Gambling in American History

Gambling enterprises, both legal and illegal, have long been considered to be integrally involved with criminal elements in various ways. In recent decades, concerns have revolved around the use of casino organizations as banking institutions that could aid criminals in what is called money laundering. The Bank Secrecy Act of 1970, with amendments; the Money Laundering Act of 1986; and the Money Laundering Suppression Act of 1994 address the problem of money laundering.
Money laundering involves various activities. One is simply changing one set of cash bills for another set of cash bills. Many criminal enterprises rely upon patronage of ordinary people at the street level – purchasers of drugs, illegal bettors, customers of prostitutes. Such people pay for their products and services with small denomination billsones, fives, tens, and twenties. As a result, criminal enterprises have very large quantities of paper money. It is difficult to carry the money, and it is especially hard to transport the money outside of the country in order to put it into secret bank accounts in other countries. When a bank or a casino willingly changes many small bills for a few large bills, they may be laundering money for criminal elements.
Laundering also occurs when financial institutions convert the criminals’ cash deposits into different forms – traveler’s checks, cashier’s checks, or money orders. The institutions may also assist laundering efforts by initiating a series of wire transfers of money to foreign bank accounts or to other peoples’ accounts in a series of transactions that make it difficult for law enforcement to identify the true source of the money.
Casinos are also vulnerable for use by criminals who simply wish to establish a legitimate source for their funds so that they may use them openly. Theoretically, it would be very easy for a criminal to come to a casino, change cash into casino chips, wager with a confederate at roulette (one playing black, the other red), and then claim all the chips they end up with as income – keeping record only of their wins and not of their losses. If a casino would cooperate in such a ruse, the criminals would be very happy to let the casino have its 5 percent edge in the game (both players would of course lose when the roulette ball fell into the zero or double zero slot of the wheel.
In the case above, the gamblers (criminals) are happy to pay income tax on their winnings, freeing them from the fear of being subject to investigation from the Internal Revenue Service. The situation is even better in Canadian and European casinos, where no income tax is imposed upon winnings. All the “laundry” operation needs is a verification that the money was “won” at the casino. When I asked the manager of a large casino in Germany about the possibilities of money laundering in his casino, he smiled and quietly said, “that is a service we provide.” He was happy to have the player’s action, as the casino could not lose. Today, however, casinos in the United States can lose by laundering criminal money. They can be fined or closed down (Burbank 2000).
In 1970, Congress enacted the Bank Secrecy Act. Initially the act applied to traditional bank-type institutions only. Banks were required to report to the U.S. Treasury Department any single-day transactions that involved $10,000 in cash. The bank was required to be vigilant and to track smaller transactions to make sure that a single party was not violating the law through multiple transactions. In 1985, regulations of the Treasury Department extended the provisions of the act to the casino industry. Casinos with over $1 million in annual revenues had to abide by the reporting and other requirements. In 1986, the Money Laundering Act criminalized violations of the procedure. The act specified a very large number of criminal activities that generated money that would likely be laundered. If any person attempted to launder any such money through a bank or casino, that person would be committing a criminal offense. Anyone knowingly assisting such a person in moving that money would also be guilty of a criminal action. In 1994, the Money Laundering Suppression Act extended the provisions of the acts to Native American casinos.
The banks and other financial institutions, Native American casinos, and commercial casinos in all states except Nevada make reports to the U.S. Treasury Department. The state of Nevada made a plea to Treasury officials to allow state casino regulators to implement the requirements. Accordingly, Nevada gaming agents spend over 20,000 hours a year collecting reports, checking records, visiting casino cages, and investigating complaints regarding cash transactions. Nevada authorities have also levied much higher fines for violations of the procedures than have been levied elsewhere. One casino had to pay fines in excess of $1.5 million for multiple infractions discovered by state agents.
The casinos must track all gamblers to ensure that none is exchanging over $10,000 in a day without making a full report involving positive identification of the gambler. Reports must be given to authorities within fifteen days of the transaction. They must also keep records of every transaction over $3,000 so that they can later assess whether a single-day transaction of $10,000 has been made. The requirements apply to bringing cash into the casino for any reason—to buy chips, deposit money for later play, make cash wagers. They also apply to money coming out of the casino – as prizes, withdrawals from deposits, cashed checks. Nevada casinos are also required to report events involving suspicious activities by players or by employees.
The money laundering laws, as amended, require all casino organizations to conduct special training for all employees to ensure that they are familiar with reporting and recording requirements. They also must have an accounting plan to conduct the required activity.

