As B.C. casinos became rife with money laundering-related crimes such as extortion, assaults, kidnappings and loan sharking, those on the frontlines tasked to regulate gambling never intervened in highly suspicious cash buy-ins, and there was little known presence of law enforcement, according to a former manager of investigations at the B.C. Lottery Corporation.
Gord Friesen told Justice Austin Cullen at the Commission of Inquiry into Money Laundering in B.C. Wednesday of how he had “no authority” to intervene on casino patrons dumping six figures worth of $20 bills at the cages.
Rather, the role of investigators was only to observe, record and report, said Friesen, a former RCMP officer who retired from BCLC in 2014 after being the first such investigator in 2005.
“It would require gathering of evidence to support this was proceeds of crime,” said Friesen when asked by commission counsel Patrick McGowan why investigators didn’t show such patrons the door, so to speak.
McGowan, as an example, spoke of a documented buy-in of $200,000 made with $20 bills.
“Is that sufficiently suspicious?” McGowan asked Friesen.
“Yes,” responded Friesen.
“Did it warrant intervention by investigators?” asked McGowan.
“I don’t believe so,” said Friesen.
“Why not?” asked McGowan.
“We didn’t have evidence it was a criminal offence being committed,” said Friesen.
And so, for several years people kept bringing in bags full of small denominations.
Casino operators and BCLC officials allowed this but filed the required large cash and suspicious transaction reports with FINTRAC and the Gaming Policy and Enforcement Branch (GPEB).
It was common, said Friesen, to witness buy-ins of $100,000 to $400,000 and “to some degree” ones upwards of $800,000.
McGowan attempted to understand Friesen’s understanding of organized criminal behaviour, such as money laundering.
Was there any thought that BCLC officials ought to step in and stop suspected proceeds of crime from coming into casino cages?
“One of the problems with that is what you suspect and what is, is a different thing,” Friesen told McGowan.
“I can’t accuse people of it,” he said, adding he was in no position to show people the
door.
“Maybe they sold a house and it’s revenue from that …maybe they got it from a legit banking source. I don’t know.”
And, it would “require some level of inquiry” to figure out how someone got bags full of $20 bills, wrapped in elastic bands, said Friesen, who nevertheless reported all such activity to his superiors.
Still, McGowan put forth the suggestion that regulators had within their rights to not accept such large cash buy-ins, regardless of its source.
One such incident raised by McGowan was how one casino patron was allowed to cash in about $1 million over three days, simply because he made it known to casino and BCLC officials he was a mine owner and real estate developer. Large cash transaction reports were still filed but the money was nevertheless accepted.
As it relates to so-called “know-your-client” protocols, the commission previously heard testimony this week from two of Friesen’s investigators as to how they were told by upper management to not interview potentially suspicious gamblers and to stand down on chip passing in VIP rooms.
Asked if he recalled such discussions, Friesen replied, “No, I don’t, and honestly I would find that astounding.”
Friesen said the relationship between BCLC and the Gaming Policy and Enforcement Branch was “arm’s length.”
He said, “We needed assistance and we weren’t getting assistance. We needed help …from GPEB and Proceeds of Crime [RCMP unit].”
Friesen’s investigators filed reports to Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) and GPEB. What happened to all those reports to federal and provincial agencies is unknown to Friesen, he said.
“They had to pick up the ball if they wanted to. We couldn’t force them to do anything,” he said.
BCLC is the government agency that manages casinos, whereas the Gaming Policy and Enforcement Branch sets the regulations and standards for it — although as noted by McGowan, the two bodies have, to some extent, overlapping mandates.
The inquiry is looking at several aspects of money laundering, including how cash may have flowed from drug dealers and underground money service businesses connected to China, then into casinos, and finally tangible assets such as luxury vehicles and Vancouver real estate, particularly between 2005 and 2017.
Cullen has yet to hear from GPEB officials during the period in question.
Another issue raised by McGowan was how there was confusion at BCLC in 2011 as to whether cash buy-ins under $50,000 ought to be reported to FINTRAC.
Friesen suggested GPEB managers only wanted those bigger reports and so, according to GPEB lawyer Alandra Harlington, cash buy-ins under $50,000 were not reported to the regulator by the casinos or BCLC for four years.
It’s unclear whose fault this was, but Harlington noted it was nevertheless a violation of cash transaction reporting requirements (anything deemed suspicious or over $10,000).
B.C. casinos have since introduced alternative (electronic) buy-in processes and require explanations for sources of cash for all transactions over $10,000, the commission heard.
