[Federal Register Volume 71, Number 54 (Tuesday, March 21, 2006)]
[Proposed Rules]
[Pages 14129-14132]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-4072]


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DEPARTMENT OF THE TREASURY

Financial Crimes Enforcement Network

31 CFR Part 103

RIN 1506-AA84


Proposed Amendments to Bank Secrecy Act Regulations Regarding 
Casino Recordkeeping and Reporting Requirements

AGENCY: Financial Crimes Enforcement Network, Department of the 
Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: We are proposing to amend the Bank Secrecy Act regulations 
relating to currency transaction reporting by casinos. Specifically, we 
are proposing to exclude, as reportable transactions in currency, 
jackpots from slot machines and video lottery terminals. We are also 
proposing to exclude certain transactions between casinos and currency 
dealers or exchangers and casinos and check cashers as reportable 
transactions in currency. Finally, we are proposing several other 
amendments that would update or clarify the ``cash in'' and ``cash 
out'' examples of transactions that are set forth in our currency 
transaction reporting regulations.

DATES: Written comments on all aspects of the proposal are welcome and 
may be submitted on or before May 22, 2006.

ADDRESSES: You may submit comments identified by Regulatory Information 
Number (RIN) 1506-AA84, by any of the following methods:
     Federal E-rulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments. Include 1506-AA84 in 
the submission.
     E-mail: regcomments@fincen. treas.gov. Include 1506-AA84 
in the subject line of the message.
     Mail: Financial Crimes Enforcement Network, P.O. Box 39, 
Vienna, VA 22183. Include 1506-AA84 in the body of the text.
    Instructions: Electronic comments are preferred because paper mail 
in the Washington, DC, area may be delayed. Please submit comments by 
one method only. Any submissions received must include the agency name 
and the RIN for this rulemaking. All comments received will be posted 
without change to http://www.fincen.gov, including any personal 
information provided. Comments may be inspected in the Financial Crimes 
Enforcement Network reading room between 10 a.m. and 4 p.m. in 
Washington, DC. Persons wishing to inspect the comments submitted must 
request an appointment by telephone at (202) 354-6400 (not a toll-free 
number).

FOR FURTHER INFORMATION CONTACT: Regulatory Policy and Programs 
Division, Financial Crimes Enforcement Network, (800) 949-2732 (toll-
free number) or (202) 354-6400 (not a toll-free number).

SUPPLEMENTARY INFORMATION: 

I. Background

A. Statutory and Regulatory Background

    The Director of the Financial Crimes Enforcement Network is the 
delegated administrator of the Bank Secrecy Act.\1\ The Act authorizes 
the Director to issue regulations to require all financial institutions 
defined as such in the Act to maintain or file certain reports or 
records that have been determined to have a high degree of usefulness 
in criminal, tax, or regulatory investigations or proceedings, or in 
the conduct of intelligence or counter-intelligence activities, 
including analysis, to protect against international terrorism, and to 
implement anti-money laundering programs and compliance procedures.\2\
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    \1\ The statute generally referred to as the ``Bank Secrecy 
Act,'' Titles I and II of Public Law 91-508, as amended, is codified 
at 12 U.S.C. 1829b, 12 U.S.C. 1951-1959, and 31 U.S.C. 5311-5314, 
5316-5332.
    \2\ Language expanding the scope of the Bank Secrecy Act 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 of 2001, 
Public Law 107-56 (October 26, 2001). In pertinent part, regulations 
implementing Title II of the Bank Secrecy Act appear at 31 CFR part 
103.
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    Casinos are cash-intensive businesses that offer a broad array of 
financial services. These services include customer deposit or credit 
accounts, facilities for transmitting and receiving funds transfers 
directly from other financial institutions, and check cashing and 
currency exchange services. Consequently, these services offered by 
casinos are similar to and may serve as substitutes for services 
ordinarily provided by depository institutions and certain non-bank 
financial institutions. As such, casinos are vulnerable to abuse by 
money launderers, terrorist financiers, and tax evaders.
    In general, state-licensed casinos were made subject to the Bank 
Secrecy Act by regulation in 1985.\3\ The 1985 rulemaking was based on 
the authority of the Secretary of the Treasury to designate as 
financial institutions for Bank Secrecy Act purposes: (i) Businesses 
that engage in activities that are ``similar to, related to, or a 
substitute for'' the activities of covered businesses listed in the 
Bank Secrecy Act and (ii) other businesses ``whose cash transactions 
have a high degree of usefulness in criminal, tax, or regulatory 
matters.'' \4\ Congress later explicitly added casinos and other gaming 
establishments to the list of financial institutions regulated pursuant 
to the Bank Secrecy Act.\5\
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    \3\ See 50 FR 5065 (February 6, 1985). Casinos whose gross 
annual gaming revenue did not exceed $1 million were, and continue 
to be, excluded from Bank Secrecy Act requirements otherwise 
applicable to casinos and card clubs.
    \4\ See 31 U.S.C. 5312(a)(2)(Y) and (Z).
    \5\ See section 409 of the Money Laundering Suppression Act of 
1994, Title IV of the Riegle Community Development and Regulatory 
Improvement Act of 1994, Public Law 103-325. The current statutory 
specification 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); 
* * * 31 U.S.C. 5312(a)(2)(X).
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    Casinos authorized to conduct business under the Indian Gaming 
Regulatory Act became subject to the Bank Secrecy Act by regulation in 
1996,\6\ and card clubs became subject to the Bank Secrecy Act by 
regulation in 1998.\7\
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    \6\ See 61 FR 7054 (February 23, 1996).
    \7\ See 63 FR 1919 (January 13, 1998). Card clubs generally are 
subject to the same rules as casinos, unless a different treatment 
for card clubs is explicitly stated in 31 CFR Part 103. Therefore, 
for purposes of this Notice of Proposed Rulemaking, and unless the 
context indicates otherwise, the term ``casino'' refers to both 
casinos and to card clubs.
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B. Casino Currency Transaction Reporting Requirements

