Department of Justice Settles with Las Vegas Casino for $130 Million | Pillsbury Winthrop Shaw Pittman LLP

The settlement is the latest example of the agency’s enhanced criminal enforcement of money transmitting business and international money-laundering laws.

Takeaways

• The recent settlement is significant both in terms of its amount and the breadth and complexity of the alleged money transfers, including transfers connected to mainland China.
• This increased criminal enforcement activity emphasizes the continued need to conduct due diligence on agents, brokers and other intermediaries who assist with the international transfer of funds into the United States.
• The punishment for violations of these criminal statutes can include imprisonment, fines and criminal forfeiture.

The Department of Justice (DOJ), through the U.S. Attorney’s Office (USAO) for the Southern District of California, recently announced a non-prosecution agreement with a Las Vegas casino, which forfeited over $130 million under the agreement. The agreement settled criminal allegations that the casino conspired with unlicensed money transmitting businesses (MTBs) worldwide to transfer funds for its financial benefit. This announcement is the latest example of the DOJ’s expanding focus on alleged money-laundering activities involving MTBs and international transfers of funds, particularly transfers connected with mainland China and mainland Chinese-related criminal activity.

MTB-Gaming Investigation Settlement
The DOJ news release did not attach the agreement itself but did identify various categories of activity that had been under investigation. First, the USAO alleged that the casino contracted with third parties acting as unlicensed MTBs to recruit foreign gamblers. Those third parties transferred the funds of the gaming customers through intermediary companies, accounts and other third-party nominees in Latin America into an account for the casino in the United States.

Second, the USAO alleged unlicensed transfers through individuals, referred to in Chinese as “ren tou” (人头), who purchased chips at the casino and gambled as a proxy for another person. Third, the USAO alleged use of a method to make a sum of U.S. dollars available in the United States for a casino patron, who would then make an equivalent value of foreign currency available overseas. (This method is similar to what is sometimes referred to as a “hawala”; see, United States v. Singh, 995 F.3d 1069, 1073 (9th Cir. 2021).) The DOJ release also described other examples involving transfers for patrons whose activity should have resulted in the filing of Suspicious Activity Reports under the Bank Secrecy Act and transactions for an individual who had been convicted in China for crimes that included conducting unauthorized monetary transactions.

A related corporate filing stated the investigation concerned transactions at the casino relating to foreign patrons facilitated by unlicensed MTBs in violation of 18 U.S.C. § 1960. The filing also stated that the agreement resolved compliance issues under that statute and the Bank Secrecy Act. The USAO news release also identified an agent who allegedly controlled unlicensed MTBs as part of the first category of activity. Court records show that the same USAO prosecuted that agent in 2022 for international money-laundering under 18 U.S.C. § 1956(a)(2)(A). That agent allegedly operated an unlicensed MTB in 15 foreign countries from 2012 to 2020. The agent’s activities allegedly circumvented monetary transfer and reporting requirements in the United States and other foreign countries, including Argentina’s so-called “Cepo Cambiario” restrictions. (That individual entered into a deferred prosecution agreement, and the charges have since been dismissed.)

The Broader Context
The recent settlement is significant both in terms of its amount and the breadth and complexity of the alleged money transfers. This matter should also be viewed in the context of the DOJ’s continued interest in activity related to China, including for criminal trade secret theft, Foreign Agents Registration Act and fraud violations. In the context of financial investigations, the DOJ has identified international financial transfers into the United States from the greater China region, given that these transfers often must be made through intermediaries in light of China’s limitation of outbound foreign currency transfers to $50,000 annually. In April of this year, the USAO for the Central District of California filed charges that alleged that members and associates of a Mexican drug cartel patronized Chinese underground banking organizations and unlicensed MTBs to launder drug proceeds into the United States. U.S. v. Martinez-Reyes, et al., No. 2:23-cr-524(A)-DMG (C.D. Cal.). This trend is clearly not limited to the United States—just last month, 7 individuals were handed sentences in the United Kingdom, ranging from 11 months to 12 years, for operating an undercover £55M money-laundering ring aimed at international university students seeking to bypass China’s $50,000 outbound foreign currency limit. Similarly, in August 2023, a group of 10 individuals from Fujian province in China were arrested in the largest money-laundering case in Singapore—authorities seized and froze more than S$3 billion worth of assets from the group, which were derived from illegal remote gambling activities targeting foreign nationals.

That USAO, as well as USAOs in other parts of the country, have also brought charges against individuals in the United States who have allegedly coordinated the collection of funds—including through cryptocurrency—transferred by victims of so-called “pig butchering” schemes, which are typically romance or investment schemes perpetrated by individuals overseas against victims in the United States These efforts have led to the formation of a law enforcement working group that is focusing on these schemes, consisting of over 15 federal agencies, led by the DOJ and the Commodity Futures Trading Commission.

This increased criminal enforcement activity emphasizes the continued need to conduct due diligence on agents, brokers and other intermediaries who assist with the international transfer of funds in the United States. The MTB regulatory requirements are broad; the prohibition under 18 U.S.C. § 1960 extends to the following acts: (1) operating in a state without an appropriate state money transmission license; (2) failing to comply with federal MTB registration requirements under the Bank Secrecy Act (which apply to several types of financial services businesses, including “money transmitters,” which are persons who provide money transmission services—defined as persons who receive currency, funds or other value and transmit it to another person or place—or are engaged in the transfer of funds); or (3) transporting or transmitting funds known to be derived from a criminal offense or intended to be used for unlawful activity. As the cases above show, there is also potential exposure for international money-laundering under 18 U.S.C. § 1956. The punishment for these criminal statutes can include imprisonment, fines and criminal forfeiture.

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