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Anti-money laundering expert Peter German’s watershed report on money laundering in Metro Vancouver casinos was finally published on June 27.

In Dirty Money, former RCMP deputy commissioner German recommended the B.C. NDP government launch a new Crown corporation to regulate gambling in the province, because the Gaming Policy and Enforcement Branch is bogged-down by bureaucracy and embroiled in constant conflict with the B.C. Lottery Corporation. He also recommended a dedicated police force with officers deployed at casinos.

David Eby, the Attorney General who ordered the report, did not give a timeline for the adoption of those recommendations. Eby conceded that this was not a fault-finding mission; some accountability was sacrificed by doing a six-month review, rather than a full, multi-year public inquiry. He left BCLC CEO Jim Lightbody in his job. In 2007, in a smaller scandal, the Ombudsperson’s report on lottery retail fraud caused the firing of CEO Vic Poleschuk. 

GPEB general manager John Mazure departed his post, but Eby emphatically stated that it was unrelated to German’s review.

German estimated more than $100 million has been laundered through casinos here, driven by transnational organized criminals in China and Latin America. It involved the illegal drug trade and Vancouver real estate. He called the River Rock Casino Resort in Richmond the “epicentre of activity,” but said no large casino was untouched. 

The previous BC Liberal government did not heed warnings that loan sharking was leading to money laundering. It shut down a dedicated squad of police detectives in 2009. A new one was announced in 2016, but it was too little, too late.

On this edition of Podcast, listen to highlights of Eby and German’s June 27 news conference. 

Also: commentaries and headlines from around the Pacific Rim and Pacific Northwest, and a salute to the 151st anniversary of Canada’s confederation. 

Click below or go to iTunes and subscribe.

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Anti-money laundering expert Peter German's watershed report

  • A Matter of Confidence: The Inside Story of the Political Battle for B.C., by Rob Shaw and Richard Zussman (Heritage House, 2018) 

Bob Mackin

Postmedia’s Rob Shaw and Global BC’s Richard Zussman have succeeded in collecting and packaging the narrative from 2017’s slow-motion collapse of the BC Liberals under Christy Clark and the unlikely rise of the NDP’s John Horgan to the premiership. 

Where A Matter of Confidence excels is the step-by-step story of the tense power-sharing negotiations in late May 2017 between the trio of BC Green MLAs and teams from the BC Liberals and NDP. In the election, Clark had lost six seats — including those of four cabinet ministers. The NDP picked-up seats in Vancouver, Burnaby, Maple Ridge and, especially, Surrey. But Horgan was short of a majority and he needed the Greens to reach the top of the mountain. 

The reader will easily lose count of the neat anecdotes, like Green MLA Sonia Furstenau’s fateful elevator ride and trip to a Starbucks with Horgan. He reminded her how the BC Liberals ignored her concerns about the toxic dump at Shawnigan Lake. That led to Furstenau’s outburst in the bargaining room when the BC Liberals were on the other side of the table. 

The Greens eventually shook hands with the NDP. Their confidence and supply agreement on May 30, 2017 came a day after Horgan and Weaver were spotted enjoying an international women’s rugby sevens match in Langford. It was only a matter of time before the June 22, 2017 Clone Speech, which made things worse, instead of better, for Clark. 

Clark loyalist Mike Bernier, the education minister, made one last, desperate play before the June 29, 2017 confidence vote, inviting Green leader Andrew Weaver to meet with Clark in her West Annex office. 

“You are driving your party off a cliff,” the book says she warned him. She also suggested he needn’t ally himself with any party. Her “be somebody, rather than a footnote in history” pitch flopped. 

After the NDP and Greens won the 44-42 vote, Clark, her eyes welling up with tears, walked beyond clapping sycophants in the hallways of the Legislature toward a waiting van. Destination: Government House. Mission: Make one, last plea to the Lieutenant-Governor, Judith Guichon. 

As Shaw and Zussman wrote, in another one of their anecdotal nuggets: “The minivan unceremoniously bottomed out on the legislature driveway due to the weight of all the staff, scraping and smashing the concrete below. Shortly after, the RCMP officer who was driving almost blew a stop sign. Everyone was nervous, including the cops.”

Clark walked alone up the driveway and into the mansion, where she spent part of 45 minutes in the drawing room, pitching Guichon on the reasons she should not let Horgan become premier and why there should be another election. “But she knew almost immediately that her message wasn’t getting through,” the book says. “So the end of the meeting was spent drinking wine, two women tied together for nearly five years saying goodbye.”

Clark was often economical with the truth and this day would be no different. When she emerged, she claimed Guichon was “retiring” to make her decision. But the decision had already been made to call Horgan for a meeting where he would be asked to form government. Clark and her staff would learn their time was up, via Twitter.  

Clark, uncharacteristically, left Victoria on a commercial flight home to Vancouver with her son Hamish. The book doesn’t mention her “Air Christy” scandal of dinging taxpayers for her flying photo op tours via charter jets or how she chose to live in a party donor’s house in Dunbar — items that had been covered in-depth by The Tyee and theBreaker, respectively. Clark and son arrived close to midnight in Dunbar. Before she sent her hungry 15-year-old to bed, she made him toast. 

Her political career was toast, but she didn’t know it yet. 

Later, A Matter of Confidence reveals how Bernier had another role. This time, in warning Clark and her inner-circle that Abbotsford MLA Darryl Plecas was on the verge of quitting caucus at the July 26, 2017 retreat in Penticton. The book details how Plecas stood-up in the meeting room and called Clark out for her smirk, her uncaring government and her terrible election campaign. Plecas’s gutsy move was first reported by theBreaker (but not acknowledged in the book) after Clark had claimed caucus wanted her to stay. 

