Times Colonist July 22, 2010The government's claims that its gambling spree is being carefully monitored to prevent crime and social problems have been shredded. The issues go beyond privacy problems on its online gambling site and failures in dealing with money laundering in casinos and "community gaming centres."
The official responses, in both cases, have also been misleading or incomplete.
B.C. became the first jurisdiction in North America to introduce full-scale online gambling last Thursday, despite research showing higher risks of addiction and gambling-related problems for Internet gamblers.
Within hours, the site was shut down. B.C. Lottery at first offered no explanation. On Friday, CEO Michael Graydon said the site was so popular it reached maximum capacity and had to be closed for maintenance.
The corporation stuck with that story until Tuesday, when it revealed the real reason for the shutdown. Security had failed and accounts used by 134 people could be accessed by other individuals.
Graydon said the corporation chose not to tell the truth because it wanted to notify affected customers first.
That's unacceptable. The corporation's obligation is to British Columbians. There was no justification for providing false or misleading information for four days.
Just as there was no excuse for B.C. Lottery's failure to inform the public it had been fined $670,000 for failing to comply with federal laws aimed at preventing money laundering and terrorism-related financial activities.
The offences are serious. The federal Financial Transactions and Reports Analysis Centre (FINTRAC) requires casinos and financial institutions to report suspicious cash transfers, including all transactions over $10,000.
Casinos -- including online casinos -- offer an efficient way to launder the proceeds of crime. A drug dealer simply has to use cash to buy chips, wait a short time and then cash out, leaving with a casino cheque. FINTRAC reported 20 per cent of money laundering and terrorism financing cases uncovered in 2008-9 took place in casinos.
B.C. Lottery didn't disclose the fines. Solicitor General Mike de Jong said he wasn't told.
And when the news broke, Graydon again misled the public. On Tuesday, he told Global TV the fines came because computer problems caused late filing. Some forms were rejected because of small errors, he said.
The reality is that FINTRAC found 1,020 infractions. Only 419 were related to late reports. Another 336 were rejected because of various clerical errors.
And 227 reports were rejected because the information fell short of the legal requirements, undermining the agency's effectiveness in tracking money laundering. In another eight cases, people cashed out with more than $10,000 without showing any identification.
B.C. Lottery was also fined for failing to implement a program to reduce the risk of money laundering.
Graydon continues to maintain the fines were "administrative" and have nothing to do with money laundering.
That is, at best, an unsupportable claim. Hundreds of the faulty reports could have made it easier for criminals to launder money without detection.
The government has maintained that its gambling expansion is being closely monitored. These failures -- despite at least four years of warnings about increasing money laundering, loan sharking and other crimes at casinos -- undermine those claims.
And the shoddy response by the lottery corporation suggests a failure to understand the basic principles of openness and accountability.
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