The Dark Side of Casinos

The Highest Risks at Casinos

Most or almost all casinos perform financial activities, in particular:

• They accept money on the accounts;
• They exchange money;
• They transfer funds;
• They exchange currencies;
• They provide services to store valuables;
• They provide service to receive funds and pay using bank cards, conversion of cheques into cash;
• They provide safe deposit boxes,

and so on. In majority of cases financial services are provided 24 hour per day.

Diversity, frequency, and volume of transactions make casinos extremely convenient for money laundering, since the casino's nature is a business where cash is widely used, and most of the operations are carried out using cash. When a client visits a casino, he or she can make several cash or electronic transfers during the game or when he or she converts funds into cash. The exchange of cash for casino chips, tokens, or guaranteed cheques, as well as the provision of electronic transactions to fund or withdraw money from the accounts, make casinos an attractive target for fraudsters who are engaged in money laundering.

Criminal Interests in Casinos

Any casino is an attractive target for criminals. Casinos constantly serve as targets for criminals as an object of criminal influence and exploitation. Organized crime groups always seek ways to control casinos or to acquire the influence on the aspects of financial operations of casinos. Criminals try to filter or find ways to facilitate the mechanisms of theft, fraud, money laundering, and other crimes.

The influence of criminals on casinos can be used both for money laundering and for covering some cases of criminal actions outside the casino. In the criminal world, a casino is defined as a place where criminals and persons associated with organized crime, enjoy a rest and simultaneously launder money obtained by criminal means. In addition, gambling establishments cause additional crime activities such as usury, robbery, theft, and other crimes.

Usury

Usury (extortion) significantly prevails in some casinos. Usury is a crime of making monetary loans at excessive interest rates, which are then returned to lenders even using blackmail or threat of violence. Usury may be financed and supported by the network of organized crime groups. It may also be related to money laundering. Moneylenders usually work with addicted gamblers who have problems with gambling or players who have financial problems. If such a player becomes a victim of usury, he or she is almost always forced to take part in money laundering in casinos.

Payment Tools of Casinos

Casinos use various payment tools to create convenient conditions for their clients. Let's enumerate them:

• cash,
• chips,
• TITO systems,
• credits of slots,
• cashier's orders,
• cheques,
• gift certificates,
• chip purchase vouchers,
• gift cards.

Ways and methods of use of payment tools are different in each casino, since they are influenced by local regulators and structures of casinos. Anyway, all of these tools are often used to launder money while converting funds from one form into another.

(Here is a brief explanation for those who do not know what the TITO system is. Ticket In/Ticket Out is a system that allows slot machines to receive bills or slips of paper with the barcode, indicating the amount of money (Ticket In) in order to start the game. This system, in particular, prints out a barcoded slip of paper with the indicated amount of credits if the player wants to withdraw money from this slot (Ticket Out). Then the player can redeem his slips of paper for cash either in the cashier or at an automated kiosk. Users can also use another TITO slot, continuing the game. The automated kiosk is a multifunctional device connected to the server of network. It can perform various financial transactions for clients. In particular, it allows redeeming slips of paper and scratch cards for cash; currency for another currency (for example, to form smaller accounts or change money for coins). It also allows paying out points for the participation in the club of slot players, buying barcoded slips of paper of slot machines, and making electronic money transfers.)

Methods and Ways to Launder Money in Casinos

The use of casino payment tools (cash/chips/TITO systems/ credits of video slots/cashier's orders/cheques/gift certificates/chip purchase vouchers/gift cards).

• Structuring/refining.
• The use of accounts of casinos (credit accounts, foreign holding accounts).
• Deliberate losses.
• Winnings/deliberate losses.
• Currency exchange.
• Participation of casino employees.
• Credit cards/debit cards.
• False documents.

And now let's take a look at each method in detail, giving a couple of examples in practice, and providing a list of indicators that can be used to monitor the application of these methods.

1. The Use of Payment Tools

Casino chips are the most common forms of payment tools. These chips are issued by gambling establishments and are used in lieu of cash in transactions between casinos and players. Casino chips usually have a circular shape. They have inscription with the denomination and the name of the casino. They can be redeemed in casinos and, in some cases, within one group of casinos.

There are also loan chips that have a different color and are used by regular customers who may play taking loans. There are dead chips, which are used only by regular customers and tour operators for the purpose of playing in casinos.

Ways for Fraud with Casino Chips

The chips are purchased for cash or via an account. Then their cost is paid by casino cheques or bank cheques.