The next morning, she went for a walk along Okanagan Lake with longtime aide Mike McDonald before deciding to quit politics. 

Instead of flying back to Vancouver, A Matter of Confidence says Clark took the scenic route with McDonald in a borrowed cream-coloured 2008 Mini Cooper and they stopped at the Dairy Queen in Princeton for chicken strips and a chili dog. 

The authors do offer criticism, from time-to-time, of Clark’s hubris. She brought ex-Finance Minister Carole Taylor on as a special advisor, and they met weekly. But much of Taylor’s advice was ignored. Taylor popped the idea of a tax on house flippers in Metro Vancouver. Clark, who did impose a 15% tax on foreign buyers, didn’t bite on Taylor’s proposal. 

Another ex-Finance Minister, 2011 leadership runner-up Kevin Falcon, offered his advice during the election. He gave McDonald the phone number for the grieving parents of a child who had died at an unlicensed daycare in East Vancouver. Falcon suggested Clark call them and listen to their concerns. McDonald gave it to campaign director Laura Miller, but “nothing happened,” the book says. 

A Matter of Confidence also tells some of the story about how Clark beat Falcon in the 2011 leadership race, when accusations of impropriety swirled around stolen PIN numbers assigned to party members for the digital vote. Evidently, the book’s publisher did not halt production to add an update after damning evidence emerged from ex-BC Liberal communications director Brian Bonney’s breach of trust sentencing in Vancouver’s Provincial Court. Special prosecutor David Butcher told court that Clark’s only caucus supporter, Harry Bloy, used his connections that supplied him with blocks of PIN numbers that were then provided to other Clark supporters to vote by phone or online. “Block voting in a proxy process,” Butcher said.

The Quick Wins ethnic pandering scandal, of which Bonney was involved, got the space it warranted in A Matter of Confidence, though whistleblower Jeff Melland has publicly questioned the accuracy of Shaw and Zussman’s reporting of the documents’ route to Horgan. 

Triple deleting got only a paragraph, as did the health firings. Both, oddly, were grouped among what the authors called “little scandals” midway through the book. They were anything but little, especially the health firings. Shaw and Zussman do go into depth about the BC Liberals’ campaign to discredit respected childcare watchdog Mary Ellen Turpel-Lafond. Her no-holds barred investigations shone a light on tragic deaths of neglected and abused young people in provincial care.

In the foreword of A Matter of Confidence, Shaw and Zussman state the book’s mission is “to offer a glimpse into the decisions these governments made, or didn’t make, and the actions of those around the premiers during this time.”

They also said it is “too soon to pass judgment on their contributions to the province or how history will remember them.” 

But the authors did judge the contributions of some former lawmakers. They are not remembered kindly by the duo.

An inordinate amount of space and criticism were given to the reaction to ex-NDP MLA David Schreck’s Twitter comment about whether it was appropriate for Clark to show cleavage in the Legislature. The authors called him an “old fogey” and included an anti-sexist rant. They could have instead dispassionately explored the deliberate packaging of a politician unpopular with urban women, but who was aiming to appeal to working class, hardhat-wearing male voters in rural B.C.

Clark’s attire was no accident. She knew what she was doing in front of cameras. She also knew the power of a smile, a nod, a wink and the occasional jiggle.

Their treatment of Abbotsford’s John van Dongen was similarly unkind. Ex-cabinet minister van Dongen had been active in the caucus mutiny against Gordon Campbell in 2010. He eventually defected in 2012 to the BC Conservatives over Clark’s faltering leadership and the party’s questionable ethics. Plecas defeated him in the 2013 election. 

Instead of treating van Dongen as a free-thinking, dissident MLA concerned with government integrity, they outrageously cast him as a conspiracy theorist for simply seeking answers about Clark’s role in the controversial BC Rail privatization in 2003. Documents surfaced that suggested Clark had leaked confidential cabinet briefs, among other things. 

Ex-BC Liberal aides Dave Basi and Bob Virk maintained their innocence until suddenly in 2010 when they pleaded guilty to bribery in exchange for their $6 million legal bills being paid by the government. The trial was over and Campbell never gave British Columbians the promised full explanation. Van Dongen took it upon himself to look for answers. He even hired a lawyer, at great expense, in a bid to pry the $6 million Basi-Virk indemnity file from the government’s hands.

Instead of Clark facing up to van Dongen’s criticism, and explaining what she knew and when she knew it, she hid from the cameras and let Rich Coleman, her “Mr. Fix It,” attack van Dongen over his divorce. 

The biggest omission from A Matter of Confidence? Patrick Kinsella. 

The most powerful force in the BC Liberals’ backrooms in the Campbell and Clark eras. A campaign mastermind, bagman, lobbyist and dealmaker extraordinaire, who also found an ally in Coleman. 

Kinsella had appeared to work both sides of the BC Rail/CN Rail deal, helped Accenture privatize BC Hydro’s back office services, was key in what became River Rock Casino, put sponsorship packages together for the Vancouver 2010 Winter Olympics and was behind a failed privatization of B.C. government liquor warehousing and hauling. 

The Kinsella omission may be a function of the authors being relatively new on the scene. Shaw began covering the Legislature in 2009, and Zussman in 2014. Though Kinsella’s influence remained intact, the man in the shadows of B.C. politics opted for an even lower profile after 2010.

