I don't know what your schedule is today, but would it be possible for you to_remain during the testimony to be adduced from Congressman Reid and representatives of the casino industry, so that if there are any questions that we have developed after they have given their full statements, we can bring you back and get you to respond in some areas? Would that be possible?

Mr. WALKER. Yes; I think so. Let me just check, and I'll have to make a few phone calls and see what I can do.

Mr. HUGHES. All right. We appreciate that.

There are a number of things that I found as I examined the testimony from the industry, and I must say at the outset, I couldn't be more pleased with the progress that we have made, particularly since early this year.

I quite agree with you. I think the industry has made a genuine effort. In fact, they have gone beyond what Treasury has proposed, in the area of credit reporting, for instance, and I think the industry is to be commended for working with us and trying to fashion some new regulatory schemes to deal with what I think most responsible people acknowledge is a major problem in laundering.

But I notice that one of the proposals by the industry deals with identification, which is going to be a very important part of any regulatory scheme, and the industry suggests, and will testify, that they would use a driver's license as the basis for identification.

The Treasury, on the other hand, talks in terms of identification through a Social Security number or passport, and I wonder if you could tell me if your regulations, once implemented, if implemented as proposed, would consider a driver's license as substantial compliance for identification purposes.

Mr. WALKER. Well, Mr. Chairman, we haven't resolved this issue yet, and how the identification will be accomplished is one of the open issues that would be up for discussion.

The regulations which we have set forward, and which I have signed, are, in form, Bank Secrecy Act regulations that bring casinos under the reporting and recordkeeping requirements of the Bank Secrecy Act and then provide an exemption for State regulation, in effect, for casinos which are acting under a system of comprehensive State regulation.

Now all the details of the State regulation have not been worked out, and while we have indicated to the casinos and to the interested people that we are very strongly in favor of the proposals that they have put forward and that we are well inclined-that they are definitely on the right track, and we see that this shows real potential for the future, we have not, in effect, signed off on any given State regulatory scheme to the last letter. So this will be one of the issues that we will have to work on.

We would like to see positive identification, and I'm not sure right now, as I sit here, that a driver's license provides that degree of positivity of security in identification that would be satisfactory. A driver's license can be fabricated, it can be altered, and so forth, so that I'm not quite satisfied, as I sit here now, unless I can be persuaded otherwise, that that would be satisfactory from our perspective.

Mr. HUGHES. But Social Security numbers are fabricated.
Mr. WALKER. That's right.

Mr. HUGHES. As are passports.

Mr. WALKER. Yes; and there are other ways of fabricating. Maybe a combination of identification would be suitable here.

Mr. HUGHES. One of the principal features of your proposal is to exempt casinos from requirements of the proposed regulations if the State in which they operate adopts a regulatory scheme-and I quote-"that meets the criteria for Federal enforcement."

Your testimony doesn't spell out any of the criteria. I wonder if you could just share with us briefly what you see as the essential elements of any such criteria.

Mr. WALKER. Well, without having-I don't want to give you a definitive list, but I would like to suggest that what we are looking at here is precluding the use of money laundering, precluding the movement of currency that is undetected or unrecorded, that is used in furtherance of underworld activities, and that is the drug trafficking trade and other organized criminal activities.

I don't think that it would be too helpful to come out with a specific list of criteria, because indeed the criteria that we would establish and that had been set forth in the Bank Secrecy Act itself might in some cases be surpassed, in effect, by proposed regulations by the casinos.

The casinos, for instance, as I understand it, are willing to preclude certain kinds of transactions that would constitute money laundering. Now our regulations don't go that far. Our regulations require reporting, but we don't preclude any transactions.

So what we are interested in, essentially, is stopping money laundering wherever possible, and to the extent that we can't stop it, we want to keep track of it, and we want to have reports available to us to be able to pursue leads on the movement of currency.

Mr. HUGHES. Is it your belief that the Federal authorities would have access to whatever information the State authority, if in fact an exemption is granted, is privy to?

