B.C. Liberal minister intervened to raise betting limits, ignoring money laundering warnings about Chinese VIPs

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Global News investigation shows new money laundering concerns – Jul 24, 2018

Despite money laundering concerns from the province’s gambling regulator, officials in B.C.’s finance ministry intervened to allow B.C. Lottery Corp. to raise high-roller betting limits to $100,000 per hand in time for Chinese New Year visits, a Global News investigation shows.

In May 2015, then-finance minister Mike de Jong said in B.C.’s legislature that the controversial “senior-level intervention” was made “in the public interest” in order to maximize casino revenue.

But now — as critics ask whether wilful blindness enabled Chinese gangs to launder money in B.C.’s economy — an analysis of government records by Global News suggests the Finance Ministry’s intervention ignored clear warnings.

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Since late 2010, the regulator — GPEB — had warned the Lottery Corp. (BCLC) to limit massive cash transactions involving Chinese VIPs at private baccarat tables, documents show.

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But instead, Lottery Corp. managers did the opposite. They repeatedly raised baccarat limits, from $5,000 per hand to $100,000. And they refused to implement the regulator’s suggested “remedy” of capping VIP buy-ins with $20 bills — the denomination associated most with drug trafficking — to under $10,000.

And with an excuse that galled GPEB investigators, BCLC countered GPEB’s complaint in 2010 that VIPs were commonly bringing $200,000 or more in $20s per night to play baccarat — by arguing that wealthy Mainland Chinese businessmen had a cultural preference for gambling with bundles of cash.

Documents disclosed through freedom of information show that in late 2013, the long-running dispute between BCLC and GPEB over Chinese VIPs and large cash transactions came to a head.

And when GPEB cited money laundering concerns to block the BCLC’s demands to raise VIP betting limits before Jan. 31, 2014 — the start of Chinese New Year — BCLC sought “senior-level” intervention.

“Senior-level intervention”

A letter sent Dec. 19, 2013 from then BCLC chief executive Michael Graydon to John Mazure, the bureaucrat in charge of GPEB, says that in September 2013, BCLC requested to raise VIP betting limits for baccarat in time for Chinese New Year, “particularly” at Richmond’s River Rock Casino and Vancouver’s Edgewater Casino.

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And in October 2013, vice-president Jim Lightbody, now BCLC’s CEO, informed the Finance Ministry “this is a very strategic initiative for us to build a healthy customer base.”

Raised baccarat limits were needed to “provide greater player convenience during a peak period for casino visitation and revenue,” Graydon’s Dec. 19, 2013 letter says.

But in response to the request, “BCLC was informed that GPEB would need to approve any change to table limits.”

“A very simple decision took 13 weeks to resolve, and if not for senior-level intervention, BCLC and the Province of B.C. would miss out on an important incremental revenue opportunity,” Graydon complained, in his letter.

Documents show that a Dec. 13 GPEB briefing note on the issue was escalated for the review of then-finance minister de Jong, whose office had to play referee in the regulatory dispute.

The briefing note for de Jong pointed to GPEB’s “concerns related to money laundering” and impacts to the “integrity of gaming” if baccarat betting limits were raised to $100,000 per hand, documents show.

A redacted copy of the briefing note shows that B.C. casinos were an extreme outlier in Canada for high-limit games.

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For example, the note says, most other provinces had no high-limit betting. And at Ontario Lottery and Gaming casinos, there were $100 bet limits on table games.

Graydon’s records regarding “senior-level intervention” were only uncovered in a Privacy Commissioner complaint filed in 2015, by then NDP opposition critic David Eby, who is now B.C.’s attorney general.

“It is evident from the records that Mr. Graydon advocated — despite the concerns of the Gaming Policy Enforcement Branch — for an increase in the maximum bet limit,” a quote from Eby’s complaint letter says.

The decision, documents say, was related also to raising revenue commissions for casinos so that they would offer more “table games.”

There is some confusion, according to the redacted documents, over who in de Jong’s office actually signed the approval for these revenue-generating changes.

One email refers to GPEB’s briefing note for de Jong and his ministry’s corresponding “signed directive.”

“(De Jong’s subordinate) approved, but I don’t have one with his signature on it,” a B.C. government document says.

In an interview with Global News, de Jong was asked if he takes responsibility for raising betting limits to $100,000, against the money laundering warnings of GPEB.

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“I don’t recall the specific transaction,” de Jong said. “The B.C. Gaming Policy Enforcement Branch would bring options to the minister … and the recommendations were followed … on the rare occasions, when the minister would be involved. And I’m not sure, that this decision went to the ministerial level.”

