Has this ever happened to you? Maybe you took a trip to Vegas and had a very, very lucky day. Maybe you won a $5,000 jackpot in a casino when you played that morning, and then hit another big $5,000 win when you went back that afternoon. Sure, you got W2Gs to file at tax time — but did you know that isn’t the only report the Casino sent to the IRS about your play? Did you know they also sent the feds Form 8300, a Currency Transaction Report (CTR), used to alert the IRS to possible money laundering or criminal activity? Of course you didn’t know that. Casinos don’t tell their patrons when they file these forms. Most people don’t know anything about Form 8300 or even about Title 31 of the tax code that requires the casino to file it. Title 31, also called the Bank Secrecy Act, is the part of the code, amended by the Patriot Act in 2001, that deals with the movement of illicit cash into, out of, or through financial institutions. And if a casino or bank sends the Treasury one with your name on it, they won’t tell you they did. It’s a secret!
When Jill Waters was banned from Pauma Casino for life, the reason given by their gaming commission was her “intent to avoid tax reporting pursuant to Title 31”. Could this happen to you? Could you unknowingly trigger a Title 31 investigation by an act as simple and innocent as too large a buy-in or payout of casino chips at the blackjack tables or too big a jackpot win playing slots? When are these 8300 forms required, and what kind of information does the casino give the government on them?
Banks and financial institutions have been filing CTRs (Currency Transaction Reports), Form 8300, for customers making cash deposits of $10,000 or more since 1970, along with Suspicious Activity Reports (SARs) for any amount that might suggest money laundering, tax evasion, and other criminal or terrorist activities. You can view this form yourself on irs.gov HERE.
Since 1996 casinos with annual revenues greater than $1 million dollars have been defined as non-bank financial institutions and have been required to comply with all the requirements of this law and file CTRs. Two years later in 1998 the requirements to file this form were extended to card clubs. There are card clubs in Los Angles currently being investigated by a federal grand jury this summer for failing to comply with these Title 31 reporting requirements.
CTRs are required of “money handlers” like banks and casinos and car dealers who are paid $10,000 or more in cash for big purchases like automobiles. They are only required for large cash transactions. Credit cards and debit cards and checks don’t fall under that category. There’s a paper trail when you write a check or deposit one. Currency Transaction Reports tell the IRS about large cash dealings. They help IRS identify people who may have illegal income to hide. They often identify money launderers such as drug dealers or thieves or sports bookies taking illegal bets. They also direct the agency’s attention to honest business people who have done nothing wrong. And they also direct the IRS’s attention to gamblers with large bankrolls won or lost in the casinos who might not have gotten a W2G form for their winnings because they were playing table games, not slots. Not everyone who is the subject of a CTR has done anything illegal.
CTRs are not required if the cash transaction is less than $10,000. Often they are filed for lesser amounts, however. Box “b” at the top of the form is checked when the report is sent to the IRS if the transaction is under $10,000 but seems suspicious. These are called Suspicious Activity Reports (SAR). A cash transaction of $9,999 would be an example of a suspicious transaction as would two transactions of $5,000 each within a short period of time. SARs are currency reports that are not technically required to be filed because the $10,000 threshold is not met, but which are filed anyway because it looks like the depositor is attempting to structure the payment or deposit in a suspicious way to avoid the government’s knowledge and to avoid the CTR filing.
The bank or casino is not required to tell you — and will not tell you — a CTR is being filled out if you don’t ask. If you do ask, they may feel that inquiry is in itself suspicious and file one anyway. Not all cash transactions for large money amounts are indicative of illegal activity or unreported income. Not all trigger an investigation. If you have a small business such as a restaurant or bar, for instance, you easily could have over $10,000 in cash to deposit when you visit the bank with your receipts at the end of the day. But if you are a gambler, and the casino reports large bets or winnings of $10,000 or more on a CTR when you play its table games, be prepared to have IRS auditors review your tax returns and possibly ask you to explain where the money came from, where it went, and how much of it is shown on your tax return at the end of the year.
Title 31 regulations apply only to cash transactions of over $10,000: cash-in or cash-out. Cash-in transactions at a casino might include actions such as the purchase of chips, bets of currency, purchases of a casino’s checks, exchanges of currency for currency, including foreign currency — all for large amounts of cash, $10,000 or more.
Cash-out casino transactions might include actions such as redemption of chips, advances on any form of credit, payments on bets, cashing of large checks, reimbursements for customers travel and entertainment expenses by the casino— again totaling over $10,000.
Multiple currency transactions are treated as a single transaction if they total more than $10,000 during any gaming day. Casinos also file suspicious activity reports for lesser amounts when it appears a customer structured their transaction to avoid CTR reporting. For instance breaking a $12,000 cash transactions into 3 transactions of $4,000 would be reported as a suspicious activity. For this reason many casinos record transactions as low as $3,000 by a customer and track them to see if there are other actions taken that might cause the patron to reach the $10,000 threshold.
Minimal gaming is another type of suspicious activity relating to money laundering. In this case the patron puts large amounts of money in play, but gambles very little before cashing out. Money could be laundered by inserting currency into a slot machine or a change kiosk as well.
Suspicious activities can involve two or more individuals handling the same currency bankroll. This is referred to as “agent activity” by the casino. Agent activity is suspicious because it allows individuals to structure their transactions below the $10,000 that would require a CTR.
A CPA Joe Oprosko, claims in Indian Gaming on the web that a log is also kept for all cash-to-cash money exchanges in excess of $1,000, larger bills to smaller bills and vice versa. I was unaware of this, and have not yet found another source to confirm this,
In his article he also gives some real-life examples of money laundering that took place in casinos and were reported to the IRS Criminal Investigation Unit. One involved a major drug dealer who played $100 dollar slots, wagering hundreds of thousands of dollars in order to receive a casino check and W2G to legitimize his income. In another example, a number of customers all bought chips below the reporting threshold and then passed them on to a single individual who cashed them in and received a casino check triggering the filing of a CTR making the transaction seem legitimate. Over a 12 month period, he was named on CTRs totaling $1.1 million dollars paid out, but not one CTR for money paid in. There are many stories about money laundering HERE.
If you have been following the news about the indictment of Dennis Hastert accused of structured cash withdrawals from banks and then lying to federal investigators about its purpose to pay a former student he had abused, you have a timely example of these issues. You can read the June 9 report from the New York Times HERE.
To sum it up, lets go back to the Water’s sisters-in-law. They changed seats when they won their $2,040 jackpot and as a result were accused of evading taxes and were banned by the casino for life. Keep their story in mind when you gamble. Be aware that some casinos are so afraid of being fined for not complying with Title 31 requirements that they sometimes over react. And, most importantly, keep that $10,000 figure in mind and don’t do anything that might trigger a CTR or suspicious activity report if you can.
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