Mr. WALKER. Yes.

Mr. HUGHES. Is there any information the State would collect that you envision the Federal Government would not have access to?

Mr. WALKER. No. The Federal Government would have access. Mr. HUGHES. Have you had any discussions with the State regulatory agencies?

Mr. WALKER. Yes, we've had discussions. Even today-

Mr. HUGHES. With all the jurisdictions that have legalized gambling?

Mr. WALKER. That's correct.

Mr. HUGHES. Has that been an ongoing discussion with them? How do you interface with the State regulatory agencies?

Mr. WALKER. We have been meeting from time to time with them, and members of my staff have been in discussion with them. I would say it was ongoing in the sense that we are aware-each of us is aware of what the other is doing at the present time.

Mr. HUGHES. Do you have any idea of how long it would take the States, if a State is going to be granted an exemption, to actually promulgate the regulations that would satisfy the general criteria that are to be provided by the Federal Government?

Mr. WALKER. Well, I think we are looking at a matter of a few months; nothing more than that. We feel, and we have been told, that these regulations could be promulgated in a matter of a few months.

Mr. HUGHES. Do you know whether the various jurisdictionsNew Jersey, Nevada, and Puerto Rico in particular-are operating in tandem with Treasury and the industry? Are they on their own moving ahead with a regulatory scheme? What is the situation?

Mr. WALKER. My understanding is that this is all part of the discussions that are going on. I don't think that-it hasn't been brought to my attention that they are moving independently to establish a regulatory scheme on their own but that they are working with us to find out what our needs are before they go ahead. As far as the three jurisdictions that you have referred to, my understanding is that they have been in communication with each other but that they are treating the problem as individual ones for each jurisdiction.

I would not expect all three jurisdictions to come forward with a common regulatory program.

Mr. HUGHES. It's my own perception that the industry is different in each of the States. In some instances, rather marked differences in the manner in which States regulate the industry.

Do you envision that each State will custom tailor its own regulatory scheme under the general criteria, or do you envision a uniform standard for casino gaming throughout the country?

Mr. WALKER. No; I think that each one would tailor their own regulatory scheme in accordance with their own industry requirements and needs.

Mr. HUGHES. In your reporting requirement under proposed section 103.22(a)(2), a transaction in currency of more than $10,000 is needed to trigger a requirement to report.

However, I note in the broad recordkeeping requirement of the new proposed 103.36 regulation, there is no $10,000 threshold. Is that the department's intent-that is, all those records be maintained regardless of the amount of money involved?

Mr. WALKER. Yes; with regard to-are you referring to 103.36? Mr. HUGHES. Yes.

Mr. WALKER. With regard to the records, we would anticipate the records being kept generally of all transactions, as opposed to any reporting requirements. Reporting requirements would be $10,000

or more.

Mr. HUGHES. I wasn't able to determine, in fact, looking at either the industry testimony or at your testimony or the proposed regulations, how we are going to deal with those transactions that take place at the table, if at all.

For instance, you might be able to very easily segregate money, as the industry, I think, suggests would be a good way to preclude money laundering at the cage. However, how, if in any way, would you deal with those situations where somebody is cashing in a great deal of money buying chips at, say, a roulette table, which would exceed $10,000? How do you propose to deal with that situation, if at all?

Mr. WALKER. Right now, our office feels that that is something we would want to look at, but we would not right now feel the need to have regulated.

In the first place, our primary concern here is money launderers who are not legitimate gamblers. They are people who might just go in to a cage, exchange small bills for large bills, or buy chips and then redeem them at a later time, or have the money wired out of the cage.

The actual transactions that occur at the table-the craps table or the roulette wheel-would not be really a problem-are not seen by us now to be problem areas, and we would not want to interrupt the flow of business going on there by requiring forms to be filed and the like.

Now if it turns out that we are detecting a substantial problem in money laundering at the table, then we would have to visit this question, but the casinos have approached this in such a positive spirit at the present time that we would expect them to report to us any unusual transactions by customers at the tables.

