Industry Reports

British Columbia Money Laundering Report Recognizes Casino Chip Walking as Dangerous Practice

The former member of the Royal Canadian Mounted Police Peter German described the casinos situated in the region of Vancouver as “laundromats” aimed at the cleaning the proceeds of organized crime in his report to the Government of British Columbia. For some time now, the relation between local casinos and money laundering schemes has caused some concern among authorities and communities, as the schemes have been using legitimate gambling venues to “wash” dirty money obtained through illegal means.

As revealed by Mr. German in the report, chips are taken from casinos and used outside the gambling facilities to settle loans and to facilitate the money movement from outside Canada. The practice is commonly known in the industry as “chip walking”. What is more, according to report findings, there were at least two cases in which chips were used as currency in drug trafficking in British Columbia.

According to the former Mountie, chip walking could be a serious problem, especially in large quantities. Mr. German reminded that chips have a serious advantage, as their value equated with the current value of the dollar, which practically makes them an alternate currency.

The investigation findings are just a small part of the report on money laundering which was prepared by Mr. German. The report also offers a more thorough perspective of the different ways in which casinos have been associated with crime and money laundering.

In addition, a recommendation in terms of the so-called “chip walking” practice has been included in the report, with Mr. German urging the British Columbia Lottery Corporation (BCLC) to establish a chip tracking system. According to him, the lack of a suitable tracking mechanism when it comes to chips facilitates the opportunity for them to be used as a currency for illegal activities. In addition, the absence of such a chip tracking mechanism is also a means by which some gamblers are able to purchase chips to be used by anonymous third parties.

BC Authorities Do Not Consider Chip Walking a Major Threat

For the time being, the authorities in British Columbia do not recognize chip walking as a major threat.

However, other countries know better. The former director of the US Financial Crimes Enforcement Network, Jennifer Shasky Calvery, raised a red flag over the practice at a bank secrecy conference back in 2014. According to Ms. Shasky Calvery, a player who walks out of a gambling venue with a large number of chips, or keeps them stored on-site in a lock box for a prolonged period of time, may be actually trying to conceal their funds or source of income. This, on the other hand, could be a sign of an activity which should be reported.

Even more concerning is the fact that currently, the casinos situated in British Columbia do not have a special security feature aimed at preventing players from walking out of a certain venue with chips in their pocket. According to the findings included in the report of Mr. German, a large number of $5,000 chips went missing from the River Rock Casino in 2015. The chips were valued at an amount of between $4.4 million and $13.6 million, the report says.

As far as special protection measures to prevent chip walking from happening are concerned, Mr. German said that radio frequency detention devices could be placed at casino exits. The problem is that this technology has not been proven as reliable enough. Another suggestion made by Mr. German involves the insertion of a serial number on chips or personalizing them to a particular VIP customer in order for a tracking option to be created.