    Regulations under the Bank Secrecy Act define a ``transaction in 
currency'' as any transaction ``involving the physical transfer of 
currency from one person to another.'' \8\ Casinos must report each 
transaction in currency involving cash in or cash out of more

[[Page 14130]]

than $10,000,\9\ and are required to aggregate transactions in currency 
(treat the transactions as a single transaction) if the casino has 
knowledge that the transactions are conducted by or on behalf of the 
same person and result in cash in or cash out of more than $10,000 
during any gaming day.\10\ The rule requiring casinos to report 
transactions in currency also lists examples of transactions in 
currency involving cash in and cash out.\11\
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    \8\ See 31 CFR 103.11(ii)(2).
    \9\ See 31 CFR 103.22(b)(2).
    \10\ See 31 CFR 103.22(c)(3).
    \11\ See 31 CFR 103.22(b)(2)(i) and (ii).
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    Casinos must report transactions in currency by filing Currency 
Transaction Reports on FinCEN Form 103 (``Currency Transaction Report 
by Casinos''). A casino must record identifying information on the 
Currency Transaction Report, verify identifying information, and 
indicate a description of the transaction(s).\12\ In addition, a casino 
must file the completed form within 15 days following the date of the 
reportable transaction and retain a copy of the Currency Transaction 
Report for a period of five years from the date of filing.\13\
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    \12\ See 31 CFR 103.27(d) and 103.28.
    \13\ See 31 CFR 103.27(a)(1) and (3).
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II. Proposed Amendments to the Bank Secrecy Act Regulations

