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FinCEN fines California card club $8 million for AML offenses

The Treasury Department’s Financial Crimes Enforcement Network fined one of California’s biggest and oldest card clubs $8 million for willfully violating U.S. anti-money laundering laws.

FinCEN imposed the civil penalty on Artichoke Joe’s. The card club, located in San Bruno, California, has been in operation since 1916.

Artichoke Joe’s “willfully violated” U.S. anti-money laundering laws from 2009 to 2017, FinCEN said.

“During this 8-year period, [Artichoke Joe’s] failed to implement and maintain an effective AML program, and failed to detect, deter, and timely report many suspicious transactions,” FinCEN said.

A card club is a type of gambling business where games are generally limited to those actually involving playing cards. In card clubs, players play against each other and not against the “house.”  Like casinos, card clubs are defined as financial institutions under the Bank Secrecy Act and are subject to FinCEN’s rules.

Friday’s action was only the second time FinCEN has penalized a card club. In late 2015, the agency fined Oaks Card Club of Emeryville, California $650,000. The club admitted that it violated the anti-money laundering requirements of the Bank Secrecy Act.

FinCEN said Friday that Artichoke Joe’s “turned a blind eye to loan sharking, suspicious transfers of high-value gaming chips, and flagrant criminal activity that occurred in plain sight.” 

FinCEN acting director Jamal El-Hindi said the card club failed “to establish adequate internal controls and its willful violations of the Bank Secrecy Act.”

Next month, Ken Blanco, a top DOJ prosecutor, will take over as FinCEN director.

FinCEN said Artichoke Joe’s compliance failures allowed “customers to pool or co-mingle their bets with relative anonymity.”

Artichoke Joe’s disputes FinCEN’s claims and is considering “next steps,” according to a Wall Street Journal report by Sam Rubenfeld.

Dennis Sammut, president of Artichoke Joe’s, told the WSJ the card club “is fully committed to upholding all laws and complying with all regulations.”

“A lot of effort has gone into and continues to go into compliance with the many laws and regulations applicable to cardrooms, and we will continue to dedicate all resources needed to achieve compliance with FinCEN and all other governing agencies,” Sammut said.

In March 2011, state and federal law enforcement agencies raided Artichoke Joe’s, FinCEN said.

The raid led to the racketeering indictment and conviction of two Artichoke Joe’s customers for loan-sharking and other illicit activities conducted at the club, FinCEN said.

Senior-level employees of Artichoke Joe’s “knew that loan-sharks were conducting criminal activity through the card club” and using its gaming chips to facilitate illegal transactions, FinCEN said Friday.

“Nonetheless, [Artichoke Joe’s] failed to file any Suspicious Activity Reports (SARs) on this activity,” FinCEN said.

FinCEN’s said the $8 million penalty imposed Friday “recognizes the duration and severity” of Artichoke Joe’s violations, the size and sophistication of the card club, its “awareness of criminal activity on its premises, and its deficient culture of compliance.”

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Richard L. Cassin is the publisher and editor of the FCPA Blog.

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