Big cash flowing into River Rock Casino sparks money-laundering probe

SAM COOPER / VANCOUVER SUN

SEPTEMBER 24, 2017 07:24 AM

Revelations that B.C. casinos may have been used by Chinese high-rollers to launder massive wads of cash that could be “proceeds of crime” come as no surprise to Sandy 
Garossino.




The co-founder of Vancouver Not Vegas said the contents of a government report, released Friday after freedom of information requests by Postmedia, are “consistent” with everything she’s learned after fighting the proliferation of casinos for more than five years.

“The crime comes with the industry,” she said.

Garossino hopes the independent review of money-laundering controls ordered by Attorney General David Eby helps to address the problem, but she warned it would need to “rise above politics.”

“The B.C. Lottery Corporation has, in a very short time, become a behemoth in the provincial government,” she said. “We’ve become dependent on that revenue.”

Eby said his government is “serious” about identifying money laundering activities and ensuring there are policies in place to prevent it in B.C casinos.

“We will bring in the best experts available to assist us, and I am confident we will succeed,” he said in a statement.

The planned review was Eby’s response to a damaging confidential report about casinos overseen by B.C. Lottery Corporation. Commissioned in 2015 by B.C.’s gaming policy enforcement branch, but not released until Postmedia filed a freedom of information request, the report focuses mostly on allegations of “unsourced cash” flowing into Richmond’s River Rock Casino.

Auditor MNP LLP explains the reasons for its report, noting that the enforcement branch “compiled a document which identified approximately $13.5 million in $20 bills being accepted in River Rock in July 2015.” That’s equivalent to a 20-storey-high stack of $20 bills, taller than the 12-storey height of the casino’s hotel building.

“Law enforcement intelligence has indicated this currency may be the direct proceeds of crime,” the MNP report states.

The majority of cash is presented to casino staff by “high-roller Asian VIP clients” who have travelled from China or recently immigrated from China, the report says.

Investigations and interviews showed that some VIPs have been allowed to purchase gambling chips at River Rock with more than $500,000 in small bills at a single time. And casino staff are accepting these wads of cash even though there is “no known source of funds.”

In its report, MNP says it looked at the actions of the enforcement branch, casino overseer B.C. Lottery Corporation and B.C. casino operators.

MNP’s report notes that all these parties have an interest in maintaining the gaming revenues pouring into B.C., but warns the gambling system is at risk of being corrupted.

The enforcement branch, an arm of the Finance Ministry, “has an interest in reducing the influx of unsourced cash into gaming facilities in B.C.,” the report states. MNP concluded there must be “acknowledgment, from all parties, that the proceeds of crime may be being injected into the gaming system despite the controls put in place.”

The report says that River Rock’s staff have “fostered a culture accepting of large bulk cash transactions.” Because the majority of VIPs using cash to buy chips are from China or have recently acquired resident status in Canada, it is difficult for staff to build client profiles to judge if their wealth is legitimate, the report says.

“Chinese nationals … comprise the majority of the identified high-risk demographic at River Rock,” the report says.

Also, considering the high volume of cash flooding into River Rock, the casino doesn’t have enough staff to follow anti-money-laundering protocols and investigate risks, the report says. However, MNP said it didn’t discover “material” breaches in BCLC or River Rock’s risk controls.

While BCLC gets a black eye in the report, sources within the casino overseer have told Postmedia that they have been tackling the problem, and for several years they have been working with police to identify suspected “high-risk” gamblers and alleged criminals suspected of supplying VIPs with cash.

MNP’s report suggests underground banking channels are being used by gamblers seeking to avoid China’s tight capital controls.

“Interviews have confirmed that VIPs are indeed wealthy non-residents, or business persons with interests in Vancouver and China, coming to Vancouver to gamble,” the report states. “The use of possible underground banking operations using large volumes of unsourced cash have become increasingly common and accepted as a convenience feature for VIP players who may not be able to send funds to Canada.”

MNP’s report said because of errors in BCLC’s reporting methods, it “was unable to determine the actual number and amounts of large cash transactions.”

There were also errors or omissions on reports submitted to Canada’s anti-money-laundering agency, Fintrac, the MNP report says.

BCLC acknowledged errors in its cash reporting data.

MNP says the issue of B.C. casinos, especially River Rock, “accepting large volumes of cash has been a growing problem in the province for a number of years. … BCLC is accountable to the province for revenue. … Service providers (are) focusing on revenue.”

MNP recommends that “casinos refuse unsourced cash deposits exceeding a certain dollar threshold until the source can be determined and validated.”

Other issues identified include the role of River Rock VIP “host” staff, who are given incentives to maximize high-roller revenue for the casino by keeping these gamblers happy. Since these hosts have the most interaction with high-rollers, they should be required to report suspicious transactions, MNP says.

One question relates to the revenue loss that casinos could experience if they vet high-rollers and large cash purchases of chips more diligently.

Great Canadian Casinos, the owner of River Rock, did not reply to detailed questions on Friday. But it issued a statement saying it complies with all regulatory requirements set by provincial and federal agencies. “At all times, we govern ourselves to meet or exceed those obligations, rules and standards.”

It said it welcomed the review ordered by Eby and would comply with any revisions to the regulatory structure.

The issues identified in MNP’s report happened while the B.C. Liberal government, and Finance Minister Mike de Jong, were responsible for gambling in B.C. On Friday afternoon, a B.C. Liberal representative said de Jong couldn’t be located for comment.

“I’m trying to get in touch with him,” Carlie Pochynok of the B.C. Liberal caucus said.

BCLC says it “delivered” $1.339 billion to the province from gambling revenue in the last fiscal year, which is “a vital portion of the provincial budget” for health care, education and services. Of that total income, $13.8 million goes to the gambling enforcement branch. B.C. also shares gambling revenue with municipal governments, such as Richmond, that host casinos.

MNP’s report suggests conflicting interests between the parties involved in B.C. gaming and the revenue it brings in.

“There are inherent conflicts between the mandates of B.C.’s gaming policy enforcement branch, BCLC, and the service provider,” the report states.