    We are proposing to amend certain regulations under the Bank 
Secrecy Act that require casinos to report transactions in currency of 
more than $10,000. In response to requests from the gaming industry, we 
are proposing to exclude jackpots from slot machines and video lottery 
terminals as reportable transactions in currency. We also are proposing 
to exclude certain transactions between (i) casinos and currency 
dealers or exchangers and (ii) casinos and check cashers from the 
requirement to report transactions in currency. Finally, we are 
proposing other technical and clarifying amendments to the illustrative 
list of cash in and cash out transactions in the rules.
    Jackpots from slot machines and video lottery terminals account for 
a significant portion of Currency Transaction Reports filed by casinos. 
Absent fraud or abuse of the slot machine or video lottery terminal, a 
customer who wins more than $10,000 in jackpots at a slot machine or 
video lottery terminal generally will have won those funds solely 
because of the workings of the random number generator in the slot 
machine or in a central computer that is networked with the video 
lottery terminal. Accordingly, the jackpots are not likely to form part 
of a scheme to launder funds through the casino. Further, because 
casinos are required to file federal income tax forms with the Internal 
Revenue Service on jackpots of $1,200 or more, jackpots from slot 
machines and video lottery terminals are not likely to form part of a 
scheme to evade taxes. We believe that jackpots from slot machines and 
video lottery terminals do not pose a significant risk for money 
laundering, terrorist financing, or tax evasion. Consequently, Currency 
Transaction Reports filed with respect to the jackpots do not have a 
high degree of usefulness in criminal, tax, and regulatory matters. 
Therefore, we are proposing to eliminate the requirement that casinos 
file Currency Transaction Reports for jackpots in excess of $10,000 
from slot machines or video lottery terminals.
    In addition, we believe that transactions in currency between 
casinos and currency dealers or exchangers and check cashers are often 
routine casino business transactions. To illustrate, a check cashing 
company may operate on the premises of a casino. The check cashing 
company may cash checks for customers of the casino. Typically, the 
check cashing company writes a business check to the casino and in 
return receives currency from the casino cage to run the check cashing 
operation. As another illustration, a casino may enter into a 
contractual agreement with a commercial currency dealer or exchanger to 
have that business acquire excess foreign currency and foreign coins 
that a casino has accumulated from exchanges with its customers. In 
return, a casino generally receives a cashier's check or a business 
check from the dealer for the currency exchanged minus a commission for 
the service. At present, both types of transactions qualify as 
``transactions in currency'' such that, if the transactions meet the 
$10,000 threshold set forth in the rule, a casino would be required to 
file one or more Currency Transaction Reports. We believe these 
business transactions should not be subject to the reporting 
requirements of 31 CFR 103.22(b)(2). Further, requiring a casino to 
file Currency Transaction Reports with respect to these transactions 
would be duplicative of those filed by currency dealers or exchangers, 
or check cashers, which are themselves subject to the requirements of 
the Bank Secrecy Act and to the requirement to file Currency 
Transaction Reports.\14\ Duplicate filings with respect to the same 
transaction do not provide a high degree of usefulness in criminal, tax 
or regulatory matters.
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    \14\ See 31 CFR 103.22(b)(1).
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III. Section-by-Section Analysis

A. Jackpots From Slot Machines and Video Lottery Terminals--
103.22(b)(2)(ii) and 103.22(b)(2)(iii)

    For the reasons described above, we are proposing to amend 31 CFR 
103.22(b)(2)(ii)(E) by deleting the reference to slot jackpots from the 
list of reportable cash out transactions in currency. We also are 
proposing to add a new paragraph, 31 CFR 103.22(b)(2)(iii)(B), that 
would explicitly exclude such transactions as ``payments on bets'' for 
purposes of casino currency transaction reporting.

B. Currency Dealer or Exchanger, or Check Casher Transactions--
103.22(b)(2)(iii)(A)

    We are proposing to amend 31 CFR 103.22(b)(2) to add a new 
paragraph (iii)(A) that would exclude from the list of reportable cash 
in or cash out transactions in currency, certain transactions in 
currency conducted between a casino and currency dealers or exchangers, 
or check cashers, as defined in 31 CFR 103.11(uu)(1) and (2), 
respectively. As described above, currently, our regulations require a 
casino to file a Currency Transaction Report for cash in or cash out 
transactions in excess of $10,000 conducted between casinos and 
currency dealers or exchangers and casinos and check cashers.\15\ Also, 
as discussed above, this proposed amendment would eliminate duplicative 
filings.\16\ We believe that as long as these currency transactions are 
conducted pursuant to a contractual or other arrangement with a casino 
covering those services in Sec. Sec.  103.22(b)(2)(i)(H), 
103.22(b)(2)(ii)(G), and 103.22(b)(2)(ii)(H), these currency 
transactions should not be subject to currency transaction reporting 
requirements applicable to casinos.
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    \15\ Since July 1997, there has been an ``Exceptions'' provision 
under the ``General Instructions'' section of the Currency 
Transaction Report by Casinos form for a casino's transactions with 
currency dealers or exchangers, or check cashers. This exception 
provision from such casino reporting on FinCEN Form 103 (Rev. 
November 2003) would be revised to reflect the language of this 
amendment once a final rule is issued.
    \16\ This proposed amendment does not relieve a currency dealer 
or exchanger, or a check casher, from complying with the reporting 
of currency transactions in excess of $10,000 conducted with a 
casino. See 31 CFR 103.22(b)(1).
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C. Other Amendments

    A summary of other technical amendments follows.

