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Federal ‘failures’ on money laundering prompt B.C. inquiry to call for provincial watchdog

Global News logo Global News 2022-06-15 Sam Cooper
Chips at the River Rock Casino in Richmond, B.C. © John Lehmann/Globe and Mail/The Canadian Press Chips at the River Rock Casino in Richmond, B.C.

The Cullen Commission's final report into money laundering in B.C. has faulted senior provincial government ministers, including former premier Christy Clark, for being warned about incredible growth in suspected laundering of criminal cash in the government's casinos, but failing to “ensure such funds were not accepted.”

While Commissioner Austin Cullen found that Clark and former B.C. Liberal gaming minister Rich Coleman were among the senior elected officials and the B.C. Lottery Corporation managers who failed to stem suspected criminal proceeds that were flooding into B.C. coffers -- in some cases ignoring repeated and escalating warnings -- Cullen said there was no evidence that politicians' failures to act were motivated by corruption.

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The 1,800-page document, released Wednesday, also included new data that detailed the stunning growth in cash transactions into B.C. casinos that investigators first flagged in 2008, and how these transactions continued unabated until at least 2014, when casinos accepted $1.2 billion in cash transactions that were $10,000 or more. Many of these transactions matched indicators for criminal cash, Cullen said, because they were delivered to casinos in bricks of cash and in duffel bags.

"Sophisticated criminals have used B.C. as a clearing house to launder a vast amount of money," Cullen said in media interviews after his report was released. "This is fundamentally destabilizing to the economy we want for our province."

Cullen also found that B.C.’s economy, including casinos, real estate dealings, banks and law offices face big money-laundering risks, and that the failures of federal RCMP and Fintrac, Ottawa’s anti-money-laundering agency, allowed money laundering to grow.

Fintrac’s reporting regime is essentially wasteful and the “RCMP’s lack of attention has allowed for the unchecked growth of money laundering since at least 2012," the report said.

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This finding resulted in one of his most impactful recommendations: a new B.C. anti-money-laundering enforcement and investigation unit to fill the federal gap.

He also recommended that B.C. implement an independent legislative anti-money-laundering commissioner who would be accountable to the public, rather than to the provincial government.

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He concluded that despite mounting evidence of B.C.’s money-laundering problems and public concern since 2008, “governments have failed to grasp the nature” of the problem, and that “it is time to change this trend permanently.”

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During the inquiry, Cullen heard that money laundering in B.C. casinos involved loan sharks delivering bundles of $20 bills that had been packaged consistently with the proceeds of drug trafficking to high-profile gamblers who had travelled primarily from China to Canada to play baccarat in secluded areas of the casinos. And these foreign high rollers often paid back the loan sharks the funds they gambled via transactions in China and Hong Kong.

Cullen credited an RCMP anti-money-laundering unit and an officer named Barry Baxter for launching an investigation in 2010 into B.C. casinos where this type of money laundering was occurring.

The unit’s case summary at the time said that the River Rock Casino in Richmond and the Starlight Casino in New Westminster were targeted because they were “a very significant source of money-laundering activity, using wealthy People’s Republic of China gamblers as willing pawns in their activity.”

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“The individuals actually conducting the buy-ins at the casino, and doing the gambling, were wealthy Chinese businessmen, many with little to no ties to Canada,” Baxter’s report said.

“These high-roller players typically pay-back [sic] their losses via bank-deposits [sic] in the People’s Republic of China or Hong Kong, which are ultimately brought back to Canada by the loan-sharks (in non-cash form) as ‘legitimate’ money. This is often done by international money-laundering groups.”

But Baxter's investigation was cancelled in 2012, Cullen found, after the federal government cut funding, and the RCMP responded by dropping any focus on money-laundering prosecutions.

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The report found former gaming minister Coleman at fault for a conflict between him and Baxter, who went public in early 2011 with concerns that his team suspected organized crime was using B.C. casinos in sophisticated money-laundering operations. Coleman responded by rebuking Baxter publicly and saying he was wrong.

Coleman's comments "posed a real risk of misleading the public into believing that there was no basis for concern about suspicious transactions in the province’s casinos at a time when Mr. Coleman had good reason to believe that there was cause to be worried about the origin of the funds in those transactions," the report said.

In interviews after the report's release, Cullen told Global News that he agreed that Coleman's comments could have impeded RCMP investigations.

In a statement, Coleman said the report's findings "prove" that allegations the BC Liberals were ignoring money laundering or were corrupt were "politically-motivated oversimplifications."

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“The word corruption has been tossed around irresponsibly by media and politicians for several years, but the Commissioner has found that to be utterly false,” the former Langley East MLA said.

“While hindsight is 20/20 and there is always more that could have been done, the idea that we were somehow purposefully ignoring or somehow aiding money laundering has been proven to be incorrect.”

He also emphasized the report reflecting that he received "different advice from different branches of public service" as gaming minister and that he "did the right thing" in 2011 in seeking a review of the information that was coming from the lottery corporation and the regulator, the Gaming Policy and Enforcement Branch.

Coleman announced he was retiring as MLA in early 2020, on the same day he'd been first nominated to run for the BC Liberals back in 1996. The commission's hearings had begun with opening statements a few days prior.

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Meanwhile, some experts were left scratching their heads over Cullen's conclusion that he could not find any of the politicians who neglected to stem the flood of suspected dirty cash had personally benefited from their inaction.

One former RCMP officer who investigated transnational crime networks in B.C. casino probes questioned Cullen's logic.

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"I am sorry, but being willing to continue taking the money without accountability is a form of corruption," the former police officer told Global News, on condition of anonymity because he was not authorized to speak on the matter.

Coquitlam Mayor Brad West, who followed the inquiry closely and often criticized B.C. politicians for turning a blind eye to money laundering, agreed.

"It is a sad reflection on our current state of affairs that nobody is ever responsible for their inaction or failings," West said on Wednesday. "The buck never stops anywhere, it gets passed around."

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