The gambling industry is a prime target for those seeking to launder illegal funds. This includes physical casinos, online casinos, bars with poker machines, and both physical and online sports betting services. The global gambling industry generated record-breaking revenues in 2021, reaching $261 billion (USD) in the US and €87.2 billion (EUR) in Europe, making it an attractive option for criminals seeking to launder money. Relative to population size, Canada’s gambling industry made a proportional $2.64 billion (CAD) in revenue in 2021.
Money laundering is a serious crime that has the potential to harm not only individuals but also financial institutions and casinos. In the realm of the gambling industry, both the Criminal Code and the Proceeds of Crime (Money Laundering) and Terrorist Financing Act in Canada address the issue of money laundering. The latter creates reporting obligations for financial transactions that are above certain thresholds or suspicious, and establishes the Financial Transactions and Reports Analysis Centre (FINTRAC), which plays a role in collecting and analyzing this information for use by law enforcement.
The Criminal Code provisions against money laundering go back further and predate the regulatory measures administered by FINTRAC. Part XII.2 of the Criminal Code, sections 462.3 to 462.5, creates offenses related to the conversion of criminal proceeds and the laundering of money. The Supreme Court of Canada has noted that these provisions represent a shift in Canadian criminal law, focusing on the proceeds of crime instead of the individual or corporate offender, and aimed at neutralizing criminal organizations.
To prevent and detect money laundering activities in casinos, various measures have been put into place. Casinos are obligated to implement anti-money laundering (AML) programs and train their staff on how to recognize and report suspicious transactions. They must also conduct customer due diligence, which includes verifying the identity of customers and monitoring transactions for unusual or suspicious activity. Records of all transactions, including suspicious ones, must be kept, and these transactions must be reported to FINTRAC.
Gambling has always been a popular way for criminals to launder their illicitly obtained funds. Casinos, both physical and online, provide an opportunity for criminals to convert their illicit funds into clean cash. In physical casinos, illicit funds can be converted into chips, played with for a short period of time, and then cashed out in the form of a check or through fixed-odds betting terminals (FOBTs). Online casinos have seen an increase in money laundering as well, with criminals depositing large amounts of money into betting accounts, placing a few small dummy bets, and then emptying the account. They can also break down their funds into smaller amounts and set up multiple betting accounts, cashing out all the money after a short period of time, making it harder to detect.
Law enforcement agencies are aware of the money laundering problem in the gambling industry and are taking steps to combat it. Casino operators have a responsibility to protect customers and keep crime out of the industry by being committed to anti-money laundering measures, regularly assessing them, and training employees to check customers and recognize suspicious activity.
The growth of digital banking and cryptocurrencies has made it easier for criminals to launder money quickly and covertly. The anonymity of cryptocurrencies makes it even easier for criminals to launder money, making it harder to track and source data on the levels of crime. This poses a challenge for governments in their efforts to stop criminals from using them for money laundering.
The Vancouver Model is a sophisticated variant of money laundering that was used to launder hundreds of millions of dollars through casinos in British Columbia from 2008 to 2018. This model combines elements of a traditional Hawala money laundering method and the cash-in, cash-out tactic used in casinos. For example, a person in one jurisdiction (“Jurisdiction A”) seeks to move large amounts of money out of the jurisdiction and potentially circumvent cash export laws. The person transfers the funds to criminals in Jurisdiction A, then travels to another jurisdiction (“Jurisdiction B”). The criminals in Jurisdiction A arrange for their associates in Jurisdiction B to deliver the equivalent amount of the original transfer to the person in Jurisdiction B, mostly in the form of cash derived from crime that the criminals need to launder. The person then takes the cash to a casino in Jurisdiction B and converts it into casino chips, which they then cash out. The criminals in Jurisdiction A then collect the equivalent amount of the original transfer in cash, minus a fee for their services.
The Vancouver Model was highly successful and was used to launder hundreds of millions of dollars through British Columbian casinos. It was only discovered and dismantled through a combination of law enforcement investigations, regulatory actions, and increased public awareness. It is crucial to remember the significance of persistent efforts to curb and identify money laundering in the gambling sector, requiring a sustained level of attentiveness and collaboration between regulatory bodies, law enforcement, and the gambling industry as a whole.
In conclusion, money laundering continues to pose a serious threat to the gambling industry and efforts must be taken to prevent and detect it. This includes implementing anti-money laundering programs, conducting customer due diligence, and reporting suspicious transactions to FINTRAC. The growth of digital banking and cryptocurrencies has made it easier to engage in illicit money laundering, making it more important than ever to stay vigilant and be proactive in the fight against this crime. The Vancouver Model serves as a cautionary tale of the sophisticated methods that criminals may use to launder their illicit funds, highlighting the need for continued efforts to prevent and detect money laundering in the gambling industry.
