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AML in Canada
An industry perspective on the commitment to compliance
As part of one of the most heavily regulated industries in the world, Canadian gaming operators have long shown an ongoing commitment to improving compliance and cooperation with federal and provincial anti-money laundering (AML) legislation and rules. Canadian Gaming Business recently sat down with leading experts from across Canada to get their perspective on the industry’s approach to AML and the challenges of conducting business under the regulatory microscope.
Participants:
Ilkim Hincer, Counsel, Commercial Co-Chair: Gaming, Osler
Terry McInally, Chief Compliance and Risk Officer, Gateway Casinos
Derek Ramm, Director, Intelligence and Investigative Support Branch, Investigation and Enforcement Bureau, AGCO
Tracey White, Director, Casino Finance, Seminole Gaming/Hard Rock Hotel & Casino Tampa and Hollywood, Florida
How would you describe the Canadian gaming industry’s approach to AML?
Terry McInally: Casinos must adhere to the same reporting standards as banks and credit unions with the additional requirement to report any disbursement over $10,000. Gaming facilities are regularly audited by a number of different agencies including the BCLC, GPEB, and the Financial Transaction and Reports Analysis Centre of Canada (FINTRAC) to ensure they are fully compliant with all applicable legislation, laws, policies and procedures.
Derek Ramm: I’ll speak specifically to the Ontario model. There is generally a very collaborative relationship between the regulator, Crown corporation, casino operator and law enforcement when it comes to our approach to anti-money laundering issues. Compliance is a cornerstone of the industry. Canada was also recently subject to a review of its anti-money laundering regime by the international Financial Action Task Force (FATF), and the final report issued last year was largely favourable with regard to the efforts of the gaming industry.
Tracey White: The gaming industry is dedicated to AML compliance and considers AML a key component of daily operations. This is very evident by organizations allotting sufficient resources for AML Compliance programs including hiring AML experts to oversee the AML program.
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What has been the biggest change in AML compliance in the last few years and what do you think will be the biggest change to come?
Ilkim Hincer: A significant change is the ever-increasing role of technology – that is automation, information management and data analytics. Similar to how data is used from a marketing perspective, data analytics will play a bigger and bigger role in AML, particularly in respect of empowering operators for risk assessment purposes. Some of this will be in response to mandated monitoring requirements, but a good deal of it will also be critically important in helping organizations make informed business decisions, therefore minimizing risk and optimizing success on a number of levels.
TM: Some of the more significant changes to occur in the last few years have related to the implementation of requirements regarding “Source of funds, source of wealth and sourced cash restrictions.” All of these changes were clearly understood by the industry and implemented in a controlled and expedited manner. It is very difficult to pinpoint where the next potential change could be, however, we expect that there is a potential for exploration of other controlled cash alternatives such as “credit.”
DR: We’ve seen a significant investment in resources in AML compliance in the gaming industry, both domestically and internationally. Governments and regulators in the AML sphere continually tweak requirements based on threat assessments – in recent years, there’s been considerable attention paid to issues like proliferation financing, human trafficking and corruption (transparency and beneficial ownership). In the gaming industry, that will probably translate to an increased focus on understanding the players’ source of wealth.
TW: The biggest changes have been the increased focus to “Know Your Customer,” identifying risk behaviors for suspicious activity and termination of customer relationships with casino organization if other risk mitigation efforts fail. It is anticipated that the gaming industry will be addressing gambling addiction (problem gambling) as a risk issue to be included in organization AML program.
What’s the biggest misconception about AML?
IH: One misconception in Canada is that FINTRAC is a regulator in the traditional sense; it’s more accurate to consider it an intelligence agency. It focuses on the detection of money laundering activities by analyzing financial transaction and providing this information to the police. It does have a compliance function of course, but that is primarily to feed the intelligence function. In Canada, there may also be confusion in the public at large about the roles of the gaming regulators, Crown corporations, third-party service providers, and FINTRAC.
TM: The biggest misconception is the idea that a player can enter the casino with large sums money, play for a short period and cash out and receive a cheque. This does not occur; in fact, a large cash buy-in of small denomination bills, means that we segregate those funds and return the same funds to the patron when they cash out. They only receive a cheque for verifiable wins.
DR: I think the biggest misconception is that casinos are perceived as “laundromats,” which seems to be largely driven by portrayals in movies and some unfortunate aspects of the industry’s history south of the border. Casinos are definitely a cash-intensive business and therefore have inherent vulnerabilities to the placement stage of money laundering. That being said, the industry is highly regulated and continually subject to various inspections and audits. There are also strict licensing and registration requirements, with honesty and integrity being foremost considerations in any jurisdiction.
