After a decade-long court battle, the B.C. Lottery Corp. has revealed why Canada’s money-laundering watchdog fined it close to $700,000 for violating the law against money laundering and financing of terrorists.
In 2010, Fintrac fined BCLC for violations of the law after it did on-site reviews of six B.C. casinos in late 2009.
BCLC appealed the $695,750 penalty and the Federal Court set it aside in 2017. The court issued confidentiality orders in 2012 and 2014 barring the release of records related to the appeal.
Now, BCLC has revealed that Fintrac found seven deficiencies in its oversight of casinos, including failures to mitigate high-risk gambling, obtain ID from people making large buy-ins, report large cash transactions and keep adequate records.
Those revelations and others came this week after a nine-year battle by CBC News to obtain the facts through a freedom-of-information request.
BCLC said in an emailed statement that it began working to change the 2012 confidentiality order in February so it could provide documents for the B.C. money laundering inquiry led by Justice Austin Cullen.
BCLC provided Postmedia News with 40 pages of the records after the confidentiality order was recently varied.
The first of the seven deficiencies listed in Fintrac’s report of its findings was related to BCLC’s compliance rules.
Fintrac said interviews with cage staff at casinos revealed that, with the exception of slot jackpots, “little or no verification of client gaming activity was taking place — particularly for transactions that had been identified as high risk.”
The second deficiency involved staff failing to ascertain the identity of people making large cash transactions.
Fintrac reviewed casino records and found nine instances where staff didn’t ask to see IDs of clients who accumulated buy-ins equals to or greater than $10,000 within a 24-hour period.
Deficiencies three through six involved BCLC’s reporting of large cash transactions. After reviewing 1,577 large cash transactions from Jan. 1 to Oct. 15, 2009, Fintrac identified 165 reports filed later than the 15-day deadline.
Fintrac found that 206 of the 1,577 reports included incorrect dates and 369 reports lacked detail about the occupation of the clients, some of whom identified themselves as “self-employed” or “business owner.”
Casinos were also late in reporting every single large casino disbursement report from a sample of 500 reports taken between Sept. 28 and Oct. 15, 2009, according to Fintrac.
All 500 large casino disbursement reports were not submitted to Fintrac in the “prescribed form and manner,” and all had been submitted as transactions taking place in Williams Lake, not the correct casino sites across B.C.
The seventh deficiency was in record-keeping. Fintrac reviewed 2005 large cash disbursement records for chips, token or plaques in cash from Jan. 1 to Sept. 27, 2009. Of those, 155 records lacked adequate detail about the occupation of the client.
On Feb. 10, 2010, four weeks after Fintrac submitted its findings, BCLC responded as required with plans to fix each deficiency.
Documents obtained by Postmedia show that $650 million in suspicious transactions flowed through B.C. casinos between 2010 and 2016, two-thirds of it in $20 bills.
“Over the past 10 years, Fintrac and BCLC have developed a strong professional relationship, and both organizations are fully committed to the prevention of money laundering and terrorist financing,” a BCLC spokesperson said in an email.
“In its last biennial examination in 2018, Fintrac acknowledged that BCLC had made significant progress in improving its anti-money-laundering program over the years and that we continue to enhance the program’s maturity and effectiveness.”
In 2018, the B.C. government pledged sweeping oversight reforms of the casino industry as recommended by a damning independent report on money laundering by Peter German, a former deputy commissioner of the RCMP.
German found there was a collective system failure that grew over time and outstripped the ability of existing legislation, processes and structures to effectively manage it.
For many years, certain Lower Mainland casinos unwittingly served as “laundromats” for the proceeds of organized crime, German’s 247-page report found.
German concluded that money laundered through casinos was linked, at least in some cases, to domestic and international crime organizations involved in illicit drug and precursor chemical purchases, drug importing, distribution and trafficking.
German also found that some of those that arranged money laundering were buying real estate and advising others how to conduct real estate transactions.