In A Matter of Confidence, you can be confident of reading the best narrative of the hectic and intriguing spring and summer of 2017, when the BC Liberal dynasty ended and the NDP returned to power. Particularly the day of that historic confidence vote, June 29. 

It is not the definitive primer on the rise and fall of the BC Liberal dynasty. That will be someone else’s job to write. 

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A Matter of Confidence: The Inside

Bob Mackin

Vancouver taxpayers are on the hook for almost $103,000 in retirement payments to five lame duck city councillors and Mayor Gregor Robertson this fall, theBreaker has learned.

Robertson is expected to receive $28,843.37 in what is officially called “deferred remuneration,” according to data requested by theBreaker from Vancouver city hall. The Vision Vancouver leader was paid $168,065 last year, lives in a $3.125 million English Bay penthouse and announced in January that he would not run for a fourth term in the Oct. 20 civic election. 

Gregor Robertson could afford to buy a new car with his city hall retirement bonus (CoV)

The majority Vision Vancouver city council approved a new Mayor and Councillor Remuneration bylaw in 2016 that calls for departing members of city council to be paid one week’s salary for each year in office, based on the salary received during that year of office, 

In April, public outrage forced municipal politicians on the Metro Vancouver board to rescind a similar pension scheme that would have paid them 10.2% of their annual meeting fees, retroactive to 2007. Chair Greg Moore, the Mayor of Port Coquitlam, was poised to reap $64,500 from Metro Vancouver before the about-face.

Vision Vancouver Councillors Tim Stevenson and Raymond Louie, both first elected in 2002, will not seek re-election but will get $19,114.47 each when the city council term ends this fall. Andrea Reimer and Kerry Jang, Vision councillors since 2008, are in line for $13,202.51 each. 

The only non-Vision Vancouver member expected to receive payment so far is the NPA’s George Affleck, for $9,670.64.

The cost to taxpayers could be as high as $146,277.64, if the other three NPA members and the only Vision incumbent, Heather Deal, do not run again or lose on Oct. 20. 

The first to receive a so-called “length of service payment” was Vision Coun. Geoff Meggs, when he quit last July to become Premier John Horgan’s chief of staff. Meggs’ last paycheque included the $7,335.73 bonus.

When theBreaker originally asked for the data from Vancouver city hall’s 43-person communications department on May 30, spokesman Jag Sandhu refused to provide the information and sent theBreaker’s request to the freedom of information office. FOI manager Barbara van Fraassen responded June 26 with a letter that said city hall could not provide the requested data until the council term is up.

The communications office finally relented on the same day and provided theBreaker the estimated payment amounts. 

A December 2015 report to council recommended a transition allowance of one week for each year on council, up to maximum eight weeks salary, for departing council members. 

“The committee has recognized that the role of a council member is equivalent to full-time employment,” the report said. “The role is highly public in nature and at times requires council members to make difficult decisions; decisions which may be unpopular.” 

CityHallWatch’s Stephen Bohus noticed Meggs’s bonus in the statement of financial information for 2017. He said city council should take a second look at this before the end of the term. 

“That’s astonishing, they voted these for themselves,” Bohus said. “There are many people in Vancouver struggling to make ends meet in a city that is so unaffordable. The crisis has happened under their watch, now they’re getting bonuses as they leave city hall. It’s not right.” 

Coquitlam city councillor Teri Towner’s motion on remuneration reform will go to the Union of B.C. Municipalities convention this September. She wants an independent process to consider pay raises for municipal politicians, because politicians who set their own pay have helped reduce public trust in government.

There are no post-employment restrictions or cooling-off periods for Vancouver city council members.

That means Robertson or any departing councillor is free to be hired to lobby city hall or become an executive with a city hall supplier or development applicant almost immediately after leaving office. 

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Bob Mackin Vancouver taxpayers are on the hook

Bob Mackin

Peter German, the former senior Mountie who wrote the book on money laundering in Canada, released his review of money laundering in Metro Vancouver casinos on June 27. 

German estimated more than $100 million has been laundered through Metro Vancouver casinos. His 247-page “Dirty Money” report included 48 recommendations and relied on 160 interviews with people in law enforcement, academia and the industry itself. He also noted the work of various media outlets, including CBC, Globe and Mail, Vancouver Sun and theBreaker. “A free press and strong, ethical investigative journalism is critical to the rule of law,” German said. 

German has urged the NDP B.C. government to build a new, independent regulator of gambling in B.C. and start a dedicated casino police force. 

theBreaker read German’s report and found these 14 highlights (with the paragraph number from the report, arranged under headings by theBreaker) that will blow your mind about various degrees of rampant incompetence and corruption in British Columbia. 

The Vancouver model, explained 

Peter German’s Dirty Money report was released June 27 (Mackin)

In the Vancouver Model, Chinese citizens wish to relocate some of their wealth from China to Canada. To do so, they agree to accept cash in Canada from a lender. At that point, a settling of accounts occurs, app to app, between the person making the loan and an underground banker in China. The catch is that the provenance of the cash loaned in Canada is unclear. It generally comes in the form of stacks of $20 bills, wrapped in a fashion that more closely resembles drug proceeds than it does cash originating at a financial institution. The Chinese individual will then buy-in at a casino with the cash, gamble, and either receive higher denomination bills or a cheque upon leaving the casino. The lender is both servicing a drug trafficking organization by laundering its money, and the Chinese gambler by providing him or her with Canadian cash. 

