Presentations and Speeches

Opening remarks by Director Gérald Cossette
Financial Transactions and Reports Analysis Centre of Canada
at the Casino Forum

Ottawa,
February 3, 2015


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Introduction

Good morning and thank you for being here today. I am pleased to welcome you to FINTRAC’s inaugural Casino Forum.

Canada’s anti-money laundering and anti-terrorism financing regime is a collective enterprise encompassing Canadian businesses, government, police, intelligence agencies and other stakeholders across the country. And it is only effective when we work together to protect Canadians and the integrity of our financial system.

This collective effort includes the gaming industry and the casinos that operate within it.

Despite our best efforts, we know that money is being laundered and terrorist activities financed here in Canada. At FINTRAC, we see this in the financial transactions that are reported to us, in the criminal investigations that we assist, in the media and elsewhere.

What are the consequences of this?

I will start briefly with terrorism, where it is clear that the threat is present and not going away.

Following the attacks in Ottawa and Saint-Jean-sur-Richelieu in October, the Director of CSIS told a parliamentary committee that more than 130 Canadians have gone abroad in support of extremist activities. We cannot lose sight of the fact that these very same individuals are being trained, equipped, further radicalized, and may return to Canada at any point in the future. In fact, the Director of CSIS has stated that at least 90 individuals have already done so.

Just as terrorism has gone international so has its funding. We know terrorism funding is obtained from illegitimate sources but also from legitimate ones. We also know that some of the funds raised to finance these violent crimes originate in Canada or transit through our country.

Last year, we provided 234 disclosures specifically related to terrorism financing and threats to the security of Canada. This is nearly one disclosure related to terrorism financing every business day — up 450% from 2008.

The other threat to the economic security of our country, and one of greater concern in the casino sector, is the presence of organized crime and money laundering in our communities. This threat has featured prominently in media reports across the country over the past couple of years.

The connection between the activities of organized crime — in particular, drug trafficking, theft and fraud — and the laundering of criminal proceeds is obvious. The fact is that the majority of crimes committed against Canadians are done for financial gain. And criminals must launder the money from these crimes to enjoy its benefits without having the money traced back to its criminal source.

Earlier this year in Ontario, the RCMP acknowledged FINTRAC’s assistance in a two year investigation of a drug trafficking organization with ties to organized crime groups locally, nationally and internationally. As a result of this investigation, 75 charges were laid against 9 individuals, and police seized more than 24 kilograms of cocaine, nearly 50,000 dollars in cash, and a number of firearms and vehicles.

These are real crimes, creating real victims and causing real social harm.

With the Charbonneau Commission in Quebec, we have also seen how organized crime threatens us on a broader, systemic level by corrupting and corroding the very institutions they infiltrate.

Organized crime can influence how we do business, how we enter into contracts, which businesses succeed and which fail, who wins and who loses. This distorts the dynamics of free markets and it offends our sense of fairness — particularly when an even-playing field is no longer the norm.

And as organized crime infiltrates businesses, industries and public organizations, and corrupts executives and senior officials with its laundered proceeds of crime, it gains ever more power and influence over our democratic institutions.

We know the proceeds of crime generated by criminals and criminal organizations are being laundered here in Canada. And we know this money moves through illegal channels, but also through legal ones, including the casino sector.

Results through Financial Intelligence

As Canada’s financial intelligence unit, our job is to provide actionable financial intelligence to our regime partners to assist them in their investigations of money laundering, terrorism financing and threats to the security of Canada. Last year, we provided 1,143 disclosures to the RCMP, Ontario Provincial Police, CSIS and others.

These disclosures often contain hundreds or even thousands of transaction reports from across Canada. And they are used by police to follow the money trail in order to confirm existing information, to expand the scope of their investigations and, ultimately, to get search warrants and production orders to gather evidence.

Two weeks ago, the Saskatoon Police Service and RCMP recognized FINTRAC’s contribution to a significant organized crime investigation in Saskatchewan, which resulted in 14 arrests and the seizure of narcotics, approximately $100,000 currency as proceeds of crime, approximately 200 firearms, tens of thousands of rounds of ammunition, and other material and property.

Demand for our financial intelligence has roughly doubled in the past five years, and it has benefited a large number of money laundering and terrorism financing investigations as well as a myriad of other criminal investigations.

Casino Obligations

Of course, everything begins with the financial transaction reports we receive from you and from thousands of other businesses across the country. These reports are the lifeblood of our analysis and make it possible for us to do our intelligence work and, ultimately, to help protect Canada and Canadians.

