Finance: BSA Title 31 – A Collaborative Effort

by Joe H. Smith

On December 10, 2020, Kenneth A. Blanco, Director, FinCEN, gave a speech at a Financial Crimes Enforcement Conference in which he encouraged financial institutions to utilize the 314(b)-information sharing program. He stated, “Information sharing among financial institutions through 314(b) is critical to identifying, reporting, and preventing crime and bad acts.” Furthermore, the Director announced the issuance of additional guidance (FinCEN Fact Sheet 12/2020) intended to clarify the circumstances where 314(b) applies in hopes of enhancing participation. The guidance noted that voluntary sharing is helpful to enhancing compliance with anti-money Laundering (AML) and terrorist financing requirements, most notably:

• Gathering info on customers or transactions.

• Shedding light upon overall financial trails.

• Building a more comprehensive picture of a customer’s activities.

• Alerting other participating financial institutions to customers’ suspicious activities.

• Facilitating the filing of more comprehensive Suspicious Activity Reports (SARs).

• Aiding in the detection of money-laundering and

terrorist financing schemes.

• Facilitating more efficient and reliable SAR reporting decisions. (Issue 23 of the SAR Activity Review-Trends, Tips & Issues)

The guidance clarified that casinos and card clubs are subject to the AML program requirement, and any associations of them are eligible to share information under Section 314(b). Accordingly, under the safe harbor provisions, information may be shared regarding individuals, entities, and organizations for purposes of identifying, and reporting activities that may involve possible terrorist activity or money laundering. The participants need not have information directly related to proceeds of a specified unlawful activity or transactions involving money laundering, nor is a conclusive determination necessary that the activity is suspicious. Instead, it is sufficient to have only a reasonable basis to believe the information relates to activities potentially involving money laundering or terrorist activity, actual or attempted. Whenever a SAR narrative has benefited from shared information, it should so note; however, disclosure of information revealing the existence of a SAR is precluded, although participants may work together to file joint SARs. (SAR Confidentiality Standard 31 CFR 1020.320)

Within tribal gaming, many associations have been formed. Some are defined by a state jurisdiction and others a common market area. Generally, their meetings represent a time to share training and discuss issues of mutual interest. However, it has been the exception for associations to enter into information sharing arrangements under Section 314(b). In part, this has resulted from a lack of clarity as to whether an association had to be a defined financial institution. The most recent guidance has addressed this issue by explicitly stating that “FinCEN does not require the organization that forms and operates an association of financial institutions…to itself be a regulated financial institution under the BSA and its implementing regulations.” Of course, the association must conform their membership and activities to the requirements of Section 314(b).

Those that have devoted decades to the gaming industry will likely acknowledge the challenges of change risk management, whether the change is purposeful or unexpected. Predicting, understanding, and managing the consequences of change can be a highly speculative exercise. Case in point, the pandemic has been a wrecking ball to this industry. Institutional knowledge has suffered because those that can retire have done so. Due to staff shortages, some people are put into positions they are minimally qualified for, with others promoted before they are ready. The outcome has been a weakening of the control environment and elevated vulnerability to the occurrence of irregularities.

The confiscation of counterfeit currency is a daily occurrence for most casinos. Likewise, the detection of patrons working the gaming machines to launder up bills has become a troublesome nuisance. Counterfeit checks, stolen credit cards, and false identification are costing operations dearly. Finally, the cybercriminal has benefited greatly from the state of flux created by the virus. Gaming has been victimized in the millions by schemes limited only by the creativity and tenacity of the perp. Operators and regulators need to be equally persistent in their pursuit of measures to mitigate the risk posed by this unexpected change to the way we have conducted business for decades. Section 314(b) offers an opportunity for gaming operations to share information about money laundering activities initiated by persons of nefarious intent. Participation in the information sharing program facilitates compliance with AML regulations and the detection and deterrence of criminal behavior in and to the enterprise.

In satisfying the requirements to benefit from the 314(b) safe harbor protection, an association must do the following (FinCEN Section 314b):

• Financial institutions and associations must register with FinCEN’s Secure Information Sharing System.

• Prior to sharing information, steps must be initiated to confirm the participants are also 314(b) registrants.

• Establish procedures to safeguard shared information and use it for appropriate purposes.

For additional information, a detailed user guide is available in FinCEN’s Secure Information Sharing System.

Joe H. Smith, CPA, CFE, CFF, CGAP, is a Senior Consultant for REDW, LLC and Commissioner for the Picayune Rancheria of the Chukchansi Indians Tribal Gaming Commission. He can be reached by calling (503) 314-2009 or email