Loto-Québec reports nearly $420 million in large cash transactions in six years

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Loto-Québec reports nearly $420M in large cash transactions in six years

Des experts say Quebec's casinos and gaming halls remain vulnerable to money laundering by organized crime.

The Casino de Montréal is managed by Loto-Québec.

Casinos and gaming halls in Quebec are always easy targets for organized crime. State-operated establishments are sites for laundering millions of dollars in dirty money, experts warn.

According to data obtained by CBC/Radio-Canada from Loto-Québec, the latter has reported nearly $420 million in large cash transactions to Canada's money laundering watchdog over the past six years .

Casinos are often used as playgrounds for criminals, who see them as both a place to have fun and a place [to] launder their money, says Matt McGuire, an internationally renowned expert in the fight against money laundering.

Although it is impossible to establish the proportion of legal transactions compared to illegal transactions, the expert maintains that it is almost certain that part of the money used in casinos is associated with organized crime networks, which profit from illegal activities such as drug trafficking and human trafficking.

“Ordinary people have very little cash on them. A large amount of cash is an indicator.

— Internationally renowned anti-money laundering expert Matt McGuire

Canadian casinos are required by law to report suspicious transactions and large cash transactions of $10,000 or more at the Financial Transactions and Reports Analysis Center of Canada (FINTRAC).

The organization is mandated to identify money laundering threats and pass the information on to law enforcement authorities. A casino that fails to comply with this regulatory requirement risks hefty fines.

CBC News struggled to access the transaction reports that Loto-Québec sent to FINTRAC since October 2017. These reports may contain details about a casino customer's profession, source of funds, or grounds for suspicion.

Loto-Québec provided CBC/Radio-Canada with the number of suspicious transactions and large cash transactions it reported quarterly to FINTRAC from January 2015 to March 2021. However, the monetary value of suspicious transactions and the other details have not been made available.

From fiscal year 2015-2016 to fiscal year 2019-2020, Loto-Québec reported an average of $77 million per year in large cash transactions to FINTRAC. This equates to some 5,000 operations per year or 14 per day, a number that has remained relatively constant. Reports of suspicious transactions went from 254 in 2015-2016 to 395 in 2019-2020.

Matt McGuire, internationally renowned anti-money laundering expert

Matt McGuire isn't surprised Loto-Quebec is reporting more questionable transactions, as the crown corporation has been tougher since being fined a few years ago for failing to comply with the law. Indeed, in February 2020, Loto-Québec was imposed an administrative penalty of $147,000 for three violations observed during a compliance review carried out in 2012 at the Casino de Montréal.

FINTRAC has accused Loto-Quebec of failing to report suspicious transactions and failing to provide specific details about the profession of a customer who carried out cash transactions over $10,000.

As first reported by Journal de Montréal, Loto-Québec refused to pay the initial fine and spent $260,000 on attorney's fees to challenge it.

In November 2020, Loto-Québec's practices were called into question following a TVA investigation which revealed that known members of organized crime appeared to benefit from privileges such as free access to hotel rooms, meals and shows at the Casino de Montréal.

Following the broadcast of the reports, the Minister of Finance of Quebec, Eric Girard, to whom Loto-Québec reports, announced that an independent audit would examine the ways of doing things at casinos, particularly with regard to loyalty programs. Documents indicate that the government paid almost $300,000 to the firm Deloitte to carry out this audit.

The results of the audit, made public in the summer of 2021, concluded that there were no shortcomings in Loto-Québec's procedures. However, Deloitte made 39 recommendations, including:

  • increasing Loto-Québec's powers to deny access to criminals;
  • conducting stricter as to the identity of the players and the source of the funds;
  • improve the sharing of information between police forces and Loto-Québec;
  • cancel membership in loyalty programs for members of organized crime.

As a result of the audit, people associated with organized crime were excluded from Loto-Québec's loyalty program; they no longer receive personalized offers.

A spokesperson for the Department of Finance told the CBC that some of Deloitte's recommendations require legislative changes, which are still being studied together with Loto-Québec.

Loto-Québec declined CBC's request for an interview with its president and CEO, Jean-François Bergeron. However, in the fall of 2021, the latter said on TVA Nouvelles that he wanted to limit the use of cash in his gaming establishments. Players' wagers and winnings would instead be recorded on a card provided to them. A pilot project was to be launched on this subject this fall.

According to Matt McGuire, the use of a single card would help the Crown corporation identify suspicious transactions .

“Each of the operations is then identifiable and traceable. It's every forensic accountant's dream.

— Internationally renowned anti-money laundering expert Matt McGuire

Some wonder why the government is taking so long to implement Deloitte's recommendations.

Shortly after British Columbia commissioned an investigation into money laundering in its casinos in late 2017, the BC Lottery Corporation adopted a source of funds guideline for cash transactions over $10,000.

Before a player can exchange his money for chips, he must present the casino with a receipt of the day indicating in which financial institution the money was withdrawn, in addition to the account number and the transaction number. This measure has considerably reduced the volume of illicit funds circulating in establishments.

In Quebec, the government corporation now verifies the identity of the customer and the source of the funds when a transaction exceeds $3,000. The threshold was previously $10,000.

When the CBC asked Loto-Québec for more information on how this policy works, including whether the customer must also show a receipt, a Corporation spokesperson told them to submit a request for access to information.

This lack of transparency is of concern to Pat Poitevin, Executive Director of the Canadian Anti-Corruption Center of Excellence (CCEAC), a not-for-profit organization based in Ottawa.

A Crown corporation must be even more rigorous in terms of compliance measures for money laundering and fraud, underlines Mr. Poitevin. It sets the tone for private industry.

Although he considers it a good idea to have lowered the transaction threshold to $3,000 for verification of identity, he believes that if customers only have to verbally explain where their money is coming from—saying, for example, that it's an inheritance—it's futile. Organized crime groups are good at finding loopholes.

Mr. Poitevin believes that Loto-Québec must inform taxpayers of what it is doing to detect, prevent and reduce threats. This would increase public confidence and deter organized crime.

It's one thing to have measures in place, but if you don't communicate them, people continue to assume that [a state-owned casino] is easy prey to exploit, he concludes.

With information from Paul-Émile d'Entremont

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