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Scathing report highlights multiple failings that led to laundering of billions of dollars in B.C.

17/06/2022

Billions of dollars in cash were laundered through British Columbia casinos, a report commissioned by the provincial government found.

The 1,800-page report on laundering between 2008 and 2018 was released Wednesday by former B.C. Supreme Court Justice Austin Cullen. It is the result of 133 days of hearings, where the Commission of Inquiry into Money Laundering in B.C. heard testimony from 199 witnesses.

"This inquiry explored the myriad ways in which the greedy and the devious seek to make their crime-stained money appear legitimate," the report said.

Cullen was highly critical of the B.C. Lottery Corporation and several provincial ministers responsible for gaming for not doing enough to stop the rampant money laundering, which he says was happening in plain sight.

In 2014 alone, British Columbia casinos accepted nearly $1.2 billion in cash transactions of $10,000 or more, including 1,881 individual cash buy-ins of $100,000 or more – an average of more than five per day," the report said.

Cullen's report does not estimate exactly how much money was laundered in B.C., but said it amounted to billions each year.

"Sophisticated professional money launderers operating in British Columbia are laundering staggering amounts of illicit funds," the report said.

He said failings on multiple levels led to money laundering becoming a pervasive issue in the province, and highlighted several opportunities where more could have been done by those in leadership roles.

"For too long money laundering has been kept on the sidelines. Too often it has been largely ignored. It's time for that to change," Cullen said, speaking at a news conference after the release of the report.

'BRICKS' OF CASH DELIVERED

Cullen wrote, in addition to the extraordinary amounts, the bills used in many of the transactions exhibited well-known characteristics of cash derived from crime.

“It often consisted predominantly of $20 bills, oriented in a non-uniform fashion, bundled in 'bricks' of specific values (as opposed to number of notes), bound with elastic bands, and carried in shopping bags, knapsacks, suitcases, gym bags, cardboard boxes, and all manner of other receptacles," the report said.

The report also said the cash was frequently delivered to casino patrons at or near casinos very late at night or early in the morning by unmarked luxury vehicles.

“It should have been apparent to anyone with an awareness of the size and character of these transactions that Lower Mainland casinos were accepting vast quantities of proceeds of crime during this time period," Cullen said.

A former senior investigator with B.C.'s gambling regulator told the inquiry that the cash, to him, "smells like drug money," but that no one questioned patrons about its source.

'STOOD BY' AND LET IT HAPPEN

Cullen wrote that despite repeated warnings from various levels of law enforcement, no meaningful action was taken to address the issue until 2015.

“BCLC resisted these calls for action and continued to allow these transactions, almost without exception," the report said.

Of the lottery corporations corporate security and compliance managers, Cullen wrote: “They stood by and permitted B.C. casinos to accept vast sums of illicit cash. BCLC’s approach reflected a completely unacceptable and unreasonable risk tolerance.”

BCLC said, though its lawyer, "Viewed from the lens of what we now know, everyone could and should have responded more quickly to those large cash transactions."

Cullen was also critical of the RCMP, saying officers' "lack of attention" allowed the problem to go unchecked.

"There was no sustained effort to investigate money laundering activity in British Columbia," he said.

"This level of attention by the RCMP to money laundering is not commensurate with the money laundering activity and risks in this province."

'MIXED MESSAGES'

Cullen also had harsh words for former provincial minister responsible for gaming Rich Coleman.

“Coleman was aware of the concerns….that the province’s casinos were being used to launder the proceeds of crime. At the same time, Mr. Coleman also received information from BCLC stating that the province’s gaming industry had a strong and effective anti–money laundering regime," Cullen wrote.

"Mr. Coleman responded to these mixed messages by arranging for an independent review of anti–money laundering measures in the gaming industry, but he did not take action to stem the flow of the suspicious cash transactions that he had been warned about."

Coleman, for his part, told the commission, "Hindsight's always 20-20. I didn't have better information at the time."

Cullen also said former premier Christy Clark could have done more to tackle the problem.

“Clark appropriately delegated oversight of the gaming industry to a succession of experienced ministers. In 2015, however, the premier learned that casinos conducted and managed by a Crown corporation and regulated by government were reporting transactions involving enormous quantities of cash as suspicious," he said in the report.

"Despite receiving this information, Ms. Clark failed to determine whether these funds were being accepted by the casinos (and in turn contributing to the revenue of the province) and failed to ensure such funds were not accepted.”

Also named in the report were former gaming ministers Mike de Jong and Shirley Bond. All four Liberal politicians testified during the public inquiry, and said their actions were based on the information they had available.

While Cullen was critical of how former Liberal politicians handled the money laundering problem, he made it clear he did not think it amounted to corruption.

“There is no evidence that any of these individuals knowingly encouraged, facilitated, or permitted money laundering to occur in order to obtain personal benefit or advantage, be it financial, political, or otherwise," he wrote.

Still, he said, they should have done more to stop it.

LUXURY GOODS, REAL ESTATE

The report found criminals also laundered money through B.C.’s luxury goods market.

“Luxury goods are inherently vulnerable to money laundering. Criminals can use large amounts of cash to buy such goods," Cullen wrote.

"Then, they can be moved more easily and less suspiciously than bulk cash. Many of the goods criminals target retain or increase in value over time, and they can ultimately be sold.”

Cullen wrote criminals also laundered money by buying properties in B.C., but he doesn’t believe it had a significant impact on the overall price of real estate.

“There are strong reasons to think that fundamental factors such as supply and demand, population increase, and interest rates are far more important drivers of price," the report said. "Money laundering should be addressed, to be sure, but steps taken to counteract money laundering should not be viewed as a solution for housing unaffordability.”

101 RECOMMENDATIONS

Cullen made 101 recommendations as part of his report, among them that the province should appoint a dedicated anti-money laundering commissioner, the threshold for requiring proof of funds for casino transactions conducted in cash be lowered from $10,000 to $3,000, and a reporting requirement for luxury goods transactions of $10,000 or more.

He also recommended more use of civil forfeiture, stricter regulations for money lenders, lawyers, accountants and mortgage brokers, and more money laundering training for police.

Speaking later in the day, B.C.'s attorney general called the findings "profoundly concerning."

David Eby praised the work of the current NDP government in commissioning the investigation, and touted its work to implement anti-money-laundering measures following previous work.

He said the province will review the new recommendations and work them into what's already being done, "in particular in relation to housing and real estate."

"I believe these recommendations will help us to transform the meaning of the 'Vancouver model' from a description of unchecked dirty money moving through our casinos to a model of governments responding forcefully to the threat of money laundering."

FRAUD EU