Florida DBPR Anti-Money Laundering Conference

1001 BRICKELL BAY DRIVE, 32ND FLOORMIAMI, FLORIDA 33131

T: 305.350.5690

ANDREW S. ITTLEMAN, ESQ., CAMS

aittleman@fuerstlaw.com

“The Importance of Management in the Casino AML Infrastructure”

Understanding Management’s Role in the Casino AML Environment Through the Eyes of the IRS, and Why it Makes Good Corporate Sense for Management to be

Alert and Involved

Session 2

Las Vegas Sands Corp. (LVS)Las Vegas Sands Corp. (LVS)

Las Vegas Sands Corp.’s Ongoing Investigations

1. Foreign Corrupt Practices Act (FCPA): DOJ and SEC investigating allegations of bribery related to Sands China Ltd.

Las Vegas Sands Corp.’s Ongoing Investigations

2. Money Laundering: DOJ and Grand Jury Investigating Allegations of Money Laundering, Violations of Title 31

Related to:United States v. Ausaf Umar SiddiquiUnited States v. Zhenli Ye Gon

Other Noteworthy Money Laundering Cases

Anti-Money Laundering Programs for Casinos

31 C.F.R. § 103.64: Compliance Programs for Casinos should include, at a minimum:

i. A system of internal controls;ii. Internal and/or external independent testing for compliance;iii. Training of casino personnel; andiv. An “individual or individuals” to assure day to day compliance.

“Off the Shelf” programs will not suffice; instead, programs must “be commensurate with the money laundering and terrorist financing risks posed by the products and services provided by the casino…”

Program must actually be implemented.

IRS BSA Examinations of Casinos

Components:1. Initial Interview(s)2. Systems analysis3. Review of recordkeeping

- CTRCs/SARCs- Cash-in/Cash-out- Surveillance logs- Casino accounting system

The “Initial” Interview

Announced via “appointment letter” (3494)

Letter requests the following personnel be present for the initial meeting:

a. Vice President Finance;b. Casino Controller;c. Casino Manager;d. Casino Cage Manager;e. Director of Information Systems;f. Title 31 Compliance Coordinator;g. “Any others directly involved in Title 31 Compliance”

The “Initial” Interview…continued

Types of questions:

History of the casino and plans for the future;

Gross gaming winnings per year;

What gambling activities are offered;

Number of cage, pit and slot areas;

Operating hours;

Employee practices (e.g. hours and whether employees may gamble on premises)

The “Initial” Interview…continued

Types of questions:

Additional Interviews

“The examination should include several interviews… Owners/operators, shareholders, directors, floor and cage managers, and employees responsible for preparing currency reports and securing and maintaining records pertaining to the reporting requirements under the BSA should be questioned as to their knowledge and training of the BSA recordkeeping and reporting violations.

Knowledge is one of the elements needed to prove willfulness with respect to a violation of the regulations.”

However, lack of knowledge and training is no defense.

Organizational Structure of Casino

Note:Most Currency transactions between the casino and its customers take place at either the gaming tables on the casino floor or the front windows at the casino cage.

Variety of Casino Managers

Casino Manager (manager of casino floor)Pit boss (supervisory authority over pit)Floor person (supervisory authority over particular table(s))Room managers (Keno, Bingo, Poker, etc.)Casino cage manager(s)

Variety of Casino Managers

BSA/AML Information Flow

Board of Directors

BSA/AML Compliance Department

Employees(dealers, cashiers/tellers, pit clerks)

Management

1. Preserves the integrity of the casino’s gambling operation;- Ensures the employees are following Casino’s

internal gaming policies;- Ensures the employees are being vigilant for

suspicious, unlawful activity.

2. Shields the casino from corporate liability;3. Shields the board from individual liability.

BSA/AML Informational Flow

Compare Sands to United States v. Wachovia: • Was the Sands compliance program sufficient?

Review the program to determine if it is “commensurate with the money laundering and terrorist financing risks posed by the products provided by the casino…”

Not a strict liability standard.

May be pursued civilly and criminally.

How is Corporate Liability Established?

Criminal: 18 U.S.C. § 1956(a)(1)-(3)Government must establish knowledge that “the property involved in a financial transaction represents the proceeds of some form of unlawful activity,” and proof of conducting the transaction

How is Individual Liability Established?

“to conceal or disguise” the nature of the property or to “avoid a transaction reporting requirement under State or Federal law…”

Shareholder derivative context: Negligent oversight and breach of fiduciary duty:

e.g. Stone v. Ritter, 911 A.2d 362 (Del. 2006); See also Sheldon Adelson Shareholder Derivative Litigation

– Derivative plaintiff must show either (1) that the directors knew or (2) should have known that violations of law were occurring and, in either event, (3) that the directors took no steps in a good faith effort to prevent or remedy that situation, and (4) that such failure proximately resulted in the losses complained of...

– These types of allegations could be that the company lacked an audit committee, or that the committee only met sporadically.

How is Individual Liability Established?…continued

BSA/AML Information Flow

Board of Directors

BSA/AML Compliance Department

Employees(dealers, cashiers/tellers, pit clerks)

Management

1001 BRICKELL BAY DRIVE, 32ND FLOORMIAMI, FLORIDA 33131

T: 305.350.5690

ANDREW S. ITTLEMAN, ESQ., CAMS

aittleman@fuerstlaw.com