LAS VEGAS, NV, UNITED STATES, (February 8, 2025) — On January 20, 2025, President Trump . This landmark action carries profound implications for several industries, including the casino sector, particularly concerning Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) programs.
Understanding the Executive Order (“EO”)
The executive order lays the groundwork for the government to classify international drug cartels as Foreign Terrorist Organizations and/or Specially Designated Global Terrorist. This prohibits US persons and businesses from conducting any transactions with these organizations or associated individuals. The sanctions designation also requires businesses to immediately freeze any funds tied to these sanctioned person(s) or entities and immediately report the accounts to the US government.
The federal government also receives broad authority to act against these designated national security threats including freezing assets, imposing travel bans, and enhanced surveillance and enforcement operations. While the primary targets are Mexican drug cartels, the order also encompasses other organized criminal groups, such as La Mara Salvatrucha (MS-13) that have extensive presence and operations in the United States.
Legal Authority Used to Designate Cartels as Sanctioned Terrorists
The Trump EO uses the legal framework of EO 13224, signed by President George W. Bush shortly after the attacks on September 11, 2001 establishing a specific sanctions program for terrorist organizations acting against US interests. Both of these EOs rely on the International Emergency Economic Powers Act (IEEPA) which provides the president with sweeping authority during times of National Emergency to direct the US government to designate and block the assets of foreign individuals and entities that posed significant national security or terrorist risks to the United States. (Notably, the President declared a national emergency relating to the threat of cartels and transnational organizations in Section 1.(c) of the Executive Order.) The resulting sanctions program established from EO 13224 was the “Global Terrorism Sanctions Regulations” administered by the Office of Foreign Assets Control (OFAC). The Order also invokes the president’s authority under Section 219 of the Immigration and Nationality Act to designate foreign parties as Foreign Terrorist Organizations. The Trump EO allows the US government to designate drug cartels and related criminal organizations to this global terrorism sanctions program.
Impact on the Gaming Industry
Gaming operators are now highly exposed to sanctions risk due to the proximity of the threat, as drug cartels and affiliated actors operate cross-border in Mexico and the United States. These actors can easily frequent gaming operators – both land-based and online – to engage in legitimate play. This is a critical distinction with traditional suspicious activity monitoring. The sanctioned individual may be engaging in legitimate gaming activity, but the casino or online operator will be out of compliance if they do not halt the transactions and freeze the funds.
As these organizations become designed starting within the next 30 days, gaming operators will be prohibited from any transactions with these actors and required to immediately freeze any existing accounts and report them to OFAC.
Moreover, gaming operators will be expected to understand customers connected to designed cartels that could be aiding and supporting these groups (e.g., terrorist financing).
In short, it is no longer just about verifying the “source of funds.” Sanctions compliance requires a complete prohibition of business engagement with sanctioned actors and careful consideration of any persons connected to them.
The following are important considerations for gaming operators to strengthen their sanctions programs:
- Board-Approved Sanctions Policy
OFAC issued guidance in 2019 that highlights the need for management commitment and accountability for the sanctions compliance program. A strong starting point is a well-defined sanctions compliance policy approved by executive management and the board of directors.
- Risk Assessment
Conducting a sanctions risk assessment enables gaming operators to evaluate their exposure to sanctioned actors engaged in transactions. This includes assessing proximity risks to drug cartels and related criminal organizations (including US-based groups like MS-13) while critically acknowledging the potential for affiliated persons to engage in play.
- Screening and Monitoring
Any operator at risk of sanctioned actors conducting transactions should immediately implement sanctions screening and monitoring. This technology is highly affordable, often offering volume-based discounts, allowing operators to immediately detect and prevent transactions with a prohibited person or entity.
- Internal Controls
Developing internal controls and procedures helps staff to clearly understand how to handle situations when a sanctioned actor is identified.
- Testing and Auditing
Regular evaluations of technology and program effectiveness is important to ensure the compliance program is operating as intended and meets sanctions obligations.
- Training
Educating employees on compliance obligations and best practices will also help them understand how to deal with situations when a sanctioned actor is identified.
To assist in this process, OFAC created a framework for OFAC compliance commitments:
https://ofac.treasury.gov/media/16331/download?inline
By adopting this framework, gaming operators can better manage sanctions risk and the increased likelihood of dealing with sanctioned actors. Taking this approach significantly reduces the risk of enforcement actions, as OFAC stated:
“OFAC will evaluate a subject person’s SCP [sanctions compliance program] in a manner consistent with the Economic Sanctions Enforcement Guidelines. When applying the Guidelines, OFAC will consider favorably subject persons that had effective SCPs at the time of an apparent violation.”
Sanctions Enforcement: Civil and Criminal
Violations of OFAC sanctions carry their own enforcement requirements. The penalties specifically for the terrorism sanctions program relevant to the drug cartel designations are substantial:
- Civil Monetary Penalty: greater of $377,700 or twice the amount of the transaction per violation.
- Criminal Penalty: A person who willfully commits, willfully attempts to commit, or willfully conspires to commit, or aids or abets in the commission of a violation of any license, order, regulation, or prohibition shall, upon conviction, be fined not more than $1,000,000, or if a natural person, may be imprisoned for not more than 20 years, or both.
These penalties may be imposed on both organizations and any individual involved in conducting the transaction with a sanctioned actor.
Fines compound quickly.
For example, a gaming operator that does not conduct sanctions screening across the entire player base and processes 10 transactions for a sanctioned actor totaling $500,000 could face over $1,000,000 in civil and criminal fines as well as have executives or employees each fined up to $1,000,000 and face up to 20 years in prison for negligence or purposefully conducting transactions with a sanctioned actor.
In 2023, OFAC fined companies over $1.5B, including more than $900M against crypto company Binance. The Trump administration is aggressively targeting drug cartels, drug-related criminal organizations, and focusing on US border security, indicating the frequency of fines is likely to increase. These penalties for noncompliance with the new sanctions on drug cartels, both financial and criminal, are severe, making it critical for gaming operators to implement OFAC’s compliance framework. Strengthening sanctions monitoring, employee training, and internal controls will help operators identify and block transactions with sanctioned individuals, reducing the risk of hefty fines and legal consequences.
ABOUT KINECTIFY
Kinectify is an intelligence and risk management technology company serving gaming operators in the US and Canada. Kinectify’s modern AML platform empowers clients to efficiently manage risk with real-time intelligence so they can focus on growing their businesses instead of being bogged down by compliance. In addition, Kinectify’s advisory services enhance gaming operators’ capacity with industry experts who can design and test programs, meet compliance deadlines, and even provide outsource services for the day-to-day administration of compliance programs.
To learn more about Kinectify and book a demo, visit www.kinectify.com