The CEO of the BC Lottery Corporation has told a public inquiry that he was concerned that raising bet limits in B.C. casinos to $100,000 per hand in 2014 could “open the door to larger scale money laundering” via high rollers from China using mysterious cash from underground banks, but that the corporation decided to do it anyway.
At B.C.’s Cullen Commission on Thursday, Jim Lightbody was questioned about decisions to increase the Lottery Corp.’s revenue via mostly wealthy Chinese nationals after he became aware in 2011 that the RCMP and provincial gaming regulator suspected that high rollers were buying casino chips with bags of $20 bills loaned to them by Asian gangs.
The commission — which is mandated to determine whether corruption allowed money laundering to take root in B.C. casinos — has previously heard that the Gaming Policy and Enforcement Branch concluded after 2010, that suspicious cash transactions via Asian gangs and Chinese VIPs were growing exponentially, and that in 2014, suspected drug-money laundering in B.C. casinos was forecast to reach about $200 million per year.
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Lightbody testified that Lottery Corp. managers understood that most of the high rollers from China were using bags of $20 bills sourced from underground banks to buy casino chips. He said an “influx” of wealthy gamblers from China and Hong Kong arrived in Vancouver after the 2010 Winter Olympics, and that Lottery Corp. managers also wondered if they obtained duffel bags of $20 bills from Vancouver “cash-based” businesses in the construction or restaurant sector.
He told commission lawyer Patrick McGowan that the Lottery Corp. compliance team did “everything in our power” to mitigate risks surrounding the mysterious cash.
He said he became aware of increased risks following a casino review in 2011, and subsequently delegated risk mitigation to a Lottery Corp. vice-president named Terry Towns.
“I can’t recall specifics,” Lightbody told the inquiry. “I’m sure he did something.”
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Lightbody said the Lottery Corp. did not consider refusing cash with unknown origins or asking high rollers to declare their source of funds, or putting a $10,000 limit on “buy-ins” in $20-bill denominations. That’s what the branch urged the Lottery Corp. to do from 2010 to 2014, the inquiry has heard.
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“Wasn’t the obvious question not how (VIPs from China) made their money, but where did the $200,000 in $20s in a grocery bag that they just put on the counter come from?” McGowan asked.
Lightbody said he believed asking Chinese VIPs to declare their source of funds would have impacted Lottery Corp. revenue.
“You and I are not the kind of people that want to spend 12 hours at the table and bet that kind of money,” he said. “But these are people that have a real concern about their privacy and the ‘government’ knowing how much money they have. So using things like cheques (isn’t) something they are drawn to.”
The inquiry has heard that branch investigators believed that until a major RCMP investigation in 2015 threatened to embarrass the B.C. government, the Lottery Corp. took no actions to cut back on suspicious cash.
Lightbody said it wasn’t until the RCMP informed him in mid-2015 that an “international crime unit in Richmond” was using a money-services business to fund Lottery Corp. VIPs to buy casino chips and real estate in the province that he could be sure organized crime was using his casinos.
“(The RCMP said) there was a potential tie-in with transnational terrorist financing,” Lightbody said. “I was blown away.”
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In September 2015, he testified, he asked senior B.C. officials whether the Lottery Corp. should reduce or eliminate the “high-limit” baccarat games that had been raised to limits of $100,000 per hand in 2014, in order to cater to Chinese VIPs.
He said he was told that the BC Liberal minister responsible at the time, Mike de Jong, “would deal with this from an enforcement side.”
And the Lottery Corp. started to place “cash conditions” on about 40 VIPs who were judged to be high risk for money laundering, Lightbody said.
However, in 2016, when B.C.’s assistant deputy minister for gaming directed Lightbody to require gamblers to declare their source of funds, the Lottery Corp. decided not to apply the rule broadly to all large cash transactions, the inquiry heard.
Lightbody said he confirmed with Cheryl Wenezenki-Yolland, the deputy minister for gaming at the time, that the “minister didn’t mean all cash transactions” needed a declaration on source of funds.
His cross-examination was set to continue Friday.
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Meanwhile, the inquiry heard that Derek Sturko, a former assistant deputy minister responsible for gaming, reviewed a memo in March 2009 that warned that risk of money laundering at Lottery Corp. casinos was “extremely high.”
The memo recommended that cash transactions of “greater than $300,000 in $20 bills should be deemed suspicious,” and that casino service providers should refuse suspicious cash transactions. The memo also warned that casinos were taking in cash with the “smell of illegal substances.”
But the Lottery Corp. was against some of the memo’s recommendations, he said.
And Sturko testified that he couldn’t recall if he elevated the memo’s recommendations to Rich Coleman, the minister responsible for gaming in 2009.
An RCMP anti-illegal gaming unit funded by the BC Lottery Corp. was disbanded in March 2009, Sturko added.
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