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NEWS: Feds say IPI violated anti-money laundering Bank Secrecy Act

Deleon Guerrero: Without IPI response, "this whole gaming industry is moot."

By Jacob Nakamura

(Tumon, Guam) The Financial Crimes Enforcement Network (FinCEN), the enforcement arm against money laundering of the U.S. Department of the Treasury, informed Imperial Pacific International on March 4, 2020, that the operator of the behemoth Saipan casino operation is in violation of the anti-money laundering Bank Secrecy Act.

The disclosure was made in IPI's financial statements for 2019 to the Hong Kong Stock Exchange.

"During 2017, IPI was subject to a routine BSA compliance examination conducted by the Internal Revenue Service (“IRS”) for the period from October 2016 to March 2017. During the year, the IRS issued a report (“IRS Report”) with findings on IPI’s compliance with the BSA. IPI, through its external legal counsel, had responded to the IRS Report and acknowledged certain of the findings of violations noted in the IRS Report. Subsequent to the end of the reporting period, IPI received a letter from FinCEN dated 4 March 2020, which has requested IPI to provide certain information and documents relevant to compliance with these regulatory requirements from October 2016 through the present. FinCEN has indicated in the letter that there were apparent violations of the BSA and its implementing regulations and it is considering whether to impose civil money penalties or take additional enforcement action against IPI. As of the date of issuance of this results announcement, IPI is still in the process of preparing for the information to be submitted to FinCEN. Accordingly, it is not practicable for the Company to accurately predict the resolution of this matter, including timing or any possible impact to the Group. Notwithstanding the aforesaid, the Directors, based on external advice, have made a provision for the estimated civil money penalty in respect of the identified and potential violations. The Group has been and is under normal operation without any interruption from this ongoing investigation, save for the temporary closure of its casino operation in Saipan due to the COVID-19 outbreak as further disclosed in note 18(a) to this results announcement." - 17b, Notes to the Consolidated Financial Statements For the year ended 31 December 2019, IPI (p. 20)

The last time FinCEN levied a fine in the CNMI, the Tinian Dynasty operation was told to pay $75 million.

IPI has long been suspected of money laundering through its Saipan casino, which according to previous financial reports was grossing $4 billion in revenue a month. That is equivalent to every resident of the Commonwealth paying $800,000 into the casino every year.

The casino has said that its high rollers come from Asia. But according to banking reports from the Department of Finance during the period, when the casino was grossing some $4 billion a month, cash transactions through every banking institution in the CNMI came no where close to accounting for the $48 billion in revenue appearing on IPI's books.

Rep. Tina Sablan first raised the FinCEN report in legislative session and to the attention of the Saipan and Northern Islands Legislative Delegation during its meeting to confirm the nominations of Gov. Ralph Torres's appointees to the Commonwealth Casino Commission.

In today's commission meeting, newly-elected chairman Edward Deleon Guerrero berated IPI officials for not being able to answer his questions regarding the report.

Mr. Deleon Guerrero said today that if IPI does not address the FINCEN report "this whole gaming industry is moot."

He also called for a financial suitability hearing after asking IPI public relations vice president Tao Xing whether IPI's certification of good financial standing was accurate. Mr. Xing could not answer the question.

"If it was a misrepresentation and if IPI is not in good financial standing that is grounds for suspension and revocation of IPI's casino license," Ms. Sablan said.

Rep. Ed Propst, who along with Ms. Sablan and others in the opposition to the casino and to the Torres administration, said:

"While I continue to hear from casino supporters claim, 'We cannot let this casino industry fail,' all I can tell them is what we said from the very beginning, when we were all led to believe in a casino that would bring to the CNMI an initial investment of $7 billion, a 2,000 room luxury hotel along with the world's largest water park: 'If it sounds too good to be true, it probably is.'

"PERHAPS if our government's public officials all agreed to work with IPI from the very beginning to ensure they remain compliant instead of trying to enrich themselves and their families, we could have written sensible laws and contracts that were based in reality, not fairy tales."

IPI is at the heart of the largest corruption scandal involving one of the nation's governors. Gov. Ralph Torres, his brothers, and all but one of their wives, are the subjects of federal investigations involving the casino.

According to the FinCEN:

"FinCEN was created in 1990 to support federal, state, local, and international law enforcement by analyzing the information required under the Bank Secrecy Act (BSA), one of the nation's most important tools in the fight against money laundering. The BSA's record keeping and reporting requirements establish a financial trail for investigators to follow as they track criminals, their activities, and their assets. Over the years, FinCEN staff has developed its expertise in adding value to the information collected under the BSA by uncovering leads and exposing unknown pieces of information contained in the complexities of money laundering schemes.
"Dirty money can take many routes-some complex, some simple, but all increasingly inventive-the ultimate goal being to disguise its source. The money can move through banks, check cashers, money transmitters, businesses, casinos, and even be sent overseas to become clean, laundered money. The tools of the money launderer can range from complicated financial transactions, carried out through webs of wire transfers and networks of shell companies, to old-fashioned currency smuggling.
"FinCEN researches and analyzes this information and other critical forms of intelligence to support financial criminal investigations. The ability to link to a variety of databases provides FinCEN with one of the largest repositories of information available to law enforcement in the country. Safeguarding the privacy of the data it collects is an overriding responsibility of the agency and its employees-a responsibility that strongly imprints all of its data management functions, and indeed, all that the agency does.
"FinCEN provides a networking process designed to facilitate information sharing between agencies with shared investigative interests."
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I am not particularly prescient or insightful, but when the idea of a casino first raised its ugly head, it stunk. It all stunk: the greedy, desperate, lawmakers and the equally greedy Chinese.

The (mostly) good people of Saipan circulated a petition and I signed it in a Kagman tent. To no avail. Petitions to block the casino had been successful previously, but not this time. Was there some funny business in throwing the petition out? You bet your little cotton socks.

The casino/hotel was doomed from the start, and we are reaping the fruits of unfettered greed. Each side thinks it can manipulate the playing field - which was far from level at the beginning. How many lawsuits have…

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