The B.C. Lottery Corporation software that was supposed to help stop money laundering and better understand gamblers’ behaviour was racked with delays and never really worked the way it was envisioned.
The March 2013 Anti-Money Laundering (AML) Compliance and Analytics Enhancement Project charter stated that the program would allow more effective use of investigators’ time and ensure compliance with regulations, “and will also deliver a roadmap for corporate security to expand the use of [North Carolina-headquartered SAS Institute’s] AML program with improved data quality and additional integrations.”
The project was overseen by vice-president of security Brad Desmarais, the former police officer who later became BCLC’s head of casinos, and supposed to go live in the third quarter of 2015.
BCLC executives approved the business case in May 2014 and budgeted $7.4 million for the project. Approximately $3 million was for software licensing and server costs. The rest was largely for labour and services.
Change orders, however, show that SAS’s work on the project was paused shortly after it began, with a mid-December 2014 restart and revised August 2015 implementation target. The budget for payments to SAS increased from $1.29 million to $1.67 million. By the start of July 2015, the project was extended to the end of 2015. By late November of 2015, with a month to go until the revised deadline, another extension. This time, to Sept. 30, 2016.
“Build and test are taking longer than anticipated and the schedule has been revised to reflect the delay,” said documents released to theBreaker under freedom of information.
On May 9, 2016, another budget increase to $1.81 million and an extra month of work, to Oct. 31, 2016.
BCLC had three scenarios for its business case: do nothing, hire 40 full-time equivalents at $3.63 million a year or buy anti-money laundering software for almost $7.3 million. The business case favoured the latter.
“BCLC’s AML oversight is essentially a manual process which requires significant resources to meet regulator compliance requirements on a daily basis. We are looking to identify technological solutions for overall AML compliance as well as address the new regulatory reporting obligations that come into effect Feb. 2014. Furthermore looking to enhance overall investigator efficiency and mitigate potential reputational risk/damage that many be caused to BCLC due to regulatory non-compliance.”
The project was supposed to last 12 to 18 months and correspond with new Proceeds of Crime Money Laundering Terrorist Financing Act regulations effective February 2014.
An earlier iteration of the project included an April 2012 negotiated request for proposals, for Statistical Predictive Analytics Software, that sought software to analyze BCLC’s historic casino and community gambling products and customer data “to assist in forecasting patterns and trends.”
Three bidders responded: Angoss Software Corp.; IBM Canada; and SAS Institute. A BCLC report dated June 26, 2012 recommended a $300,000 contract with SAS for a three-year-period with a one-year renewal option.
“BCLC has used SAS to determine appropriate groupings of customers to award free-play bonuses to maximize marketing effectiveness,” said a Feb. 15, 2018 BCLC briefing note. “It has also used the software to determine the appropriate placement of slots on the casino floor in order to optimize slot performance, and to predict the likelihood of slot machine parts that are about to reach the end of life. “
BCLC was the first in the gambling industry to hire SAS for AML services and BCLC intended to incorporate case management, monitoring and incident reporting. The AML functions were designed for the banking sector and use a combination of behavioural and peer-based analytics techniques to enhance detection of suspect transactions.
“SAS represented to BCLC that it could deliver on these requirements. It was later determined that, due to the differences in the AML requirements between the banking and gambling sectors, SAS would need to undertake increased effort and customization in order to meet the requirements,” the briefing note said.
“Since September 2017, BCLC has used some functions of SAS AML, specifically monitoring and alerting functions. SAS AML delivered nine automated alerts, two of which BCLC currently uses. The others are not currently in use for various functionality reasons and because more recent changes to AML controls made some alerts no longer useful (e.g. requiring source documents for all buy-ins). SAS remains a powerful analytics tool and BCLC will proceed with leveraging the analytics capabilities of the software to further its AML program.”
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