[Federal Register Volume 67, Number 187 (Thursday, September 26, 2002)]
[Rules and Regulations]
[Pages 60722-60730]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-24147]



[[Page 60721]]

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Part II





Department of the Treasury





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31 CFR Part 103



Financial Crimes Enforcement Network; Amendment to the Bank Secrecy Act 
Regulations--Requirement That Casinos and Card Clubs Report Suspicious 
Transactions; Final Rule and Notice

  Federal Register / Vol. 67, No. 187 / Thursday, September 26, 2002 / 
Rules and Regulations  

[[Page 60722]]


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DEPARTMENT OF THE TREASURY

31 CFR Part 103

RIN 1506-AA22


Financial Crimes Enforcement Network; Amendment to the Bank 
Secrecy Act Regulations--Requirement That Casinos and Card Clubs Report 
Suspicious Transactions

AGENCY: Financial Crimes Enforcement Network (FinCEN), Treasury.

ACTION: Final rule.

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SUMMARY: This document contains amendments to the regulations 
implementing the statute generally referred to as the Bank Secrecy Act. 
The amendments require casinos and card clubs to report suspicious 
transactions to the Department of the Treasury. Further, the amendments 
make certain changes to the requirement that casinos and card clubs 
maintain Bank Secrecy Act compliance programs. The amendments 
constitute a further step in the creation of a comprehensive system for 
the reporting of suspicious transactions by the major categories of 
financial institutions operating in the United States, as a part of the 
counter-money laundering program of the Department of the Treasury.

DATES: Effective Date: October 28, 2002.
    Applicability Date: For suspicious transaction reporting, the 
applicability date is March 25, 2003. See 31 CFR 103.21(g) of the final 
rule contained in this document.

FOR FURTHER INFORMATION CONTACT: Leonard C. Senia and Shelley Waxman, 
Senior Regulatory Compliance Program Specialists, Office of Compliance 
and Regulatory Enforcement, FinCEN, (202) 354-6400; and Judith R. 
Starr, Chief Counsel, and Christine L. Schuetz, Attorney-Advisor, 
Office of Chief Counsel, FinCEN, at (703) 905-3590.

SUPPLEMENTARY INFORMATION:

I. Statutory Provisions.

    The Bank Secrecy Act (``BSA''), Public Law 91-508, as amended, 
codified at 12 U.S.C. 1829b, 12 U.S.C. 1951-1959, and 31 U.S.C. 5311-
5332, 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, or in the conduct of 
intelligence or counter-intelligence activities to protect against 
international terrorism, and to implement counter-money laundering 
programs and compliance procedures.\1\ Regulations implementing Title 
II of the BSA (codified at 31 U.S.C. 5311 et seq.) appear at 31 CFR 
part 103. The authority of the Secretary to administer the BSA has been 
delegated to the Director of FinCEN.
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    \1\ Language expanding the scope of the BSA to intelligence or 
counter-intelligence activities to protect against international 
terrorism was added by section 358 of the Uniting and Strengthening 
America by Providing Appropriate Tools Required to Intercept and 
Obstruct Terrorism (USA PATRIOT ACT) Act of 2001 (the ``USA Patriot 
Act''), Public Law 107-56.
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    The Secretary of the Treasury was granted authority in 1992, with 
the enactment of 31 U.S.C. 5318(g),\2\ to require financial 
institutions to report suspicious transactions. As amended by the USA 
Patriot Act, subsection (g)(1) states generally:
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    \2\ 31 U.S.C. 5318(g) was added to the BSA by section 1517 of 
the Annunzio-Wylie Anti-Money Laundering Act (the ``Annunzio-Wylie 
Anti-Money Laundering Act''), Title XV of the Housing and Community 
Development Act of 1992, Public Law 102-550; it was expanded by 
section 403 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, Public 
Law 103-325, to require designation of a single government recipient 
for reports of suspicious transactions.

    The Secretary may require any financial institution, and any 
director, officer, employee, or agent of any financial institution, 
to report any suspicious transaction relevant to a possible 
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violation of law or regulation.

Subsection (g)(2)(A) provides further that

    If a financial institution or any director, officer, employee, 
or agent of any financial institution, voluntarily or pursuant to 
this section or any other authority, reports a suspicious 
transaction to a government agency--
    (i) The financial institution, director, officer, employee, or 
agent may not notify any person involved in the transaction that the 
transaction has been reported; and
    (ii) No officer or employee of the Federal Government or of any 
State, local, tribal, or territorial government within the United 
States, who has any knowledge that such report was made may disclose 
to any person involved in the transaction that the transaction has 
been reported, other than as necessary to fulfill the official 
duties of such officer or employee.

Subsection (g)(3)(A) provides that neither a financial institution, nor 
any director, officer, employee, or agent of any financial institution

    that makes a voluntary disclosure of any possible violation of 
law or regulation to a government agency or makes a disclosure 
pursuant to this subsection or any other authority * * * shall * * * 
be liable to any person under any law or regulation of the United 
States, any constitution, law, or regulation of any State or 
political subdivision of any State, or under any contract or other 
legally enforceable agreement (including any arbitration agreement), 
for such disclosure or for any failure to provide notice of such 
disclosure to the person who is the subject of such disclosure or 
any other person identified in the disclosure.

Finally, subsection (g)(4) requires the Secretary of the Treasury, ``to 
the extent practicable and appropriate,'' to designate ``a single 
officer or agency of the United States to whom such reports shall be 
made.'' \3\ The designated agency is in turn responsible for referring 
any report of a suspicious transaction to ``any appropriate law 
enforcement, supervisory agency, or United States intelligence agency 
for use in the conduct of intelligence or counterintelligence 
activities, including analysis, to protect against international 
terrorism.'' Id., at subsection (g)(4)(B).
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    \3\ This designation does not preclude the authority of 
supervisory agencies to require financial institutions to submit 
other reports to the same agency or another agency ``pursuant to any 
other applicable provision of law.'' 31 U.S.C. 5318(g)(4)(C).
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    The provisions of 31 U.S.C. 5318(h), also added to the BSA in 1992 
by section 1517 of the Annunzio-Wylie Anti-Money Laundering Act, 
authorize the Secretary of the Treasury ``[i]n order to guard against 
money laundering through financial institutions * * * [to] require 
financial institutions to carry out anti-money laundering programs.'' 
31 U.S.C. 5318(h)(1). Those programs may include ``the development of 
internal policies, procedures, and controls''; ``the designation of a 
compliance officer''; ``an ongoing employee training program''; and 
``an independent audit function to test programs.'' 31 U.S.C. 
5318(h)(A-D). In 1994, Treasury adopted a regulation requiring casinos 
to implement anti-money laundering programs in accordance with 31 
U.S.C. 5318(h).\4\
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    \4\ See 59 FR 61660 (December 1, 1994).
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    Section 352 of the USA Patriot Act amended section 5318(h) to 
mandate compliance programs for all financial institutions defined in 
31 U.S.C. 5312(a)(2). Section 352 of the USA Patriot Act became 
effective April 24, 2002. On April 29, 2002, Treasury issued an interim 
final rule providing that certain financial institutions, including 
casinos, would be deemed to be in compliance with 31 U.S.C. 5318(h) if 
they establish and maintain anti-money laundering programs as required 
by existing FinCEN regulations, or their respective federal regulator 
or self-regulatory organization.\5\ Therefore, a casino or a card club 
that implements