[Prof. John] Langdale’s research indicates that Vancouver is a hub for Chinese based organized crime. A complex network of criminal alliances has coalesced with underground banks at its centre. Money is laundered from Vancouver into and out of China and to other locations, including Mexico and Colombia. Illegal drug networks in North America are supplied by methamphetamines and precursor chemicals from China and cocaine from Latin America. In addition, “high rollers” from China facilitate the flight of capital from China using Canadian casinos, junket operators and investment in Canadian real estate. (from paragraph 126) 

RCMP report on loan sharking

In January 2009, an RCMP report was prepared on the extent and scope of illegal gaming in B.C. The report was prepared from data for the years 2005 to 2008. It included the following in its executive summary: 

“…during the three-year research period there were four murders and one attempted murder of people who had some involving in gaming. Forty-seven individuals have been identified in suspected loan sharking activities.” 

Coleman (Mackin)

The 47 individuals believed to be involved in loan sharking included go-betweens or runners. It noted that besides lending money at a criminal rate of interest, loan sharks can be involved in money laundering and extortion. Many victims are reluctant to call the police while others may contact the police as a means of buying time from the loan shark. 

The report noted that in 2009 there were at last (sic) seven significant loan sharking rings operating in the Lower Mainland, including family operations. Some were believed to be involved with known organized crime groups. The report noted that loan sharking can be a very lucrative business, judging by one loan shark owning a house valued at over $2 million. 

The report also quoted from a June 2009 national RCMp report on the vulnerability of casinos to money laundering an organized crime. (189)

The new BC Liberal euphemism

By spring 2004, the new model was in place. Through a franchise arrangement, revenue to the government could be doubled. The regulator remained in government but was placed under an [Assistant Deputy Minister]. ‘Problem gambling’ was renamed as ‘responsible gambling.’  (227)

IIGET goes 

Although it was given an additional year, government was not satisfied that [Integrated Illegal Gaming Enforcement Team] was providing value for money. On March 31, 2009, it was disbanded, thereby ending direct, focused police involvement in gaming within B.C. Although the team had made inroads into illegal gaming, the prevailing view in government was that the results did not justify the expenditure. From this point forward, police involvement within casinos occurred, either through calls for service to the police force of jurisdiction, or by the RCMP’s proceeds of crime unit, discussed later. 

To this day, there is debate about the effectiveness of IIGET. Some have complained that it failed to achieve its objectives. Others point to resourcing problems. Some members complained that they did not receive significant training in this specialized area. The fact that IIGET did not bring in partners was a reason given more recently by the RCMP. The absence of Vancouver Police members was seen as an impediment due to the number of illegal gaming complaints, which originated in the city. 

The abolition of IIGET came despite the consultative board receiving a report two months earlier from the RCMP, which dealt with the extent and scope of illegal gaming in B.C. The report was requested by IIGET and was prepared from data for the years 2005 to 2008…

The report noted that 284 gaming incidents were reported during the three years, of which 183 involved illegal common gaming houses. Twenty-five reports involved common gaming houses operated by organized crime figures or frequented by gang members. Two were the scenes of murder or attempted murder. Children were abducted from one gaming house to force the payment of a debt. (412) 

Elsewhere in Richmond  

A GPEB investigator reported that in September 2010, a patron entered the Starlight casino with $3.1 million, of which $2.6 million was in $20 denominations, bundled in bricks of $10,000, wrapped with an elastic band at either end and carried in inexpensive plastic bags. The same patron made numerous other buy-ins, always with used currency. Sometimes he left the casino and returned minutes later with another bag of cash. He was known to associate with individuals who had previously been involved in loan sharking. (433) 

All tickety-boo

BCLC lottery vs. casino profits chart, showing Christy Clark, from BCLC’s Rolling the Dice presentation (BCLC FOI)

April 2014, new GM requested organizational review of GPEB, conducted by Corporate Services in Ministry of Finance and completed on Sept. 18, 2014. Briefing notes to the minister indicate the purpose was to “support the ongoing success of GPEB…” and to “determine how GPEB programs and services can best be aligned, integrated and delivered to ensure the integrity of gaming.” The minister was apparently not advised in writing of the ongoing problems within GPEB. (509)

Money Laundering Summit 

On June 4, 2015, BCLC, GPEB, FinTRAC, [Canada Revenue Agency], [Canada Border Services Agency] and RCMP officials met together at BCLC’s Vancouver offices for a workshop, entitled “Exploring Common Ground, Building Solutions.” This has been referred to as the “Money Laundering Summit.” The rhetorical questions asked of participants was, is there a problem? The general consensus – yes. BCLC investigators assured the police that after conducting two to three weeks of surveillance on suspected money launderers, the police would be able to locate the “money house.” 

The RCMP appears to have taken up this challenge. On July 22, 2015, [Federal Serious and Organized Crime] officer advised a BCLC investigator that they had found “Pandora’s Box” the previous evening. The RCMP officer added that some of the money may be going offshore to fund terrorism. The BCLC investigator immediately notified senior managers at BCLC. The investigator also notified GPEB. 

Once the police became engaged, BCLC investigators provided support in what BCLC termed a “great relationship.” In addition, the River Rock provided “enormous” support when requested by police, often on short notice. 

