[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