IBA Compliance Connection

Your go to source for compliance!

What is our bank’s responsibility for ensuring that funds from lottery ticket sales are deposited in segregated accounts? Some of our customers sell lottery tickets without maintaining segregated accounts at our bank (but we do not know whether they maintain segregated accounts at other institutions).

—

by

admin

The Illinois Lottery Law does not impose requirements on banks to maintain segregated accounts for lottery funds; instead, it places the responsibility on the lottery sales agent. You may wish to remind customers that a failure to maintain segregated accounts for lottery proceeds is a Class 4 felony in Illinois, but you are not required to monitor these accounts or issue reminders to your customers.

As you note, for many customers, it will be difficult to determine that a customer is failing to segregate funds from lottery proceeds, since the customer may be maintaining a segregated account at another institution. But if you suspect that a customer is commingling lottery proceeds with other funds in amounts exceeding $5,000, we recommend filing a Suspicious Activity Report (SAR), since such activity clearly violates Illinois law and may violate federal law as well.

For resources related to our guidance, please see:

  • Illinois Lottery Law, 20 ILCS 1605/10.4 (“Every person who shall violate the provisions of Section 10.3, or who does not segregate and keep separate and apart from all other funds and assets, all proceeds from the sale of lottery tickets received by a person in the capacity of a sales agent, shall upon conviction thereof be guilty of a Class 4 felony. . . . ”)
  • FinCEN Rules, Reports by banks of suspicious transactions, 31 CFR 1020.320(a)(2) (“A transaction requires reporting under the terms of this section if it is conducted or attempted by, at, or through the bank, it involves or aggregates at least $5,000 in funds or other assets, and the bank knows, suspects, or has reason to suspect that: (i) The transaction involves funds derived from illegal activities or is intended or conducted in order to hide or disguise funds or assets derived from illegal activities (including, without limitation, the ownership, nature, source, location, or control of such funds or assets) as part of a plan to violate or evade any Federal law or regulation or to avoid any transaction reporting requirement under Federal law or regulation.”)