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how Ohio fights money laundering in casinos

Published on October 25, 2014, 4:32 pm

by Jeff Grant Twitter account Jeff Grant LinkedIn account

When laundry is dirty, it can be washed clean. When money is dirty, meaning it has been acquired through illegal means, it can also be washed clean. This is done through an illicit act called “money laundering.” Money laundering is a way for criminals to cover their guilty tracks and is, unfortunately, a common occurrence in casinos both in the U.S. and abroad.

Senators in Ohio are attempting to address this issue through a new bill. Ohio Senate Bill 141, presented to the Ohio Senate in summer 2013, would make certain activities associated with casino money laundering punishable crimes. If the bill passes, Ohio would be the first state in the U.S. to have a specific law linking money laundering to casinos.

Unofficial Votes for Senate Bill 141 (Jun 26, 2013)
Unofficial Votes for Senate Bill 141 (Jun 26, 2013)

Examples of How Dirty Cash is Laundered in a Casino

Cash that has been gained illegally, say through a drug deal, is dirty money. Guilty drug dealers understandably want to exchange their dirty bills for fresh ones as soon as possible. One way to do this is to visit a casino, exchange the cash for chips, play table games for a short while, then trade the chips back in for cash. Just like that, dirty money is transformed into clean, untraceable money and the drug dealer's trail is cleared.

Dirty money can also be laundered through the use of modern slot machines. Cash deposited into a machine is automatically converted into a ticket receipt. When the slot player quits, they take the receipt to a cashier or bill breaking center and exchange it for different, clean cash. Again, just like that, dirty money becomes suddenly clean and untraceable.

Why Criminals Use Casinos to Do Their Laundry

Casinos offer criminals a rather inconspicuous method of converting dirty money. It is a common occurrence for high rollers to carry large sums into a casino. No one bats an eye when hundreds of dollars are laid down on a blackjack table or when hundreds are claimed at the cashier's station. Unless a winning amount is high enough to warrant the completion of IRS tax forms, questions are never asked. In fact, an authority who pries a casino visitor for personal information could actually be sued in court for violation of personal privacy. Such prying, therefore, seldom occurs.

How the money laundering in casinos works
How the money laundering in casinos works

IRS Reporting Requirements

In the United States, different reporting requirements exist for different types of gambling:

  • At a horse track, a jackpot of $600 or more requires the fulfillment of a tax form.
  • On a slot machine, $1,200 is the magic number at which winnings must be reported to the IRS.
  • Keno winnings in excess of $1,500 must be reported.
  • Poker winnings in excess of $5,000 must be reported.

Because of these rather low financial ceilings, it would seem that criminals with thousands upon thousands of dirty dollars would have a difficult time going unnoticed in a casino setting. That's where “smurfing,” another tactic to cover guilty tracks, comes in.

Smurfing: Another Tactic to Cover Tracks

When a money launderer's “winnings” exceed the IRS limits for tax reporting, they may decide to use their criminal associates to help them break the cash into smaller chunks. This practice is known as "smurfing." Say a drug lord wants to launder $20,000 in dirty cash. He easily exchanges the money for chips, then disburses it in smaller amounts to 20 friends. Through smurfing, each friend escapes the casino unnoticed with $1,000 in fresh, clean money. No taxes are paid and no suspicions are aroused.

Why Ohio Casinos Have Been Turning a Blind Eye to Money Laundering

Money laundering is a federal offense in the U.S., but according to Matt Schuler of the Ohio Casino Control Commission, authorities in Ohio casinos are unable to do anything about it when they see it happen because state law does not address the activity. As Ohio becomes an increasingly viable competitor in the U.S. casino market, laundering becomes more of a concern for politicians in the state.

In 2009, Ohio erected its first in a series of four casinos: the Horseshoe in Cincinnati, the Horseshoe in Cleveland, the Hollywood in Columbus, and the Hollywood in Toledo. According to Schuler, these four casinos are riddled with money launderers on a daily basis. Politicians hope that Senate Bill 141 will finally address the issue, making it easier for authorities to crack down on criminals who are using Ohio's casinos to cleanse their money.

Senators' Perspectives on the Bill

Jim Hughes from Columbus (left ) and Larry Obhof from Medina (right)
Jim Hughes and Larry Obhof

Senate Bill 141 was introduced by two Republican senators: Jim Hughes from Columbus and Larry Obhof from Medina. The senators' ultimate hope is that the bill will curb money laundering in Ohio casinos. Because it would be difficult, perhaps impossible, to monitor each casino patron's financial activities and behavior for laundering activity, the bill aims to punish those who fail to fill out required tax forms, as well as those who fraudulently fill out the forms.

Indeed, the bill offers a somewhat indirect route to curbing money laundering in casinos, but if it is passed, it is expected to have an effect on where criminals choose to launder their money. If a new law makes it more risky for them to do their dirty deeds in Ohio's Horseshoes and Hollywood's, it is likely that they would at least take their money laundering business elsewhere.

The penalties for breaking the proposed law would be strict, involving both fines and jail time. Casino patrons convicted of violating the proposed law would receive up to a year in prison and a fine of $2,500 upon their first offense. Upon a second offense, the punishment would be up to a year and a half in prison and a $5,000 fine.

Senator Bill Seitz of Cincinnati expressed his fear that innocent casino patrons could unintentionally violate the new law due to their ignorance of IRS reporting requirements. Schuler responded to Seitz's concern by remarking that he would not allow the law to “ensnare” innocent civilians who obviously don't know what they have done wrong.


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