‘More complex than … anticipated’
BCLC staff unable to properly make use of $7-million, anti-money-laundering software
In the middle of a money-laundering crisis, B.C. Lottery Corp. analysts are stuck manually digging for data on risky gamblers and large transactions because of problems with a new, $7.3-million, anti-money-laundering software system, Postmedia News has learned.
For years BCLC casinos in Metro Vancouver have been targeted by a transnational money-laundering operation that has used VIP gamblers recruited from China to launder hundreds-of-millions in suspected drug cash, RCMP and government documents allege. In 2014, as so-called whale gamblers flooded Metro casinos with suspicious cash, BCLC’s executive approved a plan to buy a high-tech software system to flag suspected money-laundering transactions, at a budgeted cost of $7.4 million.
These expensive data-crunching systems are used by big Canadian banks, and they’re programmed to automatically collect indicators of potential money-laundering and fraud transactions, so that the institutions can meet their legal requirements to report to Canadian regulators.
BCLC’s new software was expected to “eliminate many manual processes,” and “support a detailed view of a customer’s risk profile ... in order to identify circumstances which need the direct attention of BCLC investigators,” according to a February 2017 BCLC memo, obtained by Postmedia in a freedom-of-information request.
Investment in the software would result in a system, the memo says, “that automates most aspects of customer and transaction monitoring for money-laundering risks. It will allow BCLC to better risk-assess money-laundering threats and allow more sophisticated and timely responses.”
But four years after the new hightech system was planned, the program, called Statistical Analysis Software, is barely functioning, according to Postmedia’s probe. And BCLC analysts claim that they don’t have the ability to use the system and produce reports regarding large and potentially risky transactions, without manual efforts.
In response to Postmedia’s questions about BCLC’s delayed implementation of the system, the Ministry of Attorney-General stated: “Upon request from the attorney-general, Dr. Peter German is investigating Statistical Analysis Software as part of his independent and thorough review of British Columbia’s anti-money-laundering policies and practices in relation to B.C. casinos.”
The 2017 memo explains reasons for the system’s delayed launch. Through a collaborative effort by BCLC and the contracted supplier, the software program was supposed to “monitor player transactions and trends against a series of risk scenarios, developed specifically for the gaming industry.”
But even though the software was designed for BCLC, it hasn’t been functioning to meet BCLC’s needs. The system was supposed to be running in 2016, but its launch was expected to be delayed until later in 2017, according to the 2017 memo.
“Currently, most of BCLC’s customer and transaction monitoring is done manually by BCLC investigators and analysts,” the memo says, “using a variety of global databases to confirm the details provided by patrons.”
Adapting the system for BCLC’s needs “proved more complex than originally anticipated,” a BCLC statement says, and getting the system to work as intended “is an ongoing priority.”
At some point in 2017, though, BCLC was able to get the system to “automate alerts regarding key anomalies to support our anti-money-laundering program,” the statement claims. The system has so far cost $7.3 million to implement, the statement said.
BCLC staff confirmed to Postmedia this week that data analysts don’t have the ability to use the system, and they claim the task of creating records regarding potentially risky transactions would require hundreds of hours of manual efforts. That information came out in the context of a Postmedia FOI request about risks surrounding non-cash, patron gaming-fund accounts.
As Postmedia has reported, these accounts were promoted by BCLC as a way to wean VIP gamblers away from suspicious cash buy-ins, and they’re supposed to provide a better audit trail for anti-money-laundering investigators. However, B.C.’s gaming enforcement branch is concerned that these new accounts rely almost exclusively on bank-draft deposits from high-risk VIP gamblers. In 2016, the top- 10 BCLC patrons — of a total 387 patron gaming-fund users — accounted for 47 per cent of the $301-million total gaming-fund deposits, documents say.
And bank drafts, documents say, accounted for $185 million of the $186 million deposited in 2016.
This was a problem because “the majority of bank drafts are accepted” by casino operators “without knowing whether the funds are coming from the (VIP gambler’s) own bank account … some of the drafts are blank, no name has been entered,” documents say. “Customer due-diligence (for some VIP gamblers) responsible for a significant amount of patron gaming-fund account activity may not be sufficient.”