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Delta bets on cashless casino to tackle money laundering

Industry not there yet as Cascades scheduled to open in Ladner next year

It’s been just over a year since Delta council gave final approval to a contentious casino proposal and it will be another year or so before the $70-million facility opens its doors in Ladner.

In the meantime, however, discussions are continuing as civic officials look to ensure that Cascades Casino Delta does not fall victim to the money laundering epidemic that rocked B.C.’s casino industry. After years of suspicious transactions believed to be in the hundreds of millions of dollars, efforts are finally underway to better regulate the sector, including recommendations from Peter German’s Dirty Money report.

One idea that’s slowly gaining traction is that of a cashless casino.

The City of Delta has requested the federal and provincial governments immediately undertake a joint review of cashless gaming systems in casinos in order to assess their effectiveness in preventing money laundering compared to current regulations.

“One solution to the problem of money laundering in casinos is the use of card-based technologies instead of cash. This concept is gaining traction in casinos around the world where the benefits for players and casino operators are being recognized, including convenience, enhanced personal safety and financial transparency,” a staff report to Delta council explains.

“Cashless systems require an account that is linked to the individual player whose identity has been verified. This means that gambling data can be tracked, and money transactions are transparent, thereby limiting opportunities for crime such as money laundering. Funds can be moved electronically between the account and all gaming devices in the casino.”

When it comes to the possibility the new Delta casino will be cashless, Tanya Gabara, public relations director for Gateway Casinos & Entertainment Ltd., said it’s an interesting idea, given technology has allowed other industries to go cashless. However, currently no casino or jurisdiction in North America has introduced completely cashless wagering.

“There are currently many cashless options within B.C. casinos, including debit and credit cards, bank drafts and electronic funds transfers. Our industry is always looking at adding new payment options but cash will always continue to be part of the payment mix. Much like others parts of society, we will move with the customer,” she explained.

 

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Tanya Gabara with Gateway Casinos and Chris Fairclough with the B.C. Lottery Corporation told the Delta Chamber of Commerce last year about safe play measures. - optimist file

 

Gateway has begun construction on its casino/hotel complex at the site of the now-demolished Delta Town & Country Inn at the junction of highways 17A and 99. Scheduled to open late next year, the complex will include a casino with 500 slot machines and 24 gaming tables as well as three restaurants and a 124-room hotel.

Asked about the possibility of casinos going cashless, the B.C. Lottery Corporation responded that it currently offers account-based gambling on PlayNow.com and is exploring ways to expand this type of option into land-based casinos. 

“The use of cash is becoming less prevalent in commerce generally and BCLC is interested in following consumer trends as well as mitigating risks in its business. BCLC is at the initial stages analyzing the potential for account-based gambling in casinos as it believes there are opportunities to enhance BCLC’s anti-money laundering program, the player experience and player health through an account-based system that could further reduce the amount of cash brought in by customers,” BCLC explains.

“BCLC has done a preliminary analysis of cashless and account-based gambling in casinos elsewhere in the world and so far has found such systems exist in varying degrees in some casinos in a small number of countries. None of these systems is currently completely cashless. For many years, BCLC has been committed to reducing the use of cash in casinos and currently offers cashless options for buy-ins including debit cards, bank drafts from Canadian and top U.S. banks, and electronic funds transfers.”  

Michael Lipton, a lawyer and gaming law expert with Dickinson Wright in Toronto, noted cashless land-based casinos will still only be as good as their weakest link, which is true in the way casinos currently operate.

“A long as you have a good system, you’ve got training and you’ve got auditing, you’ll be in a strong position to ensure there’s the least amount of money laundering as is possible. No system is foolproof, that’s for sure. It’s really a question of making sure you’re working together in a concerted effort of pursuing the objective of trying to ensure you have the best anti-money laundering regime in place and proceeding along those lines. You don’t hear issues with respect to money laundering in other jurisdictions in Canada because, I think, they seem to be able get it right… whenever your system is weak or whenever your people are not trained in operations, you’re always going to have those issues,” he said.

“Having said all of that, having looked at the Internet casino-type of operation that effectively is a form of cashless gambling, Ontario and British Columbia and other jurisdictions have online slots. The idea of cashless is if you use your computer to open up an account, you’ll always have a way in which you can trace the funds. Of course, when you open an account, what you should be doing is a form of KYC, Know Your Client, and to that extent, there’s a number of procedures sophisticated and responsible operators go through.

“Sometimes they require two or three pieces of identification. Once you are satisfied, then the way in which they take money from that account will be based on the individual, how he or she gambles, and that will always be available for one to examine, review, assess and check. So, with cashless gaming, as long as you follow KYC, it will be effectively a form of anti-money laundering procedure and you should be able to reduce the likelihood of money laundering.”

Paul Burns, president and CEO of the Canadian Gaming Association, told the Optimist the industry is looking at multiple payment options from many perspectives, and those options have both pros and cons.

