This week, compliance and gambling experts from around the country are descending on Seton Hall for the university’s Gaming Law, Compliance, and Integrity bootcamp. That includes Odds On Compliance Director of Regulator Operations Alison Staknis is one of them, but before she went to New Jersey, she penned this look at what land-based sportsbooks should be wary of for federal matters in addition to state regulations.
In the context of retail sportsbook operations, compliance with federal regulations such as the Anti- Money Laundering (AML) provisions of the Bank Secrecy Act (BSA) and the Office of Foreign Assets Control (OFAC) sanctions program is critical.
The BSA requires financial institutions, including retail sportsbook operators, to implement effective AML programs to detect and report suspicious activity, such as money laundering and financing of terrorism. This involves monitoring transactions, verifying customer identities, and maintaining accurate records. The AML program should be tailored to the specific risks posed by the retail sportsbook’s business model, customer base, and products and services offered.
Retail sportsbook operators must also comply with Title 31’s reporting requirements, including the filing of Currency Transaction Reports (CTRs) for transactions involving currency in excess of $10,000, and Suspicious Activity Reports (SARs) for transactions suspected of being related to money laundering or financing of terrorism.
Failure to comply with Title 31 can result in severe penalties, including fines, reputational damage, and loss of license. Retail sportsbook operators must prioritize compliance with Title 31 to ensure the legality and integrity of their operations. In an arena where players want to remain anonymous, this can be challenging and against the grain of total customer satisfaction, however, living up to the law is paramount. This article will examine common procedures used by retail sportsbooks to ensure they are compliant.
For CTR compliance, it is common for retail sportsbooks to have a threshold in which they find reasonable to start aggregating cash in and out transactions. For example, when a player places a bet or redeems a ticket for $3,000 or more, the Ticket Writer will ask for identification and will complete a log which will track the player’s activity for the rest of that gaming day. Once the player exceeds $10,000 in cash in or out transactions for a gaming day, a CTR will be filed with the Financial Crimes Enforcement Network (FinCen). It is important for this information to be central among ticket writers and a process in place to make sure logged information reaches those coming in on the next shift. This may be easy when there are system tools being used but challenging with the logging is manual.
To prevent illegal activities such as money laundering and the financing of terrorism from occurring in your facility, employees must be adequately trained to monitor behavior and spot suspicious activity. This could be a player stuffing large amounts of cash into the kiosk in an attempt to launder money and remain anonymous. It could also involve a player trying to break up cash transactions among different ticket writers in the hopes of going unnoticed. Players attempting to structure may also ask questions to become privy as to when the gaming day begins and ends so they can scatter their activity across multiple gaming days causing hurdles for the operator to aggregate effectively. Players may refuse to provide ID and if this happens during a transaction which is going to exceed $10,000 in cash in or out for the gaming day, the transaction should be refused, and the suspicious activity should be reported to the company’s AML/BSA officer. It is common for key employees in the operation to have access to a form that is used to report suspicious activity to the AML/BSA officer who may ultimately file a SAR with FinCen.
Office of Foreign Assets Control (OFAC) is a division of the U.S. Treasury Department responsible for administering and enforcing economic and trade sanctions against targeted foreign countries, terrorists, international narcotics traffickers, and other threats to the national security, foreign policy, or economy of the United States. OFAC compliance is a critical aspect of retail sportsbook operations. Retail sportsbook operators must screen customers and transactions against OFAC’s lists of sanctioned individuals and entities to ensure that they are not facilitating transactions with these parties. This requires the implementation of OFAC screening procedures and sometimes the use of software tools to automate the process.
The most common procedure is to check customers against the lists when there is a transaction which requires the operator to obtain identification from the player. This could be during a W2G event, when the player hits a threshold set by the operator in which they begin to aggregate cash transactions, or possibly a threshold set forth by the state gaming regulator where it is required to create a patron profile once the amount is reached.
If a match is found, OFAC should be contacted immediately to confirm the match. Property (funds) may need to be blocked, meaning funds will need to be kept and placed in an interest-bearing account from which only OFAC-authorized debits may be made. The funds and any earned interest must remain there until OFAC gives clearance to release or transfer the funds. Frozen funds must be reported by the sportsbook annually. Failing to file a complete and accurate annual report of blocked property can result in significant penalties and fines, as well as damage to an entity’s reputation. It is important for entities in possession of blocked property to consult with OFAC regulations and seek guidance from legal counsel to ensure compliance with annual reporting requirements.
In conclusion, compliance with regulations and industry standards is crucial for the operation of retail sportsbooks. It helps to ensure the integrity of the industry, protects consumers, and prevents illegal activities. Failing to comply with these regulations can result in significant fines and damage to the reputation of the sportsbook operator.