The Proceeds of Crime (Money Laundering) and Terrorist Financing Act captures a range of reporting entities with different business models and methods of operations. These entities offer financial services and/or conduct transactions, and can be exploited by criminals.

We recognize that casinos are unique. Unlike financial institutions, we know that the majority of casinos do not have account-based clientele. The entertainment-oriented focus is another clear example of this distinction. This does not mean, however, that casinos should be any less vigilant when it comes to fulfilling their obligations.

In fact, there are a number of features inherent to the casino sector that increase the industry’s risk profile and its vulnerability to criminal abuse. The lack of customer identification and verification of the source of a client’s funds are two key points of vulnerability. The casino industry is also cash-intensive, further increasing the risk of being exploited by those looking to launder criminal proceeds.

The Importance of a Robust, Risk-based Approach to Compliance

Casinos can address these risks by ensuring they have a well-designed, applied and monitored compliance regime. This includes the assessment and documentation of risks related to money laundering and terrorism financing in a manner that is appropriate to your business.

The key elements of a compliance regime need to be present and effective in order to combat money laundering and terrorism financing.

We have observed some encouraging signs through our examinations and interactions with the casino sector in the past few years. For example, we have seen improvements in the compliance regime elements within some casinos, specifically related to risk assessments and compliance training plans.

We have also noticed that some of you are starting to use analytics to explore customer trends. In other reporting sectors, we have seen how useful this is to strengthening anti-money laundering and anti-terrorism financing compliance efforts.

FINTRAC recently developed revised risk-based assessment guidance and consulted with the casino sector through the Public-Private Sector Advisory Committee last fall. We are now revising our guidance documentation based on the input we received. A final version of this guidance will be published soon.

While there has been progress in the casino sector, we need to see improvement in a number of key areas. Most importantly, greater attention is required to the quality and quantity of reports that casinos submit to FINTRAC, particularly in relation to suspicious transactions.

Suspicious Transaction Reports

Suspicious transaction reports are critical to our analysis and to the financial intelligence that we provide to our law enforcement and national security partners. We have cited a number of reporting entities across all sectors in recent years for neglecting their suspicious transaction reporting obligations. With this and the support of businesses, we have seen an increase of just over 16% in the number of suspicious transaction reports we received over the past two years.

Unfortunately, this positive trend has not carried over to the casino sector. The volume of suspicious transaction reports that we received from casinos dropped by 27% between 2012 and 2013. This concerns me.

Suspicion is about common sense. What would be the behaviour of the average person? Individuals walking around with large amounts of cash are not the average Joes. So to play large amounts of cash on a regular basis cannot be considered “normal”, even less so a second or third time. Three times outside the norm does not become the norm.

Given the importance of suspicious transaction reports to our work, we have focused considerable resources on enhancing the methodology we use to assess compliance and on communicating our expectations to reporting entities. This morning, we will present our new compliance assessment methodology for suspicious transaction reports.

Administrative Monetary Penalties

Compliance is an absolutely critical function for FINTRAC. In addition to building and strengthening deterrence throughout the financial system, compliance ensures that we have access to the transaction reports we need to produce actionable financial intelligence for our regime partners.

Through our own compliance program, using a tailored approach, we help to ensure businesses meet their legal obligations. Last year, we completed 1,126 compliance examinations. In most instances, these examinations allowed for a discussion of how reporting entities are better able to meet their obligations.

When very significant or repeated non-compliance is identified during an examination, FINTRAC has the ability to issue an administrative monetary penalty. In 2013-14, we issued 16 such penalties, bringing the total to 57 since the Administrative Monetary Penalties Regulations came into force in December 2008.

As part of the first line of defence in deterring and detecting money laundering and terrorism financing, businesses – including the casino sector – must accept their broader responsibility as part of Canada’s AML/ATF regime in helping to protect Canadians and the integrity of our financial system.

Conclusion

Financial intelligence is now a critical element in all of the major investigations of our law enforcement and national security partners. And we are only able to contribute to these investigations because of the information that we receive from businesses such as yours.

We will get a unique perspective on this key component of the regime from Ontario Provincial Police colleagues with the Investigations and Enforcement Bureau of Ontario’s Alcohol and Gaming Commission.

I also want to take the opportunity to acknowledge the presence of the provincial gaming regulators with whom FINTRAC has MOUs. Thank you for being here today. We will continue to count on your support as we work with the sector to improve compliance and implement legislative and regulatory changes that will come into force in the near future.

Thank you all for your cooperation in the fight against money laundering and terrorism financing. I look forward to our frank discussions on a wide range of issues throughout the day.

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