“As the technologies are emerging, as the customers are willing to use it, that’s what’s really going to drive this. It’s the consumers’ willingness to use alternate payment methods that’s going to drive acceptance of this,” said Burns. “The gaming industry isn’t more dangerous that cash needs to be removed. Cash will always be part of the payment mix, but it’s all coming from customer preferences. We’re looking at it from that perspective, as technology becomes available and as people don’t carry cash as much.”

Luke Clark, the director of the Centre for Gambling Research at UBC, said that while going cashless is seen by some as a way to make it more difficult for money launderers, it remains to be seen how it can alter the psychology of gamblers.

“At the current time, I think it is a little concerning in terms of a potential to increase excessive gambling. One thing that occurred to me is that in research in consumer psychology, there’s quite a lot of work showing people make different financial decisions depending on whether they’re using cash or when they’re using more abstract forms of payment, like credit cards or vouchers. Specifically, people make more risky and more frivolous decisions when they’re using these more abstract formats. Psychologists talk about that in terms of ‘the pain of paying’,” he said.

Clark noted there’s been little in the way of studies when it comes to cashless payments and gambling, especially when it comes to people with gambling problems or at risk of having such problems.

“The other part of it is that it’s a very new proposal and there’s no blueprint for what a cashless casino should look like and it could be done in a lot of different ways. What we need to be very careful about is introducing gamblers of further sources of funds, particularly funds on credit. A lot of regular gamblers use strategies when they go to the casino when they try to keep control of their spending, and a lot of those strategies involve cash and they leave their banking cards at home. These are simple but quite effective strategies, but moving toward a cashless system seems to require banking facilities in the casino and could directly undermine those strategies that gamblers are using,” added Clark.

The Delta staff report notes that to address concerns cashless casinos could encourage problem gambling, responsible gambling features can be added to cards, including the player pre-selecting limits on the time and/or money spent during a gambling session. Account summaries or activity statements can provide the player with clear and accurate information on game play and net expenditures. There’s also self-exclusion whereby a player can exclude themselves from gambling during certain times or days.

 

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Many at a public hearing in Ladner last year on the proposed casino warned of money laundering and other crime. - optimist file

 

“The City of Delta is asking the provincial and federal governments to take a step back and consider the role that cashless casinos could have in simplifying the regulation and oversight of gaming activities. More specifically, Delta is asking for a joint review of cashless gaming systems as an effective method of preventing money laundering in casinos,” the report adds.

Delta police Chief Neil Dubord recently made a presentation to council regarding currency security at B.C. casinos.

“Money laundering affects all British Columbians, therefore systemic change is required beyond all borders of Delta,” he told civic politicians.

“There has been significant policy changes regarding suspicious transactions and reporting at our local casinos and that was one of the early recommendations by Peter German in his report to the attorney general,” said Dubord. “As a result the sources of all funds are required to be reported on now in relation to any transaction that is over $10,000 and of course any significant suspicious transaction is also required to be reported as well.

“We know that policy has been put in place and it did have an impact in relation to the amount of what was believed to have been money laundering happening in our casinos.”

Dubord said police will continue to work with BCLC and other partners to ensure the Delta casino is not vulnerable to financial crime.

“We will continue to develop information sharing agreements relative to suspicious transactions and other public safety-related information between Delta police and law enforcement partners specific to the Delta casino,” said Dubord. “From housing prices to street-level gang shootings, the effects of organized crime are far-reaching throughout Metro Vancouver and the province. Organized crime occurs below ground and operates in a highly sophisticated manner.

“It is not believed that physically situating a casino in Delta will change the level of risk or impact that organized crime currently has on the city or its residents.”

 

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The $70-million Cascades Casino Delta will include 500 slot machines, 24 gaming tables, three restaurants and a 124-room hotel. - submitted

 

Bill Blair, federal minister of border security and organized crime reduction, was at city hall last month to meet with Dubord, Mayor George Harvie and Delta MP Carla Qualtrough. One of the topics on the agenda was the casino.

Harvie said the city wants to ensure the recommendations in the German report as well as Attorney General David Eby’s report are in place by the time Cascades Casino Delta opens next fall.

“We need to show the provincial government that we need continuous police resources in all our casinos,” said Harvie. “I’m more than willing to sit down with the province on cost-sharing. To me, we have to look at an independent police force for just casinos throughout the province – a full-time police presence is needed.”

Blair said his ministry has been working closely with German and Eby to address the issues of money laundering and criminal elements that have plagued the industry not only in B.C., but across the country.

“We’ve acted on a number of their recommendations and continue to make significant regulatory changes,” he said. “There is lots of work underway, but we have more to do. The problem has been clearly identified in B.C., but it’s across Canada, so we have to look at this issue at not only the local level, but provincially and federally.”