Must-know: Money laundering and terrorist financing in casinos


Nov. 20 2020, Updated 4:44 p.m. ET

Money laundering

Casinos are a cash intensive business. The majority of the transactions are cash based. Casinos perform various financial activities that are similar to financial institutions including:

  • accepting funds on account
  • conducting money transfers
  • stored value services
  • debit card cashing facilities
  • check cashing

This puts major casino operators—including Las Vegas Sands (LVS), MGM Resorts (MGM), Wynn Resorts (WYNN), and Melco Crown Entertainment (MPEL)—at risk. Criminals try to influence casinos to facilitate theft, fraud, money laundering, and other crimes. Investors could lower the risk of investing in a single casino company by investing in exchange-traded funds (or ETFs) like the Consumer Discretionary Select Sector SPDR Fund (XLY). XLY gives investors overall exposure to the casino industry.

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The above chart shows that the money laundering process takes place in three phases—Placement, Layering, and Integration. Casino regulators make sure that gaming is conducted honestly. They approve the game rules. They also require that the operator provides high surveillance and security systems. This minimizes opportunities for criminal activity. As a result, the public gains confidence in the gaming products. This provides government revenue certainty.

Key indication of money laundering in casinos

  1. Insert funds into gaming machines and immediately claim those funds as credits
  2. Gaming machine credits or payouts claimed by customers with no jackpot
  3. Purchase and cash out casino chips with little or no gaming activity
  4. High volume of transactions conducted within a short period of time
  5. Multiple chip cash out in the same day
  6. Associations with multiple accounts under multiple names
  7. Transferring funds into third party accounts
  8. Funds credited into account from country of concern
  9. Large amounts of cash deposited from unexplained sources
  10. Rapid increase in size and frequency of transactions for regular account holder

Terrorist financing

Transactions associated with terrorism financing may be conducted in very small amounts. They may not be the same transactions that are used for money laundering. Funds that are generated from legal sources make it even more difficult to determine if they could be used for terrorist purposes.

Individuals, organizations, or countries may be the subject of terrorist financing sanctions in a particular country. A list of individuals, organizations, or countries is determined. Individual countries determine how to apply the sanctions. Each country determines what obligations the casinos have to follow.

In the next part of the series, we’ll discuss why Macau’s 2015 supply could exceed demand.


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