Curiously, the regulator seems not to have been involved in this effort until notified by BCLC. According to BCLC investigators, GPEB was “the biggest part of the problem.” Clearly the relationship between investigative arms of the two entities had deteriorated, but the Executive Director of the new compliance division at GPEB made it his mission to remedy the situation. (532)

Strained or broken? That is the question 

Relationships between BCLC and GPEB are at best, strained; and at worst, broken. The issues tend to be most pronounced at the management level and within the compliance and enforcement areas. This is not new and has been ongoing for a decade. It is also not universal, as many people in both organizations work well together, but it is a general observation which was repeated in dozens of interviews…

GPEB investigators face many obstacles. They do not have on-site or office access to the iTRAK system which contains all GSP report and the BCLC investigative summaries. GPEB is allowed access to two iTRAK computers at the BCLC offices in Burnaby, which is a relatively unworkable arrangement considering the logistics of driving to BCLC’s offices simply to use a computer. A former casino executive described GPEB “always [being] pushed to the side,” with “no instant access to information.” (610)

BCLC goes undercover, RCMP not amused

source: Dirty Money by Peter German (2018)

BCLC’s AML unit has involved itself in undercover operations. One such operation was a form of ethics/value testing at [Money Service Bureaus] in the core financial district of Richmond. The genesis of the operation was information obtained by BCLC from patron interviews, which indicated that clients could obtain better interest rates at some Richmond MSBs by accepting small denomination bills during money exchange transactions. BCLC decide to test this information as part of its enhanced due diligence, AML program. The intent appears to have been an attempt to determine if local MSBs were dispensing the proceeds of crime, in the form of $20 bills, to customers. 

A BCLC employee entered various MSBs, on the pretext of having a family member who wished to wire money from China to Canada. The employee made a record of the responses obtained to various questions. Among the MSBs targeted was one of Canada’s largest foreign exchange companies… The RCMP became aware of the operation. It cautioned BCLC that performing an undercover scenario in these circumstances, which may appear relatively innocent, can have unforeseen circumstances. Without training in undercover operations, there is always a danger of discovery, leading to concern for an operator’s personal safety. Without deconfliction, BCLC could also be interfering with an ongoing police investigation. (633)

“Education session”

On Nov. 27, 2015, BCLC’s AML unit sent memo to the head of compliance noting that BCLC had previously supplied a list of 16 individuals, all known patrons of the River Rock, who had been flagged by BCLC “due to suspicious behaviour involving casino financial transactions.” In accordance with policy, GCGC was asked to “conduct an education session” with 14 of the players. 

The purpose of the education sessions was to notify the patrons that their buy-ins were being monitored and that their source of funds was of concern… (640)

FinTRAC fine 

BCLC became the first provincial gaming corporation to be sanctioned by FinTRAC. On June 15, 2010, FinTRAC issued a Notice of Violation alleging that BCLC was non-compliant with the [Proceeds of Crime, Money Laundering, and Terrorist Financing Act] because of filing delays, inadequate information and other deficiencies identified in more than 1,285 reports. According to FinTRAC, BCLC’s systems had been reporting incorrectly for years. The difficulties were exacerbated when casino disbursement reports were add to the list of reportable items on Sept. 29, 2009. The penalty was fixed at $670,000. (656)

BCLC’s bungled software buy 

SAS is clear that “the software was not proven in the casino industry” and this “presented risk from a technical, budget and timing perspective.” SAS candidly admits that many challenges arose during the project, for which responsibility has yet to be assessed. Contrary to the advice received from BCLC, the CDR issue was one of many, as follows: 

  • Misalignment on the degree to which SAS AML could integrate with the existing iTRAK system
  • Data quality issues
  • Underestimation of the customization effort required to develop FinTRAC reports, especially casino disbursement reports
  • Poor scope management, especially relating to system requirements and design changes
  • Resourcing challenges
  • Questionable testing methodology and processes that may not have adequately included system end users. (712)
Host with the most

A bag of cash from a surveillance video at Starlight Casino (BC Gov)

In one case, a VIP host allegedly arranged a buy-in of $200,000 in $100 bills for a person who was representing a high limit player, banned from the casino for inappropriate behaviour. Apparently the intent of the buy-in was to obtain chips in advance of a visit from China by four friends of the banned player. The host allegedly facilitated the purchase and provided a River Rock bag to assist the third party transport the chips out of the casino. 

[Great Canadian Gaming’s] surveillance team at River Rock observed the transaction, and reported it to BCLC as [Unusual Financial Transaction]. This was done because the patron left the casino with no play, which is a strong indicator of a possible third-party transaction. (738)

Betting with bitcoin 

Despite cryptocurrency not currently being offered as a casino cash alternative, it is quite likely that it is being used outside casinos to settle loans and other debts. Vancouver lawyer Christine Duhaime is quoted as noticing “recently that bitcoin has become a big way to move money out of China,” noting that it is “instantaneous and no one knows at either end.” 

FinTRAC asserts that cryptocurrency exchanges are MSBs and therefore subject to the normal AML requirements. However, no cryptocurrency exchanges are currently reporting to FinTRAC. (787)

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Bob Mackin Peter German, the former senior Mountie

Bob Mackin

British Columbia needs a new gambling regulator because the current one is dysfunctional, according to a report about money laundering in Metro Vancouver casinos by one of Canada’s leading anti-money laundering experts. 

“The present regulatory system in B.C. does not work in terms of compliance and enforcement of [Anti-Money Laundering],” Peter German wrote in his June 27-published report, under the catchy title Dirty Money. “The foundational structure of the Gaming Control Act does not provide for a regulatory relationship between [Gaming Policy and Enforcement Branch] and [B.C. Lottery Corporation]… the regulator is embedded within the bureaucracy of government and does not have the necessary independence to act effectively.” 

At a news conference in Vancouver on June 27, German said the new regulator should be a standalone Crown corporation and it needs to be augmented by a “specialized gaming police force” with round-the-clock presence at casinos. 

