It’s a Canadian story as old as time. High risk person meets a grocery bag filled with tens of thousands in cash. Person trades said bag of cash for casino chips and leaves without playing. Casino staff asks no questions, despite previously identifying the person as a high risk patron. Well, maybe not as old as time, but it’s a story that goes back to 2017. Revealed by then-attorney general David Eby, a step that inevitably leads to British Columbia’s anti-money laundering inquiry, revealing what would be known as the “Vancouver model.”
Except today we’re talking about a recent incident at a Greater Toronto Area casino. Ontario’s gambling regulator just hit the operators with a fine. Here’s why this adds another piece to the puzzle that should have people in the province more concerned.
Ontario Regulators Hit Greater Toronto Casino With A $70k Fine
After a lengthy investigation, Ontario’s gaming regulator hit a casino operator with a hefty bill. The Alcohol and Gaming Commission of Ontario (AGCO) hit the operators of the Fallsview Casino Resort with a $70,000 regulatory fine, specifically citing the casino failed to minimize the risk of unlawful activity, such as money laundering.
The AGCO attributes the fine to a 2023 incident caught on security camera. A patron previously identified as “high risk” sat at a gaming table in the Salon Privé, a high roller gaming area. They pulled out $80,000 in bundled cash from a grocery bag, and traded it for chips. After the cash was counted and confirmed by the staff, the patron left with their chips not playing any hands.
Regulatory staff say the casino failed to notify the AGCO and on-site police, which they’re required to do. They also allege the casino had an obligation to attempt to corroborate the patron’s source of funds, which they also failed to do.
When contacted, the AGCO said they couldn’t comment further at this time, since it’s now a legal matter.
The situation resembles an issue that was discovered in Vancouver a few years ago. It eventually led to the discovery of a unique money laundering technique that earned the city a title amongst the biggest money laundering hubs in the world, inflating home prices along the way. Not even Dubai managed to get a technique named after it, so it really is an honor.
The Vancouver Model—Casinos, Homes, Cars, & Gangs
Money laundering has three phases—placement, layering, and integration. Placement is introducing illicit cash into the legitimate system. Layering is a series of transactions meant to obfuscate the original source. Integration is, well… the integration of that illicit capital into the legitimate financial system.
The Vancouver model is a comprehensive strategy that covers all three of the phases. At a high-level, it involves giving a broker money abroad and picking it up in a new destination. This avoids export-import hurdles, but there’s still the issue of not being able to show up with $100,000 in cash at a bank without attracting a little attention. That’s where casinos come in—they provide placement.
After depositing their money in one part of the world and picking up cash in their destination, they’re directed to the high-roller room at a casino to trade their cash for chips. Play a few hands (or not), and then cash out and receive a casino cheque. It’s the same cheque a person would get after collecting what’s left after a high-roller losing streak, or a hot hand that gives a windfall of tax-free casino winnings. As a result, it doesn’t attract much scrutiny.
Laundering in casinos isn’t new. It was one of the first issues we found when tracing capital flows funding Vancouer’s sudden real estate boom. However, when prominent investigative journalist Sam Cooper dove into the issue, he found it was a much more extensive operation.
The cash from the casinos? Often mixed with the proceeds of crime, such as the cash from fentanyl sales. After integration the funds were layered in a wide range of transactions—from small businesses to expensive used luxury cars that were purchased in cash and resold for “profit.”
Toronto Is Always A Little Behind Vancouver, Even With Laundering
Most notable is the use of funds suddenly buying homes, outcompeting end-users and driving up costs along the way. As Cooper puts it—Vancouver’s fentanyl, housing, and organized crime issues are really the same issue. They’re essential for the Vancouver model to work.
BC’s government has been scrambling to erect hurdles to slow down laundering. Money laundering can’t be stopped entirely, but it tends to flow where it encounters the fewest hurdles. Their very public warning in 2017 should have led other governments to action a plan to prevent the same issues in their regions. Instead, the Government of Ontario followed the next year with nothing but an “Open For Business” sign—both literally and figuratively.
The AGCO fine is just one allegation at a casino. By itself, not indicative of any extensive issues—unfortunately, the issue doesn’t quite stand by itself. It’s surprising this was able to happen when this exact scenario sparked wide-scale reform of anti-money laundering regulations, but that’s not the issue. This is far from the first warning Ontario has had about its casino sector.
Canadian intelligence has been trying to get the attention of policymakers on this issue for some time. One of Canada’s agencies warned them casinos were tools used by transnational laundering criminals. Another held a presentation alleging a transnational gang’s Ontario operation was laundering the proceeds from the surge of GTA car thefts through casinos and real estate. And my personal favorite, one intelligence agency recently alleged 1 in 10 organized crime groups were involved in government. Actually, I guess it’s not incredibly surprising in hindsight.