[Federal Register Volume 61, Number 37 (Friday, February 23, 1996)]
[Rules and Regulations]
[Pages 7054-7056]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-3888]
[[Page 7053]]
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Part II
Department of the Treasury
_______________________________________________________________________
31 CFR Part 103
Amendments to the Bank Secrecy Act; Regulations Regarding Tribal
Gaming; Final Rule and application to Tribal Gaming; Final Rule and
Application to Tribal Casinos; Notice
Federal Register / Vol. 61, No. 37 / Friday, February 23, 1996 /
Rules and Regulations
[[Page 7054]]
DEPARTMENT OF THE TREASURY
31 CFR PART 103
RIN 1506-AAO7
Amendments to the Bank Secrecy Act; Regulations Regarding Tribal
Gaming
AGENCY: Financial Crimes Enforcement Network, Treasury.
ACTION: Final rule.
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SUMMARY: The Financial Crimes Enforcement Network (``FinCEN'') is
amending the regulations implementing the Bank Secrecy Act to include
casinos operated by or on behalf of Indian tribes within the definition
of financial institution set forth in those regulations. The amendments
extend the reporting and recordkeeping requirements and anti-money
laundering safeguards of the Bank Secrecy Act to tribal casinos.
EFFECTIVE DATE: The final rule is effective August 1, 1996.
FOR FURTHER INFORMATION CONTACT: Leonard C. Senia, Senior Financial
Enforcement Officer, Office of Regulatory Policy and Enforcement,
FinCEN, (703) 905-3931, or Joseph M. Myers, Attorney-Advisor, Office of
Legal Counsel, FinCEN, (703) 905-3590.
SUPPLEMENTARY INFORMATION:
Background
This final rule amends the regulations implementing the statute
popularly known as the ``Bank Secrecy Act,'' Pub. L. 91-508, as
amended, codified at 12 U.S.C. 1829b, 12 U.S.C. 1951-1959, and 31
U.S.C. 5311-5330. The final rule: (i) amends the definition of
``casino'' in 31 CFR 103.11(n)(7)(i) to include explicitly casinos
operating on Indian lands; (ii) amends the regulatory definitions of
``person'' and ``United States'' in 31 CFR 103.11(z) and 103.11(nn),
respectively; (iii) adds definitions of the terms ``Indian Gaming
Regulatory Act,'' ``State,'' and ``Territories and Insular
Possessions'' in 31 CFR 103.11(rr), 103.11(ss), and 103.11(tt),
respectively; and (iv) makes a conforming change to the recordkeeping
and retention requirements of 31 CFR 103.36(b)(7) to reflect the
regulatory system contemplated by the Indian Gaming Regulatory Act
(IGRA). The amendments reflect the terms of section 409 of the Money
Laundering Suppression Act of 1994 (the ``MLSA''), Title IV of the
Riegle Community Development and Regulatory Improvement Act of 1994,
Pub. L. 103-325.
FinCEN published a notice of proposed rulemaking (the ``Notice'')
in the Federal Register on August 3, 1995 (60 FR 39665) proposing the
amendments to the Bank Secrecy Act regulations that are the subject of
this final rule. Only four comments were submitted in response to the
Notice. These comments were submitted, respectively, by a staff
attorney at the National Indian Gaming Commission, by the governments
of two states within which tribal lands are located, and by one tribal
casino.
The only substantive change made to the rule is the postponement of
the rule's effective date until August 1, 1996. FinCEN believes that
the delayed effective date will provide tribes and tribal casino
management companies with a reasonable amount of time to implement
operating and staff training programs for Bank Secrecy Act compliance.
In this connection, FinCEN is publishing in today's Federal Register a
notice of a tribal casino Bank Secrecy Act compliance conference to be
held in April of this year.
Explanation of Provisions
A. Definition of ``Casino''
The definition of casino is amended to include explicitly casinos
operating on Indian lands. Under this amendment, the term ``casino''
now includes any casino duly licensed or authorized to do business
under the IGRA or other federal, state, or tribal law or arrangement
affecting Indian lands.
The general need for and appropriateness of treatment of casinos as
financial institutions for purposes of the Bank Secrecy Act have been
accepted since the mid-1980s. The Department of the Treasury has made
clear the need to prevent casinos, which offer to their customers a
variety of financial services such as deposit or credit accounts, check
cashing and currency exchange services, from being used as a vehicle
for money laundering. The potential risk of money laundering in casinos
on Indian lands is not any less than the risk of money laundering in
state-licensed casinos. Thus, this final rule makes casinos operating
on Indian lands subject to the full set of reporting and recordkeeping
provisions, and anti-money laundering safeguards, of the Bank Secrecy
Act to which other casinos in the United States are subject.