They are going to be, in effect, doing some policing work on their own, so that at this point I don't feel that it's necessary to address the table issue.

Mr. HUGHES. Well, you know, it has been my experience that they watch the play fairly well. I could see where there could be a great deal of evasion of the recordkeeping by just going directly to the table and cashing in $3,000 at a clip and then moving on.

Many of the people that launder funds end up doing some gambling-not very much. They are there primarily to launder funds, and indeed the casino is in a sense a victim, because there is very little play involved, but it would not be very difficult to cash in $3,000 at one table and move on to another, because quite often there is quite a bit of play. At a busy time, it's not difficult to move

on.

So I suppose you would have to probably rely upon the alertness of those that are administering the table, but it could present a major loophole, just as we have seen with the banks.

You alluded to some of the circumstances involving the cashier's and certified checks that were being negotiated. Those individuals could keep it just below the $10,000 reporting requirement and aggregate great sums of money that way. I think you indicated it was $7 million that was laundered in that fashion by just keeping the sums just below $10,000.

Mr. WALKER. I think that this is obviously something that we will have to keep a very close eye on.

I would point out, though, that the casinos have a tremendous industry-a tremendous interest in precluding money laundering at casinos, because they know that their regulatory schemes are being monitored and that in the event that this problem persists, there will be more regulation, so that I would think the casinos would see it in their own best interest to exercise whatever overriding authority they have over their own customers to preclude this kind of activity themselves, and I'd like to see that happen, frankly. I would not like to have a regulation over every bit of activity in a casino.

Mr. HUGHES. I don't think you could do that, and I am not suggesting that by any stretch of the imagination. I think that we have to rely upon the alertness of the casinos, and I've seen, you know, a genuine effort at this point to come up with a program that is realistic.

I believe the casinos have testified in their statements in chief that they will report unusual transactions. An alert pit boss will quite often see that kind of movement. So I'm not suggesting that you can do it through paperwork. I'm not sure that that's the answer. I think it has to do with the kind of cooperation that we need between the industry and the authorities to identify those unusual transactions.

Mr. WALKER. I think that's correct.

Mr. HUGHES. I've noticed, John, in the proposed regulations, that you have excluded casinos that have less than $1 million in gross annual gaming revenues, and if I understand Congressman Reid's testimony, that's about 98 casinos in Nevada.

I wonder if you can tell us why you established that particular cutoff and whether that doesn't create a possibility for loopholes, since those who would launder money would not be contributing really to the gross annual gaming revenue of the casino because they really don't contribute anything. All they are there for is to exchange bills.

Mr. WALKER. Well, many casinos-so-called casinos-in Nevada would not be recognizable as casinos to you or me if we drove up to them. They would be grocery stores, or bars, or gas stations, or small establishments of that sort, and right now, based upon the cases that we have studied, this is not a problem.

Mr. HUGHES. So you feel that the $1 million threshold is a reasonable one?

Mr. WALKER. Is a reasonable threshold for the kind of establishment that we would be interested in.

Mr. HUGHES. This is my final question, and then I'll defer to the rest of the members here. What do you estimate to be the cost to implement these regulations from the Federal perspective? Any idea?

Mr. WALKER. Under $100,000.

Mr. HUGHES. I see. OK. Thank you.

The gentleman from Florida.

Mr. SMITH. Thank you, Mr. Chairman.

Mr. Walker, I think I heard you say that you had been in contact with the gaming authorities in Nevada, Puerto Rico, and New Jersey. Can you give me some indication about their reaction to the substance of the proposals and their reaction in terms of monitoring the effectiveness of their State regulatory system, some of which is in place now? And, as a corollary, also some comment about why you feel it would not be appropriate to have a common program, or that it is inappropriate to have a common program so that the Federal Government would be dealing with the same regulations in all of the areas which allow legalized gambling?

Mr. WALKER. First of all, we have seen nothing but a cooperative attitude on the part of the State authorities that we have talked with in this regard, as has been true of the casino industry itself.