U.S. Treasury Secretary Has Authority Over CNMI Casino: Court

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Tinian Dynasty’s motion to dismiss criminal charges denied

By Ferdie De La Torre

SAIPAN, CNMI (Saipan Tribune, June 2, 2015) – U.S. District Court for the NMI Chief Judge Ramona V. Manglona ruled yesterday that the U.S. Congress has given the U.S. Department of the Treasury Secretary the authority to regulate casinos in the CNMI.

Manglona said because Treasury has been duly authorized by Congress under a statute to expand the definition of the United States to include the CNMI, and because Treasury has in fact promulgated regulations consistent with that authority, it has the authority to enact regulations to prevent money laundering by casinos licensed in the CNMI.

Manglona discussed the Treasury Secretary’s authority in her order that denied the owner of Tinian Dynasty Hotel and Casino’s motion to dismiss the indictment against the company for lack of federal jurisdiction and failure to state an offense.

Manglona said Treasury’s first regulation of casino gaming was targeted at casinos licensed "by a state or local government."

The judge said in the 1994 Money Laundering Suppression Act, Congress clearly modeled the first part of its definition of casino on the Treasury definition.

Two years later, Manglona said, Treasury extended the reach of the Bank Secrecy Act again to include the CNMI when it revised the regulatory definitions of "United States" and "Territories and Insular Possessions."

The U.S. government filed in November last year 158 criminal charges against Hong Kong Entertainment, owner of Tinian Dynasty.

The charges are one count of conspiracy to cause a financial institution to fail to file a currency transaction report or CTR, 155 counts of failure to file a CTR, one count of failure to file a suspicious activity report, and one count of failure to maintain an effective anti-money laundering program. The indictment has also a notice of forfeiture.

HKE, through counsel Bruce Berline, has moved to dismiss the indictment on grounds that it was not obligated to file CTRs because Congress has not given Treasury the authority to regulate casinos in the CNMI.

Berline asserted that HKE is not subject to Treasury regulation as a casino because it is not "licensed as a casino…under the laws of any state or any political subdivision of any state."

Berline said Tinian Dynasty casino is licensed under the laws of the CNMI, which is not one of the 50 states.

Berline asserted that although the Bank Secrecy Act now defines "United States" to include the CNMI, "when the Treasury Secretary prescribes by regulation," the statutory definition of casino doesn’t use the term "United States."

Therefore, Berline argued, that the term "state," which is not defined, cannot be read to include the CNMI.

Berline pointed out that the attempt of the Treasury Secretary to exert authority over a CNMI-licensed casino by crafting the regulatory definition of "financial institution" as such in the United States, fails because it conflicts with the statutory definition.

In the U.S. government’s response, the U.S. Attorney’s Office said it is prosecuting the Tinian Dynasty not as a state-licensed casino, directly under the statute, but as a CNMI-licensed casino as prescribed by Treasury regulation.

The prosecution asserted that the Tinian Dynasty is subject to the Bank Secrecy Act’s reporting requirements for financial institutions under the first catch-all definition of that term, which allows the Treasury Secretary to regulate activities it determines are "similar to, related to or a substitute for any activity" specifically listed as a financial institution.

In denying HKE’s motion to dismiss, Manglona pointed out that from its inception in 1970, the Bank Secrecy Act granted the Treasury Secretary authority to expand the term "United States" to include "the possessions of the United States."

Manglona said that, in 1986, just a week before the Covenant between the U.S. and the people of the NMI came fully into effect, Congress amended the definition expressly to include the CNMI, as well as other U.S. territories and possessions.

Prior to 1995, the judge said, this definition, in conjunction with the subparagraph giving Treasury authority to regulate "similar" businesses, unquestionably would have allowed Treasury to make rules requiring casinos in the CNMI to report large cash transactions.

However, Manglona said, in the 1980’s there were no casinos in the CNMI.

Manglona said the authority for a Commonwealth municipality to grant casino licenses was first established in 1990, after the Tinian Casino Gaming Control Act of 1989 was passed by local initiative.

Around this time, she said, casino gaming had just begun to branch out from Nevada to other states, with New Jersey amending its constitution in 1976 to allow casino gambling in Atlantic City.

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