De Jong, who is the MLA for Abbotsford-West, said he disagrees with the “premise of the question” when asked whether the directive raising betting limits was issued despite clear warnings from GPEB.

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In the aftermath of the Finance Ministry directive to raise betting limits to $100,000, BCLC revenues spiked.

Suspicious cash transactions tied to the Chinese VIPs had been rising exponentially since 2010, government records show. And the money laundering in BCLC casinos peaked in the 2014-15 fiscal year.

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But internal BCLC records obtained by Global News show that in late 2014, GPEB again complained about “the amount of extremely large cash buy-ins (BCLC investigators were) seeing recently.” The BCLC believed these cash transactions were tied to VIP baccarat players and a Richmond organized crime suspect named Paul King Jin, documents show.

Finally, BCLC management reached out to RCMP organized crime unit leaders, internal records indicate.

And the so-called E-Pirate casino money-laundering probe launched after February 2015.

And yet, in February 2015, BCLC CEO Jim Lightbody didn’t seem to show any concern.

The Victoria Times Colonist reported that with lottery sales falling, Lightbody and BCLC’s partner casinos in the Lower Mainland strategically focused on attracting “businessmen and industrialists” keen to play $100,000 per hand.

And because of decisions to increase betting limits at baccarat from $5,000 to $100,000, BCLC expected to surpass its target of net income of $1.2 billion for the year, “due to an increase in high-limit table revenue.”

The VIPs are mostly from Mainland China, mostly prefer to deal in cash, and commonly buy-in for a game with $200,000, Lightbody was quoted as saying.

“So they do come in with bags full of money for their buy-ins,” he said.

He insisted, however, that the corporation and the casinos have regulations in place to ensure the money was acquired legally.

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“We know them very well,” he said. “We know their source of wealth. We know all their personal information; they need to share that with us for regulatory reasons.”

It eventually became clear, in the E-Pirate probe, these VIPs were part of an organized crime scheme believed by police to be aiding the production and import of fentanyl and other narcotics into B.C.

March 2019 B.C. Civil Forfeiture filings allege that while banned by BCLC, from June 2012 to June 2015, Paul King Jin illegally provided $23.5 million in cash to Chinese high-rollers at BCLC casinos.

And Jin was allegedly running illegal high-limit baccarat casinos for Chinese VIPs in Richmond, where police found and seized River Rock Casino and Edgewater Casino VIP chips, according to the filings.

Global News has been unable to reach Jin directly or through his lawyer for comment on the allegations. No charges have been filed.

BCLC refused to make Lightbody available for an interview to Global News for questions in this story.

BCLC says that it is working to implement anti-money laundering measures recommended in a 2018 B.C. government review by former B.C. RCMP executive, Peter German.

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Graydon was also not available for interview.

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“This threat will increase”

GPEB and BCLC documents and source interviews show that BCLC was warned specifically about organized crime concerns related to high-limit baccarat and Chinese VIPs.

In a Nov. 24, 2010 letter to BCLC, GPEB’s director of casino investigations Derek Dickson wrote the regulator was concerned by a jump in suspicious cash transactions involving numerous patrons at Vancouver-area BCLC casinos.

“It typically involves well-known LCT [large cash transaction] patrons that play baccarat and arrive with cash as a buy-in,” Dickson wrote.
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He pointed to one particular high-roller, who made $3.9 million in cash buy-ins in just two months. Twenty-dollar bills were used for $3.5 million of that total, and the VIP brought in about $200,000 in cash in duffel bags night after night, GPEB stated. In one case, the VIP lost $330,000 playing baccarat, and then immediately met a car at the front door of the casino to receive “an object” from the trunk. He returned to gamble $325,000 in casino chips.

Dickson wrote that he and GPEB director Joe Schalk had met with the RCMP’s officer in charge of the Integrated Proceeds of Crime Unit, (IPOC) “and they are well aware of the issue and are seriously concerned that the casinos are being used as a method to launder large sums of money for organized crime groups.”

In fact, IPOC and GPEB had started an active investigation focused on a ring of major suspected loan sharks and VIPs active at River Rock Casino. According to a GPEB source, the IPOC investigation was promising, but it ended in late 2011 when the unit was de-funded due to decision-making in Ottawa.

A statement from RCMP Supt. Bruce Ward in September 2017, then a lead E-Pirate investigator, outlines the scale of the Chinese VIP problems the RCMP finally revealed.

“The BCLC had identified in the year leading up to our file, $180 million in cash that came into the River Rock Casino. So that is bags of cash,” Ward said. “We’ve talked to these businessmen. It is not cultural. There is no reason in Canada to carry more than you and I carry in cash.”


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