Amid more 'dirty money' revelations, BCLC seeks 'anti-money laundering solution'

The B.C. Lottery Corporation is looking for a contractor to provide an "anti-money laundering solution" after spending $7.3 million on a fix former RCMP deputy commissioner Peter German described as a "software debacle."

BCLC published a pre-qualification to select proponents for an anti-money laundering solution on the province's procurement website this week.

"The tools currently being utilized are at the end-of-life and are manually intensive," the project overview reads.

"The goal is to ensure that BCLC continues to meet its mandatory reporting requirements as defined by (the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.)"

A 'fiasco'

The search for technology to crack down on casino-based money laundering comes amid the latest revelations about a tide of dirty money that has washed into the B.C. economy through real estate and luxury vehicles.

This week, German put the amount of money laundered through the housing market at $5.3 billion.

In his initial report on gaming, he estimated the amount laundered through B.C. casinos at more than $100 million. But subsequent estimates put that figure closer to a billion dollars.

As part of his first report, German dedicated a section to problems with BCLC's failed last attempt at implementing anti-money laundering software. He called the situation a "fiasco."

"The result in terms of (anti-money laundering) has been more dramatic," he wrote.

"The inability of the new system to deliver as BCLC had hoped means that BCLC must rely on its existing systems and manual intervention to monitor patrons."

'Don't throw good money after bad'

German concluded that the software situation was typical of a pattern that saw BCLC confidently attempt to set a "gold standard" for anti-money laundering compliance only to be overwhelmed by the "flood of cash arriving in B.C. casinos."

Instead of going through the competitive bid process, the lottery corporation sought out the services of a leading U.S.-based supplier of anti-money laundering software to banks.

But the software was untested in the casino context and challenged by a requirement that — among other issues — regulators have to track money leaving casinos in a way that doesn't happen in the banking sector.

German also wrote that the absence of a field containing middle names for 17,000 patrons drove false positives "through the roof."

The company identified other issues, including data quality, poor scope management and "questionable testing methodology" all of which meant that analysts were left largely relying on existing systems to do their work.

The issues came to a head with a report about the problems in the Vancouver Sun that B.C.'s Attorney General tasked German to investigate. He noted that after reading the report, the company "contacted BCLC and not the reverse."

"The old adage, 'don't throw good money after bad' applies in this case. BCLC should expend no further public money on the ... project," German wrote.

"Any attempt by government and Crown agencies to develop hardware and software solutions must always be approached with great caution ... [requests for proposals] exist for a reason."

'Production-ready' not 'future-state'

Apparently the lottery corporation heeded German's advice, going the competitive route as it seeks out a new supplier.

"BCLC is seeking a software solution to further modernize and streamline anti-money laundering processes and analysis of gambling activity, including: online gambling, Patron Gaming Fund accounts, Source of Funds reporting, and ongoing monitoring of certain customers and their transactions," BCLC said in a statement.

"Proponents must demonstrate that they have a system that has been operationalized and implemented in casinos, including a Canadian casino."

According to the procurement notice, the anti-money laundering solution will have to work for online casino and land-based casinos.

At this point, potential bidders are asked to complete a questionnaire which appears drawn from some of the lessons learned from the previous software.

Proponents have to provide at least one reference about a project of similar size and scope conducted within the gaming industry. And they also have to offer a plan "based on a current production-ready offering of a solution, not on future-state capabilities."

The deadline for applications is May 24.