Wednesday June 15, 2022 | VICTORIA, BC [Last update: 2 pm on June 16, 2022]
by Mary P Brooke | Island Social Trends
An exploration of the money laundering in BC casinos that was going on pre-2017 has resulted in a final report issued today.
The Commission of Inquiry into Money Laundering in British Columbia Final Report – June 2022 was released at 11:30 am this morning, after three years of much fact-gathering, testimony and evidence-gathering. There are 101 recommendations in the 1,831-page report, which includes a 30-page executive summary.
During the pandemic, hearings were shifted to a virtual format.
What sparked the inquiry:
Up to 2017, politicians & BCLC had turned a blind eye to money-laundering in BC casinos. Perhaps they thought it was too complex or too big to handle, perhaps they didn’t care. Or somewhere in between.
Members of the media caught on to comments and observations by individuals, casino staff and others. This caught the attention of politicians.
The BC NDP government under John Horgan took it seriously when they came into office in July 2017. Attorney General David Eby was shown some video evidence, and an independent inquiry came after that (as announced in May 2019) which took three years.
What is money laundering:
The report defines money laundering as “the process used to disguise the source of money or assets derived from illegal activity.”
It was found that at casinos large stacks of cash were used. There was a money laundering typology that came to be known as the “Vancouver model” — a workaround whereby wealthy casino patrons were provided vast sums of illicit cash by ‘cash facilitators’ who were affiliated with criminal organizations; some held wealth in China but were unable to access that wealth in Canada because of Chinese currency export restrictions (so they resorted to cash facilitators to get money to gamble in BC), it was stated in today’s report.
“Money laundering is a significant problem requiring strong and decisive action”, it was stated in the report summary.
“Money laundering has, as its origin, crime that destroys communities – such as drug trafficking, human trafficking, and fraud. These crimes victimize the most vulnerable members of society. Money laundering is also an afront to law-abiding citizens who earn their money honestly and pay their fair share of the costs of living in a community.”
The amount of money being laundered through BC casinos was described today by the Honourable Austin F. Cullen as “staggering”. One year, at least $14 million was processed through money laundering in BC casinos.
Tied to criminal offences:
Money laundering is tied to revenue-generating criminal offences.
- Nine offences were rated as having a very high money laundering risk. These offences were capital markets fraud, commercial trade fraud, corruption and bribery, counterfeiting and piracy, illicit drug trafficking, mass-marketing fraud, mortgage fraud, third-party money laundering, and tobacco smuggling and trafficking.
- Eight offences were rated as having a high money laundering risk. These offences were currency counterfeiting, human smuggling, human trafficking, identity theft and fraud, illegal gambling, payment-card fraud, pollution crime, and robbery and theft.
- Four offences were rated as having a medium money laundering risk. These offences were firearms smuggling and trafficking, extortion, loan sharking, and tax evasion / fraud.
- One offence (wildlife crime) was rated as having a low money laundering risk.
Through luxury goods:
There was money-laundering done through the acquisition and trade of drugs, jewelry and high-end cars, as well as artworks.
Known to politicians:
The illegal activity of money-laundering at the government’s casinos was evidently known to both elected politicians (including the premier at the time, Christy Clark, as well as cabinet ministers Rich Coleman, Mike de Jong and Shirley Bond.
“Ms Clark failed to determine whether these funds were being accepted by the casinos (and in turn contributing to the revenue of the Province) and failed to ensure such funds were not accepted,” it was stated in the report.
As well, the BC Lottery Corporation (BCLC) also essentially turned a blind eye, including running a counter-narrative in internal communications.
Complete turnover at BCLC:
Today BC Attorney General David Eby told media that there has been a complete turnover of the BCLC executive team and board (from pre-2017) as well as “significant internal process changes” in addition to “the personnel changes to respond to this issue”, he said during an early-afternoon press conference.