[[Page 14131]]

    1. Gaming instruments--103.22(b)(2)(i)(A). We are proposing to 
amend 31 CFR 103.22(b)(2)(i)(A) by deleting the term ``plaques'' and 
substituting the phrase ``other gaming instruments'' for cash in 
transactions. The term ``plaque'' only applies to a high value chip. In 
contrast, a gaming instrument would include any casino-issued financial 
product that is used to facilitate a gaming transaction (e.g., high 
dollar denomination plaques used in playing baccarat games, and stored 
value cards containing funds or monetary value), including those 
associated with a particular customer.
    2. Money plays as bets of currency--103.22(b)(2)(i)(E). We are 
proposing to amend 31 CFR 103.22(b)(2)(i)(E) to include money plays as 
``bets of currency'' and thus reportable cash in transactions for 
purposes of our currency reporting requirements for casinos. Under 31 
CFR 103.11(ii)(2), a ``transaction in currency'' includes any 
transaction involving the physical transfer of currency to a casino. A 
``bet of currency'' is listed as an example of a transaction in 
currency involving cash in.\17\ Therefore, a wager of currency on table 
game play represents a ``bet of currency''--and a transaction in 
currency involving cash in--regardless of whether the customer wins or 
loses the wager.
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    \17\ See 31 CFR 103.22(b)(2)(i)(E).
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    3. Bills inserted into electronic gaming devices--
103.22(b)(2)(i)(I). We are proposing to add a new paragraph, 31 CFR 
103.22(b)(2)(i)(I), to include ``bills inserted into electronic gaming 
devices'' as a type of cash in transaction. The insertion of currency 
into a slot machine or a video lottery terminal (which are electronic 
gaming devices), regardless of whether a customer wagers the currency, 
involves the physical transfer of currency to a casino.\18\
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    \18\ See 31 CFR 103.11(ii)(2).
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    In the absence of a wager, the transaction is analogous to the 
purchase of a token or chip with currency, as the customer exchanges 
currency for a: (i) Token to wager at a slot machine or video lottery 
terminal, or (ii) chip to wager at a table game. The purchase of a 
token (or chip) with currency is a transaction in currency involving 
cash in.\19\ Likewise, the insertion of currency into a slot machine or 
video lottery terminal is a transaction in currency, even in the 
absence of a wager.\20\
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    \19\ See 31 CFR 103.22(b)(2)(i)(A).
    \20\ See 31 CFR 103.22(b)(2)(i)(E).
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    4. Tickets and other gaming instruments--103.22(b)(2)(ii)(A). We 
are proposing to amend 31 CFR 103.22(b)(2)(ii)(A) to delete the phrase 
``and plaques'' and insert the phrase ``tickets, and other gaming 
instruments'' for cash out transactions. The proposed amendment 
replaces the term ``plaque,'' which only applies to a high value chip, 
with terminology that is more current and commonly used with respect to 
the latest gaming technology. A ticket is a document issued by a slot 
machine, video lottery terminal, or a pari-mutuel clerk to a customer 
as a record of the wagering transaction and/or substitute for 
currency.\21\ A customer can use a ticket at a machine or terminal that 
accepts tickets or cash a ticket out at a cage, slot booth, a 
redemption kiosk, or a pari-mutuel window at the gaming establishment. 
As described previously, a gaming instrument would encompass any 
casino-issued financial product that is used to facilitate a gaming 
transaction (e.g., high dollar denomination plaques used in playing 
baccarat games, and stored value cards containing funds or monetary 
value).
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    \21\ Tickets are voucher slips printed with the name and the 
address of the gaming establishment, the stated monetary value of 
the ticket, date and time, machine number (e.g., asset or location), 
an 18-digit ticket number, and a unique bar code. Tickets are a 
casino bearer ``IOU'' instrument. Slot machines or video lottery 
terminals that print tickets are commonly known as ``ticket in/
ticket out'' or ``TITO'' machines.
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    5. Payments based on receipt of funds through wire transfers--
103.22(b)(2)(ii)(F). We are proposing to amend 31 CFR 
103.22(b)(2)(ii)(F) pertaining to payments in currency by a casino to a 
customer based on receipt of funds through a wire transfer to delete 
the reference to credit to a customer. Some casinos have been confused 
by the reference to credit for this type of cash out transaction. Since 
this reference is unnecessary, it will be removed.
    6. Travel and complimentary expenses and gaming incentives--
103.22(b)(2)(ii)(I). We are proposing to amend 31 CFR 
103.22(b)(2)(ii)(I) to clarify the types of reportable cash out 
transactions under this provision. Specifically, we are proposing to 
replace the word ``entertainment'' with the term ``complimentary'' \22\ 
for expenses, and to add the phrase ``gaming incentives'' which would 
mean that travel and complimentary expenses and gaming incentives would 
be reportable as currency transactions.
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    \22\ Although, complimentary (also referred to as ``comps'') 
items typically are goods or services that a casino gives to a 
customer, at reduced or no cost, based on significant play, they can 
also be in the form of currency.
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    7. Tournaments, contests or promotions--103.22(b)(2)(ii)(J). We are 
proposing to add a new paragraph, 31 CFR 103.22(b)(2)(ii)(J), to add 
payments for tournament, contest, or other promotions as types of cash 
out transactions.

