From loyalty cards to social media, gaming establishments have perfected the art of collecting customer information.

The intended use of this data is primarily to drive the casino’s bottom line. Casino operators use customer information to pinpoint VIP players and cater to personal preferences for non-gaming activities such as dining and entertainment. Even Financial Crimes Enforcement Network (FinCEN) Director Jennifer Shasky Calvery acknowledged during last year’s Global Gaming Expo that casinos have mastered, in a commercial sense, the “know your customer”(KYC) process. “Knowing your customers is something that casinos do very well,” she said. “You ask your customers many questions about their preferences; you can and should get information about their sources of funds to meet your obligations to identify and report suspicious activity.”

No practical person will dispute the notion that knowing your customer is sound business practice. However, in the eyes of regulators, understanding your customer should not only be done for commercial benefits. In this respect, casinos have often failed to utilize the information and data obtained to establish strong, risk-based customer due diligence processes. Although shifting the KYC focus on compliance matters may seem simple in theory, the actual application, in the context of a gaming establishment, has its challenges. For one, the casino operator’s customer base is highly transient. The considerable amount of foot traffic on the casino floor presents difficulties in collecting, monitoring, and tracking information. Second, the casino floor is often portrayed as a haven for customers to gamble in a relaxed, comfortable environment. Casinos must find the appropriate balance between its KYC duties and maintaining a pleasurable gaming experience for its patrons. It’s the fluidity and ease of game play, not the continuous inquiry for personal information, which attracts gamblers to casinos. Third, global expansion, specifically in Asia, can also pose some challenging risks with regards to building an effective KYC program. The inherent geographic risk, scarcity of reliable and publicly available information in certain jurisdictions, and the region’s susceptibility to financial crimes such as bribery, corruption, and money laundering offer compliance hurdles for any institution.

As such, industry regulators have stepped up the scrutiny of casinos that operate within the region. For example, global gaming operator Las Vegas Sands recently agreed to pay a $47.4 million civil money penalty for failing to report suspicious transactions tied to alleged drug trafficker and Chinese national Zhenli Ye Gon. Strong KYC programs can help casinos identify underlying risks associated with its customers, especially high-rollers who may be involved in illicit activities.

With all the “cards” theoretically stacked against the industry, casinos must perform the arduous task of rebuilding their KYC programs to focus more on regulatory compliance. Casinos should realize that strong KYC programs have ancillary benefits that go beyond the collection of customer information. Knowing your customer can help identify potential risks in a customer base and help target areas to invest additional time, money, and resources. Customer information can also help surveillance teams to be mindful of specific customers that frequent the casino floor. Transaction monitoring functions can perform additional due diligence and focus towards customers identified as high-risk. Even cage/cash handlers can be trained to identify “red flags” associated with potentially suspicious customers.

Casinos should also consider that anti-money laundering laws and regulatory guidance are generally baselines for compliance. Current regulations, such as record-keeping requirements should be seen as the minimum standards and compliance programs should go above and beyond what is currently required. As the industry continues to evolve, regulatory reforms may have trouble adapting with the changing landscape. As such, casinos will need to be intuitive and flexible in order to build KYC programs designed to anticipate both current and future compliance needs.

Vasilios Chrisos is a principal in Ernst & Young LLP’s Fraud Investigation & Dispute Services (FIDS) practice focusing on investigations, lookbacks, and regulatory inquiries related to AML, sanctions, and antibribery and corruption (AB&C) matters. The views expressed are those of the author and are not necessarily those of Ernst & Young LLP. He can be reached at