Finance Committee on March 27th, 2018

[David Eby]

Yes, it is.

[The Chair, Liberal, Wayne Easter]

Then we will find it and give it to committee members.

[David Eby]

The author is Adam Ross, and it's Transparency International Canada. I believe it's titled “No Reason to Hide”.

[The Chair, Liberal, Wayne Easter]

Thank you.

Mr. Albas, you have five minutes.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Thank you, Mr. Chair.

Thank you, Minister, for coming from British Columbia and making the sojourn to be with us today.

You mentioned a number of areas where FINTRAC can be utilized in a different way to serve more than it currently does. They do important work. I've floated the idea of allowing FINTRAC, legislatively, to aggregate its data, so that policy-makers such as you in British Columbia can see the overall picture of how many cash sales are being done, which are perhaps not being picked up by Canada Mortgage and Housing Corporation or OSFI because they are provincially regulated mortgages.

I think that information is being collected now, but FINTRAC, legislatively, is not allowed to share information, beyond that for an individual case referred for investigation of terrorism, organized crime, or other money laundering. Would you be supportive, as a policy-maker from British Columbia, of seeing personal data being aggregated in such a way that it wouldn't affect any privacy laws but would give policy-makers such as you a better lens?

[David Eby]

Certainly one of the great frustrations for those of us with responsibility for ensuring adherence to the rule of law in British Columbia has been that we learn about what's happening in our real estate market or in our casinos through journalists. Sam Cooper of Postmedia and Kathy Tomlinson of The Globe and Mail are the ones who are providing a lot of the information. That is obviously not a desired situation. We need to be ahead of this activity. When it's publicly released in the newspaper, it means we're behind the criminals.

One of the great opportunities is exactly what you've said: better information sharing. FINTRAC has incredible information. They see trends years before we recognize them at the provincial level. We have all kinds of provincial legislative authority that we can levy to address different issues, but we have to know what they are. Anything you can do to provide or facilitate FINTRAC sharing that information proactively with the provincial government level would be of great benefit.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Minister, when it comes to the casinos, I am quite alert to the case, but first of all, do you believe that B.C. is the only jurisdiction in Canada that has this issue with money laundering? Are you an outlier, or is this something that should be analyzed right across the country to see if there are other provinces that have a similar issue? Have you heard from any of your counterparts in other provinces in regard to this?

[David Eby]

I was the critic responsible for gaming for a couple of years in opposition before becoming the minister responsible, and I raised the issue of large cash transactions in our casinos. The answer that invariably came back, whether it was from people in the industry or whether it was from government, was that everybody was adhering and there were extensive audits and reviews of the reporting regime, and that as a result we could all have confidence that money laundering was not happening, and that the proceeds of crime, to quote the former finance minister, were not welcome in B.C. casinos. Obviously that was not the case.

I unfortunately don't know what's happening in other provinces and I can't speak to that, but I have no reason to think that criminal gangs confine themselves to metro Vancouver or that they don't share information about how things can work. However, there are some significant differences when I look at, for example, Ontario, which has a much larger police force in casinos than we did in British Columbia. We didn't even have a regulator present in the casinos outside of Monday to Friday, 9 to 5. I'm sure none of the members in this House frequents casinos, but if you've ever found yourself in a casino—as I have on social occasions—it tends not to be Monday to Friday, 9 to 5. We needed to have the regulator in place in the casino evenings and weekends, which is when this activity was taking place.

I apologize for taking all your time with this answer, but we had a pretty unique situation in B.C. in terms of a lack of regulatory presence in our casinos and a provincial government that, in my opinion, did not take the actions necessary to clamp down on this. I hope it's not the case in other provinces, but I don't know.

[The Chair, Liberal, Wayne Easter]

Dan, you can have a very short question.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

I do realize that, as the minister responsible now for the system, you have recommendations coming and you've made recommendations here. I commend you and your government for coming this far to talk about the federal component, but why have you not set up a task force or set up an edict directly that no more than $10,000 of monies can be accepted at any one time? Why haven't you said you will no longer accept the practice of suitcases of $20 bills? I think that is 100% within your power. Why have you not done that?

