The Royal Canadian Mounted Police (RCMP) have seized more than CAN$9 million as part of a multinational money-laundering investigation dubbed E-Pirate,
Vancouver Sun reports. Government documents allege that Paul King Jin, who owns a British Columbia spa, orchestrated a CAN$500 million money laundering service involving casinos and underground banks in Canada, China, and Macau. Investigators say Jin helped wealthy Chinese individuals gamble in British Columbia casinos using suspected drug cash he supplied through underground banks linked to Chinese organized crime groups. The RCMP seized more than CAN$2 million during a raid of Silver International Investment, an unlicensed British Columbia-based bank that allegedly funneled money to gamblers, and another CAN$1 million in suspected drug money when it stopped two individuals seen entering Silver's offices. According to ledgers uncovered during its raids, Silver laundered CAN$220 million in cash and sent more than CAN$300 million offshore in a single year.
Money laundering doesn't necessarily involve fraud, but the two are linked because the proceeds from fraud often need to be laundered in order to be kept or spent. The amounts of money involved can be enormous, and the laundering schemes are complex, making their deterrence and detection challenging. The RCMP's E-Pirate investigation illustrates how money laundering works. In this case, investigators say drug dealers laundered their profits — $1 million, for example — through underground banks in Canada and then in China. In turn, the Chinese bank lent the $1 million to a gambler who went to a legitimate casino and converted the money into chips. The gambler then cashed in the chips for $1 million, now "laundered," which was available for investment or other uses.
To combat such money laundering schemes, regulators and gambling institutions must establish rigorous anti-money laundering (AML) programs and thoroughly monitor them to keep them up to date. In
a similar case in Australia involving wagering company Tabcorp, a federal court judge cited the "insufficient resourcing together with insufficient processes for consistent management oversight, assurance, and operational execution" in approving a AUS$45 million fine against the company for violations of Australia's Anti-Money Laundering and Counter-Terrorism Financing Act between 2010 and 2014, according to The Sydney Morning Herald. Casinos and other gambling-related businesses can address such concerns by making these improvements:
- Undertake a risk-based approach and assessment. Many countries have laws requiring companies to have a policy and procedure in relation to assessing and managing money laundering risks. This involves discrete steps for assessing the most proportionate way to manage and mitigate the specific money laundering and terrorist financing risks the organization faces. These methods include policies, procedures, controls, monitoring, and review.
- Conduct customer due diligence inquiries. These inquiries should confirm the identity of customers engaged in large or frequent transactions by examining valid, government-issued photo identification documents. Casinos also should look into a player's source of wealth and funds to measure risk. For customers who are assessed as higher risk, casinos should limit the types of permitted transactions.
- Monitor and report large cash transactions and payments to customers. Canada requires reporting of transactions of CAN$10,000 or more as well as of suspicious transactions of any amount. Unlike banks, casinos don't refuse many money transactions because of revenue considerations. However, they should stop suspicious transactions to help prevent money laundering. Moreover, political will is needed to require casinos to report large transactions.
- Report suspicious activity. Casino employees should be required to report information that comes to them within the course of business where they know or where they have reasonable grounds for suspecting that a person is engaged in money laundering or terrorist financing. Employees should report these activities to the nominated officer — a member of senior management responsible for dealing with anti-money laundering issues. If the nominated officer determines that a report provides grounds for knowledge or suspicion, he or she should report the matter to regulators. Additionally, lawmakers and regulators should review and strengthen penalties where they find this reporting is deficient.
- Clearly mark all checks as a return of gaming funds or as a payout of a verified win to make clear whether funds actually are from gambling wins versus chip-to-cash conversion.
- Control the exchange of currencies. Where there is minimal play, casino policy should result in a refusal to issue a check or even a ban on future play for the individual involved if money laundering is suspected.
- Promote or require the use of cash alternatives such as debit cards and customer accounts through which bank drafts and electronic funds transfers may be used, especially for large money transactions. These alternatives are somewhat easier to implement with online gambling, where transaction limits are more common.
- Provide mandatory AML training for casino staff that is updated regularly.
- Establish a dedicated unit consisting of members who are Certified Anti-Money Laundering Specialists and have expertise in AML investigations, programs, and intelligence. This unit should work with police and regulatory agencies, and share information regarding individuals it believes may be engaged in criminal activity, including money laundering and terrorist financing-related offenses.
Governments can help address money laundering by making it easier to prosecute cases. It also would help if authorities could seize assets believed to be directly connected to money laundering.