1-25-2024 11:16am

MGM Grand and The Cosmopolitan Casinos Agree to Pay Combined $7.45 Million Settlement to Resolve Related Money Laundering Probe

Anita Johnson-Brown Editor

On January 25, the Department of Justice (DOJ) announced that the former president of MGM Grand Casino has pleaded guilty to a federal criminal charge, by failing to file reports of suspicious transactions that his casino was required to make, as per the Bank Secrecy Act (BSA).

As part of the settlement, MGM Grand and The Cosmopolitan of Las Vegas casinos have agreed to pay a combined $7.45 million, undergo external review, and improve their anti-money laundering (AML) compliance program. This settlement resolves an investigation into alleged violations of money laundering laws and the BSA.

By The Los Angekes News

Read the full story below:

ormer President of MGM Grand Pleads Guilty to Violating the Bank Secrecy Act for Allowing Man Involved in Criminal Conduct to Gamble

Scott Sibella, 61, of Las Vegas, Nevada, pleaded guilty late Wednesday afternoon to one count of failure to file reports of suspicious transactions required to be made by casinos.

According to his plea agreement, Sibella was the president of the MGM Grand from at least August 2017 until February 2019, during which time he knew that a casino patron, Wayne Nix, ran and operated an illegal bookmaking business. Despite this knowledge, Sibella allowed Nix to gamble at MGM Grand and affiliated properties with illicit proceeds generated from the illegal gambling business without notifying the casino’s compliance department.

Not only did Sibella allow Nix to gamble at the casino, he also authorized Nix to receive complimentary benefits at the casino, including meals, room, board, and golf trips with senior executives and other high net-worth customers of the casinos to further encourage Nix to patronize the casino and/or other affiliated properties.

Despite being trained and having knowledge of his duties, Sibella failed to report to MGM compliance personnel that Nix was an illegal sports bookmaker. Because Sibella failed to report the suspicious activity by Nix, MGM Grand failed to file at least one suspicious activity report regarding Nix’s source of funds for Nix’s cash payments to MGM Grand.

According to court documents unsealed today, Sibella admitted to law enforcement in 2022 that he believed Nix was involved in illegal sports bookmaking, but “didn’t want to know because of my position,… If we know, we can’t allow them to gamble…. I didn’t ask, I didn’t want to know I guess because he wasn’t doing anything to cheat the casino.”

Sibella pleaded guilty before United States District Judge Dolly M. Gee, who scheduled a May 8 sentencing hearing, at which time Sibella will face a maximum penalty of five years in prison and a fine of $250,000.

Nix pleaded guilty in April 2022 to one count of conspiracy to operate an illegal gambling business and one count of subscribing to a false tax return. He is scheduled to be sentenced on March 6.

“Financial institutions have a duty under the law to report criminal or suspicious activity occurring at the institution though SARs,” said First Assistant United States Attorney Joseph McNally. “Our office will aggressively prosecute corporate executives and employees who turn a blind eye to criminal actors depositing illegal funds at casinos and financial institutions.”

“Turning a blind eye to laundering of illicit funds and knowingly avoiding reporting requirements puts public safety at risk,” said HSI Los Angeles Assistant Special Agent in Charge Jennifer Reyes. “The El Camino Real Financial Crimes Task Force is uniquely prepared to investigate, disrupt, and prosecute the bad actors, holding them accountable for their actions.”

“Mr. Sibella’s willful violation of Bank Secrecy Act obligations to report suspicious activities put the credibility of the MGM Grand at risk,” said Special Agent in Charge Tyler Hatcher, IRS Criminal Investigation, Los Angeles Field Office. “The BSA mandates reporting of suspicious activities to protect financial institutions from becoming participants in money laundering activities often benefitting criminal or terrorist organizations. While president of MGM Grand, Mr. Sibella undermined the trust and confidence of his employees, customers and regulating agencies, and for that he will be held accountable. Additionally, the non-prosecution agreements with MGM Grand Hotel, LLC and The Cosmopolitan of Las Vegas should serve as notice to other casinos and financial institutions that evading BSA obligations can carry severe consequences, and we will investigate suspected non-compliance.”

