BCLC warned in 2015 about large casino cash transactions

In October 2015, former B.C. finance minister Mike de Jong wrote to the B.C. Lottery Corp. and warned that for B.C. casinos, “large and suspicious transactions remain prevalent,” Postmedia News has learned.

At that time, de Jong also directed BCLC board chairman Bud Smith to “enhance customer due diligence to mitigate the risk of money laundering ” in B.C. casinos, according to information cited in a May government letter to BCLC chief executive Jim Lightbody.

The direction from de Jong came after B.C. casino operators reported about $177 million in suspicious cash entering their casinos in 2014, government documents show.

“Despite the introduction and promotion of non-cash alternatives in gaming facilities through earlier phases of the anti-money laundering strategy, I am advised that large and suspicious cash transactions remain prevalent. This situation must be addressed,” de Jong’s Oct. 1, 2015 letter says.

The information — revealed in documents obtained by Postmedia after a freedom-of-information request — raises questions about why serious internal concerns about the laundering of proceeds of crime in casinos were only released last week by the B.C. government, and whether a dangerous problem was allowed to fester for too long.

Late last week, Postmedia reported that Attorney General David Eby released a damaging confidential audit of the BCLC. Based on the audit, Eby ordered an independent review of the BCLC’s money-laundering controls.

The audit by accounting firm MNP LLP was ordered by B.C.’s gaming enforcement branch in 2015, and focused mainly on unsourced cash flooding into River Rock Casino in Richmond. The report said police intelligence indicated that VIP high rollers, mainly from China, were provided massive wads of cash by criminals in B.C., and that casino staff allowed the VIPs to purchase gambling chips without proper reviews of the fund sources.

One of MNP’s main recommendations was that casinos in B.C. refuse to hand out chips for large cash deposits until the sources of funds could be verified. This vetting could be difficult though, MNP’s report says, since the majority of high-risk casino clients at River Rock are “Chinese nationals.”

The idea of barring cash until clients are properly vetted was suggested to the BCLC in July 2016, according to documents obtained by Postmedia.

“My letter … included the suggestion that BCLC should consider not accepting funds where the source of the funds cannot be determined or verified,” says a subsequent letter from enforcement branch assistant deputy minister John Mazure. “The letter also provided examples of how such a policy could be implemented.”

Mazure’s letter to Lightbody this May also acknowledged the casino overseer has increased efforts to crack down on money laundering since 2015.

Based on data provided by B.C. casino operators, there were $177 million in suspicious cash transactions in 2014. The figure shrank to $132 million in 2015 and to $72 million in 2016, Mazure’s letter states.

“This is a significant reduction and reflects the actions taken to date by BCLC,” Mazure wrote. “However, $72 million is still a significant amount of suspicious cash … Further action is still required to mitigate the risk presented by the proceeds of crime entering B.C. gaming facilities.”

In an interview Monday with Postmedia, de Jong said that he took action on the money-laundering concerns he was advised of in 2015, but didn’t release MNP’s audit to the public because he was advised not to.

“The latter part of 2015, we started to get information highlighting concerns around money laundering, (and MNP’s report) was part of that,” de Jong said. “The advice at the time was don’t release the report, which could be used by money launderers to adjust their practices.”

De Jong said his government’s response to the money-laundering concerns was to start the Joint Illegal Gaming Investigation Team in April 2016.

“I think there’s obviously more to be done and there’s going to need to be ongoing vigilance,” he said.

The B.C. Lottery Corp. was asked by Postmedia Monday why it did not immediately implement cash-vetting suggestions from the enforcement branch and MNP’s recommendation that “casinos refuse unsourced cash deposits exceeding a certain dollar threshold until the source can be determined and validated.”

The BCLC did not respond by deadline Monday to several questions, including whether staffing would be increased at River Rock to combat suspicious cash.

“We want to ensure you receive the most accurate information,” a BCLC spokeswoman said.