[[Page 60723]]

and maintains a compliance program as required by 31 CFR 103.64 will be 
deemed to be in compliance with the requirements of 31 U.S.C. 
5318(h)(1).
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    \5\ See 67 FR 21110 and 31 CFR 103.120(d).
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II. Application of the Bank Secrecy Act to Casinos and Card Clubs

    With this rule, the Department of the Treasury extends to casinos 
and card clubs the suspicious transaction reporting regime to which the 
nation's banks, thrift institutions, credit unions, broker-dealers, and 
certain money services businesses, including money transmitters and 
issuers, sellers, and redeemers of money orders and traveler's checks, 
are already subject. Banks, thrift institutions, and credit unions have 
been subject to the suspicious transaction reporting requirement since 
April 1, 1996.\6\ Money transmitters and issuers, sellers, and 
redeemers of money orders and traveler's checks were made subject to 
the suspicious transaction reporting requirement on March 14, 2000.\7\ 
On July 1, 2002, FinCEN published a final rule requiring broker-dealers 
to file reports of suspicious transactions beginning after December 30, 
2002.\8\
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    \6\ The suspicious transaction reporting rule for banks is found 
at 31 CFR 103.18. In collaboration with FinCEN, the federal bank 
supervisors (the Board of Governors of the Federal Reserve System 
(``Federal Reserve''), the Office of the Comptroller of the Currency 
(``OCC''), the Federal Deposit Insurance Corporation (``FDIC''), the 
Office of Thrift Supervision (``OTS''), and the National Credit 
Union Administration (``NCUA'')) concurrently issued suspicious 
transaction reporting rules under their own authority. See 12 CFR 
208.62 (Federal Reserve); 12 CFR 21.11 (OCC); 12 CFR 353.3 (FDIC); 
12 CFR 563.180 (OTS); and 12 CFR 748.1 (NCUA). The bank supervisory 
agency rules apply to banks, non-depository institution affiliates 
and subsidiaries of banks and bank holding companies, and bank 
holding companies.
    \7\ The suspicious transaction reporting rule for these money 
services businesses is found at 31 CFR 103.20.
    \8\ See 67 FR 44048. This rule can be found at 31 CFR 103.19.
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    State licensed gambling casinos were generally made subject to the 
BSA as of May 7, 1985, by regulation issued early that year. See 50 FR 
5065 (February 6, 1985).\9\ Special BSA regulations relating to casinos 
were issued in 1987, and amended in 1989 and (more significantly) in 
1994. See 52 FR 11443 (April 8, 1987), 54 FR 1165 (January 12, 1989), 
and 59 FR 61660 (December 1, 1994) (modifying and putting into final 
effect the rule originally published at 58 FR 13538 (March 12, 1993)). 
These actions reflect the continuing determination not only that 
casinos are vulnerable to manipulation by money launderers and tax 
evaders but, more generally, that gaming establishments 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.
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    \9\ Casinos whose gross annual gaming revenue do not exceed $1 
million were, and continue to be, excluded from Bank Secrecy Act 
coverage.
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    In recognition of the importance of the application of the BSA to 
the casino gaming industry, section 409 of the Money Laundering 
Suppression Act codified the application of the BSA to gaming 
activities by adding casinos and other gaming establishments to the 
list of financial institutions specified in the BSA itself. The 
statutory provision found at 31 U.S.C. 5312(a)(2)(X) reads:

    (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). 
* * *
    Gambling casinos authorized to do business under the Indian Gaming 
Regulatory Act became subject to the BSA on August 1, 1996, see 61 FR 
7054 (February 23, 1996), and the class of gaming establishments known 
as ``card clubs'' became subject to the BSA on August 1, 1998.\10\ See 
63 FR 1919 (January 13, 1998).
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    \10\ Generally card clubs are subject to the same rules as 
casinos, unless a specific provision of the rules are 31 CFR part 
103 applicable to casinos explicitly requires a different treatment 
for card clubs. As in the case of casinos, card clubs whose gross 
annual gaming revenue is $1 million or less are excluded from BSA 
coverage. See 31 CFR 103.11(n)(8).
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    Since May 1985, casinos located in Nevada have been exempt from 
certain BSA requirements pursuant to a memorandum of agreement between 
the Treasury Department and the State of Nevada on behalf of Nevada 
casinos under 31 CFR 103.45(c)(1) (subsequently renumbered as 
103.55).\11\ By its terms, the memorandum of agreement only exempts 
Nevada casinos from the BSA requirements applicable to casinos at the 
time it was signed, including currency transaction reporting and 
recordkeeping requirements. Therefore, casinos in Nevada must comply 
with the final rule published in this document.
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    \11\ 31 CFR 103.55(c)(1) provides that the Secretary of the 
Treasury may grant exemptions to casinos in any state ``whose 
regulatory system substantially meets the reporting and 
recordkeeping requirements of this part.''
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III. Importance of Suspicious Transaction Reporting in Treasury's 
Counter-Money Laundering Program

    The Congressional authorization of reporting of suspicious 
transactions recognizes two basic points that are central to Treasury's 
counter-money laundering and counter-financial crime programs. First, 
it is to financial institutions that money launderers must go, either 
initially, to conceal their illegal funds, or eventually, to recycle 
those funds back into the economy. Second, the employees and officers 
of those institutions are often more likely than government officials 
to have a sense as to which transactions appear to lack commercial 
justification (or in the case of gaming establishments, transactions 
that appear to lack a reasonable relationship to legitimate wagering 
activities) or that otherwise cannot be explained as constituting a 
legitimate use of the casino's financial services.
    The importance of extending suspicious transaction reporting to all 
relevant financial institutions, including non-bank financial 
institutions, relates to the concentrated scrutiny to which banks have 
been subject with respect to money laundering. This attention, combined 
with the cooperation that banks have given to law enforcement agencies 
and banking regulators to root out money laundering, have made it far 
more difficult than in the past to pass large amounts of cash directly 
into the nation's banks unnoticed. As it has become increasingly 
difficult to launder large amounts of cash through banks, criminals 
have turned to non-bank financial institutions, including casinos, in 
attempts to launder funds.\12\ Indeed, many non-banks have already 
recognized the increased pressure that money launderers have come to 
place upon their operations and the need for innovative programs of 
training and monitoring necessary to counter that pressure.
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    \12\ See., e.g., United States v. Vanhorn, 2002 U.S. App. LEXIS 
14277 (8th Cir. July 16, 2002) (defendant converted illegally-
derived money into cash at casino, then deposited it as gambling 
proceeds into investment account); United States v. Bockius, 228 
F.3d 305 (3rd Cir. 2000) (defendant laundered money by wiring funds 
to casino, losing some of the money gambling, and taking the 
remainder of the cash); United States v. Napoli, 179 F.3d (2nd Cir. 
1999) (sentencing of defendant convicted of money laundering by 
depositing funds derived from scheme to defraud cigarette importers 
into casino account, gambling a portion, then cashing the remainder 
out).
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    The National Money Laundering Strategy for 2002 (the ``2002