German (left) and Eby on June 27 (Mackin)

German conducted 160 interviews during his six-month review, which he stressed was not a fault-finding mission, rather an examination of structure and process: “The failure was not of one entity or person, but the system.” 

Lower Mainland casinos, German wrote, “unwittingly served as laundromats for the proceeds of organized crime. This represents a collective system failure, which brought the gaming industry into disrepute in the eyes of British Columbians.”

Years of denial, coupled with “alternate hypotheses and acrimony between entities,” he wrote, caused the “perfect storm” that climaxed in July 2015.

That is when an RCMP officer advised a B.C. Lottery Corporation investigator that police had been looking for a minnow, but found a whale — in reference to an expanding investigation involving a money service bureau, casino and proceeds of crime. GPEB investigators found that $13.5 million had passed through casino cash cages, mostly in $20 bills, the preferred currency of drug traffickers. 

Late last September, Attorney General David Eby ordered the review from German, a former RCMP deputy commissioner, now law professor at the University of B.C. and the author of a leading anti-money laundering textbook. Eby said the previous BC Liberal government “turned a blind eye” to money laundering in B.C. casinos, in the mistaken belief it was a victimless crime. 

“Nobody said no, nobody said do not accept this money unless you know where it came from,” Eby said.

German said the “epicentre of activity was at the River Rock, but no large casino was untouched.”

Indeed, as proven in a surveillance video that Eby narrated during the news conference. The clip showed highlights of large cash transactions at Starlight Casino, the Gateway-owned gambling haven on the far east side of Lulu Island, in an area governed by New Westminster. 

“Who was doing this? Essentially, domestic and international organized crime, through intermediaries, was both loaning money to high rollers and hiring its own ‘smurfs’ to gamble,” German said. “What did they do? The gamblers, some of whom were dupes, turned small denomination bills into a more useful denomination or instrument.”

German said high-end money laundering gained intensity after 2010 and estimated that well over $100 million has been laundered through B.C. casinos. In April 2009, then-Solicitor General Rich Coleman shut down the Illegal Gaming Enforcement Team, after it had warned of organized crime infiltrating B.C. casinos. German said that Coleman cooperated with his review, but he did not see the need to interview the previous minister responsible for gambling, Mike de Jong, or his deputy, Athana Mentzelopoulos.

“[Money laundering] is a serious crime with serious consequences,” Eby said. “It is tied to the opioid crisis that has taken thousands of people from their families, it is linked to the real estate market and housing prices that have made life unaffordable for British Columbians.”

Police involvement, public scrutiny by investigative journalists and the actions of the gambling industry, German wrote, “dramatically reduced the quantity of suspicious money entering casinos from its high point in 2015.”

“We must ensure, however, that the problem does not resurface in the future.”

Confusion and chaos 

German found that as early as 2012, some GPEB and BCLC employees recognized that small-time loan-sharking evolved into large-scale money laundering. 

BCLC’s anti-money laundering efforts, he wrote, are under-resourced and BCLC was left in the role of “pseudo-AML regulator of its own franchises, the casino operators. GPEB was also frustrated by the reporting structure that existed for many years within the Ministry of Finance.”

The region’s casino operators, Great Canadian Gaming, Gateway Casinos and Paragon Gaming, serve as the front-line defence against dirty money in casinos. They receive cash, track movements of gamblers, and must complete and forward transaction reports to BCLC and GPEB. 

A bag of cash from a surveillance video at Starlight Casino (BC Gov)

German’s report acknowledged the role of gamblers from China, but said many high limit gamblers who used dirty money were dupes and others were simply trying to remove their money from China, in order to make a life in Canada. 

German wrote that this is not an Asian problem, but it is about those who buy illegal drugs, counterfeit products and stolen property and others who operate in the underground economy to avoid taxes.

“Who is buying the drugs? It’s actually people in this province that are buying the drugs,” German said. “It is easy to point the finger elsewhere abroad, and so forth, but we also have to realize illegal drug sales occur right here and that money gets laundered right here.” 

Will any heads roll? 

In 2007, the BCLC board fired then-CEO Vic Poleschuk after a damning report by the Office of the Ombudsperson into lottery ticket retailers who had won big prizes. In this case, Eby laid the blame for the systemic failure at casinos squarely on the previous BC Liberal government, not the senior management of BCLC or GPEB who were tasked with implementing policy.

“In my opinion, the responsibility lies with government, and the [BC Liberal] government has been removed,” Eby said.

Jim Lightbody remains CEO of BCLC. Eby said GPEB Assistant Deputy Minister John Mazure’s departure was a personnel matter not related to German’s report. Career bureaucrat Mazure’s resume includes stops at treasury board, the environmental assessment office and the government’s pension department. 

Eby cited time and cost for not holding a public inquiry. 

“The downside of trying to move quickly on this is the loss of some accountability, the loss of the ability to say this person violated this policy, this person violated that law,” Eby said. “The upside of it is, from British Columbians’ perspective, is that we can act quickly to get dirty money out of B.C. casinos and move on to the next piece because we can’t let organized crime get ahead of us.”

“The next piece” is for German to examine the role of money laundering in real estate, luxury cars and even horse racing. 

In total, German made 48 recommendations, nine of which are completed or underway, including weekly meetings by a suspicious transaction analysis team, ending BCLC undercover operations, except in conjunction with the regulator and/or police, and spending no more money on the malfunctioning SAS anti-money laundering software. 

Eby said the rest of the recommendations are either being implemented or under review.

