B.C. Casino and Regulator Investigated for Alleged Anti-Money Laundering Failures
According to an investigative inquiry, River Rock Casino, the largest casino in British Columbia (B.C.), regularly did not fully report suspicious transactions, violating anti-money laundering (AML) rules.
The B.C. Lottery Corporation (BCLC), the province’s gambling
regulator, is also alleged to have been aware of the transgressions, but did
not take action. The Cullen Commission of Inquiry into Money Laundering in B.C.
is looking into these potential AML breaches.
The most notable of the suspicious transactions saw one
casino patron bring CA$1.8m (US$1.35m) in cash over the course of a single week
in December 2014. Despite these suspicious transactions, the BCLC did not tell
the casino operator to refuse the money or to conduct a source of funds check.
Former AML director under the microscope
A government lawyer questioned former BCLC AML and
investigations director John Karlovcec on Friday about the lack of action
concerning the suspicious cash transactions. B.C.’s Gaming Policy and
Enforcement Branch (GPEB) lawyer Kaitlyn Chewka focused her questions largely
on the CA$1.8m worth of buy-ins from 2014.
Karlovcec admitted that these transactions were suspicious
and they would have been reported to police and GPEB as well as FINTRAC, the
reporting center for financial transactions in Canada. Chewka explained that
the BCLC had the power to take further action but did not do so.
One of Karlovcec’s e-mails at the time regarding the
suspicious transactions said: “I recognize that we do not want to jeopardize
revenue.”
Karlovcec testified that he was not under pressure to
prioritize casino revenue, but he did agree that casinos may have resisted AML
measures so as to not offend high rollers.
The casino was only reporting cash transactions worth at
least CA$50,000 (US$37,572), contrary to the CA$10,000 FINTRAC reporting
requirement. Two cash buy-ins made entirely in CA$20 (US$15.03) bills totaling
CA$49,960 (US$37,542) and CA$49,980 (US$37,557) in 2011 were not reported as
suspicious. Authorities believe that casino staff might have informed high
rollers of this reporting limit so they could avoid triggering an
investigation.
The Cullen Commission questioned former BCLC manager of
investigations Gord Friesen on October 28. Investigating lawyers highlighted numerous
examples of Friesen disagreeing with his subordinates about large cash
transaction investigations.
Investigators raised concerns about the River Rock reporting
practices, but Friesen refused to investigate these concerns. River Rock Casino
lawyers maintain that the casino met all reporting duties and that there were
no AML breaches.
The Cullen Commission was launched because of reports that
illegal cash was fueling the gambling, luxury car, and real estate industries
in British Columbia. New AML controls went into effect in January 2018 in B.C.
as a result of ongoing concerns.
The new rules required any casino patron who spent at least
CA$10,000 within a 24-hour window to reveal their source of funds. All
high-risk venues are also now under 24/7 monitoring by regulators. The
province’s casinos saw lower VIP and revenue growth numbers following the
introduction of these measures.
B.C. Attorney General David Eby commissioned an independent
report that found that regulators and operators were happy to turn a blind eye
to large cash transactions, leading to the casinos in the province being dubbed
a “laundromat for organized crime.” The extent of money laundering at B.C.
casinos was so large that the international intelligence community described
the use of VIP players to launder criminal proceeds as “the Vancouver Model.”
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