B.C. Lottery Corp. finally reveals secret behind $700K fine for money laundering fumbles
CBC News fought 9 years to find out why BCLC fell afoul of FINTRAC, Canada's money laundering watchdog
The B.C. Lottery Corporation has finally given up a decade-long fight to keep a secret.
In 2010, BCLC was hit with a $700,000 fine by FINTRAC, the country's money laundering watchdog, for undisclosed violations of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
It was the largest penalty ever levelled against a provincial gaming corporation — until FINTRAC eventually withdrew its case after a long and complicated legal battle.
But BCLC still fought to keep the facts of the case from the public.
Now the lottery corporation has voluntarily released documents that detail its past failings, relenting after a nine year freedom of information battle with CBC News.
The move comes after B.C. Attorney General David Eby spoke with BCLC's new board of directors earlier this year.
"I think the release of these documents...is long overdue," Eby said in February.
Mike Larsen, president of the B.C. Freedom of Information and Privacy Association, agrees.
"Access delayed is access denied," says Larsen. "And it is about time that we have this information."
7 major deficiencies
The documents show FINTRAC found BCLC's oversight of the province's casinos to be deficient in seven major "high risk" areas between 2009 and 2010.
FINTRAC required the lottery corporation to report on large and suspicious cash transactions — possible proceeds of crime being laundered through casinos.
But after a major audit, it found casino staff were conducting "little to no verification" of high risk client betting, that BCLC had failed to adequately report large cash transactions over $10,000, and that casinos were allowing high rollers to simply identify themselves as "self-employed" or "business owners."
Recent investigations have shown criminals were able to launder up to $1 billion in dirty money through the province's casinos for over a decade — often bringing in bags and suitcases packed with bundles of $20 bills, the currency of street drugs.
The CBC reported extensively on the flow of suspected "dirty money" as far back as 2008.
BCLC insisted it was making changes
Internal letters between BCLC and FINTRAC reveal the lottery corporation insisted it was making changes to its "high risk measures," and blamed some of the deficiencies on technical glitches and human error.
The lottery corporation begged FINTRAC to drop the $700,000 fine and keep its deficiencies secret from the public— arguing disclosure of its failings would tip off money launderers to its weaknesses.
"Publication ... would indicate to the patrons of casinos that it is possible to avoid the necessary identification, recording and reporting [of large and suspicious cash transactions], which is a message BCLC does not wish to have made," wrote former BCLC president and CEO Michael Graydon in a fax to FINTRAC dated June 30, 2010.
"The public notice will detract from the very considerable efforts BCLC is making to appropriately comply," insisted Graydon. "It will encourage inappropriate behaviour."
But Larsen says that argument never made any sense.
"There were no trade secrets about how to money launder that could have really been gleaned from the information that has been finally released," says the freedom of information advocate.
"So I find that argument hard to believe."
News of $700K fine leaked, source sought
In a subsequent fax one month later in August 2010, BCLC's CEO appeared angry that news of the $700,000 fine had been leaked to the press — and the search was on to find the whistleblower.
"Active inquiries have been made at BCLC and it has not been possible to identify the source," wrote Graydon. "Damage has been caused as a consequence of the premature public disclosure of the ... notice of violation."
Despite the leak and Graydon's departure in 2014, the lottery corporation continued to fight CBC's request for details of its deficiencies — in battles before the courts and B.C.'s information and privacy commission.
BCLC also appealed the $700,000 fine, and the Federal Court issued confidentiality orders barring the release of the records.
In 2017, FINTRAC withdrew its case against BCLC and the penalty was set aside by the court.
In 2018, the CBC refiled a request for the 2010 records — to BCLC and the Ministry of the Attorney General.
The ministry released some documents, but key information was redacted.
When Eby was asked in February about his own ministry blocking full release, the attorney general said "British Columbians deserve to see this information."
Secrecy 'erodes trust'
The B.C. Lottery Corporation says it began the process to release the long-secret information around the time of Eby's statement in February — as part of its participation in the current provincial inquiry into money laundering in B.C..
In mid-June, the court loosened the confidentiality order and BCLC finally gave the records to the CBC.
The lottery corporation says in FINTRAC's last examination in 2018, the watchdog agency acknowledged the lottery corporation "had made significant progress in improving its anti-money laundering program."
But Larsen says BCLC should have come clean about its shortcomings back in 2010.
"You end up in the end looking like you're being unnecessarily and perhaps conspiratorially secretive," says Larsen.
"That absolutely erodes trust, for sure."
CBC Vancouver's Impact Team investigates and reports on stories that impact people in their local community and strives to hold individuals, institutions and organizations to account. If you have a story for us, email impact@cbc.ca.
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With files from Paisley Woodward