[[Page 60724]]

Strategy'') \13\ reaffirms Treasury's commitment, expressed in prior 
National Money Laundering Strategy reports, to extending to casinos the 
requirement to report suspicious transactions.\14\ As explained in the 
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National Money Laundering Strategy for 1999:

    \13\ The 2002 Strategy, published in August 2002, was the fourth 
in a series of five annual reports called for by the Money 
Laundering and Financial Crimes Strategy Act of 1998; Public Law 
105-310 (October 30, 1998), codified at 31 U.S.C. 5340 et seq. Each 
annual report is to be submitted to Congress by the President, 
working through the Secretary of the Treasury in consultation with 
the Attorney General.
    \14\ 2002 Strategy, at page 44 (``FinCEN anticipates issuing a 
final rule [requiring casinos to report suspicious transactions] by 
December 2002'').
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    The attention given to the prevention of money laundering 
through banks reflects the central role of banking institutions in 
the global payments system and the global economy. But non-bank 
financial institutions require attention as well. Money launderers 
will move their operations to institutions in which their chances of 
successful evasion of enforcement and regulatory efforts is the 
highest.\15\
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    \15\ 1999 Money Laundering Strategy, at 35-36.
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    The reporting of suspicious transactions is also recognized as 
essential to an effective counter-money laundering program in the 
international consensus on the prevention and detection of money 
laundering. One of the central recommendations of the Financial Action 
Task Force Against Money Laundering (``FATF'') is that:

    If financial institutions suspect that funds stem from a 
criminal activity, they should be required to report promptly their 
suspicions to the competent authorities.

Financial Action Task Force Annual Report (June 28, 1996),\16\ Annex 1 
(Recommendation 15). The recommendation applies equally to banks and 
non-banks.\17\
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    \16\ FATF is an inter-governmental body whose purpose is 
development and promotion of policies to combat money laundering. 
Originally created by the G-7 nations, its membership now includes 
Argentina, Australia, Austria, Belgium, Brazil, Canada, Denmark, 
Finland, France, Germany, Greece, Hong Kong, Iceland, Ireland, 
Italy, Japan, Luxembourg, Mexico, the Kingdom of the Netherlands, 
New Zealand, Norway, Portugal, Singapore, Spain, Sweden, 
Switzerland, Turkey, the United Kingdom, and the United States, as 
well as the European Commission and the Gulf Cooperation Council.
    \17\ This recommendation revises the original recommendation, 
issued in 1990, that required institutions to be either ``permitted 
or required'' to report. (Emphasis supplied.) The revised 
recommendation reflects the international consensus that a mandatory 
suspicious transaction reporting system is essential to an effective 
national counter-money laundering program and to the success of 
efforts of financial institutions themselves to prevent and detect 
the use of their services of facilities by money launderers and 
others engaged in financial crime.
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    Similarly, the European Community's Directive on Prevention of the 
Use of the Financial System for the Purpose of Money Laundering calls 
for member states to

ensure that credit and financial institutions and their directors 
and employees cooperate fully with the authorities responsible for 
combating money laundering * * * by [in part] informing those 
authorities, on their own initiative, of any fact which might be an 
indication of money laundering.

EC Directive, O.J. Eur. Comm. (No. L 166) 77 (1991), Article 6. Accord, 
the Model Regulations Concerning Laundering Offenses Connected to 
Illicit Drug Trafficking and Related Offenses of the Organization of 
American States, OEA/Ser. P. AG/Doc. 2916/92 rev. 1 (May 23, 1992), 
Article 13, section 2.\18\ All of these documents also recognize the 
importance of extending the counter-money laundering controls to ``non-
traditional'' financial institutions, not simply to banks, both to 
ensure fair competition in the marketplace and to recognize that non-
bank providers of financial services as well as depository 
institutions, are an attractive mechanism for, and are threatened by, 
money launderers. See, e.g., Financial Action Task Force Annual Report, 
supra, Annex 1 (Recommendation 8).
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    \18\ The Organization of American States (``OAS'') reporting 
requirement is linked to the provision of the Model Regulations that 
institutions ``shall pay special attention to all complex, unusual 
or large transactions, whether completed or not, and to all unusual 
patterns of transactions, and to insignificant but periodic 
transactions, which have no apparent economic or lawful purpose.'' 
OAS Model Regulation, Article 13, section 1.
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IV. Notice of Proposed Rulemaking

    The final rule contained in this document is based on the notice of 
proposed rulemaking published May 18, 1998 (the ``Notice'') (63 FR 
27230), and the Request for Additional Comments on the nature of the 
proposed reporting standard published March 29, 2002 (the ``Additional 
Request for Comments'') (67 FR 15138). The Notice proposed to require 
casinos \19\ to report suspicious transactions to the Department of the 
Treasury. The notice also proposed related changes to the provisions of 
31 CFR 103.54 (subsequently renumbered as 103.64) relating to casino 
compliance programs.
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    \19\ As used hereafter in this document, the phrase ``casino'' 
when used singly includes a reference both to casinos and to card 
clubs, as the latter term is defined in 31 CFR 103.11(n)(6), unless 
the context clearly indicates otherwise. See 31 CFR 
103.11(n)(5)(iii). 31 CFR 103.11(n)(5)(iii) and (n)(6) were added to 
the BSA regulations by final rule published at 63 FR 1919 (January 
13, 1998).
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    Subsequent to issuing the Notice, FinCEN held four public meetings 
to provide interested parties with the opportunity to present their 
views with respect to the potential effects of the Notice, as well as 
to provide FinCEN with additional information and feedback useful in 
preparing the final rule based on the Notice.\20\ FinCEN then made 
transcripts of these meetings available to requesting parties.
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    \20\ These public meetings were held in New Orleans, Louisiana, 
on July 14, 1998; Chicago, Illinois, on July 23, 1998; Scottsdale, 
Arizona, on August 6, 1998; and New York City, New York, on 
September 9, 1998.
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    The comment period for the Notice ended on September 15, 1998. 
FinCEN received a total of eighteen comment letters. Of these, 5 were 
submitted by casinos, 4 by casino trade associations, 4 by agencies 
representing state or tribal governments, 2 by casino consulting 
services, 1 by several members of the New Jersey Congressional 
delegation, 1 by an agency of the United States Government, and 1 by a 
law firm. The comment period for the Request for Additional Comments 
ended on May 28, 2002. FinCEN received a total of fourteen letters. Of 
these, 4 were submitted by casino trade associations, 3 by agencies 
representing state or tribal governments, 2 by casinos, 3 by members of 
the United States Congress, 1 by a card club, and 1 by a law firm 
representing several tribal governments.

