Wikileaks: Peru’s gaming sector “wide open” for money laundering

A lack of regulation and qualified personnel make Peruvian casinos a target for abuse by money launderers and drug traffickers, former US Ambassador to Peru, Michael McKinley, wrote in a 2009 diplomatic cable obtained by Wikileaks and posted by daily El Comercio.

The cable describes a visit to Peru by the Treasury Department’s Office of Technical Assistance (OTA), which found “lax to non-existent regulatory controls, a toothless Gaming Commission staffed by unqualified personnel, and a cursory registration process.”

“The gaming sector is thus wide open to money launderers, drug traffickers, and counterfeiters, both Peruvian and foreign,” the cable says. “The sector badly needs reform.”

The US Treasury said it considers Peru’s gaming sector to be “unregulated” and that it is closer to Guatemala’s gaming industry, which is the worst in the region, than to Chile’s, which is considered to have the best regulations.

“Therefore US companies, individuals, or gaming houses that have an operating license in the U.S. are prohibited by law from doing business, serving as management contractors or opening U.S. franchises in Peru,” the cable says. “No US licensed entity has any business being here in Peru and if they are here then it is a strong indication that they are up to no good given the financial risk of losing the US license.”

According to the cable, there are more than 750 gambling locations in Peru, which covers casinos and slot machine houses. This includes nine casinos, which are all located in Lima, and the rest are slot machine houses that include some 60,000 slot machines in total.

One of the main problems of Peru’s gaming sector is that there are no requirements for reporting large currency transactions, the cable says.

“There also seems to be confusion, or rather a free interpretation as to what constitutes a ‘suspicious activity’ which a gaming location would be required to report,” the cable says. “According to the Casino owners, it is not unusual for them to have individuals gambling $30,000 to $40,000 a day, and the owners argue because there are so few people in Peru with that kind of money, they know them all. And because they know them, it isn’t suspicious since they do it all the time.”

“Finally, there is no prohibition on cash for cash exchange, cash for checks, and cash for wire transfers, all of which are allowed and unregulated in Peru but prohibited in countries that are considered ‘regulated.’ This lack of strong controls makes the system very vulnerable to counterfeit currency.”

The cable goes on to point out that several casino operators in Peru were denied licenses in other countries, for reasons such as not being able to prove the origin of funds.

“Additionally, a casino operates in Peru with its source of funds listed from a bank account in the British Virgin Islands and has no obligation to prove origin of funds beyond that particular bank account,” the cable says.

The OTA says it is “fruitless” to providing training to Peru’s gamining industry unless lawmakers make changes to legislation.

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