Many Caribbean jurisdictions have casino gaming facilities. Lotteries are also in operation on larger islands that have major population concentrations. Casino gambling is offered in approximately twenty jurisdictions. Major events in the expansion of casinos in the region include the closing of casino operations in other places—a crackdown on illegal casinos in the United States in the 1950s, Castro’s Cuban revolution in 1959, London’s casino reforms in 1968. Each of the casino locations follows different regulations for casinos with different taxation structures and different enforcement policies. Overall, it might be suggested that there is considerable laxity in regulation. A tradition of laissez-faire oversight has been generated by the fact that casino gaming was, in several places, initiated by operators from other jurisdictions—such as Cuba and early Nevada—who had operated with limited enforcement in those jurisdictions. Also, the purpose of gaming in the Caribbean region has been to draw in tourists whose economic activity outside the casinos provided the greatest level of benefits to the jurisdiction—greater than could be provided by direct taxation. Casinos are seen as an added attraction that fills an entertainment void for the majority of tourists, particularly in evening hours. The tourists come for beach attractions and occupy daytime hours outside the casinos. The nature of their travels suggests that they have only limited hours for gaming activity. The relatively high expenses for hotel rooms and transportation also provide impediments to the development of the region as a place for mass crowds of gamblers.
Although efforts to establish casinos persist in the noncasino jurisdictions of the region, several factors seriously obstruct the opportunities for successful casinos. One factor is government stability. Financial institutions that are necessary for capital investments generally lack confidence in the island locations owing to traditional and ongoing political problems. As governments change, taxation policies also change, adding to the instability of business conditions. A second problem is that most of the jurisdictions do not have formal specialized gaming control boards. In most cases, a minister of finance oversees gambling along with his or her other duties. Without specialized government regulation, casino management controls the honesty of games. The managers also control the size of the bank—how much money they have on hand. Cases of cheating against the players or failing to pay off wins have occurred. A third difficulty arises from a lack of a coherent policy on development of the casino industry. Governments (or politicians) may greedily desire the fees that come with licenses for casinos, and accordingly, they may license too many facilities. Markets can be saturated, making profits very difficult for most casinos.
Several of the island nations are newly independent, and as such, the local populations resent the notion of having foreign entrepreneurs on their soil. They may resent any suggestions that the casino operators offer regarding the manner in which the casino conducts business. This situation has an impact on the labor forces available for the resorts. Jurisdictions may require that hires be taken from a native workforce that might be totally inadequate for the tasks at hand. Many of the populations have been agriculturally based, and commercial work habits, such as following daily work schedules, have been lacking. This means that the casinos have to engage in conducting long training sessions. Also, it may be very difficult for a casino operated by “foreigners” to fire or discipline local workers if they are inefficient or even if they are dishonest. The concept of manana has become very much a part of some operations, causing customer service goals to trail the recreational interests of the employees. Sometimes resentment against foreign casino owners is transformed into resentment against the customers.

El Rancho Casino, Port-au-Prince, Haiti.

Another factor that causes some difficulties to gaming operatives in the Caribbean region is currency exchange. This is usually overcome by having all gambling transactions conducted in dollars. Problems may then be posed by government policies restricting exportation of dollars (either in player wins or owner’s profits). Import duties can be overwhelming to the casinos during construction and furnishing phases of start-ups.
The casinos encounter marketing problems, as costs can be very high. The costs of travel are high owing to a lack of direct flights into major U.S. cities; all tourist products are expensive, as they must be imported.  Moreover, tourism is seasonal in all the jurisdictions. One additional seasonal difficulty is presented by severe (and potentially catastrophic) weather at the end of the summer season each year. The weather problems only exacerbate the inadequacies of island infrastructure—airports, roads, water, and power supplies.
All the above factors make casino gambling a risky commercial business in most of the Caribbean region. Nonetheless, many operators seem willing to give gambling a try in most places where it is legal. One exception seems to be the Virgin Islands, which legalized casinos as a result of an election in 1995. No company has presented an application for a license in this new “wide-open” venue. The intervening years have witnessed two major hurricanes that have dampened investor optimism.
The Virgin Islands are at the eastern end of the Greater Antilles. On the western end, Cuba has no casinos, and Jamaica has permitted slot machine gaming but has resisted other casino gaming. Haiti has had several casinos, but severe political turmoil culminating in a U.S. military invasion and occupation in 1994 has effectively ended casino operations. There is some effective casino gaming in both Puerto Rico and the Dominican Republic. To the north of the Greater Antilles (technically outside of the Caribbean basin), the Bahamas have some profitable operations as well. Also to the north, Grand Turks Islands and the Caicos Islands have one small casino in a resort hotel. Most of the islands in the Caribbean region welcome operators of Internet gaming beamed toward the United States and focusing upon gambling on sports events.
In the Lesser Antilles, the Leeward Islands of St. Martin, St. Kitts (formerly St. Christopher)–Nevis, and Antigua and Barbuda all have casinos. St. Martin is a divided island, one-half being a subprefecture under French control; the other part—the Netherlands Antilles—is under control of The Hague.  The Windward Islands of Martinique, Saint Vincent, Saint Lucia, and Guadeloupe have casino gaming, as do each of the “ABC” islands in the south Caribbean—Aruba, Curacao, and Bonaire.
There have been unsuccessful efforts to place casinos on other island nations and dependencies of the Caribbean, including Trinidad and Tobago, Barbados, the Cayman Islands, the Grenadines, and Grenada. Either investors with ample resources to make it all work would not step forth (considering the multiple disadvantages listed above), or the governments could not be persuaded that they wanted this kind of foreign investment and potential foreign control over their island economies.