Canadian government clamps down on money laundering at BC casinos

After a report that detailed how BC online casino and land-based casino venues were being used by underworld figures to launder billions of dollars, the Canadian government clamped down with new money laundering regulations.  Casinos are reeling from the results as their growth stalls and revenues fall. 

Money Laundering at BC Casinos

Casinos have always been used by criminals as a place where they could launder money with impunity.  A report that detailed how Asian underworld figures had laundered close to $2 billion at British Columbia casinos spurred the Canadian government into action with new regulations that are aiming to put a stop to the practice.

The report, by Global News, demonstrated how billions of dollars had been flowing through special B.C. Lottery Corp. high-roller accounts. Large amounts were funded by criminal bank drafts and loan sharks. Gamblers were seen using bundles of suspicious transactions and dirty cash in casino high-limit cash cages. Even more sophisticated channels were used to launder cash into bank drafts via B.C. Lottery Corp. “patron gaming fund” accounts. The system exploited Canadian money services businesses, banks and lax B.C. Lottery Corp. money-laundering controls.

Lottery Corp. patron gaming accounts were introduced in 2009 as an alternative for massive cash transactions. Close to $2 billion in funds flowed from questionable bank drafts from 2013 to 2017. Many of those bank drafts came from Chinese high-rollers who have associations with known BC loan sharks.

In addition, over $600 million in suspected dirty money cash in denominations of $20 – bills favored by drug lords -- passed through BC casinos from 2010 to 2016. 

The “patron gaming accounts” at the Lottery Corp. were used almost exclusively by Chinese high-rollers. These punters poured huge sums into Vancouver-area casinos from unidentified sources. Once B.C. police and Gaming Enforcement Branch investigators and police began to report to the BC government about gamblers from China flooding the casinos with suspicious cash, the patron accounts became even more active as the new preferred money-laundering option.

The Lottery Corp. said that the new non-cash accounts were supposed to be funded with bank drafts and wire transfers run through reputable financial institutions to reduce the prevalence of bulk cash transactions in the casinos. The paper trail would discourage money launderers.

Audit documents showed that the patron gaming accounts were mostly funded with suspicious bank drafts including those from multiple banks and money services businesses. There were also instances of third-parties who used “nominees” – stand-in buyers – to fund patron gaming accounts. Those nominees brought in bank drafts that had no account holder or bank customer name on them.

An investigation showed that funds were often quickly withdrawn from the accounts with minimal gambling -- a red flag for money laundering. The patron account gamblers would use B.C. loan sharks as funding sources to avoid China’s capital export controls.

From 2013 to 2017, only a few high rolling Chinese gamblers – about 10 VIPS -- accounted for almost half of the funds that  flowed through patron gaming accounts. These VIPS often deposited millions per night in Vancouver-area Lottery Corp. casinos. They used bags of cash and loan sharks for chip transactions that frequently amounted to over $500,000 per night. Simultaneously, many of these gamblers were using patron gaming accounts.

New Regulations

Last year the Canadian government finally instituted new regulations for Canadian casinos that is aimed at curbing the practice of using the casinos for money laundering.

Under the new rules, high rollers who are buying $10,000 or more in chips within a 24-hour period must verify the source of their funds. This is true regardless of whether they use cash, certified checks or bank drafts.

The casino must refuse the transaction if a customer cannot provide the required information, or if the information is clearly suspicious.  The casino must then notify government authorities and an investigation will be launched.

These regulations were first proposed to the BC Lottery Corp. in 2015.  The corporation turned down the proposal.  Now the practice is obligatory via the Federal Government.

Results

To no one’s surprise, British Columbia’s biggest casinos are now seeing their revenue growth stall. Business in Vancouver reports that the average revenue of the largest BC casinos rose from C$79.7 million ($6 million USD) in 2014 to C$85.6 million in 2018. Yet the total growth of 2018 was only 0.1% higher recorded in 2017. That’s a significant drop from the 2014 reported growth of 4.4%.

Casinos offering both table games and slot machines 2018 saw their revenue from slots rise to 79.1% in 2018 as compared to 71.3% in 2014. At the same time, table share fell  to 20.3% from 28.7%.  The BCLC (British Columbia Lottery Corporation) reported that revenue from land-based casinos – which are managed by private companies but owned by the province –was flat at C$1.9 billion in the 12 months ending March 31.  Table games slipped 7.8% from the previous year while slots were up 2.6%.

River Rock led all BC casinos with revenue of C$323.7 million in 2018. That was a decline of 22.9% from 2014. River Rock’s tables showed the highest table revenue in 2018, averaging $1.7 million per table.

Burnaby’s Grand Villa Casino scored seconds in gaming revenue. Vancouver’s only downtown casino, the Parq Vancouver, came in third.  Struggling in 4th and 5th places were the hard Rock Casino Vancouver and Cascades Casino Langley. Parq was the only casino in the province to generate more revenue from tables than from slots. 

Innovation

BCLC’s innovative PlayPlanner time and budgeting tool was rolled out for members of the Encore Rewards program. The tool might not account for more revenue for BCLC but it’s earning praise as a player-friendly option that allows players to pre-commit to spending and time limits for their gaming events. PlayPlanner lets players pre-set those limits and then generates on-screen notifications  to alert players that they are nearing those limits.

Similar tools have been available since 2004 on BCLC’s online casino PlayNow.com but by adding it to the Encore Rewards program, BCLC makes it more user-friendly for higher betting players.

 

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