V. Summary of Comments and Revisions

A. Introduction

    The format of the final rule is generally consistent with the 
format of the rule proposed in the Notice. The terms of the final rule, 
however, differ from the terms of the Notice in the following 
significant respects:
    [sbull] The dollar threshold for reporting suspicious transactions 
has been raised from $3,000 to $5,000;
    [sbull] A fourth category of reportable activity has been added to 
the rule, to clarify that all violations of law, other than those 
specifically exempted by the rule, are within the scope of required 
reporting;
    [sbull] An exception from reporting relating to robbery or burglary 
has been added to the rule;
    [sbull] The language requiring casinos annually to conduct 
independent testing of their compliance programs has been revised to 
permit casinos to determine the scope and frequency of such review 
based on an evaluation by the casino of money laundering risks posed by 
the casino's operations;
    [sbull] The language requiring casinos annually to prepare a 
statement relating to the effectiveness of the casino's internal 
controls and procedures has been deleted; and
    [sbull] The language requiring casinos to incorporate into their 
compliance

[[Page 60725]]

programs procedures for using all available information to determine 
the occurrence of suspicious transactions has been revised.

B. Comments on the Notice--Overview and General Issues

    Comments on the Notice concentrated on three matters: (i) The 
proposed $3,000 threshold for reporting suspicious transactions; (ii) 
the proposed reporting standard requiring casinos to report suspicious 
transactions when they have ``reason to suspect'' that a transaction 
requires reporting under the terms of the rule; and (iii) the meaning 
of the term ``suspicious'' in the context of gaming.
1. Dollar Threshold for Reporting
    FinCEN received several comments concerning the establishment of 
the proper dollar threshold for reporting suspicious transactions. The 
majority of commenters on this subject argued that the proposed $3,000 
threshold was too low and urged that it be raised to at least $5,000, 
the suspicious transaction reporting threshold applicable to banks. In 
response to these comments, the final rule increases the dollar 
threshold for reporting suspicious transactions to $5,000. Adoption of 
this reporting threshold is intended to reduce the burden of reporting 
while at the same time ensuring collection of reports of suspicious 
transactions that are significant for law enforcement purposes.
    FinCEN wishes to emphasize that the rule is not intended to require 
casinos mechanically to review every transaction that exceeds the 
reporting threshold. Rather, it is intended that casinos, like every 
type of financial institution to which the suspicious transaction 
reporting rules of 31 CFR part 103 apply, will evaluate customer 
activity and relationships for money laundering risks, and design a 
suspicious transaction monitoring program that is appropriate for the 
particular casino in light of such risks. In other words, it is 
expected that casinos will follow a risk-based approach in monitoring 
for suspicious transactions, and will report all detected suspicious 
transactions that involve $5,000 or more in funds or other assets. A 
well-implemented anti-money laundering compliance program should 
reinforce a casino's efforts in detecting suspicious activity. In 
addition, casinos are encouraged to report on a voluntary basis 
detected suspicious transactions that fall below the $5,000 reporting 
threshold, such as the submission by a customer of an identification 
document that the casino suspects is false or altered, in the course of 
a transaction that triggers an identification requirement under the 
Bank Secrecy Act or other law.
2. Standard for Reporting
    Paragraph (a)(2) requires reporting if a casino ``knows, suspects, 
or has reason to suspect'' that a transaction requires reporting under 
the rule.\21\ Commenters on the Notice and on the Request for 
Additional Comments raised several objections to inclusion in the rule 
of an objective reporting standard. First, commenters argued that the 
``fast-paced, entertainment-filled environment'' at casinos makes 
implementation of an objective reporting standard overly burdensome. 
Commenters asserted that, although the objective reporting standard may 
be appropriate in the context of the environment found at banks, 
casinos would find it difficult to discern whether a transaction is 
unusual for a particular customer or lacks a legitimate business 
purpose. Commenters also argued that, under an objective reporting 
standard, casinos would likely find it necessary to document their 
reasons for not filing a suspicious activity report with respect to a 
particular transaction that meets the reporting threshold, or even to 
report all transactions that exceed the reporting threshold, whether or 
not suspicious. Some commenters suggested adding language to the rule 
specifically discussing a casino's obligation to exercise due diligence 
in the detection and reporting of suspicious activities. One commenter 
argued however, that even adding specific due diligence language to the 
text of the rule would not protect casinos from after the fact second-
guessing by examiners.
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    \21\ Because the standard requires reporting when a financial 
institution has ``reason to suspect'' that a transaction is 
suspicious, the standard is referred to in the comments and in this 
document as an ``objective reporting standard.''
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    FinCEN has determined that the ``has reason to suspect'' language, 
which is contained in all of the existing BSA suspicious transaction 
reporting rules, including those for depository institutions, broker-
dealers, and certain money services businesses, should be retained 
because it is necessary to the imposition of a due diligence 
requirement on reporting entities. This does not mean, however, that 
casinos will be subjected to unfair second-guessing of their efforts in 
detecting and reporting suspicious activity. Rather, the standard 
incorporates well-recognized and objective due diligence concepts. As 
FinCEN explained in the Additional Request for Comments, the ``reason 
to suspect'' standard means that, on the facts existing at the time, a 
reasonable casino in similar circumstances would have suspected the 
transaction was subject to suspicious transaction reporting. This is a 
flexible standard that recognizes the variation in operating realities 
within a casino (for example, the differences between a casino cage and 
the gaming floor), among various types of casinos, and among various 
types of financial institutions generally. This reporting standard is 
complementary to language found in the requirement that casinos 
implement BSA compliance programs. Under 31 CFR 103.64, casinos are 
required to develop and implement a program ``reasonably designed to 
assure and monitor compliance'' with the requirements of the BSA, 
including the requirement to report suspicious transactions under the 
final rule. (Emphasis supplied.) For all of these reasons, FinCEN 
believes that it is appropriate to require all financial institutions 
to which suspicious activity reporting rules under the BSA have been 
extended to meet the ``has reason to suspect'' standard.
3. Meaning of ``Suspicious'' in the Context of Gaming Activity
    Several commenters argued that the term ``suspicious'' is vague, 
and suggested that further definition of the term is necessary in order 
to help casinos identify those transactions that should be reported 
under the rule, and to avoid liability for failure to file a report in 
situations in which it is unclear whether a report is warranted. 
Commenters expressed concern that, if a specific definition for the 
term ``suspicious'' is not added to the rule, casinos will risk 
penalties in situations in which casinos and examiners disagree about 
what type of activity should be deemed suspicious.
    FinCEN believes that to craft a more specific definition of the 
term ``suspicious'' would result in a rigid, automatic approach to 
suspicious transaction reporting. As noted above, a critical aspect of 
suspicious transaction reporting is that it enables law enforcement to 
benefit from the expertise of financial institution employees and 
officers in judging which transactions are suspicious in the context of 
the particular financial services offered by the financial institution. 
Each casino must be able to recognize the sorts of transactions that 
may require additional scrutiny and at the same time understand that 
not all such transactions are reportable if a reasonable explanation 
for the circumstances of a particular transaction arises upon such 
examination. It is a

[[Page 60726]]

common characteristic of money launderers that they seek to do for 
illegitimate purposes what others do for legitimate purposes. Thus, the 
rule does not contain a specific definition of ``suspicious'' or a list 
of potentially suspicious transactions. However, FinCEN intends, when 
appropriate, to provide guidance to assist the casino industry in 
identifying transactions that may be indicative of illegal activity. 
For example, in August 2000, FinCEN published a guidance document (a 
``SAR Bulletin'') based on a review of suspicious activity reports 
filed by casinos, indicating the use of wire transfers and cashier's 
checks to deposit funds into casino accounts, used for little or no 
gaming activity, and then cashed out. Such guidance materials will be 
made available on FinCEN's Web site, www.treas.gov/fincen.
    Several commenters criticized the guidance document that FinCEN 
published in July 1998 entitled ``Suspicious Activity Reporting and 
Casinos,'' which provided examples of potentially suspicious casino 
transactions and was intended to be illustrative only. Addressing that 
guidance document is beyond the scope of this rulemaking. However, 
FinCEN intends to provide revised and updated guidance with input from 
law enforcement, regulators, and the casino industry to ensure that the 
guidance provided is timely, relevant, and useful.

