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Feds Probe Casino Money Laundering in Nevada

RENO, Nev. (CN) - Former Nevada Gaming Commissioner Michonne Ascuaga's resignation Friday amid a federal investigation of the Sparks Nugget casino illustrates the gaming industry's struggle with money laundering.

Ascuaga was CEO of the Sparks Nugget casino in Sparks for 16 years, until her family sold it to Wolfhound Holdings in 2013. Ascuaga's father, John, founded the casino in 1955, which now has 1,600 rooms and a 52,000-square-foot casino.

Gov. Brian Sandoval was not aware of the federal investigation when he appointed Ascuaga to the commission in April 2015, his spokeswoman Mari St. Martin told the Reno Gazette-Journal.

Although she was the casino's CEO for 16 years, Ascuaga said the federal probe never targeted her and she did not hide it from Sandoval or Wolfhound Holdings, which she says is responsible for settling any matters with federal investigators.

"The Sparks Nugget was informed in November 2013 by the Department of Treasury that the department was investigating whether it was appropriate to impose civil penalties for possible violations of anti-money laundering regulations," Ascuaga said in a statement.

"The matter arose from an audit-type examination conducted by the IRS at the casino in 2010. This was all disclosed immediately to the buyer."

Though Ascuaga says she was not targeted and did not hide the investigation by the Financial Crimes Enforcement Network (FinCEN), Wolfhound Holdings sued her family last week in Washoe County Court complaint, according to the Reno Gazette-Journal.

Wolfhound Holdings claims the Nugget was investigated for its record-keeping reporting policies and lax money laundering practices, according to the Gazette-Journal.

The U.S. Bank Secrecy Act defines casinos as financial institutions and requires them to report cash transactions of $10,000 or more, such as purchases of chips or winnings.

According to the American Gaming Association, the gambling industry's trade group, casinos also must file suspicious activity reports whenever they have reason to suspect a transaction of at least $5,000 may involve money obtained through criminal activity, might involve money laundering, is intended to avoid reporting requirements, has no business or apparent lawful purpose, or is inexplicable for a patron who normally would not be expected to make such a transaction.

Despite the investigation and her resignation last Friday amid the revelation of the money laundering investigation and concerns of potential conflicts of interest, Gov. Sandoval said Ascuaga served well during her short time on the Gaming Commission.

"I admire her and wish to recognize her family's long history as leaders in the gaming industry. I appreciate that she has put the credibility and reputation of the Gaming Commission first," Sandoval said in a statement.

The Nevada Legislature created the Gaming Commission in 1959. Its five members are appointed to four-year terms and regulate the state's gambling industry.

The American Gaming Association says the industry is doing its part to combat money laundering in casinos. In December it issued a 24-page report , "Best Practices for

Anti-Money Laundering Compliance," to try to "illicit activity from occurring at gaming properties," AGA president and CEO Geoff Freeman said.

"Our industry's commitment to a culture of compliance is stronger than ever," Freeman said in a statement. "We will continue to bolster these best practices, adapt to evolving threats and incorporate guidance from FinCEN and other regulators."

With 40 states allowing legal casino gambling, money laundering is a problem nationwide. The FBI in December raided two San Diego card rooms suspected of laundering $10 million for an illegal gambling ring, and Caesars Palace in September agreed to pay $9.5 million in fines after the FinCEN accused it of allowing "some of the most lucrative and riskiest financial transactions to go unreported," according to Las Vegas Business Press.

Las Vegas Sands paid $47.4 million in 2013 to end a two-year federal money laundering investigation of its Venetian and Palazzo casinos in Las Vegas and avoid potential criminal charges.

"For the first time, a casino has faced the very real possibility of a federal criminal case for failing to report suspicious financial transactions involving customers," U.S. Attorney Andre Birotte said at the time. "This is also the first time a casino has agreed to return those funds to the government."

Federal investigators told Las Vegas Review-Journal in 2013 that businessman Zhenli Ye Gon, who has dual citizenship in Mexico and China, transferred the funds to the Venetian in 2006 and 2007, and was facing drug trafficking charges in Mexico.

Ye Gon's brother, Ye Yong Ping, is serving a 25-year sentence for money laundering and manufacturing methamphetamine out of a laboratory in Toluca, Mexico.

When criminals use casinos to launder money, it's mostly done through gambling and entertainment spending, the Department of the Treasury said in its June 2015 National Money Laundering Risk Assessment report.

Because criminals who launder money at casinos appear to be doing the same thing as other patrons, the AGA says in its report that money laundering "can be confirmed or disproved only with information that ordinarily is unavailable to the casino, or by making inquiries of the patron."

To prevent such criminal activity, the federal government requires casinos to undertake measures to combat money laundering, including creating a system of internal controls, training casino staff, and ensuring compliance with state and federal financial reporting laws.

The AGA suggests casinos assess high-volume patrons who gamble large sums to determine whether they might be politically exposed, potential criminals, shady business people, or have criminal histories. Casinos also should arrange information-sharing systems to identify high-rollers and determine whether they may be laundering money, or are simply betting within their means.

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