GIANT casinos present an “unusual opportunity” for terrorists and criminal gangs to launder money, members of an influential Senate panel have claimed.

Their comments came after a record $5 million (£2.7 million) fine imposed on MGM Mirage — which has plans for super- casinos in Newcastle upon Tyne, Sheffield and London — for failing to comply with US measures to combat money-laundering.

MGM Mirage neglected to submit 14,903 currency transactions to the US Treasury Department for The Mirage casino in the 18 months to December 2002. Casinos are required to report transactions over $10,000 to the Treasury’s Financial Crime Network Service to monitor illegal activity.

As well as the record fine from the Nevada Gaming Control Board, Christopher Morishita, a former compliance officer at The Mirage, was prosecuted. He pleaded guilty and was sentenced to three years’ probation.

Terri Lanni, MGM Mirage chairman and chief executive, said in a statement that the problem was an administrative error that did not involve money-laundering. “When we became aware that cash transaction forms had been properly filled out but not mailed, we immediately reported the situation to the board and began an extensive internal investigation. The results of this were turned over in their entirety to the state,” he said.

However in a subsequent report by the Gaming Control Board, Keith Copher, its chief enforcement officer, said his investigation uncovered failures on multiple levels.

He said that several executives were aware of the violations throughout the 18-month period, failed to independently determine their extent, and failed to report them to the Gaming Control Board and the IRS. He also cited a failure of the internal audit department and by independent accounting firms.

The penalty was more than triple the $1.5 million fine paid in 1989 by Ralph Engelstad, the Imperial Palace owner, for hosting several parties on Adolf Hitler’s birthday.

The fine was imposed by the Gaming Board, who said that Mr Engelstad had brought the state of Nevada into disrepute by holding the events at his hotel on April 20, 1986 and 1988. Mr Engelstad died in 2002 and Imperial Palace has no expansion plans in Britain.

Bob Siller, the Gaming Board member who agreed the MGM Mirage fine, said that the company had been “extremely co-operative” in identifying the problem, correcting it and implementing procedures to ensure that mistakes were not repeated. But he said that the severity of MGM Mirage’s punishment reflected the seriousness of its violations.

The move prompted members of the Senate Banking Committee to voice fears that casinos might be used to funnel money to terrorists.

Senator Richard Shelby, the Republican chairman of the committee, asked how it was possible to prevent the abuse of casinos given the recent proliferation, with 600 casinos now in 30 states.

“How do we ensure that the explosion in legalised gambling is not abused by those seeking to launder the proceeds of crime or to finance criminal or terrorist activity?” he asked.

Senator Jim Bunning concurred, saying that MGM Mirage’s failure to follow anti-money-laundering measures was “very disconcerting”. “We cannot allow these things to happen, especially since there is evidence that terrorists, including September 11 hijackers, have used nonbank financial institutions,” he said.

Frank Fahrenkopf, the US casino industry’s top lobbyist, said that MGM Mirage disclosed the violation to regulators and that he was unaware of any evidence that terrorists had used casinos for money-laundering. Alan Feldman, a senior vice-president of public affairs from MGM Mirage, said that the financial link between terrorism and casinos was “ephemeral” at best. He said: “It is unfortunate that this has come up in election-year politics. That said, we failed to file the reports.”

Casinos in the UK have to adhere to the second EU Directive on Money-Laundering, which will mean that gamers will have to show ID.

MGM Mirage opposes this directive and has said that itthreatens its investment. Lloyd Nathan, its European managing director, said: “We want a large number of people coming through the doors, but the EU is saying casinos need to identity everyone before they enter. This is impossible if you have 15,000 coming into a casino on a Saturday night.”

Explore UK News

• Crime News

• Education News

• Health News

• Science News

• Scotland News

Times Recommends

• Swine flu vaccine for all as drug rushed through
• Artificial sperm and the race to build a baby
• BBC jets out stars to tout for prizes