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Lawyers for the B.C. government’s inquiry into money laundering are probing whether former B.C. Lottery Corporation officials made a deal that enabled workers at a Lower Mainland casino to underreport suspicious transactions.
Lawyers are focusing on emails exchanged between former Lottery Corp. investigator Ross Alderson and his former bosses as the latest round of hearings in the Cullen Commission continue.
The inquiry has already heard about a September 2011 email in which Alderson warned his boss, Lottery Corp. manager of investigations Gord Friesen, that Great Canadian Gaming’s River Rock Casino was only reporting suspicious transactions of more than $50,000, in violation of federal anti-money laundering rules, and that it continued four years after Alderson’s email.
The inquiry has also already heard that Alderson had told Friesen that staff at the Richmond, B.C., casino could have warned their high rollers to make transactions just below the facility’s reporting threshold of $50,000.
“We believe it is a cynical attempt by the site to avoid reporting buy-ins as suspicious,” Alderson stated in an email to his bosses, commission lawyer Allison Latimer said on Thursday.
Latimer questioned Friesen’s former assistant of investigations, John Karlovcec, about a similar emailed comment from Alderson, in which he said he had continued to raise the $50,000 threshold problem, and he worried this was a compliance concern for reporting to Fintrac, Canada’s anti-money laundering agency.
“I know a $50,000 buy-in limit was agreed upon,” Alderson’s email said, according to Latimer. “The standard response has always been it is the service provider staff resourcing issue in surveillance, and that B.C. Lottery Corp. management have agreed to the thresholds.”
Latimer asked Karlovcec if Lottery Corp. managers had agreed to allow the River Rock to set a $50,000 reporting limit.
“No. Certainly not from myself, or Mr. Friesen,” Karlovcec answered. “For whatever reason, at the River Rock, they had it in their mind (that) unless the buy-in amount was $50,000 or over, they weren’t required to report that.”
The inquiry also heard of a February 2012 email exchange between Karlovcec and a B.C. gaming enforcement investigator that also referred to Fintrac reporting concerns.
“We are starting to see a trend developing where the River Rock Casino is not submitting (reports for the gaming enforcement branch) regarding suspicious cash buy‐ins where $100 bills are presented,” the email cited by Latimer in the inquiry says.
“On at least one occasion recently, the BCLC investigators discovered that a patron had left the River Rock Casino several times and returned shortly thereafter with (a) large amount of cash in $100 denomination.”
But Karlovcec replied: “I haven’t heard the fact that River Rock Casino surveillance does not consider any buy-in with $100 bills as being suspicious, and they are too busy to do this.”
Under questioning from Latimer, Karlovcec said that he raised the issue with Great Canadian Gaming’s management, and that he doesn’t believe River Rock employees were trying to avoid Fintrac reporting laws.
Rather, Karlovcec said, it was a small number of River Rock surveillance staff who “didn’t recognize this was federal legislation and reporting had to be completed as per the regulations.”
Latimer also probed him on an allegation made by his former subordinate, Stone Lee.
Lee has testified that one of his bosses told him that Karlovcec wanted Lee to falsify a Fintrac suspicious-transaction report by making up an occupation for a particular high roller.
Karlovcec said he never asked a subordinate to do that.
Fintrac’s regulations state that any person or entity found guilty of breaching its suspicious-transaction reporting requirements “is liable on summary conviction to a fine of not more than $500,000 for a first offence and of not more than $1,000,000 for each subsequent offence.”
Lawyers for the River Rock have argued in the inquiry that they fulfilled their reporting duties and have done nothing wrong in relation to money laundering.
Questioning of Karlovcec was scheduled to continue Friday.
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