VI. Section-by-Section Analysis

A. 103.11(ii)--Transaction

    The final rule amends the definition of ``transaction'' in the BSA 
regulations, 31 CFR 103.11(ii), explicitly to include the purchase or 
redemption of casino chips or tokens, or other gaming instruments. This 
change is designed to clarify that the definition applies to 
transactions relating to gaming activity.

B. 103.21(a)--General

    Paragraph 103.21(a)(1) generally sets forth the requirement that 
casinos report suspicious transactions to the Department of the 
Treasury. The paragraph also permits, but does not require, a casino 
voluntarily to file a suspicious transaction report in situations in 
which mandatory reporting is not required. The rule itself does not 
contain a separate reference to card clubs, given that, as noted above, 
31 CFR 103.11(n)(5)(iii) generally provides that ``[a]ny reference in 
[31 CFR part 103] * * * 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.'' The final rule only applies to entities that fall within 
the definitions of ``casino'' \22\ and ``card club'' \23\ found in 31 
CFR part 103. It should be noted that each definition contains a gross 
annual gaming revenue threshold of $1,000,000.
---------------------------------------------------------------------------

    \22\ See 31 CFR 103.11(n)(5)(i)
    \23\ See 31 CFR 103.11(n)(6)(i)
---------------------------------------------------------------------------

    Paragraph (a)(2) provides that a transaction requires reporting 
under the rule if it is conducted or attempted by, at, or through a 
casino, involves or aggregates at least $5,000 in funds or other 
assets, and the casino knows, suspects, or has reason to suspect that 
the transaction falls within one of four categories of transactions. 
Thus, transactions require reporting under the final rule whether or 
not they involve currency. This is the approach that FinCEN has taken 
with respect to all BSA suspicious transaction reporting rules.
    1. Dollar Threshold for Reporting. The final rule requires 
reporting of suspicious transactions that involve or aggregate at least 
$5,000. Several commenters suggested eliminating the requirement to 
file a suspicious transaction report on related suspicious transactions 
that, when aggregated, total at least $5,000. Commenters argued that to 
require casinos to aggregate transactions would be overly burdensome. 
However, the intent of the rule is to capture both individual 
suspicious transactions that meet the reporting threshold, as well as 
multiple transactions detected by a casino that are related (either 
because they were conducted by the same person, or because they were 
conducted by individuals working together) that, when combined, reach 
the $5,000 reporting threshold. To enable criminals to evade reporting 
simply by breaking up suspicious transactions would significantly 
weaken the rule's effect. A casino's compliance system should be 
designed to capture suspicious activity in the aggregate.
    2. Reporting Standard. Paragraph (a)(2) requires reporting if a 
casino ``knows, suspects, or has reason to suspect'' that a transaction 
requires reporting under the rule. As explained above, this reporting 
standard incorporates a concept of due diligence into the reporting 
requirement.
    3. Scope of Reporting. Paragraph (a)(2) contains four categories of 
reportable transactions. The first three reporting categories are 
identical to those contained in the Notice. The first category, 
described in paragraph (a)(2)(i), includes transactions involving funds 
derived from illegal activity or intended or conducted to hide or 
disguise funds or assets derived from illegal activity. The second 
category, described in paragraph (a)(2)(ii), involves transactions 
designed, whether through structuring or other means, to evade the 
requirements of the BSA. The third category, described in paragraph 
(a)(2)(iii), involves transactions that appear to serve no business or 
apparent lawful purpose or are not the sort of transactions in which 
the particular customer would be expected to engage, and for which the 
casino knows of no reasonable explanation after examining the available 
facts. A number of commenters opposed the reporting of transactions 
that could not definitively be linked to wrongdoing. Commenters argued 
that customers in a casino cannot be relied upon to act in ways 
consistent with any particular norm of financial transaction, but may 
be motivated by, for example, gambling superstitions. However, FinCEN 
believes that a suspicious transaction reporting rule must include a 
requirement for the reporting of transactions that vary so 
substantially from normal practice that they legitimately can and 
should raise suspicions of possible illegality in the mind of a 
reasonable casino employee. Unlike many criminal acts, money laundering 
involves the taking of apparently lawful steps for an unlawful purpose. 
A skillful money launderer will often split the movement of funds 
between several institutions so that no one institution can have a 
complete picture of the transactions or funds movement involved. Thus, 
the reporting of transactions that are unusual for a gaming customer 
generally, or for a particular customer, is an important element of 
suspicious transaction reporting.
    Commenters also urged FinCEN to remove the language in the rule 
requiring casinos to report transactions that have ``no business or 
apparent lawful purpose'' (emphasis added). Commenters argued that many 
casino patrons do not have a business purpose for the transactions they 
conduct at casinos; rather, casino customers conduct transactions for 
entertainment/gaming purposes and for this reason, such language is 
inappropriate for a suspicious transaction reporting rule applicable to 
casinos. This suggestion has not been adopted. Casinos do conduct many 
types of transactions that resemble those conducted at traditional 
financial institutions. For example, a customer at a casino cage can 
initiate or receive funds transfers, open and settle deposit and credit 
accounts, and

[[Page 60727]]

purchase and cash checks. Moreover, the simple fact that a customer is 
not motivated by a business purpose in conducting a transaction that is 
otherwise not suspicious would not trigger the requirement to report 
under the rule.
    The final rule contains a fourth reporting category, described in 
paragraph (a)(2)(iv), involving the use of the casino to facilitate 
criminal activity.\24\ The addition of a fourth category of reportable 
transactions to the rule is intended to ensure that transactions 
involving legally-derived funds that the casino suspects are being used 
for a criminal purpose, such as terrorist financing, are reported under 
the rule. The addition of this reporting category is not intended to 
effect a substantive change in the rule. Such transactions should be 
reported under the broad language contained in the third reporting 
category, requiring the reporting of transactions with ``no business or 
apparent lawful purpose.'' FinCEN believes that this broad language 
should be interpreted to require the reporting of transactions that 
appear linked to any form of criminal activity. Nevertheless, the 
fourth category has been added to make explicit that transactions being 
carried out for the purpose of conducting illegal activities, whether 
or not funded from illegal activities, must be reported under the rule. 
It should be noted that, in determining whether transactions are 
required to be reported under the third or fourth reporting categories 
of the rule, casinos are not expected to have expert knowledge of what 
constitutes a violation of each state or federal criminal law. Rather, 
it is intended that casinos will report transactions that appear, for 
whatever reason, to be conducted for an unlawful purpose.
---------------------------------------------------------------------------

