In Depth

How institutional infighting allowed money laundering to flourish at B.C. casinos

The answer was always right in front of them. But the bodies tasked with overseeing gaming in B.C. couldn't stop fighting long enough to see it.

Report reveals infighting and pettiness that made regulators miss problem right in front of them

Peter German's report details bureaucratic and systemic problems which saw millions in dirty cash laundered through Lower Mainland casinos. (CBC)

"Toxic." "Poisoned." "The enemy."

In a report about money laundering in Lower Mainland casinos, you might hope those terms were used to describe the criminals whose dirty cash has fuelled both an opioid epidemic and a housing affordability crisis in Greater Vancouver.

Instead, they show up in a section about the "testy relationship" between the B.C. Lottery Corporation and the province's Gaming Policy and Enforcement Branch — and how they view each other.

It's the triumph of bureaucracy and in-fighting over common sense — a theme which runs throughout Peter German's deeply researched review of the problem.

'Crapping on each other'

As he wrote, it's not that people on all sides of the issue didn't raise red flags.

But the institutional players were often too busy fighting each other to properly focus on a common enemy.

Which, as German points out in one notable 2016 case, left the "frustrated" head of compliance for Richmond's River Rock casino to issue a directive, himself, telling employees to stop accepting huge amounts of unsourced cash.

The amount of money laundered through Lower Mainland casinos is estimated to be at least $100 million. (CFSEU-BC)

The casino industry told the former RCMP deputy commissioner that it "craves" clarity between the BCLC — which oversees casinos — and the gaming branch — which regulates gaming.

"It is their number one wish," German quotes the industry association as saying. "At present, the two entities 'spend mental energy crapping on each other.'"

'This stinks'

And if not on each other — then on those who dared point out the glaringly obvious.

German's report details the reaction of then-Liberal gaming minister Rich Coleman in 2011 to a comment from a veteran RCMP commercial crime investigator in a CBC exposé.

Insp. Barry Baxter had seen video of stacks of $20s delivered to casino cash cages and large gambling buy-ins from women who described themselves as "housewives."

He shared his suspicions with the CBC's Eric Rankin, telling him the casino industry appeared to have been targeted for "very sophisticated money-laundering activities by organized crime."

German's report says Rich Coleman, then the minister responsible for gaming, objected to comments made by an RCMP officer in a CBC story about money laundering in casinos. (CBC)

German's report says Coleman objected to Baxter's comments.

The officer was cautioned by the RCMP and "his remarks would be the last public comment by an RCMP officer on any matter related to B.C. casinos for a number of years."

Among Baxter's offending words? "We're suspicious that it's dirty money ... The common person would say this stinks."

Indeed, German's report suggests that for years BCLC focused on the way the money was delivered, instead of asking the simple question at the root of the problem: where is the money coming from?

'The cash was rolling in'

The answer was out there.

German's report says the executive director of the Gaming Policy and Enforcement Branch nailed it in an email back in 2013.

"What I am suggesting is a possibility is that the gambler receives the cash money from loan sharks, who receive the money from what I believe is criminal sources," the official wrote.

"The gambler loses the cash money gambling at the casino and ultimately repays his debt in the foreign jurisdiction."

B.C. Attorney General David Eby and Peter German at the release of German's independent report into money laundering in B.C. (Yvette Brend/CBC)

But the lottery corporation was looking in another direction.

German's report says the executive director "all but stopped dealing" with BCLC in the year that followed as the lottery corporation argued "the bundling of small denomination bills was not necessarily an indicator that money was the proceeds of crime, as there could be other explanations."

And in 2014, the same executive director was dismissed without cause and directed to leave along with the gaming branch's senior director of investigations.

Shortly after, another CBC story ran about people arriving at casinos with shopping bags full of $20s and $50s.

The Ministry of Finance said the decision to investigate lay with police. And they touted efforts to provide "traceable cash alternatives" — focusing once more on the method of money movement, not the underlying madness.

"In theory this was correct," German's report stated. "In reality, no police were investigating or tracing money and the cash was rolling in."

Acceptable risk?

In his overview, German points out that his task was to review, not to blame.

He points out the absurdities, systemic infighting and lapses of oversight which led to the laundering of at least $100 million over the past decade.

No individual is singled out for fault.

But German raises questions about the beliefs underpinning an industry worth billions to B.C.'s economy — and what we're willing to risk for that revenue.

"I disagree that issues of risk, certainly serious ones that impact on public safety, should be balanced with revenue generation," German wrote. 

"This may be acceptable in other industries where the risks simply involve financial expenditures. It is not acceptable in an industry which is susceptible to criminal risks, such as loan sharking and money laundering."

As his report suggests — B.C. rolled the dice for far too long.

About the Author

Jason Proctor

@proctor_jason

Jason Proctor is a reporter in British Columbia for CBC News and has covered the B.C. courts and mental health issues in the justice system extensively.