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Rod Smith

Money Laundering Rules Reviewed; Gaming Regulators Developing Reforms

14 August 2003

LAS VEGAS -- The Gaming Control Board is developing new procedures for tracking anti-money laundering reports, board Chairman Dennis Neilander said Wednesday.

The internal review and process for developing regulation reforms comes in the wake of the discovery earlier this year that two Nevada casino companies failed to make the required Regulation 6A filings.

MGM Mirage admitted in February its Mirage resort had failed to file almost 15,000 reports over an 89-week period between 2001 and 2003 and in June paid a $5 million civil fine imposed by the Nevada Gaming Commission

Neilander said a second civil case involving Station Casinos' failure to file hundreds of anti-money laundering reports is proceeding.

Also on Wednesday, District Judge Joseph Bonaventure rejected a negotiated settlement in the only criminal case stemming from the failure of The Mirage to file the required documents.

Liz Quillin, the chief deputy attorney general who is prosecuting the case, said Bonaventure balked at a provision of the settlement with former Mirage 6A compliance officer Chris Morishita because the charges had been pleaded down to a gross misdemeanor.

The criminal case was continued until Aug. 20, at which point "it is hoped" Bonaventure will accept the negotiated settlement, Quillin said.

If he still rejects the agreement, the parties will have to renegotiate something acceptable to the court or Bonaventure said the case will proceed to trial, Quillin said.

Morishita's attorney was unavailable for comment Wednesday.

Critics have argued that Regulation 6A reporting procedures in place since 1997 leave regulators vulnerable to not noticing if a casino fails to file the reports, which are used to track large cash transactions by individuals in casinos.

In 1997, reporting procedures were changed to require casinos to submit Regulation 6A reports directly to the Treasury Department's Financial Crime Network (FinCEN), which makes them available on the Internet to state regulators.

A FinCEN spokeswoman has said in the past that the Internal Revenue Service audits 6A reports submitted by Nevada casinos irregularly and relies on the state to enforce reporting requirements. FinCEN could not be reached for comment Wednesday.

Greg Gale, the chief auditor for the Gaming Control Board, said current state audit procedures will spot casinos' failure to file the reports, but it may take as long as three years to notice something is amiss.

Gaming Control Board attorney Jennifer Carvalho told the Nevada Gaming Commission in June during the hearing on The Mirage penalty that procedures in place before 1997 would have caught any such nonfilings much sooner.

Critics argue the state needs to conduct an investigation to determine how regulators missed two major incidents of reports not being filed and release a report on any reforms being undertaken.

Gaming expert and University of Nevada, Las Vegas, professor Bill Thompson said there "has to be a public accounting of what happened and what is being done to make sure it doesn't happen again.

"There's a void (between agency regulations), and someone needs to decide whether Nevada's going to police the reporting or if the Feds are going to do it," Thompson said.

In addition to completing the Station Casinos investigation, Neilander said the Gaming Control Board is also engaging in follow-up discussions with other licensees.

When that process is completed, "we will re-evaluate the procedures (for reviewing 6A filings)," he said.

Neilander confirmed that before 1997, the Gaming Control Board received 6A filings directly and said "it may make sense to go back and get the reports in a more timely fashion again."

Once the evaluation of procedures is complete, Neilander said his agency will propose amendments to Regulation 6A, and that part of the reform process will address the procedures that allowed the regulators to miss the nonfiling of reports for almost two years.

At UNLV, Thompson on Wednesday said, "This is the direction they should be taking. They need to review the loophole so there will be a very small likelihood this will ever happen again."