Objectives, Scope, and Methodology

Our initial objectives were to determine (1) the extent of legalized gaming in the United States, (2) the currency transaction reporting requirements for casinos, (3) the currency transaction reporting requirements for tribal casinos, and (4) the level of enforcement efforts to ensure that casinos are complying with currency transaction reporting requirements. Indian gaming may generate large amounts of revenue for some of the tribes that own these operations. According to International Gaming and Wagering Business (various issues 1988 through 1995), wagering in nontribal casinos increased from about $117 billion in 1984 to about $368 billion in 1994. On the other hand, under BSA regulations, casinos are required to report all cash transactions over $10,000, including gaming winnings. Casinos must also obtain and verify additional identifying information about customers who wish to deposit funds, open an account, or establish a line of credit. Tribal casinos report such cash receipts over $10,000 on a Report of Cash Payments Over $10,000 Received in a Trade or Business, IRS Form 8300. Certain Tribal Casinos Are to Be Subject to BSA Currency Transaction Reporting Requirements

The Money Laundering Suppression Act of 1994 expanded the definition of a “financial institution” subject to BSA reporting requirements to include certain tribal casinos. IRS Examination Division and Criminal Investigation Division officials in New Orleans stated that they work together to ensure that casinos comply with BSA requirements, and that any potential money laundering would be investigated. (Both are prohibited transactions in amounts over $2,500.) The new BSA regulations that require casinos to take a more active role in ensuring their own compliance with BSA, as well as other money laundering prevention strategies such as Nevada’s prohibited transactions, could be positive steps toward compliance given the limited IRS resources for compliance reviews. 1. Casino gaming includes riverboats. 2. 3. 4.
Why GAO Did This Study

Pursuant to a congressional request, GAO examined: (1) the extent of legalized gaming in the United States; (2) currency transaction reporting requirements for casinos; (3) whether the same transaction reporting requirements apply to tribal casinos; and (4) the Internal Revenue Service's (IRS) efforts to ensure that casinos are complying with currency transaction reporting requirements.

What GAO Found

GAO found that: (1) 48 states permit some form of legalized gaming, including riverboat casino gaming and Indian gaming; (2) the amount of cash wagered annually in casinos has grown from $117 billion in 1984 to $407 billion in 1994; (3) the Bank Secrecy Act (BSA) requires casinos to report currency transactions over $10,000, obtain additional identifying information about customers opening a line of credit, and develop BSA compliance programs that meet certain requirements; (4) although Nevada casinos report customers that purchase chips in cash amounts over $10,000, they do not report customer identification information on verified winnings over $10,000 or cash exchanges involving small denomination bills over $2,500; (5) tribal casinos are not subject to BSA, but they must report currency transactions in accordance with the Internal Revenue Code (IRC) provision regarding cash received in a trade or business; (6) IRS has made efforts to educate tribal casino officials on IRC reporting requirements to ensure that they are complying with federal regulations; (7) IRS needs to use its enforcement resources to complete compliance reviews of other nonbank financial institutions and to ensure that individuals and businesses are complying with tax laws; and (8) new BSA regulations will relieve some of the pressure on IRS by requiring casinos to take a more active role in ensuring their own compliance with BSA.