The amendments make it clear that the term ``casino'', as applied
to tribal lands, includes not only tribal casinos created in conformity
with IGRA. The term also includes casinos operating on Indian lands
under a view that compliance with the Indian Gaming Regulatory Act is
unnecessary or inconsistent with inherent tribal rights; such non-IGRA
sanctioned tribal casinos are not exempted from the terms of the Bank
Secrecy Act. In its comments, the State of California specifically
noted its approval of this language in the amendments, and cited the
fact that a significant number of casinos on Indian lands within its
borders were operating Class III gaming without the tribal-state
compact required by IGRA.
The other changes in the definition of casino are designed simply
to list explicitly the three classes of government authorities that can
authorize or license casinos subject to the Bank Secrecy Act. The
changes are intended neither to expand nor contract the coverage of the
Bank Secrecy Act to casinos operating under state authority or under
the authority of various United States territories or possessions.
Recognizing the need to proceed thoughtfully in adopting the rules
of the Bank Secrecy Act to the realities of the operation of casinos on
Indian lands, the Notice specifically sought comment about whether any
part of the Bank Secrecy Act applicable to casinos generally did not
accurately reflect the way tribal casinos operate. Few comments were
received on this issue; the comments that were received indicated that
tribal casinos operate similarly to non-tribal casinos, and that both
tribal and non-tribal casinos should be treated uniformly under the
Bank Secrecy Act.
The State of California commented that the term ``casino'' should
be defined to include Indian gaming establishments engaging in bingo,
lotteries, and pari-mutuel wagering. As outlined in the Notice, the
retention at this time of the term ``casino,'' rather than substitution
in 31 CFR 103.11(n)(7)(i) of the broader authorizing language of 31
U.S.C. 5312(a)(2)(X), is intentional. The Department of the Treasury
generally has sought to apply the Bank Secrecy Act to gaming
establishments that provide both gaming and an array of financial
services for their patrons. Activities such as bingo, lotteries, and
pari-mutuel wagering, are not generally offered in casino-like settings
and may create different problems for law enforcement, tax compliance,
and anti-money laundering programs than do full-scale casino
operations. Consequently, although the MLSA grants the Department of
the Treasury authority to extend the Bank Secrecy Act to the full range
of gaming establishments in the United States, FinCEN intends at this
time to concentrate on taking the initial step of extending the
existing Bank Secrecy Act structure to true casino-like establishments
operating on Indian
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lands. (Of course, a full-scale casino that happens to offer, inter
alia, pari-mutuel wagering, for example, is included within the
definition of ``casino'' with respect to all of its gaming activities.)
FinCEN also sought comment on how compliance by tribal casinos with
the requirements of the Bank Secrecy Act could best be examined and
enforced. Aside from a suggestion from the one tribal casino commenter
that external auditors were best suited to examine for compliance with
the Bank Secrecy Act, FinCEN received no other responses to this
question. The Internal Revenue Service is generally responsible for
auditing the Bank Secrecy Act compliance by casinos and has full
authority to audit such compliance by tribal casinos.
FinCEN also received comments seeking: (i) clarification of the
terms ``gross annual gaming revenue'' and ``gaming day'' in the casino
definition; (ii) an increase in the $1 million threshold in the
definition of casino; and (iii) reconsideration of certain casino
recordkeeping and verification rules withdrawn on March 12, 1993.
Because the scope of these comments goes beyond the scope of the
Notice, these comments are not addressed in this final rule.
As outlined in the Notice, the uniform treatment of state-licensed
and tribal casinos is a necessary prelude to the consideration of
broader issues affecting the application of the BSA to the entire
gaming industry. Those issues include whether clarifications should be
made in the definition of casino as new types of gaming develop (or
whether the term ``casino'' is sufficiently elastic to encompass such
developments 1), whether special rules should be formulated for
small casinos, and how best to implement with respect to casinos the
suspicious transaction reporting and anti-money laundering program
rules authorized in the amendments made to the Bank Secrecy Act by the
Annunzio-Wylie Anti-Money Laundering Act of 1992, Title XV of the
Housing and Community Development Act of 1992, Pub. L. 102-550, and by
the Money Laundering Suppression Act.
\1\ For example, an establishment that claimed to be a gambling
``club'' rather than a casino because it simply offered customers an
opportunity to gamble with one another, but that in practice funded
certain customers so that other customers were in effect gambling
against ``house'' money, and that offered its customers financial
services of various kinds, could well be a casino under present law.
If so, such a ``club'' would violate the Bank Secrecy Act now (that
is, without the need for further regulatory changes) if it failed to
report currency transactions in excess of $10,000, or allowed a
customer to deposit funds in a player bank account without requiring
customer identifying information.
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B. Conforming Changes in ``Meaning of Terms''
Changes are made to the definition of ``person'' and ``United
States'' in 31 CFR 103.11 (z) and (nn), and definitions of the terms
``Indian Gaming Regulatory Act'', ``State'', and ``Territories and
Insular Possessions'' are added to Sec. 103.11 as new paragraphs (rr),
(ss), and (tt), respectively. These definitions are added as required
corollaries to the new casino definition.