The current BCLC Chair is Greg Moore. Other BCLC board members are Joan Axford, Hilary Cassady, Fiona Chan, Lisa Ethans, Dusty Kelly, Mario Lee and Coro Strandberg. Lynda Cavanaugh is the Interim President & CEO.
Of the $429.9 million in net revenue to the BC government through BCLC, the largest share ($147.2 million) went to funding health-care. Notably, $93.5 million was allocated to a “responsible gambling strategy”.
As the report has just been released, BCLC said in a release later this afternoon that it will now be reviewing it and supporting government’s work to respond to the recommendations.
“I would like to thank Commissioner Cullen and his team for their substantial work on the important issue of money laundering across multiple sectors of BC’s economy,” said Greg Moore, BCLC Board Chair. “As Commissioner Cullen noted in his report, the industry is in a better place where the issue of illicit cash is taken seriously and adequately addressed by BCLC, which he noted has taken ‘significant and appropriate efforts’ to address suspicious transactions and money-laundering activity in BC casinos.”
“BCLC has completed significant work with government in recent years to strengthen safeguards that protect BC casinos from financial crimes, and we are ever committed to building on that momentum to help stamp out crime from our communities,” said Marie-Noelle Savoie, BCLC Chief Compliance Officer and Vice President of Legal, Compliance and Security.
“We are determined to continually improve our programs and work in lockstep with our partners in the anti-money laundering regime to obstruct the sophisticated and ever-evolving tactics of criminals who attempt to target our communities,” said Savoie in today’s BCLC news release.
BCLC says it supported the provincial government’s decision to establish an Inquiry and worked cooperatively with Commissioner Cullen throughout the entirety of the process. As the Crown corporation responsible for managing commercial gambling entertainment for the Province, BCLC was granted standing in the Inquiry in relation to the gaming and horse racing sectors.
Definition of corruption:
The Commissioner today said the former politicians knew about the money-laundering but that the Inquiry could not produce any evidence of “corruption”.
Corruption was defined as having to do with personal financial gain. None could be shown on the part of politicians or personnel at BCLC.
But in political life there is much to be gained other than money into one’s own pocket (indeed, any sensible politician would avoid receiving inappropriate funds in any obvious way).
Eby, when asked if he expects those former politicians to explain their failure to respond to the situation of illegal funds essentially funneling into government coffers (BCLC supplies a large chunk of its revenues to the Government of BC), said:
“I hold myself to a higher standard than being awarded the sash of ‘not corrupt’. I’m proud of my actions that I took on this file. I am glad for the Commission’s finding about the impacts that those actions have had on the issue in our casinos. And I recognize and commit to prioritizing acting on the Commissioner’s recommendations, how we move forward to deal with what he describes as an enormous problem,” said Eby.
As for holding elected officials of the former BC government to account, Eby said: “It is not going to be my job to pursue these individuals, many of who are no longer in politics, to get their explanations. But for their own legacies, they may choose to explain why they did what they did,” said Eby.
“The government of BC should not knowingly be accepting the proceeds of crime,” said Eby who has been Attorney General since the NDP formed government in July 2017 under Premier John Horgan.
Fallout for BC Liberals:
The BC Liberal party (who held government from 2001 to 2017) last week announced that they are changing the name of their party. Time for a refresh, a new coat of paint. That’s happening ahead of the next provincial election which is scheduled for 2024.
Implementing the recommendations:
It will take years and millions of dollars to implement all the 101 money-laundering recommendations. Eby said BC will have to do the federal government’s job, to take care of all this.
Federal support needed:
The federal anti–money laundering regime is not effective, it was stated in the report.
One of the primary criticisms of the federal regime is the ineffectiveness of FINTRAC, the agency responsible for receiving and analyzing information about money laundering threats and communicating this information and analysis to law enforcement.
Today Eby said “the support we hoped for from the federal government has not been there”, and he hopes federal public safety minister Marco Mendicino “will join us” in convincing the prime minister and cabinet to do more.