This method can be used in an even more clandestine way in a number of casino networks where the chips are bought for black money and converted into credits. Then this money is transferred to another jurisdiction where the casino network has a subsidiary. Then the credit is transferred there, using a casino cheque in the second casino.

Fraudsters may keep the chips for a certain period of time, using them in games of chance hoping to get a legitimate income, and then redeem winnings for cash, cheques, or wire transfers.

The Purhase of Chips from Clean Players at Inflated Prices

Fraudsters can buy chips from honest players or even casino employees, who have a good reputation. The purchase is made at inflated prices and it's called a falsification of chip value.

Casino Cheques are Redeemed for Cash

Some casinos allow redeeming winning cheques for cash. The high-value casino cheques, which can be redeemed for cash, have repeatedly been seen in the re-circulation of documents and have been used as tools to pay for goods or reinvestment in criminal activities, such as the purchase of drugs. The high-value casino cheques are issued in high in the VIP room of casinos, where the services for an alternative transaction of funds from the VIP room to the player's address can be provided.

The Combination of Winnings and Cash Redeemed for Casino Cheques

Only a few casinos allow such activities. Fraudsters try to add cash to casino winnings and then redeem their winnings and their cash for one common cheque.

The Use of Chips as Currency

Fraudsters can use the chips as cash to buy drugs or other illegal goods. If you receive chips as a result of operations with the drugs, this can also help to create an alibi for criminal activities. The recipient of chips redeems them for cash in casinos.

Casino chips, used as cash, can be transported across the border and used as the funds for illegal transactions. Then they can be returned via third parties to the previous country where they may be redeemed for cash in casinos with a good reputation. Most countries do not consider casino chips as monetary tools, so they do not require customs declarations.

In some countries casino chips can be used in another similar casino. It has been known that the fraudsters often use this trick in order to avoid the attention to their activities in casinos. In order to prevent such activities, some casinos manufacture their own chips and do not allow redeeming their chips for cash from other casinos.

The Purchase of Casino Gift Certificates in High Amounts

It has been reported that fraudsters mainly buy expensive or a lot of cheap gift certificates that may be transferred to third parties. Then these certificates are sold or given, so the fraudster may dissociate himself from his illegal funds.

The Purchase of Casino Cards

Fraudsters use black money to buy casino cards from illegal customers, offering them a sum that exceeds the card values.

Two men of Asian descent who were living in Belgium visited the Belgian casino twice to buy chips for a total amount of 25,000 euros. During their visit to the casino, they did not play at the table. They collected funds using a third party instead. During the investigation it was found that all fraudsters were students who had lived together with other Asian students. It turned out that their activities had been associated with human trafficking. They wanted to create a documentary evidence of the origin of their funds without playing in a casino and collecting money via a third party.

*****

In Australia a delivery intended for one person was found. It contained roughly 4 kilograms of black tar opium, hidden inside the cargo. This man was arrested when he was trying to receive this delivery. The further investigation showed that this man was a regular visitor of casinos, where he made about 50 bets, redeeming about 890,000 Australian dollars for chips. The video showed that this man almost did not play at the table. So, we can assume that he used the income of drug trafficking for the purchase of chips for cash and their further presentation of funds as winnings.

*****

In early 2006, the Supreme Prosecutor's Office of South Korea investigated the case of bribery that included money laundering in casinos. From 2003 to 2005, a legal broker bought casino chips along with cheques in the total amount of 20 billion won (about 20 million US dollars). Then he redeemed chips and cheques for cash. He used this money to bribe the police and senior government officials.

Indicators of Money Laundering Using Monetary Tools of Casinos:

• The use of money in slots and the immediate presentation of these funds as winnings.
• The statement of a customer about payouts of gambling machines without jackpots.
• The statement of a customer about high payouts of slot machines.
• Significance differences from standards costs and players' bets.
• The use of a large number of bills by clients while playing slot machines that have high levels of payouts and do not have betting limits that can restrict significant losses. It leads to the accumulation of points with the minimal involvement in the gameplay.
• Frequent betting on equal chances when two players on the opposite sides of the table make bets of the same size (in roulette, baccarat, and craps).
• The absence of the intention to win.
• Two or more clients wager in the game on equal chances
• for players.
• The customer has a lot of coins or bills.
• The establishment of friendly relations or an attempt to establish friendly relations with employees
• of casinos.
• The purchase of chips for cash and insignificant involvement in the gameplay
• The request of the customer to add cash to his winning and redeem the combination of cash and
• winning for one cheque.
• Repeated requests to write cheques.
• A lot of activities over a short period of time.
• Repeated exchange of chips for cash per day.
• Structuring of transactions with chips and cheques.
• A request to transfer money to another casino.
• The use of numerous names for such activities.
• The use of third parties to purchase casino chips.
• The use of credit cards to purchase casino chips.
• The use of personal cheques, bank cheques, and traveler's checks to purchase casino chips.
• The problems that may arise during the verification of a customer: refusal, false documents, one-time documents, and tourists.
• The customer buys chips and leaves the casino shortly afterwards.
• Receipts and cash vouchers whose dates precede the date of reimbursement.
• The use of large amounts to purchase chips.
• The frequent purchases of casino gift certificates.
• The acceptable winning does not correspond to the written one.
• A very sharp increase in the volume and frequency of operations that are conducted by the regular customer.
• The detection of chips brought to the casino.

