The financial sector has always been a favorite target to money launderers. Hence, all the measures to prevent crimes and to reinforce anti-money laundering systems are mainly directed to the financial sector. The explosive growth of the gambling industry has attracted the attention of many people, who have started to play casino games as their hobby. More rounds played per hour means more money for the casino, which may help money launderers to have their ill-gotten gains into the mainstream. In this sense, casinos may be a boon to wrongdoers.
Casinos are recognized as a cash-intensive business. Similar to any other enterprise that handles large money flows on a daily basis, these gambling facilities conduct money transactions and accept funds on accounts. This seems to be the perfect condition for money launderers to legitimize their illicit proceeds. In fact, anti-money laundering measures have turned into a major priority for the countries, in which gambling industry is regulated.
Shelved Report Sparks Money Laundering Concerns at Local Casinos
This year, Canada has found itself at the heart of a serious money laundering scandal. The largest casino in the province of British Columbia, River Rock Casino Resort, has become ensnared in a big money laundering probe. In September of this year, the newly-elected British Columbia government presented a shelved casino report that raised money laundering concerns at River Rock Casino. The report stayed swept under the rug for more than a year by the previous Liberal government.
According to the report, the casino staff accepted huge amounts of cash from high-roller Asian players with interests in Vancouver and China. What is even more disturbing is that most of these transactions included unsourced cash. It was reported that the VIP Asian customers were buying-in big stacks of chips with small bills of $20 on regular basis. Some time ago, the police have warned that the $20 bill is the most used banknote by drug dealers. Despite this information, casino workers were prone to accept the money. Canada’s financial watchdog Financial Transactions and Reports Analysis Centre (FINTRAC) announced that it is to review the report “on which it was not consulted, to determine whether any action on its part is appropriate.”
A letter sent to the British Columbia Lottery Corporation (BCLC) last year revealed that FINTRAC warned BCLC of River Rock Casino’s lapses. According to the letter, 80% of the casino staff was not familiar with “suspicious transaction indicators relevant to the casinos sector.” It is important to note that this is not the first time, in which FINTRAC slaps BCLC on the wrist for not fulfilling its responsibilities in due manner. It should be explained that BCLC runs and monitors all the 17 land-based casinos in the province. BCLC’s operations, on the other hand, are monitored by the Gaming Policy and Enforcement Branch (GPEB).
Canada Reels Over Money Laundering Punch
After Canada has been rocketed by the money laundering scandal, Postmedia managed to obtain a number of important confidential documents via a freedom of information request. The first one is a memo that was sent by Gaming Enforcement Branch’s Director of Compliance Len Meilleur to the Royal Canadian Mounted Police (RCMP) and B.C. Lottery Commission. According to the memo, organized criminal networks in the country’s gambling life are “a viable threat to public safety”. This raised the question if British Columbia’s casinos comply with the country’s anti-money laundering system or they just aim at maximizing their profitability.
The warnings in Mr. Meilleur’s memo seem to be based on real facts. He backed up his allegations with other documents, which revealed River Rock Casino’s extensive money laundering history.
An internal audit issued in June 2016 by the province’s Gaming Policy Enforcement Branch (GPEB) suggested that the VIP Asian players obtained money from lenders who were banned from B.C. casinos due to anti-money-laundering restrictions. The audit alleges that the criminals used the VIP players as “nominees” in order to circumvent anti-money laundering measures. The high-roller gamblers were assigned the task to place side bets on behalf of their patrons, who provided the funds. The VIP gamblers could pay back their loans in China through the established illicit banking network.
The internal audit also revealed that River Rock Casino allowed players to buy-in chips with $20 bills and cash out with wads of $100 bills, which would not evoke any attention when banking. This process became known as “refining” dirty money. Here it is important to mention that back in the days, BCLC recommended casinos to pay out winnings in the same denomination, in which the players were buying-in. According to the report, Richmond’s River Rock Casino violated BCLC’s recommendations and allowed patrons to buy chips with bills of small value and be paid with big-denomination bills.
An RCMP investigation into money laundering through B.C. casinos found out that the wrongdoers used an illegal money transfer business in Richmond, allegedly operated by Paul “King” Fun, to lend drug cash to Asian high-rollers to gamble. Investigators believe that the illicit network has allegedly access to bank accounts in Mexico and Peru related to some of the largest drug trafficking organizations. As if that is not enough, there is also a suggestion that the illicit network has also access to accounts in Iran, which are allegedly linked to terrorist financing.
Charges Hang Over Wrongdoers as Probe Moves Ahead
Following RCMP’s Project E-Pirate probe of alleged B.C. drug-cash money-laundering, the money-transfer business Silver International Investment and two individuals have been found guilty of money laundering practices. RCMP allege that the criminals used Silver International as an illicit banking network to loan suspected drug cash to VIP high rollers, recruited from Macau. In that way, the wrongdoers were able to skirt China’s capital control for exporting and importing funds and avoid attention from Canada’s financial watchdog. In a raid on Silver International’s office in 2015, the police seized more than $2 million in mostly $20 bills and account books.