“In all cases, we will be moving as quickly as possible to slam the door shut on dirty money in B.C. casinos and cut off funding to organized crime in our province,” he said. “It won’t be easy to reverse a decade and a half of neglect, but we are not waiting to get started. The era of inaction and denial is over.” 

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Bob Mackin British Columbia needs a new

Bob Mackin

A Chilliwack flight training school that the provincial government suspended in March is facing a three-day small claims trial in Provincial Court beginning June 26. 

The registrar of the Private Career Training Institutions Branch suspended BlueBird Flight Academy Inc. on March 26 for failing to provide a student data report, failing to provide financial statements, failing to pay $562.29 in fees and payment to the student protection fund, and failing to refund students enrolled without meeting admission requirements. 

That decision was upheld by the registrar. BlueBird filed an appeal to the commissioner, just like the subsequent April 27 cancellation of BlueBird’s designation certificate. 

Niyas Vadakke Thoduvil

In moving to effectively shut down BlueBird’s courses, Private Career Training Institutions Branch cited BlueBird’s failure to provide financial statements and failure to refund students enrolled without meeting admission requirements. That means BlueBird is prohibited from offering or providing any career-training programs. The provincial government defines a career-training program as a “career-related program for which tuition paid is equal to or greater than $4,000 and the instructional time is equal to or greater than 40 hours.” 

Student Niyas Vadakke Thoduvil’s May 2016 notice of claim against BlueBird is scheduled to be heard over three days in Chilliwack Provincial Court. He is seeking $10,317.18 owing in course fees, $10,000 in monthly expenses and $1,400 interest towards his education loan. His claim notice said the he paid $37,000 in tuition. 

In March of last year, Thoduvil unsuccessfully offered to settle the claim for $10,317.18.

In the notice of claim, the 29-year-old Kerala, India-native Thoduvil wrote: “While my training was on track and I was prepared for my private pilot flight test, I was issued a termination letter from my institution without any valid reason. I was helpless and I didn’t get my remaining money back. Training was completely stalled which consequently affected my peace of mind and thereby my family members in thinking of my future and career. I immediately joined with Principal Air Ltd. and successfully passed my private pilot license flight test within a short period.” 

Thoduvil had complained of the revolving door of management and instructors, of which he had six during his time at BlueBird.

The Nov. 7, 2016 reply notice from Sodhi stated that no refund is due, as per the enrolment agreement, which was signed by Thoduvil. “Bluebird is not responsible for any monthly expense,” said the response. “Student was at fault for termination. Bluebird is not responsible for education loan obtain (sic) by student. Student was warned many times regards to training issues but failed to comply, resulting in termination.” 

BlueBird terminated Thoduvil on May 23, 2016, claiming he was a danger to himself, the aircraft and flight instructor. It refunded 70% of the fees remaining — $10,300 — on June 6, 2016 and told him that the school would pay another flight training unit $4,500 and the remaining $5,800 on a pay-as-you-go basis. 

Thoduvil applied to transfer to Principal Air. Sodhi allegedly told that company’s instructor Jeannette Nosko that Thoduvil was unsafe. Nosko did not believe the allegation and allowed Thoduvil to become a student. BlueBird paid Principal $4,500, but did not release the remaining $5,800.

Nosko’s Feb. 23, 2017 letter said Thoduvil had 75 hours of flight time and BlueBird allowed him to fly 20 hours by himself, but BlueBird’s training quality was deficient. 

“After flying with Mr. Thoduvil I determined that his previous training was inadequate. I found that required flight maneuvers and procedures were taught incorrectly or not at all,” Nosko wrote. “None of these items made him an unsafe pilot, however his flying skill was not adequate to pass a flight test.”

Nosko’s letter said that Thoduvil eventually completed his private pilot’s licence on Nov. 14, 2016 with Principal.

None of the allegations has been proven in court. Sodhi did not respond for comment. 

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Bob Mackin A Chilliwack flight training school that

Bob Mackin

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 CEO Jim Lightbody (left) and Brad Desmarais (LinkedIn)

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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Bob Mackin The B.C. Lottery Corporation software that

Bob Mackin

The campaign manager for Dan Brooks, the Vanderhoof hunting guide elected the B.C. Conservative Party leader in 2014, was behind a dirty tricks campaign to undermine his only opponent.

Rick Peterson sued now ex-leader Brooks and campaign manager Barry Sikora for defamation. A trial slated for early May was settled out of court. 

Peterson emailed his supporters on June 24, with a copy of Sikora’s written apology for mailing the anonymous smear letters against venture capitalist Peterson’s business and political activities. 

Not only was Sikora the Brooks campaign manager, but his Classic Impressions company was contracted by the party to send ballots to members. Therefore, Sikora had the membership contact list.

“The letter contained misleading statements about your professional and political activities,” Sikora wrote. “I regret my actions and want to apologize to you, to your family, to your business associates and to the BC Conservative Party for the harm and hurt I may have caused.”

At the April 2014 convention in Richmond, the party counted 721 votes for Brooks and 440 for Peterson. Only 28% of the party’s 4,100 members voted in the mail-in election, meaning Brooks had less than 20% support across the party. . 

“It took four years to bring this to closure, but the effort and expense (Sikora’s cheque to me falls far short of covering four years’ of legal expenses I’ve incurred) that went into it were, in my view, worth it,” Peterson wrote. “It’s hard enough to attract good people into public service, so when something like this happens, it’s important to send out a clear message that candidates in any race deserve to be treated with respect.”

Peterson said he also received an apology from Brooks, who regretted not speaking out against the smear campaign. Brooks, twice-elected, but twice-resigned, maintained his innocence, however.