TW: Another misconception is that casinos do not care about AML or overlook their AML responsibilities when the customer is a high roller. Casino organizations, however, develop risk-based AML programs to address all types of customers including “high rollers.” Mitigating controls are implemented to reduce residual risk concerns. There are many similarities between the U.S. and Canadian AML regulations, however in the U.S. the casino must analyze transactions and provide intelligence and information to local law enforcement when appropriate. Hard Rock’s AML program in the U.S. includes comprehensive data gathering on patron(s) to identify risk and includes utilization of internal system analytics to identify possible AML concerns.
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How do casinos and other gaming operators help catch criminals? What do we do?
TM: Casinos and gaming operators employ dedicated, trained security, surveillance and compliance professional to who help provide a safe and fun environment for guests. They use sophisticated tools such as state-of-the-art surveillance to monitor and record activities and coordinate security actions, to help ensure the integrity and fairness of the games. Operators provide detailed and continuous training to our staff both in yearly refresher training programs and specifically regarding any updates or changes to the regulatory framework or reporting regime.
As examples:
- Cage staff/slots staff continuously monitor transactions at slots to ensure that cheque requests are for verifiable wins of jackpots (In the absence of verification, NO cheques will be issued)
- Table games staff monitor, record and report all large play on the gaming floor, which includes integration with our surveillance staff (including dedicated surveillance staff for VIP play)
- Cage staff monitor anything that could be a suspicious activity relating to a transactions and notify appropriate areas as required (activities such as low demonization large cash buy-ins)
DR: Casinos in Ontario are subject to federal AML reporting and compliance obligations, as well as the Registrar’s Standards for Gaming. The Standards require casino operators to implement measures to minimize unlawful activity (including money laundering) related to gaming. In addition to reporting to FINTRAC, casinos must immediately notify the AGCO and our Investigation and Enforcement Bureau of any suspicious activity. The bureau is comprised of Ontario Provincial Police members, many of whom are embedded throughout the province at gaming sites. This puts us in a unique position to respond to issues – suspected money laundering or otherwise – in a very timely manner.
TW: Suspicious activity reports filed by casinos and other gaming operators are used by law enforcement and are an important tool for the investigative process. In cases where immediate action may be needed, casino organizations can contact local and federal law enforcement directly to expedite any investigative efforts especially when terrorist activity is suspected.
What are the biggest risks for casinos and gaming operators?
IH: Today with the world becoming a much smaller place — thanks to technology — and the ease with which funds can flow internationally, verifying the sources of funds being presented at gaming facilities can be a real challenge. Another significant risk is seeking AML compliance as a task-driven obligation as opposed to a critical risk-mitigation mechanism. This creates the danger of organizations and individuals following compliance task lists by rote without really understanding the underlying purpose and may lead to increased money laundering risk, especially when the exercise of discretion is involved (be it related to reporting or the taking of some other action). This isn’t unique to AML compliance of course but can be real challenge operationally and organizationally nonetheless.
TM: I believe the biggest risk relates to the potential misconceptions currently in the public today. We are a highly regulated industry and we follow both the procedures and regulations with a strict and consistent approach. Misconception and a lack of understand regarding the rigorous approach we take as industry to comply is damaging to our industry, our reputation, the strength and efforts of our diligent staff.
DR: Complacency can be a problem. Casinos need to constantly monitor player activity, even if that player is well-known to staff. The FATF report that I previously mentioned also observed that casinos can sometimes focus too heavily on cash transactions and may underestimate the risk posed by funds received from accounts with financial institutions.
TW: Criminal activity and/or illicit funds used for gaming are high-risk concerns for casinos and gaming operators. A risk-based AML program along with “Know Your Customer” and “Due Diligence” programs are effective tools.
How do casinos and gaming operators demonstrate their ongoing commitment to and investment in AML?
TM: The safety of guests, security of casinos and integrity of all aspects of the business is paramount to the industry. They invest in continuous training and verification programs to ensure we are current and compliant with all legislation, laws, policies and procedures at all times. Where changes and improvements are identified they work to implement them as quickly and efficiently as possible.
DR: Again, speaking from the Ontario experience, I’ve seen a significant investment and focus on improving AML compliance over the past several years. We’ve established a provincial casinos working group that meets quarterly to discuss AML issues, trends and best practices. The group is comprised of representatives from every facet of the province’s gaming industry: regulator, Crown corporation, casino operator and law enforcement. I think everyone recognizes that crime is not only bad for society as a whole, but bad for business.
TW: Casino and gaming operators demonstrate ongoing commitment to AML by establishing a culture of compliance. The organization’s culture must start at the top executive levels and is indicative of the level of support for the AML compliance program. We call this the “Tone at the top.” This leads to more resources for improving AML compliance including systems, employee training and hiring qualified individuals to oversee and maintain a robust AML program. These individuals must partner with operations to identify AML risk and develop an AML program that can be successfully implemented by all operation levels. The commitment and tone at the top impacts all employee levels to indicate full commitment for the AML program and that revenue interest will not be placed ahead of AML issues.
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