While most of Eby’s testimony Monday centred on his understanding of the matter and the events leading up to the inquiry – first as an opposition critic to the BC Liberal government and then as the BC NDP’s attorney general, since July 2017 – it was near the end of his more than five-hour testimony that Eby doubled down on his initial suspicions of a failed regulatory regime at B.C. casinos.
“I make no bones I would have handled this situation differently than the previous administration,” Eby told B.C. Lottery Corp. counsel Bill Smart, who had asked if Eby’s pre-inquiry comments to media that the BC Liberals “turned a blind eye” to money laundering in casinos was an attempt to “maintain a political narrative.”
Smart’s client BCLC has faced criticism at the inquiry for it’s allegedly lax efforts to curb large and suspicious cash transactions. Smart has generally pointed to new anti-money laundering (AML) regulations the Crown corporation implemented between 2010 and 2017 and a corresponding decline in suspicious transactions.
Smart veered from specifically defending his client at times, choosing to question Eby’s political motivations in a bid to cast doubt in the inquiry process.
“Those are serious allegations to make about politicians,” he suggested to Eby.
Last week, Smart , whose former press secretary was Smart’s son, Stephen Smart.
On Friday, Smart briefly questioned former Finance Minister Michael De Jong.
“I expect you’ve always tried to act in what you think is in the best interests of the public in the work you do?” Smart asked De Jong, who was also prompted by Smart to speak about the emotional toll the money laundering allegations had on him and some BCLC officials.
It was one BCLC official, investigator Ross Alderson, who took concerns of his own to media in 2017, leading to significant media coverage of the matter.
Eby told commission counsel Patrick McGowan he was made aware of the leak and considered .
Eby told of how he was concerned about suspected money laundering in casinos as early as 2014, based on a number of media reports dating back to 2010. He wrote letters to the BC Liberal Attorney General Suzanne Anton then.
“And it seems I was right,” Eby told lawyer Marie Henein, counsel for Robert Kroeker, who was dismissed from BCLC by Eby’s ministry.
Kroeker had produced a report in 2011 on casino money laundering concerns for BCLC. The inquiry has heard of how government was slow to pick up on his recommendations, with the Clark government taking five years to re-establish an illegal-gambling police unit.
Eby said he didn’t think BCLC was taking the matter “seriously.” He noted BCLC compliance boss Brad Desmarais had discussed with media that large cash transactions were simply consistent with wealthy gamblers. Under Desmarais, BCLC floated the notion that losing at tables was not consistent with money laundering.
Eby told of how he’d later realize, by speaking to investigators at the Gaming Policy Enforcement Branch, that this was not entirely true.
“The money laundering was occurring at the footsteps of the casino,” said Eby, describing the “Â鶹´«Ã½Ó³»Model.”
Such a theory formed the backbone of a 2015 RCMP investigation dubbed E-Pirate. It purported that transnational organized crime was providing illicit drug cash exclusively to Chinese gamblers, who would repay the loans back in China, via underground banks. The Mexican cartels and Iranian criminal networks are said to be involved, according to some former RCMP officers.
Eby said he came into office in July 2017 and noticed a “significant” gap in perceptions between BCLC executives, such as Desmarais, and GPEB executives.
Smart has been critical of GPEB for not taking more forceful action as a regulator of BCLC. GPEB investigators have themselves described a weak regulator.
Eby described how he couldn’t determine whether BCLC had the matter under control or whether GPEB investigators were right in their belief that routine deposits of six figures’ worth of $20 bills at all hours of the day were proceeds of crime.
“When I saw that video [of cash buy-ins], it seemed quite clear to me there was a problem,” Eby said .
But Smart pointed out that even GPEB stated it couldn’t be sure the money was criminal in nature. Smart maintained it was a lack of police presence that was the root of the supposed inaction.
He called E-Pirate a “crystalizing moment” after BCLC executives had called on police since 2012 to make their presence felt at casinos.
Eby spoke to his own concerns about a lack of police presence in casinos. He told the inquiry he is still concerned about the apparent lack of financial crime investigation capacity at the RCMP. He added he’s been disappointed with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), the federal reporting repository, for not utilizing cash transactions reports in an effective manner.
“It’s a mixed record,” Eby said.
The inquiry is to examine only what the province can do in terms of regulating anti-money laundering in its sectors, such as casinos, housing and luxury goods. While the federal government entities (RCMP and FINTRAC) are participants, they cannot be compelled to produce evidence – a matter commissioner Austin Cullen has criticized in his interim report.
Eby was asked about a “secret” RCMP report into housing and money laundering that was leaked to media. Eby said he was not given the report, which stated as much as $1 billion of dirty money may have been laundered through 1,200 homes.
Eby said the federal government called the report “a loose collection of data.”
McGowan also asked Eby about his decision to hire Dr. Peter German as an independent consultant. He explained German, an ex-RCMP superintendent and lawyer, had a grasp on financial crime and could be used to mediate what GPEB and BCLC were telling him in 2017.
German ended up producing two scathing reports on the regulatory and law enforcement response, titled Dirty Money.
BCLC officials have claimed Eby delayed proposed AML regulations until after German’s first report in March 2018.
Asked by McGowan if he was concerned illicit proceeds would continue to flow with such a delay, Eby said, “This had to be done very carefully.”
BC Liberals have taken a similar stance, stating they were depending on staff and experts to implement the right policies, even while the bags of cash rolled in, and in turn plumped government coffers. Eby, too, has yet to implement a cash cap for casino play.
When German learned police had found links between the crime networks, gamblers and real estate, he wrote a second report on money laundering in housing.
Desmarais’ lawyer, David Butcher, asked Eby to confirm money derived from China is not necessarily a source of corruption, which Eby did.
The inquiry has spoken to academics on the subject of China and money laundering. Some suggest because of the high level of corruption, unsourced money from China presents a risk. Others say Chinese immigrants are being scapegoated.
The B.C. Civil Liberties Association asked Eby about a study he produced with urban planner Andy Yan in 2015 that stated most $5 million homes sold in a span of months were purchased by Chinese people with non-Anglicized names. The study was done to exemplify the role of foreign money entering the Â鶹´«Ã½Ó³»housing market and not necessarily any risk of money laundering. Eby reiterated he regretted that the study cast aspersions on the Chinese community.