    \24\ Although the fourth reporting category does not appear in 
FinCEN's suspicious activity reporting rules for banks and money 
services businesses, identical language appears in FinCEN's 
suspicious activity reporting rule for broker-dealers found at 31 
CFR 103.19, while similar language appears in the banking regulatory 
agencies' suspicous transaction reporting rules for depository 
institutions promlugated under Title 12.
---------------------------------------------------------------------------

    Several commenters indicated that the rule seems to require casinos 
to deem each transaction as suspicious until proven otherwise, and to 
retain documentation describing why the casino has determined that each 
transaction exceeding the reporting threshold for which a suspicious 
transaction report has not been filed is not suspicious. However, the 
rule does not require this level of review and documentation. Rather, 
as explained above, casinos are expected to evaluate customer activity 
in light of the casino's relationship with the customer, and knowledge 
of customer activity in general. This is emphasized by the compliance 
program requirement for casinos found at 31 CFR 103.64, which requires 
casinos to develop and implement a written program ``reasonably 
designed to assure and monitor compliance with'' the BSA and its 
implementing regulations. (Emphasis added.)

C. 103.21(b)--Filing Procedures

    Paragraph (b) continues to set forth the filing procedures to be 
followed by casinos making reports of suspicious transactions. Within 
30 days after a casino becomes aware of a suspicious transaction, the 
casino must report the transaction by completing a Form TD F 90-22.49, 
Suspicious Activity Reporting by Casinos (``SARC'') and filing it in a 
central location, to be determined by FinCEN. Special provision is made 
for situations requiring immediate attention (e.g., where delay in 
reporting might hinder law enforcement's ability to fully investigate 
the activity), in which case casinos are immediately to notify, by 
telephone, the appropriate law enforcement authority in addition to 
filing a SARC. In addition, casinos may wish to contact FinCEN's 
Financial Institutions Hotline (1-866-556-3974), for use by financial 
institutions wishing voluntarily to report to law enforcement 
suspicious transactions that may relate to terrorist activity. Casinos 
reporting suspicious activity by calling the Financial Institutions 
Hotline must still file a timely SARC to the extent required by the 
final rule. Published for comment elsewhere in this issue of the 
Federal Register is a revised SARC designed for use by the casino 
industry as a whole, and incorporating the terms of the final rule.
    If a casino is unable to identify a suspect on the date the 
suspicious transaction is initially detected, the rule provides the 
casino with an additional 30 calendar days to identify the suspect 
before filing a SARC, but the suspicious transaction must be reported 
within 60 calendar days after the date of initial detection of the 
suspicious transaction, whether or not the casino is able to identify a 
suspect. Commenters requested clarification on the extent to which a 
casino must attempt to obtain customer identification for purposes of 
completing a SARC. Commenters argued that casinos often deal with 
customers with whom they are not familiar. The final rule does not 
require a casino to alter its relationship with its customers in a way 
that is inconsistent with industry practice. As a result, FinCEN 
anticipates receiving a certain number of SARCs that do not contain 
detailed customer identifying information. However, casinos must ensure 
that their BSA compliance programs include procedures for using all 
available information to determine and verify a customer's 
identification for purposes of satisfying a casino's reporting and 
recordkeeping requirements under the BSA.\25\
---------------------------------------------------------------------------

    \25\ See 31 CFR 103.64(a)(2)(v)(A).
---------------------------------------------------------------------------

D. 103.21(c)--Exceptions

    In response to comments, paragraph (c) provides that a casino is 
not required to report under the final rule a robbery or burglary that 
the casino reports to an appropriate law enforcement authority.

E.103.21(d)--Retention of Records

    Paragraph (d) continues to provide that casinos must maintain 
copies of the SARCs they file and the original related documentation 
(or business record equivalent) for a period of five years from the 
date of filing. Supporting documentation is to be made available to 
FinCEN, and any other appropriate law enforcement agencies, or federal, 
state, local, or tribal gaming regulators, upon request.

F.103.21(e)--Confidentiality of Reports; Limitation of Liability

    Paragraph (e) continues to incorporate the terms of 31 U.S.C. 
5318(g)(2) and (g)(3). Thus, this paragraph specifically prohibits 
persons filing reports in compliance with the final rule (or voluntary 
reports of suspicious transactions) from disclosing, except to 
appropriate law enforcement and regulatory agencies, that a report has 
been prepared or filed. The paragraph also restates the broad 
protection from liability for making reports of suspicious transactions 
(whether such reports are required by the final rule or made 
voluntarily), and for failure to disclose the fact of such reporting, 
contained in the statute as amended by the USA Patriot Act. The 
regulatory provisions do not extend the scope of either the statutory 
prohibition or the statutory protection; however, because FinCEN 
recognizes the importance of these statutory provisions in the overall 
effort to encourage meaningful reports of suspicious transactions and 
to protect the legitimate privacy expectations of those who may be 
named in such reports, they are repeated in the rule to remind 
compliance officers and others of their existence.

[[Page 60728]]

G. Compliance

    Paragraph (f) continues to note that compliance with the obligation 
to report suspicious transactions will be audited, and provides that 
failure to comply with the rule may constitute a violation of the BSA 
and the BSA regulations, which may subject non-complying casinos to an 
enforcement action under the BSA.

H. 103.21(g)--Effective Date

    Paragraph (g) provides a 180-day period before which compliance 
with the suspicious transaction reporting rule will become mandatory.

I. 103.64--Related Changes to Casino Compliance Program Requirements

    General. As noted above, the suspicious transaction reporting rule 
is complemented by the compliance program requirement for casinos found 
at 31 CFR 103.64. (This requirement previously appeared at 31 CFR 
103.54.) Prior to enactment of section 352 of the USA Patriot Act 
requiring all financial institutions to develop and implement anti-
money laundering compliance programs, only casinos had been subject to 
a compliance program requirement under Title 31 of the United States 
Code. However, in response to the mandate of the USA Patriot Act, 
FinCEN has begun promulgating compliance program requirements for 
additional financial institutions, including money services businesses, 
mutual funds, and operators of credit card systems.\26\ Thus, FinCEN 
has determined to revise the proposed changes to the casino compliance 
program requirement contained in the Notice in a manner consistent with 
the compliance program requirements promulgated under the USA Patriot 
Act.
---------------------------------------------------------------------------

