purchases
or redemptions, exchanges of bills of one denomination for bills of
another denomination, exchanges of one currency for another currency,
transfers to or from player accounts or deposit facilities, payments or
advances on credit, wagers of currency or payments of currency to
settle wagers, and transfers intended for conversion to other forms of
negotiable instruments or for electronic funds transfer or transmittal
out of, or as a result of such transfer or transmittal into, the card
club.13
---------------------------------------------------------------------------
\13\ Legislation enacted in California adds gaming clubs to the
list of financial institutions in that state that are required to
report transactions in currency of more than $10,000 to the
California Department of Justice. See Assembly Bill 3183 (signed
September 28, 1996), amending Cal. Penal Code 14161. This reporting
requirement became effective on January 1, 1997. More recent
legislation in California provides for new state licensing and
regulation of the card room gambling industry in that state. This
new legislation will require card room owner licensees to report and
keep records of transactions, as determined by the Division of
Gambling Control of the California Department of Justice, involving
cash or credit, including filing with the Division reports similar
to those required by 31 U.S.C. 5313 and 31 CFR 103.22. See Senate
Bill 8, Gambling Control Act (signed October 11, 1997) amending Cal.
Bus. & Prof. Code 19800 et seq. and Cal. Penal Code 186.9 and 337j.
Most of these new requirements will become effective on January 1,
1998. It is anticipated that the California and Bank Secrecy Act
currency transaction reporting requirements will be coordinated (as
is done in other situations in which Bank Secrecy Act and state
reporting rules overlap) to reduce regulatory burden and costs of
compliance.
---------------------------------------------------------------------------
It is particularly important to understand that the requirements
apply regardless of where the transfers occur at the card club. Thus no
distinction is to be made between, for example, transactions at a cage,
cashier, or other central facility, and chip purchases or redemptions
from club runners or from dealers or other operators of specific games.
Each card club also is required, like a casino, to maintain, and to
retain, certain records relating to its operation, including records
identifying account holders (see 31 CFR 103.36(a)), records showing
transactions for or through each customer's account (see, generally, 31
CFR 103.36(b)), and records of transactions involving persons, accounts
or places outside the United States. See 31 CFR 103.36(b)(5). Records
of transactions of more than $3,000 involving checks or other monetary
instruments and records that are prepared or used by a card club to
monitor a customer's gaming activity are also among the types of
records that are required to be maintained. See 31 CFR 103.36 (b)(8)
and (b)(9). (A specific record retention requirement, applicable only
to card clubs, is discussed below.) Finally, card clubs are required to
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).
Card clubs within the scope of the final rule in any event remain
subject to the filing requirements of section 6050I of the Internal
Revenue Code, with respect to their gaming and financial services
operations, until the effective date of these amendments. See section
6050I (a) and (c) of the Internal Revenue Code, 26 U.S.C. 6050I (a) and
(c), and Treas. Reg. 1.6050I-1(d)(2). Section 6050I of the Code will
continue to apply to any non-gaming and non-financial services
operations (for example restaurant service), at card clubs that become
subject to the Bank Secrecy Act.
D. Additions to Record Retention Requirements
The final rule contains one new record retention requirement,
applicable only to card clubs. A new paragraph (11) of 31 CFR 103.36(b)
requires card clubs to retain, for five years, all currency transaction
logs, multiple currency transaction logs, and cage control logs that
the clubs maintain in their business operations. This is required to
assure an adequate basis for the audit of compliance or review of
compliance by card clubs with the Bank Secrecy Act; the restriction of
the requirement to card clubs reflects the absence for such clubs of a
state regulatory scheme under whose terms similar records would already
be required to be maintained.
E. Effective Date
The amendments made by the final rule will become effective on
August 1, 1998 to allow card clubs 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.
Paperwork Reduction Act
The collection of information contained in this final regulation
has been reviewed and approved by the Office of Management and Budget
in accordance with the requirements of the
[[Page 1923]]
Paperwork Reduction Act (44 U.S.C. 3507(d)) under control number 1506-
0063. An agency may not conduct or sponsor, and a person is not
required to respond to, a collection of information unless it displays
a valid control number assigned by the Office of Management and Budget.
The collection of information in this final regulation is in 31 CFR
103.36(b)(11). This information is required to comply with the Bank
Secrecy Act. This information will be used to assure an adequate basis
for the audit of compliance or review of compliance by card clubs with
the Bank Secrecy Act; the requirement for this information reflects the
absence for such clubs of a state regulatory scheme under whose terms
similar records would already be required to be maintained. The
collection of information is mandatory.
