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AML Summary


You may run a game room, bingo hall, or internet café, or you may simply have a few sweepstakes or skill game machines in operation at your bar/restaurant.  So, you ask, why should I care about anti-money laundering regulations?  Aren’t those meant for banks and stock brokers?

The truth is, if you are running sweepstakes, skill games, or contests, you may be acting as a financial institution.  Money comes in from the players, you hold it for them, money goes out when they decide to cash out.  In essence, this function of your business is not that different from banking or brokering stock.  So, if your business allows withdrawals or deposits into players’ accounts above certain dollar amount, the federal government is going to look at you as a financial institution and you need to be registered and have safeguards in play to guard against anti-money laundering.  Furthermore, even if your player deposits/withdrawals do not meet the federal threshold, you would be wise to have an anti-money laundering policy in place, because having one will be helpful with getting banks, PayPal, and other money-changers to work with you.

What is Money Laundering and How is it Regulated?

First, what is money laundering?  It is the way criminals and terrorists run illegally obtained cash through a business in order to convert it into some form of currency that is legitimate and traceable to a legal source—in other words, it’s how criminals hide their ill-gotten gains.  

Our federal government wants to prohibit this activity and be able to more easily track it when it does happen, and that is why Congress passed the Bank Secrecy Act.  The Act requires the Department of Treasury to oversee financial institutions to make sure criminals aren’t laundering money.  They do this by requiring financial institutions to register and requiring that those institutions file certain reports and keep certain records.

So, what are the “big steps” you need to worry about?

  1. Register as a Money Service Business (MSB)

Every financial institution needs to register with an entity called the Financial Crimes Enforcement Network (FinCEN).  FinCEN is a bureau within the Department of Treasury, and they’re tasked with safeguarding our financial system against money laundering and other financial crimes.

The federal code as an extensive section that defines what sort of organizations fall within the definition of “financial institution.”  Some operators will fall within this definition, and others will not.  Those who do fit within the definition, will be defined as a “Money Service Business” (MSB).  Here is how to tell if you qualify as an MSB:

  • If players have an account that can only be used at your store (i.e., it is not shared with multiple stores or locations) and you allow players to access funds in excess of $2,000 per day, you are an MSB and need to register. 
  • If players have an account that can only be used at your store and youdo not allow access to funds in excess of $2,000 per day, youare not an MSB anddo not need to register.
  • If players have accounts that can be used outside your store and you allow them to access funds in excess of $1,000 per day, you are an MSB and need to register.
  • If players have accounts that can be used outside your store and youdo not allow them to access funds in excess of $1,000 per day, youare not an MSB anddo not need to register.

Registration with FinCEN is done online through the BSA E-Filing System.  Here is the link: https://bsaefiling1.fincen.treas.gov/AddUser.  

You must register within 180 days from the date upon which your business is established.  Your registration must be renewed every two years.

  1. Create an Anti-Money Laundering (AML) Program

If you are an MSB and are required to register with FinCEN, then you are required to have an AML Program.  However, as noted above, even if you are not technically an MSB and do no register, it is a very good idea to have an AML Program.  Having such a program will make banks, PayPal, and other money-changers more willing to work with you.  This is because these organizations are watched closely by FinCEN and they want their customers to stay in compliance so that they are not accused of assisting in any wrong-doing.

This packet includes a simple template that can be used for your basic AML Program.  You should fill in the name of your organization, the “officer” or person who will run and oversee your program, the date of your program’s inception, etc.  But don’t just fill in the blanks and then throw your program into a file-folder.  It is important to read through the program to understand the different techniques you should be using to identify and know your customers, spot suspicious activity, file proper reports, keep good records, etc.  Then follow through by employing these techniques in your day-to-day operations.  Doing so will keep your business legitimate and professional.

  1. Designate an Officer in your Organization to run the AML Program

You should designate an officer to run and oversee your compliance program.  This could be one of the owners of your company or it could be an employee.  This person should familiarize himself/herself with the template program contained in this packet.  He/she should also work to stay abreast of the laws that regulate AML.  Finally, he/she should be able to implement and run a program designed to train any employees who will be handling your customers’ money so that those employees follow all the rules of your AML Program.

  1. Run an Annual “Check-Up” on your Program, to make sure it works

You are required to run an annual test on your program to determine if it is working properly and suspicious activity is being noticed and reported.  This can be done by an outside professional or by you or one of your employees; however, it must be done by someone other than the Officer designated to run your program.  The easiest way to run this testing is to have someone unknown to your employees come into your location and attempt to complete a transaction that should be “red flagged” and then see whether the employee(s) do what they are supposed to and flag the transaction.  If they do not, additional training and/or reminders may be required.