Transnational organized crime has been described as one of the pre-eminent criminal threats to Canada and its global partners.
A former RCMP officer with significant experience in the investigation of transnational organized crime, testified that he has witnessed the convergence of three main organized crime groups in British Columbia over the past decade:
• Mexican and Colombian cartel networks;
• Middle Eastern organized crime networks; and
• Asian organized crime networks.
Federal NDP comment:
The federal NDP have commented that the federal government failed to perform well enough. NDP Public Safety Critic Alistair MacGregor (Cowichan-Malahat-Langford) issued a statement the next day (June 16):
“This is a complete failure on the Liberal government’s part — they should have had an anti-money-laundering plan,” said the NDP in their statement, noting that the BC government is having to take over the efforts themselves.
MacGregor says it’s positive that outlined in the Cullen report yesterday “is the importance of a federal public Beneficial Ownership Registry, which the NDP successfully pushed the government to accelerate and implement by the end of 2023”.
Today the Commissioner commended “a watchful press” in alerting money laundering and the Attorney General commended “reporters, current and retired” for “pulling at the threads” of money laundering in BC casinos, saying their investigative reporting to determine accountability and reform was a significant and important effort.
“Congratulations on your efforts” which he says contributed to public education and helped mount public pressure about this issue. “Without your efforts I do not believe that this inquiry would have taken place… it was called in response to widespread public concern,” said Eby.
Meanwhile, earlier the Commissioner’s team essentially chastised media for seeming to be disappointed that no corruption was identified on the part of former elected politicians. With in a small definition of corruption as ‘money into pockets’, corruption was not found by the Commission.
The Commissioner repeated that the inquiry was about fact-finding, not for finding civil or criminal fault. Eby handled the ball well to acknowledge there is more to corruption than receiving a direct cash payment.
Police didn’t perform:
The report outlines how money laundering at the casinos was not effectively curtailed by police — a lack of enforcement. More investigators and financial analysts are needed, the commissioner said.
Independent anti-money-laundering office:
The report’s recommendations call for the Province to establish an independent office of the Legislature focused on anti–money laundering including an anti–money laundering liaison offier to be the primary point of contact for improved inter-agency collaboration and information sharing.
It is recommended that the threshold for requiring proof of the source of funds for casino transactions conducted in cash and other bearer monetary instruments be lowered to $3,000.
Casinos in BC:
There are 34 casinos and community gaming centres across the province (from slots to table games to restaurants and concert venues).
Thirty-three communities in BC operate a gaming facility. There are 13,678 slot machines and 480 table games.
One of the recommendations is that current limits on the amounts that casinos are able to pay out to patrons in the form of convenience cheques remain in place.
Real estate has been looped in:
It is recommended that the Province amend the Real Estate Services Regulation to bring the employees of developers within the licensing scheme. Business-scale “for lease by owner” and “for sale by owner” operations should be brought into the licensing scheme for real estate service providers, it was stated in the list of recommendations.
It is recommended that the BC Financial Securities Authority (BCFSA) require real estate licensees to ask clients about their source of funds at the outset of the client relationship, and record the information provided.
Mortgage brokers may be required to perform an extended criminal and police background check. Managing brokers and sub-brokers may be required to be education on the detection and reporting of fraud and money laundering in the industry.
It is recommended that the Ministry of Finance – either in conjunction with Canada Mortgage and Housing Corporation (CMHC) or on its own – develop the required data and conduct a market integrity analysis in order to identify suspicious transactions and activity in real estate.
Credit union sector:
Some money-laundering may have occurred through small credit unions.
Due to the relative size of some credit unions and other financial institutions, a number of credit unions face challenges in implementing anti–money laundering programs, it is stated in the report.
“Certain fixed costs must be borne by a financial institution regardless of its size, such as the cost of anti–money laundering software,” it is stated in the report.