Canada money launderer shows holes in Vegas casinos

By Dan Whitcomb and Deena Beasley

LOS ANGELES (Reuters) - Las Vegas has cleaned up since its days as a magnet for ill-gotten mobster gains, but a Canadian insider trading scam has exposed the smaller-scale money laundering still going on in the desert city's casinos.

Canadian Stanko Grmovsek admitted in a Toronto court earlier this year to making $9 million with a law school buddy in a 14-year illegal scheme. Court documents show he said he laundered some of it by gambling wads of cash on games like blackjack in Vegas's world-famous casino strip.

His confession was a flashback to an era when Las Vegas's "Sin City" image made it a playground for gangsters offloading their loot in glittering gambling parlors.

But strict controls have slashed financial crime in Vegas casinos to a fraction of what it once was, and most organized criminals use less scrutinized industries to convert illegal profits into clean money, experts say.

"In a currency intensive industry it's virtually impossible to eliminate entry points for money laundering," said Paul Camacho, special agent in charge for the Las Vegas Field Office of the Internal Revenue Service's criminal investigation arm.

But he said regulators and police were keeping financial crime to a minimum. "We work hand-in-hand with the casinos. We want legitimate folks coming here and having a good time. Nobody promotes this as a den of thieves."

Grmovsek's admission that he laundered chunks of money in Las Vegas came despite efforts to keep gambling parlors clean with strict controls by casinos and authorities.

Many Las Vegas casinos are publicly listed and, with their licenses at stake, they watch closely for any shenanigans at the tables. Internal Revenue Service regulations requiring cash transactions involving more than $10,000 to be reported make large-scale crime difficult.

Criminal gangs can launder money more cheaply and less conspicuously in cash-rich small businesses like used-car lots and family restaurants, yet the Grmovsek case shows casinos can still work for sums small enough to pass under the radar.

"In theory, if you employed numerous people and broke down the transactions into much smaller amounts," laundering can be done, said David Salas, deputy chief of enforcement at the Nevada Gaming Control Board.

RED FLAGS

Grmovsek said he and his friend Gil Cornblum, a Toronto lawyer, made their money from Grmovsek buying stocks based on acquisition tip-offs from Cornblum, who committed suicide as the case was pending.

After cooperating with investigators, Cornblum jumped off a highway bridge and Grmovsek faces three years in jail after pleading guilty to conspiracy to commit securities fraud.

Grmovsek said he transferred profits from offshore accounts to casinos in Las Vegas and the Bahamas where he would bet on sporting events or play blackjack and cash in piles of chips.

Experts say that in a typical scheme, a money launderer approaches the cashier's cage with cash and converts it into chips using a players card to establish his identity.

He later returns without his card to exchange the chips for cash, leaving no named record of the transaction and creating the impression he has gambled away thousands of dollars.

The scheme works in reverse if he takes out a small amount of chips, establishing his identity with a players card, and returns with a large stack, withdrawn anonymously, that he claims to have won at the tables.

David Stewart, an attorney with Ropes & Gray LLP who advises casinos on money laundering, says such behavior is a red flag.

"The biggest suspicious activity you can engage in is if you go to a casino, present a fair amount of money and you don't gamble," he said. "These are publicly traded companies. No single gambler is worth losing their license."

SMALL FRY

Commercial casinos in the United States, not including those run by Indian tribes, took in $32.8 billion in gaming revenue last year, the American Gaming Association says.

Commercial and Indian casinos filed nearly 500,000 reports of currency transactions of $10,000 or above in 2008 and some 11,000 reports of suspicious activity, according to the Treasury Department's Financial Crimes Enforcement Network.

That marks a rise from 6,000 reports in 2004 but is a small fraction of the hundreds of thousands of annual transactions.

Casinos are required to file such reports for transactions totaling at least $5,000 when there is suspicion the funds were acquired illegally, the intention is money laundering or that the casino is being used to facilitate criminal activity.

Camacho said casinos tend to be scrupulous about these reports as weeding out illicit activity is in their interest.

"If a casino willfully avoids these forms it can be subject to criminal fines, so there is a huge penalty. Not only a financial penalty but also somebody can go to jail," he said.

Global intelligence consultancy Stratfor still sees money laundering in casinos as small fry compared to the billions of dollars organized crime gangs pass through small businesses, especially along the border with Mexico.

"There's pretty good oversight generally at the U.S. casinos," said Stratfor expert Fred Burton. "I don't see this being any major shift or trend of Vegas being at the center of gravity for money laundering."

Another scheme used by small-time money launders involves betting money on both sides of a sporting event. If the gambler needs to document a source of income, he shows only the winning ticket, appearing to have won big on the game. If he needs to document a loss, he offers up only the losing ticket.

"I'll be honest, it's a challenge policing the financial highways of Vegas," said Camacho. "People involved in criminal activity ... usually don't save their money. They want to go spend it, they want to live large, and one of their goals is to go live large in Las Vegas."

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