We believe that the proceeds from Illinois lottery ticket sales should be deposited directly into segregated accounts. 

The Illinois Lottery Law requires that all proceeds from ticket sales “shall be kept separate and apart from all other funds and assets and shall not be commingled with any other funds or assets.” Similarly, the Illinois administrative rules require all lottery proceeds to “be segregated from other business or personal funds.” Additionally, the Retailer Agreement for Sale of Lottery Tickets that your customers likely agreed to states that a retailer that sells lottery tickets must “segregate from all of its other business receipts and funds and hold in trust all proceeds from Lottery sales, which the Retailer will deposit in a separate Lottery trust fund account.”

Accordingly, your customers that sell lottery tickets should not be commingling lottery proceeds with their other funds, even if done temporarily before transferring the proceeds to segregated accounts. You may wish to remind them that a failure to maintain segregated accounts for lottery proceeds is a Class 4 felony in Illinois and could result in the loss of their license to sell lottery tickets. Also, 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 1605/10.3 (“All proceeds from the sale of lottery tickets or shares received by a person in the capacity of a sales agent shall constitute a trust fund until paid to the Department either directly, or through the Department's authorized collection representative. Proceeds shall include unsold instant tickets received by a sales agent and cash proceeds of sale of any lottery products, net of allowable sales commissions and credit for lottery prizes paid to winners by sales agents. Sales proceeds and unsold instant tickets shall be delivered to the Department or its authorized collection representative upon demand. Sales agents shall be personally liable for all proceeds which shall be kept separate and apart from all other funds and assets and shall not be commingled with any other funds or assets. In the case of a sales agent who is not an individual, personal liability shall attach to the owners and officers of the sales agent.”)

• Illinois Lottery Rules, 11 Ill. Adm. Code 1770.60(t) (“All Lottery proceeds are funds of the State of Illinois, must be segregated from other business or personal funds, must be held in trust on behalf of the Illinois Lottery, and the licensed sales agent must, under penalty of law, maintain a separate bank account exclusively for deposit and transfer of weekly Lottery fund settlements by means of an Electronic Fund Transfer system.  The account must be designated on the bank’s records as ‘Lottery Trust Fund Account.’”)

• Illinois Lottery, Retailer Agreement for Sale of Lottery Tickets, page 2 (“A. The Retailer will segregate from all of its other business receipts and funds and hold in trust all proceeds from Lottery sales, which the Retailer will deposit in a separate Lottery trust fund account in a bank or other financial institution from which the Retailer will pay to the Lottery, on time, the full amount due the Lottery in accordance with the procedures established by the Lottery. These proceeds must be kept separate and apart from other business or personal funds or accounts and must be segregated as a trust fund on behalf of the Lottery.”)

• Illinois Lottery Rules, 11 Ill. Adm. Code 1770.10 (“‘Licensed Agent’, ‘Licensed Lottery Sales Agent’, ‘Lottery Agent’, ‘Licensed Sales Agent’, ‘Licensed Retailer’ or ‘Lottery Retailer’ means a person permitted by a license issued by the Superintendent under the authority of Sections 9.d, 10 and 10.1 of the Act to sell Illinois State Lottery tickets to the public, by an across-the-counter transaction at a specified point of sale at a specifically licensed location.”)

• 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. The provisions of this Section shall be enforced by the Illinois Department of State Police and prosecuted by the Attorney General.”)

• Illinois Lottery Rules, 11 Ill. Adm. Code 1770.40 (The Superintendent may revoke or suspend a license without notice or prior hearing, upon determining any of the following: . . . (7) That the licensed sales agent has commingled and has failed to segregate Lottery funds as a trust fund as required by the Act, has failed to surrender Lottery funds and/or unsold instant tickets upon demand by the Department or its authorized agent, has carried an accounts receivable balance in excess of $500 for more than 90 days, or has failed to post a bond or security deposit if required by the Superintendent; . . .”)

• FinCEN Rules, 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.”)