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B.C. casino violated reporting laws after investigator warned Lottery Corp. of breach, inquiry hears

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The Cullen Commission on money laundering has been told that despite suspicions about tens of millions of dollars passing through B.C. casinos, most of it in 20-dollar bills, the people observing the transactions claim they could only observe and report. John Hua has the details – Oct 28, 2020

A B.C. Lottery Corporation casino in Richmond, B.C., violated Canada’s anti-money laundering rules for several years after an investigator warned his superiors that the casino’s staff might be helping high rollers avoid suspicious transaction reports, a provincial inquiry has heard.

Lawyers for the Cullen Commission questioned Gord Friesen, the Lottery Corp.’s former manager of investigations, on Wednesday about a September 2011 email from one of his investigators, Ross Alderson. The email was one of a number of examples probed by the lawyers, in which Friesen disagreed with his subordinates on investigations of massive cash transactions.

The commission is tasked with probing dirty money in casinos and real estate and determining whether corruption has enabled money laundering to take root in British Columbia.

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The inquiry heard this week that Great Canadian Gaming’s River Rock Casino was only reporting suspicious transactions of more than $50,000, contrary to Canada’s laws.

And River Rock staff could have warned their high rollers to make transactions just below the facility’s reporting threshold of $50,000, Alderson warned his boss, Friesen.

“We have had some recent files where we have patrons buy in for $49,960 and $49,980 in $20s and we have found out through investigation (that) River Rock are not reporting these as suspicious,” Alderson’s email said. “(We) feel it’s too much of a coincidence and the players must have been informed.”

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But Friesen didn’t want his staff to further investigate Alderson’s concern, according to the email response read out by commission counsel Patrick McGowan.

“The problem we face is that if we believe River Rock are not reporting because someone has instructed the cage not to report these incidents, I don’t think you will get too many confessions,” Friesen wrote.

And, Friesen continued in the email, the decision to set a $50,000 reporting threshold “was a simple determination made at River Rock” because the casino handled so many transactions.

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A lawyer for B.C.’s gaming enforcement branch later asked Friesen if he was aware that River Rock had violated Fintrac’s reporting rules by setting the $50,000 threshold.

“Yes,” Friesen said.

The lawyer also asked him if he knew River Rock’s practice continued “four years after this email?”

“I have no idea,” Friesen said.

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Lawyers for the Richmond casino have argued in the inquiry that they fulfilled their reporting duties and have done nothing wrong in relation to money laundering.

McGowan also probed Friesen on a 2012 meeting that his subordinates claim took place at the Lottery Corp.’s Vancouver office.

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Friesen said he didn’t recall attending the meeting, in which Alderson and his colleagues, Stone Lee and Steve Beeskma, have said they were ordered by Lottery Corp. vice-president Terry Towns to not question high-stakes gamblers about massive cash transactions at the River Rock.

The commission has heard that Great Canadian management complained to Towns after Alderson questioned a high roller about a $200,000 cash transaction that Alderson believed involved money laundering.

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McGowan also questioned Friesen about disagreements with subordinates, including a Lottery Corp. investigator named Mike Hiller. According to McGowan, Hiller told Friesen that B.C. casinos were being used for money laundering because loan sharks, who gave high rollers bags of cash to gamble, could be paid back in other forms of currency.

Friesen said he remembered Hiller’s warning, but said that while cash coming from loan sharks looked suspicious, the Lottery Corp. did not have proof that criminal money laundering was occurring in these exchanges.

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He did acknowledge that after 2010, on his watch, it became common for gamblers to buy casino chips with $200,000 in $20 bills, which were delivered by loan sharks. The gamblers were betting up to $100,000 per hand of baccarat, and sometimes bringing $800,000 in $20 bills to cash cages.

The commission heard about one prolific Vancouver-area gambler — who the Lottery Corp. believed was a coal miner and real estate developer according to Friesen — who brought $1 million in $20s to play with at a New Westminster casino over the course of three days.

Friesen said he knew that the particular player was extremely wealthy, and that, looking back at those transactions, he doesn’t believe the high roller was laundering money.

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McGowan also asked Friesen why Lottery Corp. investigators could not reject these types of transactions or crack down on the high rollers who were accepting the cash from loan sharks, instead of bringing funds from banks to the casino.

If $200,000 in $20 bills in elastic bands was “dropped off for someone in a parking lot” and brought to a cash cage, McGowan asked, would his investigators be given authority to stop the transactions?”

“I don’t believe so,” Friesen told the inquiry. “We didn’t have evidence that was a criminal offence being committed.”

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But McGowan continued to press: “Can you conceive of any legitimate source for that quantity of $20s? Any scenario where someone would obtain $800,000 in $20s?”

Said Friesen: “Maybe they sold a house and it is revenue from that, I don’t know.”

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The commission has already heard from former Great Canadian surveillance staff that in the early 2000s, the managers at the Richmond casino that preceded River Rock allowed known loan sharks to operate because it was good for business. And as the B.C. government raised betting limits, the pool of loan sharks servicing high rollers grew proportionately.

Stone Lee, a B.C. Lottery Corp. investigator, has also testified that staff in Vancouver-area casinos were observed meeting with a notorious loan shark, Paul King Jin. And at the River Rock Casino in 2017, a “River Rock VIP manager” named Lisa Gao allegedly facilitated a $200,000 cash buy-in of casino chips for an unidentified VIP.

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Gao gave the VIP a velvet River Rock bag and the person left, with his chips, without placing a single bet, the commission heard.

Lee also testified that in one case, he learned that one of his Lottery Corp. managers, John Karlovcec, wanted him to “make up an occupation” for a high-stakes gambler on an official “large cash transaction” report that was to be filed to Fintrac.

Karlovcec has been scheduled to testify later this week.