Is Nevada’s ‘gold standard’ of gaming regulation in jeopardy after money laundering cases?

Nevada was the only state with legal casinos in the summer of 1961 when Gov. Grant Sawyer traveled to Washington, D.C., to try to halt a federal strike force from invading every major gambling hall in Reno and Las Vegas.

As recounted in his 1993 oral history, “Hang Tough,” which was published by the University of Nevada Oral History Program, Sawyer was told by U.S. Attorney General Robert F. Kennedy that Nevada was a “den of iniquity.”

“Bobby’s plan made no political sense,” said Sawyer, whose state-level 1959 legislation led to the establishment of Nevada’s two-tiered gaming regulatory system that is still used today. He took exception to Kennedy’s belief that “everybody who lived in or came to Nevada was corrupt.”

The next day, Sawyer met with President John F. Kennedy and explained that a raid would accomplish little. “He made no commitments, but the raid never occurred,” Sawyer recalled.

Sawyer and gaming leaders believed Nevada’s burgeoning casino industry didn’t need federal government oversight.

However, by 2007, as casino expansion flourished across multiple states, the U.S. Department of Treasury stepped up its scrutiny of large financial transactions at casinos. Nevada gaming overseers decided a change was needed in the state’s regulatory structure and removed Regulation 6A , which covered currency reporting requirements by casinos.

It essentially led to a role reversal for the Nevada Gaming Control Board and gave federal investigators the first crack in scrutinizing six-figure and seven-figure cash transactions inside the state’s casinos.

Seventeen years later, this change is the reason Nevada regulators are following federal prosecutors in disciplining disgraced casino executive Scott Sibella, who escaped a prison sentence last week through a guilty plea in federal court after allowing an illegal sports bookie to gamble $120,000 in unreported cash at the MGM Grand Las Vegas in 2017, violating federal anti-money laundering rules.

To some, the federal charges and Sibella’s acceptance of a year’s federal probation and a $9,500 fine have brought the issue and Nevada’s ‘gold standard’ in gaming industry regulation — a term often used by industry regulators, state lawmakers and gaming license holders to describe Nevada’s decadeslong dominance as the center for legal gaming — to a head.

“We gave up our regulatory authority,” said a former gaming regulator, one of several casino industry insiders who were granted anonymity to speak freely to The Nevada Independent because they are either licensees or regularly appear in front of state gaming regulators.

“The Treasury Department is very tight-lipped on these investigations,” the source said.

It’s unclear exactly when the control board learned about the federal investigation into Sibella. Sources said board members were unaware of any investigation when Sibella was licensed in March 2022 as president of Resorts World Las Vegas.

O n April 30 — more than three months after Sibella’s plea agreement with federal prosecutors was announced and some seven years after the violation occurred — Nevada gaming regulators filed a three-count complaint on the same charges against Sibella, who was fired from his role with Resorts World last September . He is expected to face a substantial fine and could see his gaming license revoked.

The control board’s handling of Sibella hasn’t sat well with many gaming industry insiders and observers, because it makes it appear that Nevada dropped the ball.

“The goal was always to keep the FBI out of our business,” said a longtime gaming industry observer. “You also don’t want to sit back during an ongoing investigation involving one of your licensees when you have the primary regulatory authority. I don’t know how you defend that in the court of public opinion.”

Multimillion dollar fines

Regulated casinos are now in more than half of the nation's states — and that increases to more than two-thirds of the country when tribal casinos are factored into the equation.

Many states, including Nevada, welcomed federal assistance in guarding against money laundering and suspicious cash transactions. Treasury’s Financial Crimes Enforcement Network (FinCEN) expanded its tracking of large cash transactions inside casinos in the mid-2000s. The change eliminated the burden of filing separate reports for different casinos and different states.

Nevada casino operators are still required to file reports that disclose currency transactions exceeding $10,000 with the Gaming Control Board. However, regulators at the time said the process had become cumbersome for Nevada gaming companies with casinos in multiple states.

“It's appropriate we take this action, but it's also important to note that Regulation 6A has been very valuable and served the state well for a long period of time,” then-gaming commission Chairman Pete Bernhard said when the regulators voted unanimously in September 2006 to remove the 21-year-old rule.

