B.C. casinos are ‘laundromats’ for ‘infusion of dirty money,’ report says

By DAVID P. BALLStarMetro Vancouver
JEN ST. DENISStarMetro Vancouver

Wed., June 27, 2018

VANCOUVER—Plastic shopping bags bulging with cash dumped onto casino counters. Hundreds of thousands in $20 bills, bundled by elastic bands. Thirteen minutes spent just counting the money in one security video shown to reporters.

British Columbia’s casinos “unwittingly served as laundromats for the proceeds of organized crime,” representing “a collective system failure” in which the province bears major responsibility, according to a long-awaited report released Wednesday by the Attorney General.

B.C. Attorney General David Eby stands behind Peter German — the former deputy Western RCMP commissioner he commissioned to report on money laundering in Vancouver-area casinos — at the report’s release on Wednesday, June 27, 2018 in Vancouver.  (DAVID P. BALL/STAR VANCOUVER)

The publicly owned BC Lottery Corp.’s anti-money-laundering unit doesn’t even work evenings or weekends, the nine-month investigation found. And the province’s gambling watchdog staff are “frustrated by the lack of tools” to stop laundering.

Eby alleged the previous B.C. Liberal government “turned a blind eye” despite “thousands of suspicious transaction reports” with a total that “well exceeds $100 million” — and that alarms were raised by both casino staff and police as early as 2011.

“The era of inaction and denial is over … It was so strange that it took so long to take action,” B.C. Attorney General David Eby told reporters Wednesday, as casino security footage played behind him. “The only way to combat money laundering is to tackle it full on, to bring the public on in full view.”

Read more:

Real estate investigation is next for author of B.C. casino money laundering report

Quebec-style inquiry on B.C. realty money laundering only way to get truth: lawyer

New B.C. realty review should address secrecy, laundering: advocates

Eby alleged the province ignored the extent of the problem due to “the mistaken belief that this act is a victimless crime,” he said. “But it is tied to the opioid crisis that has taken thousands of people from their families, and it’s linked to the real-estate market and housing prices that have made life unaffordable for British Columbians.”

Speaking to reporters, author Peter German — former deputy Western RCMP commissioner — said his investigation revealed to him “the modern face of organized crime” and the inability of existing legislation and policies to keep pace.

“It is the underbelly of the violence that we see on our streets and the detritus that permeates society and engages in corruption,” German said. “Most of what (the RCMP) have uncovered has come from drug trafficking.

“The tentacles aren’t just local drug trafficking but potentially international drug trafficking and laundering that money.”

Casinos employ roughly 37,000 staff in B.C., generating “huge revenue” for the province.

German urged B.C. to create a new gambling-funded Crown corporation to crack down on money laundering, as well as an entirely new gambling police force with an intelligence unit and an “emphasis on Lower Mainland casinos.”

Ordered by the province’s crusading Attorney General, David Eby, the 250-page report made 48 key recommendations to address a problem long suspected but until now unsubstantiated.

As early as 2012, German found, the problem was known to employees in the BC Lottery Corp. — which contracts private operators to run its casinos — and the Gaming Policy and Enforcement Branch, which enforces the rules.

Security camera footage from B.C. casinos, showing clients depositing massive bags of $20 bills bundled with elastics. The footage helped spark an investigation into money laundering by the province's Attorney General, released on Wednesday, June 27, 2018.

And two years earlier, German revealed, BCLC was hit with the largest fine ever handed out by the federal fiscal crime agency, the Financial Transactions and Reports Analysis Centre (FinTRAC).

Lawyer and money laundering expert Christine Duhaime called the report a “good step in the right direction” and applauded its recommendation that casinos must report directly to FINTRAC.

“This really is activity that takes place on the casino floor with people the casinos can see,” she said in a phone interview. “They know who they are; they’re clients of theirs.

Attorney General David Eby alleges the previous B.C. Liberal government “turned a blind eye” despite “thousands of suspicious transaction reports” with a total that “well exceeds $100 million.  (FLICKR/ NEWS.GOV.BC.CA)

“So they really are the ones who are best suited to monitor activity to see if it’s suspicious, and do the actual reporting instead of sending it to BCLC head office and letting them make decisions out of context.”

Another of German’s top recommendations is to call for a new independent regulator to enforce anti-money laundering rules — a Crown corporation with its own directors, registrar and in-house legal counsel, funded by gambling profits.

The previous B.C. Liberal government, through its finance minister Mike de Jong, had axed funding to casino crime investigators. German urged that B.C. give its Joint Integrated Gaming Investigation Team “permanent, fenced funding” — presumably “fenced” from future government cuts — within the RCMP’s provincial budget.

And casino staff in “VIP rooms,” he suggested, should not be allowed to handle cash or chips and be given an independent avenue to blow the whistle on “inappropriate conduct” by gamblers.

Eby had warned in an earlier interview that the hotly anticipated report’s findings were “shocking.” And B.C.’s Lower Mainland was so well-known for the practices that Eby learned authorities around the world had begun referring to it as “the Vancouver Model.”

Report author Peter German former deputy suggests that casino staff in VIP rooms should not be allowed to handle cash or chips — and be given an independent avenue to blow the whistle on “inappropriate conduct” by gamblers.  (FLICKR/ NEWS.GOV.BC.CA)

German’s revelations have already led to reforms since he gave Eby a draft in April. Eby said he’d delayed releasing it publicly because it contained allegations against individuals, which required they be given a chance to respond and for law enforcement to weigh in on risks to criminal investigations.

“Naturally with issues of money laundering, the secrecy is what makes it so difficult to track down the actual numbers and the actual scale,” said James Cohen, programs and engagement director of the anti-corruption watchdog Transparency International Canada, in a phone interview. “No doubt it was difficult to assess every aspect of money laundering, but it is important to look at why ‘the Vancouver Model’ was able to proliferate.

“A huge part of it has got to be a lack of oversight, not-good-enough enforcement and Canada’s lax rules and laws around anonymous companies and trusts. The public needs to understand how these complicated tools work.”

Here’s how such tools worked: According to the report, illegal drug trafficking gangs’ cash — from dealing, extortion, fraud and prostitution, almost entirely in $20s — was loaned to “local Chinese nationals” gambling at Vancouver-area casinos.

“The epicentre of the activity was at the River Rock casino in Richmond,” German told reporters, but was by no means alone. Those loans had to repaid through “offshore accounts … used to finance illicit drug and precursor chemical processes, drug importation, distribution and trafficking.”

But German’s work isn’t done. Under Eby’s orders, he is now turning his sights on alleged money laundering in B.C.’s red-hot real-estate sector for a second phase of his investigation and subsequent report.

German concluded by calling for B.C. to research “allegations of organized crime penetration of the real-estate industry,” as well as in horse racing and luxury cars.

But it’s the profit orientation of such crimes, he said, that might be the “Achilles heel” of criminals: “If you go after the money, you could potentially dismantle a criminal organization.”

Cohen said the “report is a very important step” but warned that to “just look at casinos would be to just see the tip of the iceberg.

“To think that money laundering stays in silos would be naive. It crosses geographies. We’ve got to take notice.”