2. Refining

Refining refers to the conversion of small-denomination banknotes to large-denomination bills. Organized groups of fraudsters often use casino services to exchange large amounts of small-denomination banknotes to more convenient large-denomination notes. In some countries, these activities are related to drug dealers who accumulate a large number of small bills due to the sale of drugs. In the case of an organized group, its participants can share funds near the entrance of a casino. Then they enter the casino and individually use their share of the money. Outside the casino, they combine their share to form the total amount.

There are the following most common ways:

• The use of cashier
• Fraudsters redeem in the cashier coins and bills of small denomination for bills of bigger denominations.
• The use of slot machines that accept bills
• Most casinos have slot machines that accept banknotes. Fraudsters insert bills to form the bankroll, but they almost don't take part in the gameplay before redeeming money for cash. Taking into account the fact that the amount can be quite large, the customer will require a receipt or its analogue from the gambling machine in order to redeem it for cash or cheques in the cashier of the casino.
• The use of casino accounts
• Fraudsters often fund their accounts using small-denomination bills. They withdraw cash, taking large-denomination bills.

A group of three foreigners separately entered the casino in Spain and bought chips paying for them with small-denomination bills. They did not play any game of chance. Then they redeemed bought chips, trying to get large-denomination bills.

*****

A fraudster used a significant amount of funds of criminal origin. This fraudster bought chips in an Australian casino and used third parties to purchase chips on his behalf. Reports of suspicious transactions indicated that a considerable amount of cash was redeemed per day for chips and vice versa. The further investigation showed that this fraudster had repeatedly sent out large sums of cash to the various institutions in Vietnam via his money transfer agent. This money was used to purchase heroin.

Indicators of Money Laundering through Refining, Structuring, and Currency Exchange:

• Activities are inconsistent with the customer's profile.
• The use of different names to perform such activities.
• Many different persons send money to one recipient.
• A cheque is issued to the player's relative.
• The third party is present in all operations but technically does not participate in the gameplay.
• The transfer of funds to the accounts of third parties.
• The transactions are performed by third parties, instead of the account's owner.
• The use of third parties to structure deposits and electronic
• transfers.
• The use of money transfer agent or tour operator to transfer or receive funds.
• The use of third parties to make a bet.
• The use of third parties to buy chips.
• The transfer of cash to the third party after the exchange of chips for cash.
• The large volume of operations over a short period of time.
• The purchase of chips for cash with the participation in the gameplay.
• Frequent bets of the size that almost reaches the upper limit.
• The frequent purchases of chips for cash spending an amount that reaches the upper limit.
• The exchange of winnings that consist of the combination of chips, cheques, and cash for cash.
• The customer often changes the gaming table or room until the bet reaches the maximum limit.
• The customer opens an account and buys chips for small-denomination bills.
• The customer plays using a lot of low-denomination bills.
• The player tries to change small-denomination notes to larger bills.
• The frequent operations of redeeming chips for cash without corresponding operations of purchasing chips and vice versa.
• The following problems may arise during the verification of the customer: refusal, false documents, and one-time tourist documents.
• Sudden changes in bets or in the ways of spending.
• The client uses notes in online gambling machines without participating in the game. He or she clicks on Cash, which leads to the release if a slip of paper from the slot. This slip of paper is redeemed for cash in the cashier or automated kiosk.

3. Casino Accounts and Other Services

The use of casino accounts provides fraudsters with some additional features. Many casinos offer deposit accounts and loans without the throughout verification of customers, unlike banks and other financial institutions. The frequent movements of funds between financial institutions and casinos, or between accounts in different casinos are used by fraudsters to launder money. Many casinos offer safe deposit boxes, especially for VIP clients.