Caixuan Qin and Jian Jun Zhu are the two individuals, who were indicted on fraud charges. RCMP found out that Qin is the director of Silver International, which address is registered in an apartment in Richmond. According to the documents, Qin is not the owner of the apartment, but he is known to own a $2.5 million property in South Vancouver. The two individuals and the investment company are to face a number of charges, the most serious of which include money laundering of drug cash and possession of a property, involved in a crime. Chinese police have also made arrests in relation to the money laundering allegations.
River Rock Casino Resort Witnesses Exponential Crime Rate Increase
This is not the first time, in which River Rock Casino has found itself in the middle of a money laundering firestorm. It was revealed that the casino has an extensive history of suspicious money transactions. According to a reliable source, for the period between 2013 and 2015, the gambling facility has filed 54,187 suspicious transaction reports in total, but only 1,194 were regarded as suspicious. Furthermore, over that span of period, the casino banned 1,209 patrons as these were detected to perform high-risk transactions.
During the period between March 2014 and June 2014, River Rock Casino and Starlight Casino accepted $27 million in wads of street-cash $20 bill. The biggest portion of the money ($24 million) flowed through River Rock Casino. Even though the casino workers alarmed the authorities about the large transaction, the local police did not take any actions. A good flashback brings us back to 2011, when the two casinos headlined the local media once again. The gambling venues reported a suspicious transaction of almost $8 million. Paradoxically, in the same year, the country’s officials started to consider stricter anti-money laundering regulations to stop sweeping dirty money cash under the carpet.
River Rock Casino’s Operator Refuses Allegations
Casino operator Great Canadian Gaming Corporation issued a statement in response to the flood of attacks against its River Rock Casino. According to the casino operator, the venue has always been fully compliant with the country’s anti-money laundering regulations and recommendations. Great Canadian Gaming even stated that River Rock Casino’s workers have always participated actively in fighting illicit cash deeds and have even joined forces with the investigators to find the criminals and lay charges against them.
The company also denied any allegations that the casino exchanges large amounts of money for checks. The operator outlined that there are only three options for the players to receive a check from the casino. Great Canadian Gambling claimed that it has taken the necessary measures to prevent its gambling facilities from misuse and it invests heavily in improving its anti-money laundering systems every year.
Great Canadian Gaming Licks Its Wounds
In August this year, Ontario Lottery Gaming Corp. (OLG) decided to trust some of its gambling facilities in the hands of Great Canadian Gaming Corporation and Brookfield Business Partners. Under the deal, the two companies were about to sign a 22-year long takeover agreement with OLG. But in September, the British Columbia government dug out the shelved casino report, which revealed that suspicious transactions took place at River Rock Casino’s floor in 2015.
The disclosures significantly shook the foundations of the gambling industry in the area. Great Canadian Gaming Corporation suffered a strong blow on its reputation due to the money laundering firestorm. Ontario’s Progressive Conservative Party even urged the government to halt the casino deal with the gambling operator, recommending that officials wait for the final results of the investigation.
To alleviate the crisis, OLG issued a statement, reacting to the Conservatives’ demands. The agency confirmed that the operator is not a subject to a criminal or regulatory investigation in British Columbia or Ontario. OLG added that the operator’s reputability is accredited by the fact that it is registered with the Alcohol and Gaming Commission of Ontario (AGCO). The agency assured that Great Canadian Gaming has the capacity to successfully accomplish its task to modernize the worn-out gambling venues and make them more efficient for the local economy. OLG announced that it is to keep its eyes peeled for any piece of new information.
Anti-Money Laundering Measures at B.C. Casinos
Organizations in industries that manage large amounts of money need to comply with federal anti-money laundering (AML) legislation. B.C.’s casinos do not file suspicious transaction reports directly to Canada’s financial watchdog FINTRAC, but to BCLC, which has the responsibility to alert FINTRAC. Under British Columbia’s gambling regulatory framework, casinos are required to report cases, in which players either provide to the casino or take away from the casino more than $10,000 over the span of 24 hours. This does not mean that all of these transactions are automatically treated as suspicious. The money transactions classified as suspicious usually have certain indicators of money laundering.
Casinos are also authorized to bar patrons from gambling activity in case the patron does not provide proper identification or deny to provide certain information. Casinos are even recommended to use electronic means for money transfers. At present, it seems that the cash transfers are still a highly-preferred method, especially among players, who are not willing to provide information about their source of funds. It is yet to become clear if there are any loopholes in British Columbia’s anti-money laundering controls.
Earlier this year, BCLC issued anti-money laundering guideline titled Casinos and Perception of Crime. The regulator highlighted that it has implemented tough anti-money laundering measures. But the province’s extensive money-laundering history indicates that the problem is much more deeply-rooted than the officials envision and its eradication needs powerful measures.
All cash intensive business units have the potential to be exploited by money launderers, but some have more potential than others. Supposing that Canada embarks on a money laundering hunt with too strict regulations, that will, most likely, trigger an exodus of high-end players. This, on the other hand, will hit the profitability of the casino industry in the province and the local government is to lose money in tax revenues. British Columbia’s government is between the devil and the deep sea as it needs to choose between two equally unpleasant options.