Written By: Dan Pearson
August 16, 2014

Banks on Hot Seat due to Money Laundering

Banks are under extreme pressure from money laundering law enforcement. (Photo from Wikimedia)

Money laundering is one of the biggest crimes in the world. Described as the concealment of the actual source of money or funds obtained illegally, it can include suspicious transfers between foreign banks. Many, though, are using casinos for these dangerous transactions. How?

Usually, it goes like this: criminals open casino accounts (it does not really matter where, as long as the casino is willing to accept large amounts of money). They present themselves as big-time high rollers to ease the distrust and make casinos more accommodating to their needs and requests. Once they have established their “credibility,” they begin to transfer illegal money from their bank accounts (usually offshore) to their casino accounts. They then withdraw the funds or convert them into chips, play a bit, then convert most of these chips the real money.

Money laundering is a hot issue for many years simply because it can lead to the disintegration of the economy and society. The funds may be used by criminals for terrorism or illegal drugs as in the case in a lot of cities in Mexico. It may also be tapped to purchase equally illegal ammunition. Indirectly, a lot of money means power, and more power means significant control not only on certain individuals but also on more recognized institutions such as the government.

Thus, it is not surprising that the United States is doing everything it can in its power to curb money laundering. Aside from setting their sights on casino operations, they are also pressuring banks.

Before, banks can be likened to a silent observer. Although some illegal money passes them, more often than not, the fight is just between casinos and law enforcement. Lately, however, banks are feeling the heat from police power as they try to give more accountability to financial institutions. You may ask why, however. One of the obvious reasons is the confidentiality agreement that exists between clients and banks. Although banks and other financial institutions have to cooperate to authorities fully and thus share financial records of suspected criminals, they are sometimes torn between revealing everything or not.

How are banks coping? They are not excited, of course. First, they have to contend to hefty fines. A very recent example is with Standard Chartered PLC when its system used to check on potential money laundering schemes made an error, which could have compelled the bank to spend millions of dollars. For the law enforcement, it’s not impossible for banks to cough up at least $100 million. Last 2012, fines or penalties amounted to over $3 billion.

The pressure also means additional work for banks. Not only do they have to keep track of huge transactions, among their other important responsibilities, but they also have to conduct audits on their casino clients. They make sure these casinos operate with best practices against money laundering and, most of all, legitimate businesses.

Will these measures and mounting pressure end money laundering? We suspect it’s a no. It’s already ingrained in our culture. Launderers will always find a new way to bring in illegal money. Nevertheless, this step, although a hassle, to say the least, can significantly reduce the crime and give casinos a cleaner image.

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