The Exchange of Cheques for Cash to Deposit Money into the Account

Some casinos allow users to redeem certain types of cheques for cash and use it while gambling. Then these cheques are transferred from the holder to the recipient.

Making a Deposit with the Help of Electronic Transfer or Bank Cheque.

Funds are deposited into the account by electronic transfer or bank cheque. Then they are redeemed for cash or transferred to other accounts with the minimal involvement in gambling.

Accounts Abroad

Sometimes the clients' accounts are maintained in the casino of one state, but the funds can be used to play at the casino of the same network in another country. For example, the funds deposited into a foreign account in Macao can be used in Las Vegas casinos. Thus, the funds available on the account do not leave the country. Therefore there is no need to declare them. Regular customers can deposit money into accounts and use it to play while visiting a casino in another country without the use of cross-border transfer of funds.

Electronic Funds Transfer from Currency Exchange Points to Accounts

Currency exchange points in some countries can transfer money to casinos of other states. For example, currency exchange points in the United States are concentrated along the southwest border. More than one thousand of them are located along the border from California to Texas. Such establishments are usually not registered. They have the appropriate bank accounts that allow them to transfer large sums of cash to casinos all over the world.

Safe Deposit Boxes

Some casinos offer safe deposit boxes for regular customers, especially for VIP clients. This is a great risk of fraud because of the lack of transparency in the use of these boxes and the possibility of third parties to have access to these boxes by entering a password. Almost all casinos do not regulate these safe deposit boxes, so almost everything can be delivered to another person via them, including chips, money, bills...

A fraudster in New York convinced foreign buyers to order a large number of cigarettes. To be sure, he did not have cigarettes and was not going to sell them to customers. He used a casino in the following way:

The buyer #1 paid in advance 100,000 dollars for a cheque issued in the cashier of a casino. The fraudster had an assistance who deposited the amount of this cheque into the casino account. The assistance was allowed to play betting up to 10,000 dollars. Then he redeemed the remainder for cash and gave it to the fraudster.

The buyer #2 paid in advance 60,000 dollars for a cheque. The assistant deposited the amount of this cheque into the account of the same casino. He was allowed to gamble. He lost $50,000 and the remaining $10,000 in cash was given to the fraudster. The buyer #2 sent another cheque in the amount of 100,000 dollars.

The buyer #3 deposited a cheque in the amount of 600,000 dollars into the account. About 180,000 dollars was redeemed for cash in the same casino. The assistant tried to withdraw the entire amount, but the casino allowed withdrawing only 50 thousand dollars. The assistant used money to gamble and won 15,000 dollars. Then the casino allowed him to withdraw the remainder of funds and redeem them for cash. Then the funds were transferred to numerous bank accounts around the world. A certain percentage was transferred to a foreign agent of a Las Vegas casino, who kept money in a safe deposit box for valuables in the main office of one of the largest banks in Tokyo. The head of the firm used to play in casinos of Las Vegas as the VIP client. While he was playing in the room for VIP clients, he never made big bets. Shortly after the game he quickly redeemed chips for dollars. His assistants also visited some casinos in Las Vegas, redeeming chips for cash.

Indicators of the Use of Casino Accounts to Launder Money:

• The frequent cases of transfer of cash, bank cheques, and funds received by electronic transfer to the casino accounts.
• Funds are withdrawn soon after the replenishment of the account.
• High activity on accounts without the participation in gambling.
• Operations on accounts are carried out by those who are not their owners.
• Funds are transferred from the account of a country that is considered to be unstable.
• Huge amounts are transferred and deposited into accounts from the unknown sources.
• The transfer of funds to the account of third parties.
• The transfer of funds from the casino account to the account of the charity fund.
• Many individual transfer funds to the same account.
• Structuring while making a deposit, withdrawing funds, or while making an electronic transfer.
• The use of third deposits for electronic transfers.
• The use of the third party to deposit huge amounts into the account.
• The use of third parties, such as accountants and lawyers, to complete transactions.
• The use of several names for such activities.
• The use of casino accounts as a savings account.
• Activities are inconsistent with the customer's profile.
• The transfer of funds from accounts of the company to casino accounts.
• The use of false or stolen identity documents for opening casino accounts.
• The customer's name and the name of the account owner are not the same.
• Opposite transactions carried out with funds that were transferred from one country to another. Then these funds were in part returned to the first country.
• The problems that may arise during the verification of a customer: refusal, false documents, one-time documents, or documents for tourists.
• Requests about the balance of accounts from politicians.

To be continued...