The likely recordkeepers are all card clubs conducting transactions
in currency at the cage or at the gaming tables with their customers
and creating records of such transactions in the ordinary course of
business. FinCEN understands that one of the largest card clubs in
California conducted a study in 1997 of currency transaction entries in
excess of $2,500 recorded in its currency transaction logs which
indicated that approximately 3,800 individual customer transactions
were recorded during a representative month. The card club is
responsible for approximately 20 percent of the IRS Form 8362 filings
submitted by all card clubs in California. By extrapolating these
figures to the entire card club industry, FinCEN estimates that
approximately 215,000 currency transactions in excess of $2,500,
occurring at the cage or at the gaming tables, would be recorded
annually.
Frequency: Each time a currency transaction is recorded at the cage
or at the gaming tables.
Estimated Number of Such Currency Transactions: 215,000.
Estimate of Total Annual Burden on Card Clubs: Recordkeeping burden
estimate = approximately 686 hours per year for record retention.
Estimate of Total Annual Cost to Card Clubs for Hour Burdens: Based
on $20 per hour, the total cost of compliance with the final
recordkeeping rule is estimated to be approximately $14,000.
Estimate of Total Other Burden Hours to Respondents: Approximately
19,000 hours per year.
Estimate of Total Other Annual Costs to Respondents: Based on $20
per hour, the total other annual costs to comply with other casino
recordkeeping, reporting and compliance program requirements is
estimated to be approximately $380,000.
Comments concerning the accuracy of this burden estimate and
suggestions for reducing this burden should be directed to the Office
of Management and Budget, Attention: Desk Officer for the Treasury
Department, Office of Information and Regulatory Affairs, Washington,
D.C., 20503.
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, it raises no novel legal or policy issues.
Regulatory Flexibility Act
FinCEN certifies that this regulation will not have a significant
economic impact on a substantial number of small entities. Under the
Internal Revenue Code, card clubs are already subject to requirements
regarding the receipt of cash from customers similar to those in this
regulation. Moreover, to the extent this regulation imposes
recordkeeping requirements, those requirements generally concern
information already found in routine business records.
Compliance With 5 U.S.C. 801
Prior to the date of publication of this document in the Federal
Register, FinCEN will have submitted to each House of the Congress and
to the Comptroller General the information required to be submitted or
made available with respect to this final rule by the provisions of 5
U.S.C. 801 (a)(1)(A) and (a)(1)(B).
List of Subjects in 31 CFR Part 103
Authority delegations (Government agencies), Banks, Banking,
Currency, Foreign Banking, Gambling, Investigations, Law enforcement,
Reporting and recordkeeping requirements, Taxes.
Amendments to the Regulations
Accordingly, 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 is amended by redesignating present paragraphs
(n)(8) and (n)(9) as paragraphs (n)(9) and (n)(10), respectively, and
by adding new paragraphs (n)(7)(iii) and (n)(8) to read as follows:
Sec. 103.11 Meaning of terms.
* * * * *
(n) * * *
(7) * * *
(iii) Any reference in this part, other than in this paragraph
(n)(7) and in paragraph (n)(8) of this section, to a casino shall also
include a reference to a card club, unless the provision in question
contains specific language varying its application to card clubs or
excluding card clubs from its application.
(8)(i) Card club. A card club, gaming club, card room, gaming room,
or similar gaming establishment that is duly licensed or authorized to
do business as such in the United States, whether under the laws of a
State, of a Territory or Insular Possession of the United States, or of
a political subdivision of any of the foregoing, or under the Indian
Gaming Regulatory Act or other federal, state, or tribal law or
arrangement affecting Indian lands (including, without limitation, an
establishment operating on the assumption or under the view that no
such authorization is required for operation on Indian lands for an
establishment of such type), and that has gross annual gaming revenue
in excess of $1,000,000. The term includes the principal headquarters
and every domestic branch or place of business of the establishment.
The term ``casino,'' as used in this Part shall include a reference to
``card club'' to the extent provided in paragraph (n)(7)(iii) of this
section.
(ii) For purposes of this paragraph (n)(8), gross annual gaming
revenue means the gross revenue derived from or generated by customer
gaming activity (whether in the form of per-game or per-table fees,
however computed, rentals, or otherwise) and received by an
establishment, during either the establishment's previous business year
or its current business year. A card club that is a financial
institution for purposes of this Part solely because its gross annual
revenue exceeds
[[Page 1924]]
$1,000,000 during its current business year, shall not be considered a
financial institution for purposes of this Part prior to the time in
its current business year when its gross annual revenue exceeds
$1,000,000.
3. Section 103.36 is amended by adding a new paragraph (b)(11) to
read as follows:
Sec. 103.36 Additional records to be made and retained by casinos.
* * * * *
(b) * * *
(11) In the case of card clubs only, records of all currency
transactions by customers, including without limitation, records in the
form of currency transaction logs and multiple currency transaction
logs, and records of all activity at cages or similar facilities,
including, without limitation, cage control logs.
* * * * *
Dated: January 7, 1998.
Stanley E. Morris,
Director, Financial Crimes Enforcement Network.
[FR Doc. 98-743 Filed 1-12-98; 8:45 am]
BILLING CODE 4820-03-P