Experts skeptical of money-laundering crackdown at B.C. casinos and elsewhere

[AP Photo/Keith Srakocic]

The B.C. government’s announcement this week of a new police unit to combat casino money laundering has some experts skeptical the fresh crackdown will do much to curtail the practice.

The Joint Illegal Gaming Investigation Team will operate within the existing Combined Forces Special Enforcement Unit, a joint RCMP-municipal police agency that targets gang activity. The gaming unit will focus on disrupting organized crime’s involvement in gaming, specifically using casinos to sanitize proceeds of crime.

The announcement comes six years after the B.C. government disbanded a similar unit, the integrated illegal gaming enforcement team, ostensibly because it was inefficient and ineffectual. This one will focus more directly on money-laundering activities, Finance Minister Mike de Jong said.

CBC News reported figures released by the provincial government show there were suspicious casino transactions totalling more than $119 million since April 2015.

Researchers who track gaming in Canada say the problem in B.C and other Canadian jurisdictions is that governments’ financial stake in lucrative gaming revenues via provincial lottery corporations that license casinos conflict with efforts to keep crime, including money laundering and loan-sharking, off the gaming floor.

“I think there’s a lot of tokenistic lip service put towards these kinds of issues,” Colin Campbell, a criminology professor at Douglas College in New Westminster, B.C., told Yahoo Canada News.

“But I think internally the mandate of the lottery corporation is to make money. And if that money’s coming from illicit sources, well we’re not going to trumpet it but gee whiz it’s still money and we’re taking it and putting it to good causes.”

There’s a huge conflict of interest at work, added Garry Smith of the University of Alberta’s Gambling Research Institute.

“You’re trying to stop crime and problem gambling and hurting consumers but on the other hand you’re trying to get this enterprise to prosper,” he said in an interview. “You get dichotomous roles and you can’t do both at the same time properly.”

Organized crime’s temptation

Casinos offer tempting opportunities for organized crime, especially drug gangs, to launder money. They’re heavily cash-oriented businesses, allowing crooks to arrive with bags of bills that they can exchange for casino chips that later are reimbursed as clean cash or a cheque.

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The Financial Transactions and Reports Analysis Centre of Canada, the federal agency better known as FINTRAC, has been responsible for monitoring large transactions, including those at casinos, for 15 years. Any cash transaction of $10,000 or more must be reported to FINTRAC.

The reporting rules have tightened steadily, particularly after the 9/11 terror attacks as FINTRAC focused on terrorism funding sources. Criminals responded by trying to fly under the radar with transactions below the $10,000 threshold or by using third parties to conduct them.

Casinos now must report any transactions by a single individual that totals $10,000 or higher over a 24-hour period, and any transaction regardless of size that their staff deems suspicious. What constitutes suspicious depends on the circumstances, FINTRAC’s guidelines explain.

A FINTRAC spokeswoman told Yahoo Canada News there were 36,029 large cash transactions at B.C. casinos in the last calendar year. The agency said 1,508 suspicious transactions were flagged but it’s not clear how many were referred to police for further investigation.

FINTRAC referred 1,200 suspicious transactions to police throughout Canada in the 2014-15 fiscal year, out of 22 million total transactions, said Paul Burns, vice-president of the Canadian Gaming Association, whose 24 member companies operate most major casinos.

No dollar amounts were available, but FINTRAC hopes to post annual countrywide statistics for each sector it monitors, from casinos to banking and real estate, by June.

Burns said the industry has worked diligently to comply with ongoing regulatory changes and minimize money-laundering opportunities. For instance, casinos record identification of those getting cash payouts and will not issue cheques made out to cash or to third parties.

“Frontline staff are trained almost on a continual basis across the country,” he said. “There’s a lot of dialogue between our industry and FINTRAC. We’re a heavily regulated industry so it’s not like this is foreign to us.”

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FINTRAC spokeswoman Renée Bercier agreed the agency has seen improved compliance in recent years in relation to risk assessments at different Canadian casinos and obligations to train staff.

“At the same time, as this is a cash intensive sector, greater attention is required regarding the quantity, quality and timeliness of the reports submitted to FINTRAC, particularly in relation to suspicious transactions.”

That’s part of the problem, said Smith and Campbell. There’s a lack of immediacy to the process, making it hard for law enforcement to respond quickly when a dubious transaction is detected.

Campbell wondered whether that will change in B.C. with the creation of the new police unit. He said he got to know the head of the previous unit, a now-retired RCMP staff sergeant, who wanted to institute an aggressive strategy to combat illicit activities, including putting undercover officers into casinos to get to know and track those involved in money-laundering and loan-sharking activities.

He complained of being thwarted by officials at the B.C. Lottery Corp. and the provincial Gaming Policy and Enforcement Branch. The message the officer received was, “Hey listen, things aren’t broken. There’s no need to be fixing it,” Campbell said.

Campbell also questioned whether members of the new unit will receive the specialized training needed to sift through the complexities of casino transactions.

“An ordinary major-crime investigator is not going to know the intricacies of gambling or money laundering in gambling venues,” he said.

B.C. casinos not the only target

Of course, B.C. casinos aren’t the only places crooks have gone to clean their cash. About a decade ago, investigators in Ontario discovered an apparent scam where members of an alleged drug gang pumped $9,000 into different slot machines at an Orillia casino, below the FINTRAC reporting threshold. They then cashed out and turned in the machine’s payout stubs for casino cheques they could deposit.

An RCMP officer involved in the investigation told CBC News that when he approached the Ontario Lottery and Gaming Corp.’s vice-president of security about this he was told to back off.

There now are Ontario Provincial Police officers located in every major casino. Burns said he believes their presence helps deter criminal activity and hopes creation of the B.C. unit will do the same.

“I see it as stepping up and adding one more piece,” he said.

It’s the casinos’ responsibility to be compliant with FINTRAC rules and ensure staff members are trained to spot suspicious transactions, Burns said. The rest is up to police.

“Casinos aren’t in the business of catching criminals,” he said. “What we are [doing] is providing information to the authorities and letting them do it.”