IV. Submission of Comments

    We invite comments on all aspects of this notice of proposed 
rulemaking, and specifically invite comments on what impact a casino 
exemption from currency transaction reporting for jackpots from slot 
machines or video lottery terminals reported would have for law 
enforcement. All comments will be available for public inspection and 
copying, and no material in any such comments, including the name of 
any person submitting comments, will be recognized as confidential. 
Accordingly, material not intended to be disclosed to the public should 
not be submitted.

V. Executive Order 12866

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

VI. Regulatory Flexibility Act

    We certify that this regulation will not have a significant 
economic impact on a substantial number of small entities since the 
regulatory reporting threshold excludes casinos whose gross annual 
gaming revenues do not exceed $1 million. For larger casinos, the 
requirements of the proposed amendments to 31 CFR 103.22(b)(2)(i)(E) 
and 103.22(b)(2)(i)(I) may be satisfied, in large part, by using 
existing business practices and records. For example, many casinos 
already obtain a great deal of data about their customers' transactions 
from information routinely collected from casino-established player 
rating and slot club accounts. This existing data can assist casinos in 
making decisions about whether a transaction is reportable as a 
currency transaction.

VII. Unfunded Mandates Reform Act of 1995 Statement

    Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law 
104-4 (Unfunded Mandates Act), requires that an agency prepare a 
budgetary impact statement before promulgating a rule that includes a 
federal mandate that may result in any expenditure by state, local and 
tribal governments, in the aggregate, or by the private sector, of $100 
million or more in any one year. If a budgetary impact statement is 
required, section 202 of the Unfunded Mandates Act also requires an 
agency to identify and consider a reasonable number of regulatory 
alternatives before promulgating a rule. We have determined that we are 
not required to prepare a written statement

[[Page 14132]]

under section 202, and have concluded that, on balance, this proposed 
rule provides the most cost-effective and least burdensome alternative 
to achieve the stated objectives associated with the same.

List of Subjects in 31 CFR Part 103

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

Authority and Issuance

    For the reasons set forth in the preamble, part 103 of Title 31 of 
the Code of Federal Regulations is proposed to be amended as follows:

PART 103--FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND 
FINANCIAL 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. 5311-5314, 
5316-5332; title III, secs. 311, 312, 313, 314, 319, 326, 352, Pub. 
L. 107-56, 115 Stat. 307.

    Section 103.22 is amended by:
    A. Revising paragraphs (b)(2)(i)(A), (E), (G), and (H), and adding 
a new paragraph (b)(2)(i)(I);
    B. Revising paragraphs (b)(2)(ii)(A), (E), (F), (H), and (I), and 
adding a new paragraph (b)(2)(ii)(J); and
    C. Adding a new paragraph (b)(2)(iii).
    The revisions and additions read as follows:


Sec.  103.22  Reports of transactions in currency.

* * * * *
    (b) * * *
    (2) * * *
    (i) * * *
    (A) Purchases of chips, tokens, and other gaming instruments;
* * * * *
    (E) Bets of currency, including money plays;
* * * * *
    (G) Purchases of a casino's check;
    (H) Exchanges of currency for currency, including foreign currency; 
and
    (I) Bills inserted into electronic gaming devices.
    (ii) * * *
    (A) Redemptions of chips, tokens, tickets, and other gaming 
instruments;
* * * * *
    (E) Payments on bets;
    (F) Payments by a casino to a customer based on receipt of funds 
through wire transfers;
* * * * *
    (H) Exchanges of currency for currency, including foreign currency;
    (I) Travel and complementary expenses and gaming incentives; and
    (J) Payment for tournament, contests and other promotions.
    (iii) Other provisions of this part notwithstanding, a transaction 
in currency or currency transaction for purposes of Sec. Sec.  
102.22(b)(2) and (c)(3) shall not include:
    (A) Transactions between a casino and a currency dealer or 
exchanger, or between a casino and a check casher, as those terms are 
defined in Sec.  103.11(uu), so long as such transactions are conducted 
pursuant to a contractual or other arrangement with a casino covering 
the financial services in Sec. Sec.  103.22(b)(2)(i)(H), 
103.22(b)(2)(ii)(G), and 103.22(b)(2)(ii)(H); and
    (B) Jackpots from slot machines or video lottery terminals.
* * * * *

    Dated: March 14, 2006.
Robert W. Werner,
Director, Financial Crimes Enforcement Network.
[FR Doc. E6-4072 Filed 3-20-06; 8:45 am]
BILLING CODE 4820-03-P