[David Eby]

I file those recommendations under the common sense category, and we have actually implemented them. In December of last year we implemented a requirement that casinos not accept cash in excess of $10,000 when they don't know the origin of it, when they don't know where that cash came from. It has been incredibly successful. Our February total for suspicious cash transactions was $200,000. The July 2015 total for suspicious cash transactions was $20 million. We've reduced it by a factor of 100. However, I don't believe that solves the problem. I believe that money has moved elsewhere, and I also believe we have a concern that needs to be dealt with regarding bank drafts.

[The Chair, Liberal, Wayne Easter]

Thank you both.

Mr. Julian.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Mr. Eby, thank you very much for being here. I know it's a 10,000-kilometre return trip, so it's very good of you to give your expertise and your knowledge about this.

I find it surprising that the former government appeared to be aware of all these problems and chose not to actually make the public aware of the difficulties and what was actually taking place in British Columbia's casinos.

Can you briefly run us through when a report was actually produced by the former government and when the report that allowed the public to become aware of the extent of the problem actually came to light?

[David Eby]

I asked Dr. German to advise me about how we got to this situation in British Columbia. That's one of the questions he will be providing information about. There are some pieces that are already in the public domain.

In 2009, when our integrated casino team, which received $1 million per year in provincial funding, was defunded, there was a report prepared in advance of that to make recommendations about how to reform that team so it would be more effective. It advised the government, at that time, that there were criminal organizations operating in B.C. casinos, that they were laundering the proceeds of crime through B.C. casinos, and that there were extensive illegal gambling houses in the Lower Mainland. The government decided to move ahead with the defunding of the team. I believe that was a critical error and a very significant one that resulted in the situation that we faced.

There were a number of internal memos. There were individuals within the gaming policy enforcement branch, likely, within the B.C. Lottery Corporation, as they had shared responsibility. They were providing information to the ministry about this. An audit into this specific activity was prepared by a third party business firm called MNP. The report was completed the year before I was elected. That report was not released to the public. I released it shortly after taking responsibility for the file, when I was briefed on it, because I believed the public deserved to know what was happening in B.C. casinos. In my opinion, the government made a decision not to release that report because they were unprepared to take the action necessary, given the implications it would have for the provincial proceeds that come from gambling.

People who were bringing this money into the casinos were actually gambling and—I don't want to let any secrets out in front of the committee, but they were losing, because the house always wins—they were losing significant amounts of money and the province was making money from this activity.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

A report was actually produced and was withheld for over a year. During that time, of course, there was a provincial election, so the former B.C. Liberal government just withheld that information from the public.

Can you tell us the consequences of that delay of over 15 months? You mentioned that in July 2015, $20 million of what we call snow washing or basically money laundering, huge amounts, were passing through the casinos. What were the consequences of waiting for that year?

[David Eby]

The peak of the activity, according to the reports that have been filed in B.C., was within July of 2015, when $13.5 million in $20 bills went through B.C. casinos and more than $20 million in suspicious cash transactions. Following that peak and looking at the trend of suspicious cash transactions, it was about $5 million a month going through B.C. casinos. That's about $166,000 a day in suspicious cash transactions.

By point of comparison, in February, which is the most recent month for which we have information following our reforms, it was $200,000 for the entire month. For the period between July 2015 and January, when we instituted those reforms, it was averaging about $5 million a month. Literally hundreds of millions of dollars that have gone through B.C. casinos represent suspicious cash transactions. Not all of them necessarily involved the proceeds of crime, but certainly, large-scale money laundering was taking place.

[The Chair, Liberal, Wayne Easter]

This is the last question.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Thank you.

To what extent has the federal government actually been backing up and doing the enforcement that needs to be done? I'm speaking specifically to Canada Revenue Agency and to the RCMP. Do they have the resources to do the enforcement? Have they been co-operative, as part of the plan that the new government has shown in British Columbia to fight back against money laundering? What are the recommendations you can give us, specifically around those two agencies?

[David Eby]

One of the recommendations we've received from Dr. German is for increased resources for enforcement. The concern and the image I have in my mind of these FINTRAC reports sitting around gathering dust is, I believe, a function of inadequate funding. I believe the province has some responsibility here and I'm very hopeful that the federal government will also be good partners with us in ensuring that Revenue Canada and the RCMP have the resources necessary to investigate these reports when they're filed.

