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Former B.C. Lottery Corp. executive questioned on under-reporting of suspicious transactions

Commissioner Austin Cullen. THE CANADIAN PRESS/Darryl Dyck. THE CANADIAN PRESS/Darryl Dyck

A former B.C. Lottery Corporation executive was in charge of compliance for a Richmond casino that under-reported suspicious transactions, B.C.’s inquiry into money laundering heard Tuesday.

It was the second day of cross-examination for Robert Kroeker, who was manager of compliance for Great Canadian Gaming from 2012 to July 2015. Kroeker left the Richmond casino and joined the Lottery Corp. in September 2015.

The inquiry has already heard that Asian-organized crime used loan sharks at River Rock Casino to provide “VIP” high-rollers from China with suspected drug cash to buy casino chips. And investigators believed the VIPs would often pay the gangs back in China.

This style of “transnational” money laundering became known as the Vancouver Model.

Read more: Gangs made B.C. casinos too dangerous to investigate for money laundering, inquiry hears

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And according to B.C.’s Gaming Policy Enforcement Branch, the suspected drug-money laundering from China increased exponentially from 2010 and was forecast to reach about $200 million per year in 2014. The inquiry has heard that former branch investigator Derek Dickson believes Lottery Corp. managers took no action against suspected drug-cash laundering until a major RCMP investigation was reported to them in July 2015.

Under examination from B.C. government lawyer Jacqueline Hughes, Kroeker acknowledged that from 2012 to 2015 — while he was responsible for compliance at River Rock Casino — the casino was not reporting suspicious transactions of under $50,000.

The inquiry has heard that this breached Canada’s anti-money laundering laws, and that Lottery Corp. investigator Ross Alderson believed River Rock staff may have warned VIPs to evade River Rock’s erroneous reporting threshold of $50,000.

“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, the inquiry previously heard. “(We) feel it’s too much of a coincidence and the players must have been informed.”

But Kroeker said he was not aware of the under-reporting problem while he was in charge at River Rock.

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“It was brought to my attention in November 2015,” Kroeker said. And he said he believed River Rock staff made the under-reporting errors due to “confusion.”

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Hughes also challenged Kroeker’s sworn testimony to the inquiry, that said under-reporting of suspicious transactions at River Rock Casino in 2014 and 2015, was only about 1.3 per cent.

According to Hughes ten per cent was a more accurate calculation, for that time period.

Hughes suggested that after Kroeker joined the Lottery Corp. he pushed back against reports and audits that alleged large-scale money laundering through Chinese VIPs was occurring at River Rock Casino.

Hughes referred to an anti-money laundering briefing document that Alderson provided to Kroeker on Sept. 8, 2015, when Kroeker joined the Lottery Corp. The document referred to 36 high-rollers that received cash from an alleged organized crime loan shark named Paul King Jin, the inquiry heard.

“There should be concern that B.C. Lottery Corp. and service provider management will be accused of ‘willful blindness,'” Alderson’s brief said, according to Hughes. “In investigative interviews conducted with (VIP) players so far BCLC has been able to determine that for a number of players they readily admit to not knowing the source of their cash, and that they pay back in suspicious circumstances using suspicious methods with little or no interest. This would indicate transnational money laundering rather than loan sharking.”

Hughes then presented a 2018 Lottery Corp. record in which Kroeker argued that high-rollers examined in another review had lost all their money to casinos.

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Read more: B.C. money-laundering commissioner rebukes Ottawa for failing to provide important records

The inquiry has heard that Lottery Corp. managers often argued that gamblers could not be laundering funds if they lost their bets. However, police and B.C.’s gaming regulator said the money laundering occurred when gamblers repaid loan sharks for cash loans, whether they won or lost casino bets.

In cross-examination by Great Canadian’s lawyer, Kroeker said he was never aware of any Great Canadian Gaming staff turning a blind eye to suspicious transactions.

In examination by his lawyer Marie Henein, Kroeker testified that he was prepared to place a $25,000 cash limit per transaction on B.C. casinos in January 2018, after B.C. Attorney General David Eby had started an independent inquiry into B.C. casino money laundering.

However, according to Kroeker’s notes of calls with Lottery Corp. CEO Jim Lightbody, Eby asked the Lottery Corp. not to take “proactive” measures against money laundering until the review was completed.

In his final statement, Kroeker said he believes he and his staff have been unfairly attacked in media reports.

Lightbody is scheduled to testify in the inquiry this week.