    \26\ See 67 FR 21114, 21117, and 21121 (April 29, 2002).
---------------------------------------------------------------------------

    a. Testing for compliance. 31 CFR 103.64(a)(2)(ii) requires that 
casino compliance programs include ``[i]nternal and/or external 
independent testing for compliance.'' The Notice proposed modifying the 
requirement so that the necessary testing (i) would be required to 
occur at least annually, and (ii) would include a specific 
determination whether programs at the casino are working effectively to 
ensure that suspicious transactions, and currency transactions of more 
than $10,000, are detected and reported, and the casino is able 
properly to comply with recordkeeping and compliance program standards. 
However, 31 U.S.C. 5318(h) as amended by section 352 of the USA Patriot 
Act does not specify the frequency with which the required independent 
testing must be conducted, and in promulgating compliance program 
requirements pursuant to the USA Patriot Act, FinCEN has not required 
annual testing. Rather, the recently published anti-money laundering 
compliance program requirements for money services businesses and 
operators of credit card systems provide that the scope and frequency 
of testing must be commensurate with the risks posed by the products 
and services offered by the financial institutions to which they apply, 
and the manner in which such products and services are offered. FinCEN 
has determined that casinos too should be permitted to conduct their 
own risk-based analyses to determine the scope and frequency with which 
the independent testing required under the rule must take place. 
Therefore, the final rule provides that the scope and frequency of 
review of a casino's compliance program ``shall be commensurate with 
the money laundering and terrorist financing risks posed by the 
products and services provided by the casino.''
    b. Occurrence or patterns of suspicious transactions. 31 CFR 
103.64(a)(2)(v)(B) requires casinos to maintain procedures to determine 
``[w]hen required by [31 CFR part 103] the occurrence of unusual or 
suspicious transactions.'' The Notice proposed revising the rule to 
make clear that the necessary procedures extend to analysis not only of 
customer accounts but also of the casino's own records derived from or 
used to record, track, or monitor casino activity. However, some 
commenters expressed concern that the proposed language would require a 
casino to screen retrospectively all transactions in order to monitor 
for suspicious activity. Given that the rule already requires casinos 
to implement ``procedures for using all available information'' to 
determine customer identification, the occurrence of suspicious 
transactions, and whether a record must be made and retained, and that 
casinos that have automated data processing systems must use them to 
aid in assuring compliance, the final rule does not adopt the language 
contained in the Notice. Instead, the provision has been revised to 
reflect implementation of the final rule requiring casinos to report 
suspicious transactions.

VII. Executive Order 12866

    The Department of the Treasury has determined that this rulemaking 
is not a significant regulatory action under Executive Order 12866.

VIII. Regulatory Flexibility Act

    FinCEN certifies that this regulation will not have a significant 
economic impact on a substantial number of small entities. The BSA 
authorizes Treasury to require financial institutions to report 
suspicious activities. 31 U.S.C. 5313(g). However, the BSA excludes 
casinos or gaming establishments with annual gaming revenue not 
exceeding $1 million from the definition of ``financial institution.'' 
31 U.S.C. 5312(a)(2)(X). Thus, certain small casinos and card clubs are 
excluded by statute from the operation of the final rule. Other 
casinos, namely those in Colorado and South Dakota, are subject to 
state law limitations on the size of wagers that may be made at those 
casinos. In casinos such as these, the burden to establish procedures 
to detect suspicious activity should be substantially reduced since the 
low dollar amount of the limits makes it unlikely that customers would 
engage in transactions at these casinos large enough to trigger a 
reporting requirement under the final rule.
    As to the remaining casinos and card clubs, many of the 
requirements of the final regulation may be satisfied, in large part, 
using existing business practices and records. For example, many 
casinos already obtain a great deal of data about their customers from 
information routinely collected from casino established deposit, 
credit, check cashing, and player rating accounts. This existing data 
can assist casinos in making decisions about whether a transaction is 
suspicious. Many casinos also already have policies and procedures in 
place and have trained personnel to detect unusual or suspicious 
transactions, as part of their own risk prevention programs. In 
addition, it is common in the casino industry to perform annual, and in 
some cases quarterly, testing of compliance programs. Further, a number 
of casinos have already begun voluntarily reporting suspicious 
transactions to Treasury.
    In drafting the rule, FinCEN carefully considered the importance of 
suspicious transaction reporting to the administration of the BSA. 
Congress considers suspicious transaction reporting a ``key ingredient 
in the anti-money laundering effort.'' \27\ Moreover, the legislative 
history of the BSA demonstrates that money launderers will shift their 
activities away from more regulated to less regulated

[[Page 60729]]

financial institutions.\28\ Finally, there is no alternative mechanism 
for the government to obtain this information other than by requiring 
casinos and card clubs to set up procedures to detect and report 
suspicious activity.
---------------------------------------------------------------------------

    \27\ H.R. Rep. No. 438, 103d Cong., 2d Sess. 15 (1994).
    \28\ ``It is indisputable that as banks have been more active in 
prevention and detection on money laundering, money launderers have 
turned in droves to the financial services offered by a variety of 
[non-bank financial institutions].'' Id., at 19.
---------------------------------------------------------------------------

IX. Paperwork Reduction Act Notice

    The collection of information contained in this final regulation 
has been approved by the Office of Management and Budget (``OMB'') in 
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) 
under control number 1506-0006. 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 OMB.
    The collection of information in this final rule is in 31 CFR 
103.21(b)(3) and (d). This information is required to be provided 
pursuant to 31 U.S.C. 5318(g) and 31 CFR 103.21. This information will 
be used by law enforcement agencies in the enforcement of criminal and 
regulatory laws. The collection of information is mandatory. The likely 
recordkeepers are businesses.
    The estimated average recordkeeping burden associated with the 
collection of information in this final rule is four hours per 
recordkeeper. The estimated average recordkeeping burden contained in 
the Notice was three hours. FinCEN received some comments during the 
comment period requesting that the burden estimate should better 
reflect the amount of time involved in analyzing whether transactions 
require reporting under the rule. Although, to a certain extent, such 
comments were based on a misunderstanding of the requirements of the 
rule that FinCEN subsequently clarified through publication of Request 
for Additional Comments, the burden estimate has been revised to 
address commenters' concerns. The burden estimate relates to the 
recordkeeping requirement contained in the final rule. The reporting 
burden of 31 CFR 103.21 will be reflected in the burden of the SARC 
form. FinCEN anticipates that the final rule will result in an annual 
filing of a total of 3000 SARCs. This result is an estimate, based on a 
projection of the size and volume of the industry.
    Comments concerning the accuracy of this burden estimate should be 
directed to the Financial Crimes Enforcement Network, Department of the 
Treasury, Post Office Box 39, Vienna, VA 22183, and to the Office of 
Management and Budget, Attn: Joseph F. Lackey, Jr., Office of 
Information and Regulatory Affairs, Office of Management and Budget, 
New Executive Office Building, Room 3208, Washington, DC 20503.

List of Subjects in 31 CFR Part 103

    Authority delegations (Government agencies), Banks, Banking, 
Currency, Investigations, Law enforcement, Reporting and recordkeeping 
requirements.

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. 5311-5332; 
title III, secs. 314, 352, Pub. L. 107-56, 115 Stat. 307.


