Cullen Commission Blames Ottawa for British Columbia’s Money Laundering Problem

By Gabriel Vedrenne

A three-year inquiry into money laundering in British Columbia predictably ended with calls for the Canadian province to dramatically strengthen supervision of money services businesses, mortgage brokers, real estate agencies and other companies.

But after 133 days of hearings, witness testimony and exhibits, the Cullen Commission, a panel of attorneys and judges investigating illicit finance in British Columbia, found in an 1,831-page final report Wednesday that the systemic failures in oversight and enforcement which allowed tens of billions of dollars of illegal income to enter Canada’s casinos, property market and financial institutions over the past decade do not end at the province’s borders.

“An overarching theme that emerged … is that money laundering is rarely afforded the priority it requires,” the panel warned. “Even when aspects of a money laundering scheme come out of the shadows and operate in plain sight—as occurred in the casino industry—a lack of will and coordination has led to an ineffective response.”

Law enforcement became aware of the gaming industry’s vulnerability to illicit finance by 2011, when the officer-in-charge of British Columbia’s federally funded Integrated Proceeds of Crime unit, or IPOC, raised an alarm over the flow of increasingly large volumes of $20 bills into local casinos and opened an investigation.

“The investigation revealed substantial amounts of cash entering B.C. casinos, which the investigators believed were from criminal activity,” the Cullen Commission reported Wednesday. “These investigators also correctly identified the typology … used to launder this cash: a group of cash facilitators were loaning large sums of cash to high-limit gamblers.”

The panel led by Supreme Court Justice Austin Cullen concluded Wednesday that the federal government aggravated the situation by cutting services and disbanding the IPOC initiative in 2012, leaving British Columbia, and presumably other Canadian provinces, without dedicated law-enforcement agencies for tackling financial crimes.

Money laundering at that point became secondary to national security and other concerns, according to the commission, which also singled out the country’s financial intelligence unit, the Financial Transactions and Reports Analysis Center of Canada, for criticism.

The panel noted that Fintrac, which also serves as Canada’s primary anti-money laundering supervisor, received more than 31 million “individual reports” of potentially illicit activity in 2019 and 2020, but forwarded fewer than 2,100 “intelligence reports” to law enforcement in Canada and fewer than 360 to British Columbia specifically.

At least some of Fintrac’s analytical shortcomings trace back to Canada’s anti-money laundering regime, which, according to the commission, incentivizes financial institutions to report transactions even when they are uncertain that the threshold of suspicion has been met.

The tendency of Canadian financial institutions to flag transactions out of caution rather than genuine, well-founded suspicion leaves Fintrac wading through enormous annual volumes of low-quality reports to find case leads, according to the panel.

The result: investigations suffer, if they begin at all.

“Law enforcement bodies in British Columbia cannot rely on Fintrac to produce timely, useful intelligence about money laundering activity that they can put into action,” the panel concluded Wednesday.

In 2015—four years after British Columbia’s IPOC began investigating the $20 bills and three years after the federal government pulled the plug on the unit—the B.C. Lottery Corporation, or BCLC, leveraged a personal relationship in “finally” convincing federal law enforcement to look into the matter.

Federal investigators shortly thereafter directly linked the provision of cash to patrons of one B.C. gaming establishment, the River Rock Casino Resort, to an unlicensed money services business in Richmond. Evidence later showed that criminals were moving up to $220 million through the MSB every year.

Casinos in British Columbia averaged more than five cash buy-ins of at least $100,000 a day in 2014 alone. BCLC flagged nearly 595 of those transactions as suspicious to Fintrac, which would receive $90 million of the $92 million budget that federal officials have allocated for anti-money laundering supervision and enforcement through 2027.

Aside from noting their tendency to report transactions mostly for defensive purposes, the Cullen Commission largely spared banks and credit unions from criticism Wednesday, and even recommended the creation of a legal “safe-harbor” that would allow them to share data on suspicious transactions with each another, without fear of liability.

To assist investigations, banks should also have permission to keep suspicious accounts open for law enforcement, while the provincial supervisor, the British Columbia Financial Services Authority, or BCFSA, should be given “a clear and enduring” anti-money laundering mandate and enough resources “to address allegations of misconduct in a timely way.”

The Cullen Commission’s most important recommendations for the formal financial services industry concern MSBs, which, despite their frequently high exposure to money launderers, often do not undergo regular inspection by Fintrac.

BCFSA should step in and fill the supervisory gap, according to the panel, whose focus on both federal and provincial shortcomings found a receptive audience in British Columbia.

“This report is important for the federal government, too,” B.C. Attorney General David Eby said Wednesday. “I hope and expect that the new federal minister with responsibility for this file will join with us in addressing this important shared challenge.”

Contact Gabriel Vedrenne at

Topics : Anti-money laundering
Source: Canada , Canada: FINTRAC
Document Date: June 16, 2022