Control board Chairman Dennis Neilander said at the time that keeping the regulation would be problematic for the agency because reporting requirements would have more than doubled the number of casino financial transaction reports that operators would have to file with the state under the federal guidelines.

Since the regulation was removed, there have been several instances where federal authorities punished Nevada gaming companies for violating anti-money laundering laws, which were then followed by state disciplinary proceedings.

In 2013, Las Vegas Sands reached an agreement with federal prosecutors to pay $47.4 million to the U.S. government to avoid criminal charges after a high-stakes gambler, later linked to international drug trafficking, made numerous large and suspicious deposits at The Venetian in 2006 and 2007.

Three years later, Nevada gaming regulators settled a complaint against Las Vegas Sands based on the federal changes and the company agreed to pay a $2 million fine.

In 2015, Caesars Entertainment paid federal authorities an $8 million civil penalty for repeated violations of the Bank Secrecy Act after the company admitted it failed to adequately monitor transactions — such as large wire transfers— that were coming from Asia through its branch offices for suspicious activity. A week later, the company paid a $1.5 million fine to Nevada after reaching a stipulated settlement with regulators.

In 2016, the Ascuaga family, the former owner of the Sparks Nugget, settled a complaint under the Bank Secrecy Act and paid a $1 million fine to the Treasury Department because the resort had a “willful disregard for anti-money laundering laws” during its operations before the casino was sold in 2013. Nevada gaming regulators never took any action because the family was no longer operating the Northern Nevada resort.

As part of the settlement with Sibella, federal prosecutors said MGM Grand Las Vegas and The Cosmopolitan of Las Vegas, the two Strip resorts that were caught up in the matter, agreed to pay a combined $7.45 million because of his actions and their failure to comply with anti-money laundering compliance programs.

Sources said they expect Nevada gaming regulators will also file disciplinary actions against the casinos and seek hefty financial penalties.

“The discussions are taking place since the Sibella plea deal,” said one legal source.

No issues with Sibella

Sibella was granted a limited Nevada license as president of the $4.3 billion Resorts World Las Vegas in May 2021, one month ahead of the resort’s opening.

The state’s investigations of Sibella and the top executives from Malaysia-based property owner Genting Berhad were not completed at the time because many COVID-19 restrictions were still in place. Several background matters on the individuals, including Genting Chairman K.T. Lim were still being investigated. Board members said matters were not material enough to delay the opening of the resort.

Control board sources said there was no hint of any issues with Sibella in 2021. In March 2022, Sibella and the Genting executives were granted full gaming licenses by the control board and commission.

However, less than a month after receiving his full license, the control board launched an investigation into Sibella’s relationship with convicted felon Brandon Sattler and his connection with a restaurant (Tacos El Cabron) at the resort.

Questions were raised during the licensing hearing when control board member Brittnie Watkins asked Sibella about a subpoena he received to testify about Sattler’s defense of a multimillion-dollar bankruptcy fraud litigation. Watkins did not name Sattler in her question, and the subpoena was later withdrawn. Sattler claimed in his deposition he did work at Tacos El Cabron.

“I guess there’s a person that they’re investigating on a fraud, well, he threw my name out there that I know this person,” Sibella said at the time. “I met the person twice. He’s been a customer for 20 years. I don’t know him from Adam. He’s done no work at Resorts World.”

Nine months later, the Gaming Control Board had two new members, Chairman Kirk Hendrick, a longtime gaming industry attorney and legal representative for the UFC, and George Assad, a former City of Las Vegas municipal court judge.

A month after Hendrick and Assad joined the board, the investigation into Sibella ended. The board took the unusual step of commenting on the matter.

“After a thorough investigation by the Nevada Gaming Control Board, the allegations … against Resorts World and its president, Scott Sibella, were found to be unsubstantiated,” control board representatives said in an emailed statement from Hendrick’s office.

Assad was quoted with the same statement in the Las Vegas Review-Journal .

Two months later, during a routine hearing to extend MGM Resorts International’s interactive gaming license, Assad questioned decisions made by past and present leadership of the company, saying the casino giant made poor financial moves and criticized declines in the company’s stock price while he was a shareholder in the business.

One gaming insider worried the comments could have hurt MGM outside Nevada.

“You have to understand that whenever a regulatory jurisdiction does something that affects their licensees, every other jurisdiction gets into this jump-on mode,” the source said.