The MGM Grand and The Cosmopolitan casinos have entered Non-Prosecution Agreements (NPAs) to resolve a related investigation into alleged money laundering and violations of the BSA. In their respective NPAs, MGM Grand and the Cosmopolitan each accepted responsibility for laundering Nix’s illicit funds and failing to properly file suspicious activity reports (SARs) on Nix, who conducted numerous transactions involving millions of dollars at the casinos between 2017 and 2020. MGM Grand also accepted responsibility for failures by the casinos’ compliance department to use all available information when performing “know your customer” (KYC) reviews of Nix.

Under the BSA, casinos like MGM Grand and The Cosmopolitan are required to implement and maintain programs designed to prevent criminals from using casinos to launder the large sums of cash that illegal activity can generate. For example, the BSA requires casinos to file reports documenting suspicious activity, such as instances where a client’s source of funds cannot be determined or are suspected to be related to crime.

As part of its NPA, MGM Grand admitted that Sibella and two casino hosts knew about Nix’s illegal gambling business, allowed Nix to continue to gamble with MGM Grand and affiliate properties, allowed Nix to present and use illicit proceeds at the casino properties, and provided Nix complementary benefits to encourage him to spend his illicit proceeds at the casino. MGM Grand also admitted that Nix at times used the golf trips with MGM Grand’s high-net-worth customers to solicit new customers for his illegal gambling business. By 2020, MGM Grand had accepted $4,079,830 in cash that was illicit proceeds from Nix’s illegal gambling business.

MGM Grand also admitted that its anti-money laundering compliance program failed to instruct the compliance team to use all available information, as required by the BSA, when performing KYC reviews to determine whether to file SARs or to identify and verify customer information, including source of funds, for transactions found to be suspicious. Compliance personnel did not regularly reach out to the marketing hosts, even where the compliance team could not substantiate or identify the customer’s source of funds, although other departments would routinely reach out to hosts in connection with, for example, the collection of funds owed to the casino. Because of the deficiencies in the AML compliance program, MGM Grand failed to detect and report the extent of Nix’s suspicious activities in SARs and failed to prevent Nix’s money laundering.

The Cosmopolitan admitted in its NPA that one of its hosts was aware that Nix ran an illegal gambling business, allowed Nix to present and use illicit proceeds at The Cosmopolitan without notifying the casino’s compliance department, and provided Nix complementary benefits to encourage Nix to spend his illicit proceeds at the casino. By 2020, The Cosmopolitan had accepted $928,600 in cash in illicit proceeds from Nix’s illegal gambling business.

While The Cosmopolitan’s AML compliance program was designed to use all available information, it did not do so concerning Nix. The Cosmopolitan host failed to report to compliance personnel or law enforcement the source of the illicit proceeds that Nix used while gambling at the casino. Because of this failure, The Cosmopolitan failed to file one or more SARs regarding the source of Nix’s funds.

In their NPAs, both casinos agreed to enhance their joint compliance program and to implement additional review and reporting requirements to ensure future BSA compliance. This includes spending at least $750,000 over two years on an external compliance reviewer, who will provide reporting to the United States Attorney’s Office. They will also amend internal audit protocols and review certain prior SARs, related customer files, and transactions.

The agreements also require MGM Grand and The Cosmopolitan to cooperate with law enforcement in any additional investigations or proceedings arising from the conduct described in the agreement’s statement of facts.

Federal prosecutors entered into the NPAs in recognition of the casinos’ remedial efforts to strengthen their AML programs, their acceptance of responsibility, their cooperation with authorities during the investigation, their agreement to pay fines, and their agreement to invest an additional $750,000 for an external compliance review and further reporting requirements designed to prevent future violations of federal law.

Under the NPAs, MGM Grand agreed to pay a monetary fine of $6,527,728 and to forfeit $500,000 in proceeds traceable to the violation, which will be counted towards the fine. The Cosmopolitan agreed to pay a monetary fine of $928,600 and to forfeit $500,000 in proceeds traceable to the violation, which also will be counted towards the fine.

Homeland Security Investigations (HSI) and IRS Criminal Investigation investigated this matter as part of HSI’s El Camino Real Financial Crimes Task Force. The Justice Department’s Money Laundering and Asset Recovery Section, Bank Integrity Unit assisted in the investigation.

Assistant United States Attorneys Jeff Mitchell of the Major Frauds Section; Rachel N. Agress of the International Money Laundering, Narcotics, Money Laundering, and Racketeering Section; and Dan G. Boyle of the Environmental Crimes and Consumer Protection Section are prosecuting Sibella and negotiated the settlement agreements with the two casinos.

This article was written by members of the DOJ and updated by The Los Angeles News