Quebec casinos and gaming halls still vulnerable to money laundering by organized crime, experts say

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Quebec casinos and gambling halls are still easy targets for organized crime, with millions of dollars in dirty money likely funneled to government-run sites, experts warn.

According to Loto-Quebec data obtained by CBC/Radio-Canada, the provincially-owned company reported nearly $420 million in large cash transactions to Canada’s anti-money laundering watchdog over the past of the past six years.

Criminals often use casinos as a playground, both as a place of entertainment and as a “place [where] they launder their money,” said Matt McGuire, an internationally renowned money laundering expert.

While it’s impossible to know the ratio between legitimate and illegal transactions, McGuire said it’s “virtual certainty” that some of the money used in casinos is linked to organized crime networks, which profit from illegal activities such as drug and human trafficking.

“The average person carries very little cash, so you know, excess cash is a warning sign,” McGuire said.

By law, Canadian casinos must report suspicious cash transactions and large cash transactions totaling $10,000 or more to the Financial Transactions and Reports Analysis Center (FINTRAC). FINTRAC’s mandate is to identify money laundering threats and pass the information on to law enforcement.

If a casino does not follow the rules, it faces heavy fines.

More suspicious transactions reported

CBC News has been fighting for access to transaction reports that Loto-Quebec has been sending FINTRAC since October 2017. These reports can include details about a customer’s occupation at the casino, how the money was brought in or grounds for suspicion.

Loto-Québec provided CBC/Radio-Canada with the number of suspicious and large cash transactions it submitted to FINTRAC each quarter, between January 2015 and March 2021. The monetary value of suspicious transactions and other details n were not available.

Between the 2015-2016 and 2019-2020 fiscal years, Loto-Québec reported an average of $77 million per year in large cash transactions to FINTRAC, which represents approximately 5,000 transactions per year, or 14 per day. This number has remained relatively constant.

Matt McGuire, an internationally renowned money laundering expert, said organized crime networks use casinos to launder their money. (Submitted by Matt McGuire)

However, the number of suspicious transactions increased from 254 in 2015-2016 to 395 in 2019-2020.

McGuire said he’s not surprised Loto-Quebec is reporting more suspicious transactions now, as it’s likely more cautious following an administrative penalty it received for non-compliance a few years ago. .

In February 2020, Loto-Québec was fined $147,000 for three violations dating back to a 2012 compliance assessment at the Montreal casino.

FINTRAC has accused Loto-Quebec of failing to submit suspicious transaction reports and failing to provide specific details about a customer’s occupation in certain large cash transactions over $10,000.

As the Journal de Montreal first reported, Loto-Québec refused to pay the original fine and spent $260,000 in legal fees to challenge the penalty in court.

Independent audit

In November 2020, Loto-Québec’s practices were called into question following a TVA investigation. The French-language outlet alleged that prominent members of organized crime received benefits such as free hotel rooms, meals and shows at the Casino de Montreal.

Following the reports, Quebec Finance Minister Eric Girard, who oversees Loto-Quebec, announced an independent audit to examine the operation of casinos, particularly with regard to loyalty programs.

Documents show the government paid nearly $300,000 to management consultancy Deloitte to carry out the investigation. The results of the audit, made public in the summer of 2021, concluded that there were no shortcomings in Loto-Québec’s procedures.

However, Deloitte made 39 recommendations, including:

  • Give Loto-Québec additional powers to banish criminals.
  • Perform stricter controls on the identity of players and their source of funding.
  • Improve the sharing of information between the police and Loto-Québec.
  • Cancellation of memberships in loyalty programs linked to members of organized crime.

As a result of the audit, people linked to organized crime were expelled from the Loto-Québec rewards program and they no longer receive personalized offers.

A finance ministry spokesperson told CBC that some of Deloitte’s recommendations require legislative changes, which are still under review with input from Loto-Quebec.

A cashier counts money at a BC government-owned casino. In early 2018, the BC Lottery Corporation adopted a “source of funds” guideline for cash transactions over $10,000, after an investigation showed what BC Attorney General David Eby, called it a “woefully flawed” system to stop money laundering. (Ministry of the Attorney General of British Columbia)

Loto-Québec declined CBC’s request to interview company president Jean-Francois Bergeron, but last fall Bergeron told TVA Nouvelles that one of the ways she wants to fight money laundering is to limit the use of cash in its gaming establishments.

To do this, all bets and winnings would go through a single card provided to each player. A pilot project was to be launched this fall.

McGuire said the one-card initiative would make it easier for the company to detect suspicious transactions.

“It makes each of their transactions trackable and traceable,” McGuire said. “It’s a forensic accountant’s dream.”

Why wait ?

Some people wonder why the province is taking so long to implement Deloitte’s recommendations.

Shortly after British Columbia ordered an investigation into money laundering at its casinos in late 2017, the BC Lottery Corporation adopted a directive on the source of funds for cash transactions over $10,000.

Before a player can exchange money for chips, that player must provide the casino with a same-day receipt showing which financial institution the money was withdrawn from, along with the account and transaction number.

This has led to a dramatic reduction in the volume of illicit funds passing through the casino.

In Quebec, the lottery company now verifies a customer’s identity and source of funds for any transaction over $3,000. The threshold was previously $10,000.

When CBC asked Loto-Quebec for more information on how this policy works in practice, including whether it also requires customers to present a receipt, a spokesperson said CBC should make an access request. to information.

A bald man with a beard sits with a blurry image of a newsroom behind him.
Pat Poitevin, executive director of the Canadian Anti-Corruption Center of Excellence, said that as a state-owned enterprise, Loto-Quebec “must have a higher level of rigor” when it comes to to report suspicions of money laundering and fraud, (Radio Canada)

This lack of transparency is of concern to Pat Poitevin, the executive director of the Canadian Anti-Corruption Center of Excellence, an Ottawa-based non-profit organization.

“I think as a public company it needs to have a higher level of rigor in terms of compliance measures to fight money laundering and fraud,” Poitevin said. “They set the tone for private industry.”

While Poitevin said he thinks it’s a good idea that Loto-Quebec has reduced the threshold for ID checks to $3,000, if customers only have to verbally explain where they got their money – for example, from an inheritance – makes “no sense”, he said. .

“It’s one thing to have the controls in place, but if you don’t communicate what you have, then it’s assumed that [a state-owned casino] remains easy prey to use and exploit,” Poitevin said.

He said Loto-Quebec must tell taxpayers what it is doing to detect, prevent and reduce potential threats. This would improve public confidence and have a deterrent effect on organized crime.

“Organized crime groups are very good at finding loopholes,” Poitevin said. “When they find loopholes, they will take advantage of them. It’s important not only to have policies on paper, but to make sure they are always tested regularly.”

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