One of the concerns I have is that FINTRAC may be concerned that they're filing reports with police agencies in British Columbia and not seeing a response. I would have no way of knowing and I don't believe our government would have any way of knowing if FINTRAC was concerned that they were sending off reports to British Columbia and nothing was happening. Therefore, that lack of a loop between the reports being filed by FINTRAC and the government knowing whether or not police have resources to respond is a very significant problem.

In terms of Revenue Canada, I can't speak to the number of investigations that Revenue Canada has instituted because of reports they've received on what was happening in B.C. casinos. I hope there were some, but I have no idea.

[The Chair, Liberal, Wayne Easter]

Thank you, both.

Go ahead, Mr. McLeod.

[Michael McLeod, Liberal, Northwest Territories, NT]

Thank you, Mr. Chair.

Thank you for the presentation. It's not something I expected to be so blatant. I come from the Northwest Territories and we don't have any casinos, so this is new to me and I'm trying to envision people walking in.... I've been to casinos across the country, so I know quite a bit about casinos. Normally when you walk into a casino, there is security there, and if you have bags they'll want to know what's in your bag. To try to envision somebody walking in with suitcases full of $20 bills to the tune of $166,000 a day, that would have to be a lot of suitcases coming back and forth.

I'm going to assume, and maybe you could tell me if I'm right on this, that you're saying the casinos are co-operating with the individuals who are bringing in their bags. They're certainly not bringing them in the front door. It can't be that blatant. I've never seen...although I don't spend that much time there. Is that what you're saying, that there is an arrangement for them to come in and exchange money?

[David Eby]

Yes, the money was walked in the front door. That's the way the money was coming into the casinos. It wasn't in armoured cars or some sort of official channel. People with a shopping bag full of $20 bills would walk up to the cage. This is what was taking place in casinos, and the casino service providers, in their defence, were doing everything that the provincial government asked them to do in terms of reporting, filling out forms, and disclosing this. Obviously it's a human activity. There are problems with the reporting from time to time, and so on, but the issue is not, in my opinion, with the reporting. The issue was that, if you walked the money into the casino, then it appeared to be no problem.

There is a very interesting story that broke about a gentleman named Michael Mancini. The allegation in a newspaper article was that Mr. Mancini had a significant amount of money in his car. The allegation is that he was involved in a car accident, was pulled over by police, and they found a significant amount of money. He was on his way to the casino, and when he was stopped by police they seized money from him. He also allegedly had drugs in the car.

It seems to me that, if you were able to get the money in the front doors of the casino, it was almost like getting it into the embassy. It was a whole different world from driving down the street and being stopped by a police officer and having a duffle bag full of $20 bills in the back seat. That would have been seized, but if you were in the casino, it wouldn't be. I don't know why that is. I don't know why it was treated so differently.

When I was briefed about it, just as for you, it was beyond my comprehension that this had been taking place for so long and so openly.

[Michael McLeod, Liberal, Northwest Territories, NT]

To try to zero in on where some of the challenges are, the casinos are reporting it, as you indicated, but their reports are not going anywhere; they're kind of sitting on the shelf. Is that where the problem lies? Is it that there are not enough resources for FINTRAC or others?

You said you've not seen a whole lot of co-operation from the RCMP or from Canada Revenue Agency.

[David Eby]

The issue I have is that these are all black boxes to me. I don't know what's happening inside FINTRAC. I don't know what's happening inside Canada Revenue Agency, or within the RCMP's federal serious and organized crime division. I don't know what activity is taking place there.

I'm hopeful that this committee will take this information I'm presenting to you, that the feeling on the ground in British Columbia is that things aren't happening, that the reports are filed and things aren't happening. If you look into this and things are happening, then I'm very relieved by that. I'm not reassured, since there have been so few money laundering charges, or certainly tax evasion charges related to this. I don't know why that isn't happening in a more accelerated way, but in any event, I hope you look into it and you can provide some assurance that there is a reason for the apparent lack of action. There may be a lot of action behind the scenes.

[The Chair, Liberal, Wayne Easter]

Okay.

Before I go to Mr. Albas, the minister has a flight at 6:10—