    2. Amend Sec.  103.11 as follows:
    a. The first sentence of paragraph (n)(5)(ii) is amended by 
removing ``(i)(7)'' adding ``(n)(5)'' in its place.
    b. In paragraph (n)(5)(iii), the references ``(n)(7)'' and 
``(n)(8)'' are revised to read ``(n)(5)'' and ``(n)(6)'' respectively.
    c. The third sentence of paragraph (n)(6)(i) is amended by removing 
``(n)(7)(iii)'' and adding ``(n)(5)(iii)'' in its place.
    d. The first sentence of paragraph (n)(6)(ii) is amended by 
removing ``(n)(8)'' and adding ``(n)(6)'' in its place.
    e. Paragraph (ii)(1) is revised to read as follows:


Sec.  103.11  Meaning of terms.

* * * * *
    (ii) Transaction. (1) Except as provided in paragraph (ii)(2) of 
this section, transaction means a purchase, sale, loan, pledge, gift, 
transfer, delivery, or other disposition, and with respect to a 
financial institution includes a deposit, withdrawal, transfer between 
accounts, exchange of currency, loan, extension of credit, purchase or 
sale of any stock, bond, certificate of deposit, or other monetary 
instrument or security, purchase or redemption of any money order, 
payment or order for any money remittance or transfer, purchase or 
redemption of casino chips or tokens, or other gaming instruments, or 
any other payment, transfer, or delivery by, through, or to a financial 
institution, by whatever means effected.
* * * * *

    3. In subpart B, add new Sec.  103.21 to read as follows:


Sec.  103.21  Reports by casinos of suspicious transactions.

    (a) General. (1) Every casino shall file with FinCEN, to the extent 
and in the manner required by this section, a report of any suspicious 
transaction relevant to a possible violation of law or regulation. A 
casino may also file with FinCEN, by using the form specified in 
paragraph (b)(1) of this section, or otherwise, a report of any 
suspicious transaction that it believes is relevant to the possible 
violation of any law or regulation but whose reporting is not required 
by this section.
    (2) A transaction requires reporting under the terms of this 
section if it is conducted or attempted by, at, or through a casino, 
and involves or aggregates at least $5,000 in funds or other assets, 
and the casino knows, suspects, or has reason to suspect that the 
transaction (or a pattern of transactions of which the transaction is a 
part):
    (i) Involves funds derived from illegal activity or is intended or 
conducted in order to hide or disguise funds or assets derived from 
illegal activity (including, without limitation, the ownership, nature, 
source, location, or control of such funds or assets) as part of a plan 
to violate or evade any federal law or regulation or to avoid any 
transaction reporting requirement under federal law or regulation;
    (ii) Is designed, whether through structuring or other means, to 
evade any requirements of this part or of any other regulations 
promulgated under the Bank Secrecy Act, Public Law 91-508, as amended, 
codified at 12 U.S.C. 1829b, 12 U.S.C. 1951-1959, and 31 U.S.C. 5311-
5332;
    (iii) Has no business or apparent lawful purpose or is not the sort 
in which the particular customer would normally be expected to engage, 
and the casino knows of no reasonable explanation for the transaction 
after examining the available facts, including the background and 
possible purpose of the transaction; or
    (iv) Involves use of the casino to facilitate criminal activity.
    (b) Filing procedures--(1) What to file. A suspicious transaction 
shall be reported by completing a Suspicious Activity Report by Casinos 
(``SARC''), and collecting and maintaining supporting documentation as 
required by paragraph (d) of this section.
    (2) Where to file. The SARC shall be filed with FinCEN in a central 
location, to be determined by FinCEN, as

[[Page 60730]]

indicated in the instructions to the SARC.
    (3) When to file. A SARC shall be filed no later than 30 calendar 
days after the date of the initial detection by the casino of facts 
that may constitute a basis for filing a SARC under this section. If no 
suspect is identified on the date of such initial detection, a casino 
may delay filing a SARC for an additional 30 calendar days to identify 
a suspect, but in no case shall reporting be delayed more than 60 
calendar days after the date of such initial detection. In situations 
involving violations that require immediate attention, such as ongoing 
money laundering schemes, the casino shall immediately notify by 
telephone an appropriate law enforcement authority in addition to 
filing timely a SARC. Casinos wishing voluntarily to report suspicious 
transactions that may relate to terrorist activity may call FinCEN's 
Financial Institutions Hotline at 1-866-556-3974 in addition to filing 
timely a SARC if required by this section.
    (c) Exceptions. A casino is not required to file a SARC for a 
robbery or burglary committed or attempted that is reported to 
appropriate law enforcement authorities.
    (d) Retention of records. A casino shall maintain a copy of any 
SARC filed and the original or business record equivalent of any 
supporting documentation for a period of five years from the date of 
filing the SARC. Supporting documentation shall be identified as such 
and maintained by the casino, and shall be deemed to have been filed 
with the SARC. A casino shall make all supporting documentation 
available to FinCEN, any other appropriate law enforcement agencies or 
federal, state, local, or tribal gaming regulators upon request.
    (e) Confidentiality of reports; limitation of liability. No casino, 
and no director, officer, employee, or agent of any casino, who reports 
a suspicious transaction under this part, may notify any person 
involved in the transaction that the transaction has been reported. 
Thus, any person subpoenaed or otherwise requested to disclose a SARC 
or the information contained in a SARC, except where such disclosure is 
requested by FinCEN or another appropriate law enforcement or 
regulatory agency, shall decline to produce the SARC or to provide any 
information that would disclose that a SARC has been prepared or filed, 
citing this paragraph (e) and 31 U.S.C. 5318(g)(2), and shall notify 
FinCEN of any such request and its response thereto. A casino, and any 
director, officer, employee, or agent of such casino, that makes a 
report pursuant to this section (whether such report is required by 
this section or made voluntarily) shall be protected from liability for 
any disclosure contained in, or for failure to disclose the fact of, 
such report, or both, to the extent provided by 31 U.S.C. 5318(g)(3).
    (f) Compliance. Compliance with this section shall be audited by 
the Department of the Treasury, through FinCEN or its delegees, under 
the terms of the Bank Secrecy Act. Failure to satisfy the requirements 
of this section may constitute a violation of the reporting rules of 
the Bank Secrecy Act and of this part.
    (g) Effective date. This section applies to transactions occurring 
after March 25, 2003.

    4. Section 103.64 is amended by:
    a. Revising paragraph (a)(2)(ii)
    b. Removing the word ``hereafter'' in paragraph (a)(2)(iii); and
    c. Revising paragraph (a)(2)(v)(B).
    The revised paragraphs read as follows:


Sec.  103.64  Special rules for casinos.

    (a) Compliance programs. * * *
    (2) * * *
    (ii) Internal and/or external independent testing for compliance. 
The scope and frequency of the testing shall be commensurate with the 
money laundering and terrorist financing risks posed by the products 
and services provided by the casino;
* * * * *
    (v) * * *
    (B) The occurrence of any transactions or patterns of transactions 
required to be reported pursuant to Sec.  103.21;
* * * * *

    Dated: September 16, 2002.
James F. Sloan,
Director, Financial Crimes Enforcement Network.
[FR Doc. 02-24147 Filed 9-25-02; 8:45 am]
BILLING CODE 4810-02-P