In 2017, the leaderless BC Conservatives ran candidates in 10 ridings and attracted just over 10,000 votes province-wide. Vernon city councillor Scott Anderson was elected interim party leader last fall. 

Peterson unsuccessfully ran for the leadership of the Conservative Party of Canada in 2017.

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Bob Mackin The campaign manager for Dan Brooks,

On this edition of Podcast, more than a thousand words with the North Vancouver photojournalist who captured some of the greatest British Columbia pictures of the 20th century. 

Ralph Bower spent four decades with the Vancouver Sun, which published 4,000 of his images. He shot the Queen, the Pope, Muhammad Ali, Elvis, the Beatles, Mick Jagger, Terry Fox… even a waterskiing squirrel! He also shot some of the city’s biggest crime, social unrest and disaster photos, from the aftermath of the deadly Second Narrows Bridge collapse in 1958 to a dramatic hostage-taking of a baby at knife point. The latter earned him the National Newspaper Award for top photo of 1985. 

A selection of Bower’s best is on display until July 3 at North Vancouver City Hall. That is where Bob Mackin caught up with Bower, who talked about his career and the state of photojournalism. 

Listen to the feature interview with Bower on this edition of Podcast. Also: commentaries and headlines from around the Pacific Rim and Pacific Northwest. 

Click below or go to iTunes and subscribe.

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Support for as low as $2 a month on Patreon. Find out how. Click here. Podcast Podcast Podcast: People, animals and scenes the keys to photojournalist Ralph Bower's enduring images

On this edition of Podcast, more

Bob Mackin

Only a couple of days after Morgan Freeman became a guest SkyTrain announcer in late May, TransLink kiboshed the gimmick.

The Oscar winner and pitchman for global Olympic sponsor Visa was suddenly accused of sexual harassment and inappropriate behaviour in U.S. media reports. He issued a statement that apologized for making inappropriate comments, but denied assaulting women.

Meanwhile, a SkyTrain car still bears the name of a prominent British Columbian who was accused of harming aboriginal children under his care. 

Car 308 (Wikimedia Commons)

In May 2010, TransLink dedicated Mark II car 308 “In the Olympic Spirit of John Furlong.” It was the first time a SkyTrain car displayed the name of a person, after Mark I cars had been dedicated to B.C. place names. The honour was to commemorate TransLink’s contribution to the Vancouver 2010 Winter Olympics transportation plan. 

TransLink told theBreaker that car number 308 remains in regular service and it still bears Furlong’s name. It did not explain why Furlong’s name remains, but Freeman’s voice does not. 

In September 2012, the former CEO of the Vancouver 2010 Winter Olympics was accused of mental, physical and sexual abuse by former students from a day school in Burns Lake. Furlong had come to Canada in 1969 as a lay missionary from Ireland to be a gym teacher at Immaculata Catholic elementary — facts that readers did not find in his 2011-published, Patriot Hearts memoir.

Furlong quickly and emphatically denied the allegations that had been published in journalist Laura Robinson’s exposé in the Georgia Straight newspaper under the headline John Furlong biography omits secret past in Burns Lake. Furlong did admit at a hastily called news conference that he had lived and worked in Burns Lake, but called that time “fairly brief and fairly uneventful.” 

The RCMP did not recommend charges. None of the allegations against Furlong has been tested in court. 

Furlong filed, but later withdrew, defamation lawsuits against Robinson and the Georgia Straight. Robinson sued Furlong for defamation, but a judge ruled in September 2015 that Furlong had a right to defend his reputation against Robinson. Three civil lawsuits against him never got to trial after the plaintiffs’ lawyer resigned without explanation. 

Furlong remains executive chair of the Vancouver Whitecaps, chair of Rocky Mountaineer and Own the Podium and a director of Canadian Tire. In 2016, the Canadian Olympic Committee made him chair of a committee to help Calgary formulate a bid for the 2026 Winter Olympics. He has also resumed paid public speaking engagements after many cancellations in the wake of Robinson’s story. 

Patriot Hearts was translated to Chinese and published in 2017, with the blessing of the Chinese government, under the title The Sun Finally Shines. There were no corrections or additions to the Welcome to Canada, Make Us Better chapter that formed the basis of Robinson’s September 2012 story. 

During the civil trial for Robinson’s defamation lawsuit against Furlong, Furlong took the stand in his own defence. Coincidentally, it was on International Olympic Day in 2015. Under cross-examination, he admitted that he came to Edmonton with his family as a landed immigrant in 1975, not 1974, the year that is mentioned in Patriot Hearts.  

Freeman (left) and Furlong.

Cathy Woodgate, one of the former students who alleged abuse, wrote an open letter to Prime Minister Justin Trudeau in November 2015, asking for Trudeau to remove Furlong from chairing the federally funded Own the Podium. Trudeau did not respond. 

At its annual meeting in July 2016, the Assembly of First Nations resolved to ask the federal government for a “thorough and impartial investigation” into the complaints against Furlong. 

Last month, the Canadian Human Rights Commission decided to proceed with the January 2017 complaint by Woodgate and other members of the Lake Babine and Burns Lake First Nations against the RCMP. The complaint alleged the RCMP’s Cpl. Quinton Mackie failed to properly investigate the allegations of abuse against Furlong.

“This complaint involves serious allegations of failure to investigate historical sexual abuse, racism and conflict of interest. In all of the circumstances, the Commission is of the view that it is in the interest of justice that it should be dealt with,” said the May 16 decision, which was attached to a June 5 letter to Woodgate.  

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Bob Mackin Only a couple of days