China-Linked Company Was at ‘Core’ of Money Laundering in BC, Inquiry Hears

May 27, 2020 Updated: May 27, 2020

A company heavily implicated in money laundering in British Columbia was “core” to a scheme that allegedly scrubbed billions in drug money from China at casinos in the Lower Mainland, according to expert witness testimony at an inquiry to determine how to combat industrial-scale money laundering in the province.

Silver International had been charged as part of a massive RCMP investigation of alleged underground bankers in Richmond, B.C., but charges were stayed in 2018.

“In my opinion, [Silver International] was the core of the whole model. It really was the vortex of capital flight, casino money laundering, and real estate money laundering,” criminologist Stephen Schneider told the Cullen Commission, which resumed hearings via video conference this week after a break since February.

Schneider, a professor at St. Mary’s University in Halifax who literally wrote the textbook on the Canadian criminal underworld, called “Organized Crime in Canada,” explained how B.C. casinos aided the scheme.

“The accusation is that drug money is laundered by providing the cash to gamblers … they take the cash in, they convert cash to chips, they play a few games, and cash out,” he said.

Silver International was at the centre of the largest money laundering investigation in RCMP history, but charges against the company and its owners, Caixuan Qin and Jian Jun Zhu, were stayed in November 2018 after the Crown mistakenly disclosed a police informant’s identity.

It is alleged that before the RCMP raided Silver International in 2015, the enterprise was funnelling as much as $1.5 million a day through “underground banks,” which laundered the money through casinos, real estate buys, and exotic cars.

“We know that the epicentre of activity was at the River Rock Casino in Richmond, but no large casino was left untouched,” former RCMP investigator Peter German told reporters in 2018 after the release of his “Dirty Money” report, which chronicled these nefarious activities and spurred Premier John Horgan to launch the inquiry.

“We know that the same people who arranged for money to be laundered in casinos were buying real estate … [some] being used for large, illegal gaming houses,” German said, adding that due to scrutiny in recent years, organized crime has been giving casinos “a wide berth.”

“What we don’t know is where [the money] went,” he said.

German’s report cites Australian professor John Langdale of Macquarrie University, who coined the term “Vancouver Model” to describe a unique and sophisticated web of international drug cartels, underground banks, and big-shot gamblers.

“Langdale’s research indicates Vancouver is a hub for Chinese-based organized crime, [and] a complex network of criminal alliances has coalesced with underground banks at its centre,” writes German in “Dirty Money.”

“Money is laundered from Vancouver into and out of China and to other locations, including Mexico and Colombia. Illegal drug networks in North America are supplied by methamphetamines and precursor chemicals from China and cocaine from Latin America. In addition, ‘high rollers’ from China facilitate the flight of capital from China using Canadian casinos, junket operations, and investment in Canadian real estate.”

Besides enriching criminal enterprises, these cash influxes added fuel to the fentanyl crisis plaguing the province and overheated an already inflated housing market. The resulting social and economic fallout was noted by B.C. Attorney General David Eby back in 2018, and most recently by the government’s counsel, who spoke before the commission in February.

“Money laundering has distorted B.C.’s economy, fuelled the overdose crisis, and driven up housing prices,” government lawyer Jacqueline Hughes told the commission in her opening statement.

“The accounts of millions of dollars flowing through B.C. casinos by way of hockey bags filled with $20 bills are now well-known.”

While Hughes promised the government would bolster itself against such criminality, a pall has been cast over this assurance by the botched Crown prosecution of Silver International, the ongoing Ontario Gaming Commission probe of River Rock employees, and a 2011 B.C. government “action plan” on countering the problem that had little effect.

According to British Columbia’s coroner’s service, between 2012 and 2018 the number of fatal overdoses where fentanyl was detected in toxicity tests increased from 4 percent to 86 percent.

A Better Dwelling study in 2019 found that since January 2000, housing prices in Vancouver had increased by 315 percent, or 207 percent faster than New York City.

More than three years earlier, the Real Estate Board of Greater Vancouver reported that in five months between October 2015 and February 2016, housing prices increased more than they did for the two decades between 1985 and 2005.

‘They All Knew’

Fred Pinnock, an RCMP alumnus with 29 years’ experience fighting organized crime in B.C., spent the last three years of his career between 2005 and 2008 as head of the force’s Integrated Illegal Gambling Enforcement Team for the province.

In a July 2018 television interview, Pinnock said the former provincial government and senior management in the RCMP were aware that money laundering was taking place in the provincially regulated casinos more than a decade ago, but looked the other way.

“They all knew what was going on in those casinos and racetracks—primarily casinos, particularly the big ones. It was the wild west in the large casinos where organized crime was running amok,” he said.

“It was no secret to government at all.”

Then-Liberal MLA and solicitor general Rich Coleman disbanded the integrated gambling enforcement team in 2009—a year after Pinnock retired—claiming it was ineffective, and has since called claims by the unit’s last commander “inflammatory.”

“No one interfered with his ability to do his job from a political perspective,” said Coleman.

For reasons that are unclear, Pinnock was denied participant standing by the Cullen Commission, as was British Columbia Lottery Corporation (BCLC) VP Brad Desmarais, who is serving as interim head of security and compliance for BCLC following Rob Kroeker’s departure in July of 2019 under a cloud of controversy.

According to Global News reporter Sam Cooper, who broke the original China-B.C. casino money laundering story in 2017, documents obtained through access to information indicated that there was a Feb. 20, 2019, complaint about Kroeker to the province’s gaming policy enforcement branch.

“I have information that Robert Kroeker … instructed [his staff] to ease up on the BCLC cash conditions on players and slow down the process of targeting suspicious buy-ins,” Cooper said, noting the basis of the allegation against Kroeker.

The BCLC, which operates the province’s casinos, remains tight-lipped over Kroeker’s exit, but money laundering problems and secrecy have become hallmarks of the Crown corporation.

According to CBC, the corporation has stonewalled the public broadcaster over access to information requests for records related to a nearly $700,000 fine levied against BCLC in 2010 after an audit by FINTRAC (Financial Transactions and Reports Analysis Centre of Canada) found rampant non-compliance.

Unlike Pinnock or Desmarais, Kroeker was granted participant standing for the commission and is represented by criminal lawyers Marie Henein and Christine Mainville, who successfully defended former Navy vice-admiral Mark Norman against breach-of-trust charges.

The Cullen Commission is not tasked with determining guilt or innocence of any alleged criminal wrongdoing, but rather with identifying the best regulatory and enforcement approaches to staunching the flow of illegal cash through B.C.’s real estate and gambling industries.

For the latter, German’s “Dirty Money” report recommends establishing an independent regulator for casinos similar to Ontario’s liquor and gaming commission, as well as a dedicated police agency with a permanent presence at casinos.

The Cullen Commission hearings will continue through June before reconvening in September. A preliminary report is expected in November.