C. Additions to Record Maintenance Requirements
Conforming language is added to the requirement of 31 CFR
103.36(b)(7) that casinos retain all records, documents, or manuals
required to be maintained under state and local laws or regulations.
The new language recognizes that a casino on tribal lands will retain
certain documents because tribal rules or tribal-state compacts, rather
than state regulation, require their retention. The amendment simply
conforms the recordkeeping and retention requirements to this fact.
D. Effective Date
Compliance with the reporting and recordkeeping provisions, and
anti-money laundering safeguards of the Bank Secrecy Act, will depend
in large part on the operating and staff training programs put in place
at tribal casinos. The amendments made by the final rule will become
effective on August 1, 1996, to allow tribes and their management
enterprises a reasonable amount of time to train their staff members
and to establish programs designed to comply with the requirements of
the Bank Secrecy Act. As noted above, FinCEN also is publishing in
today's Federal Register a notice of a tribal casino compliance
conference to be held in April of this year.
Special Analyses
It has been determined that this final rule (i) is not subject to
the ``budgetary impact statement'' requirement of section 202 of the
Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) and (ii) is not a
significant regulatory action as defined in Executive Order 12866. It
is not anticipated that this final rule will have an annual effect on
the economy of $100 million or more. Nor will it affect adversely in a
material way the economy, a sector of the economy, productivity,
competition, jobs, the environment, public health or safety, or state,
local, or tribal governments or communities. The final rule is neither
inconsistent with, nor does it interfere with, actions taken or planned
by other agencies. Finally, the final rule raises no novel legal or
policy issues.
Because this final rule affects only Indian gaming establishments
with gross annual gaming revenues in excess of $1 million, it is hereby
certified that this final rule is not likely to have a significant
economic impact on a substantial number of small entities.
List of Subjects in 31 CFR Part 103
Administrative practice and procedure, Authority delegations
(Government agencies), Banks, banking, Currency, Foreign banking,
Investigations, Law enforcement, Reporting and recordkeeping
requirements, Taxes.
Adoption of Amendments to the Regulations
For the reasons set forth above in the preamble, 31 CFR Part 103 is
amended as follows:
PART 103--FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND
FOREIGN 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. 5311-5330.
2. Section 103.11 as amended at 60 FR 228, 60 FR 44144, and 61 FR
4331 effective April 1, 1996, is further amended by revising paragraphs
(n)(7)(i), (z), and (nn), and adding paragraphs (rr), (ss), and (tt) to
read as follows:
Sec. 103.11 Meaning of terms.
* * * * *
(n) * * *
(7)(i) Casino. A casino or gambling casino that: Is duly licensed
or authorized to do business as such in the United States, whether
under the laws of a State or of a Territory or Insular Possession of
the United States, or under the Indian Gaming Regulatory Act or other
federal, state, or tribal law or arrangement affecting Indian lands
(including, without limitation, a casino operating on the assumption or
under the view that no such authorization is required for casino
operation on Indian lands); and has gross annual gaming revenue in
excess of $1 million. The term includes the principal headquarters and
every domestic branch or place of business of the casino.
* * * * *
(z) Person. An individual, a corporation, a partnership, a trust or
estate, a joint stock company, an
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association, a syndicate, joint venture, or other unincorporated
organization or group, an Indian Tribe (as that term is defined in the
Indian Gaming Regulatory Act), and all entities cognizable as legal
personalities.
* * * * *
(nn) United States. The States of the United States, the District
of Columbia, the Indian lands (as that term is defined in the Indian
Gaming Regulatory Act), and the Territories and Insular Possessions of
the United States.
* * * * *
(rr) Indian Gaming Regulatory Act. The Indian Gaming Regulatory Act
of 1988, codified at 25 U.S.C. 2701-2721 and 18 U.S.C. 1166-68.
(ss) State. The States of the United States and, wherever necessary
to carry out the provisions of this part, the District of Columbia.
(tt) Territories and Insular Possessions. The Commonwealth of
Puerto Rico, the United States Virgin Islands, Guam, the Commonwealth
of the Northern Mariana Islands, and all other territories and
possessions of the United States other than the Indian lands and the
District of Columbia.
Sec. 103.36 [Amended]
3. Section 103.36(b)(7) is amended by adding after the words
``state and local laws or regulations'' the words ``, regulations of
any governing Indian tribe or tribal government, or terms of (or any
regulations issued under) any Tribal-State compacts entered into
pursuant to the Indian Gaming Regulatory Act, with respect to the
casino in question''.
Dated: February 14, 1996.
Stanley E. Morris,
Director, Financial Crimes Enforcement Network.
[FR Doc. 96-3888 Filed 2-22-96; 8:45 am]
BILLING CODE 4820-03-P
