British Columbia Lottery Corporation (BCLC) has taken FINTRAC to court, claiming that it was “ambushed” by the financial watchdog before being fined $1 million for multiple alleged anti-money laundering (AML) violations.
As first reported by The Canadian Press, BCLC filed a notice of appeal in Federal Court on Aug. 20 that names the Financial Transactions and Reports Analysis Centre of Canada and the federal Attorney General as defendants.
In the court document, which was obtained by Canadian Gaming Business, the crown lottery corporation argued that a decision issued by FINTRAC Director and CEO Sarah Paquet on July 21 should be cast aside or at least scaled back for several reasons.
Primarily, BCLC’s representatives wrote that a 2024 examination by FINTRAC was “conducted without proper notice to BCLC and contrary to FINTRAC’s established examination procedures” and argued that the crown corp. was not given adequate opportunity to comply with FINTRAC demands.
Investigation hinged on one casino patron
A FINTRAC news release issued on Aug. 28, more than a month after the watchdog’s decision and eight days after BCLC filed its appeal, confirmed that it levied a penalty of $1.075 million on BCLC for what it alleged were three counts of non-compliance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated regulations.
FINTRAC alleged that BCLC failed to report suspicious transactions, failed to develop and apply policies and procedures for high-risk clients and failed to take special measures for high-risk clients. BCLC’s court appeal noted that the fines imposed for those three violations were $950,000, $50,000 and $75,000, respectively.
BCLC’s filing alleged that FINTRAC’s examination centred on one casino patron’s gambling activity dating back at least as far as 2018. That player was identified as the highest-volume slot machine user in BCLC’s rewards program and was flagged for “frequent use of $100 bills.”
The lottery corp. stressed in the court filing that both its own monitoring and examination policies and those of its regulator, the Gaming Policy and Enforcement Branch (GPEB) of the B.C. Ministry of Public Safety and Solicitor General, “found nothing unusual or suspicious about the patron’s activities that warranted further investigation.”
In a public statement issued Aug. 27, the day before FINTRAC’s own statement, BCLC emphasized that FINTRAC’s findings do not include allegations of any criminal offence.
FINTRAC ‘ambushed’ us, says BCLC
BCLC alleged that after it provided requested documents to FINTRAC late last year, the financial agency called what BCLC believed would be a regular quarterly meeting in December.
“During the meeting, BCLC was ambushed,” stated the notice of appeal. “This was the first time BCLC learned that it was under examination by FINTRAC and that the meeting would, in fact, serve as an exit meeting for the examination.” BCLC asserted that it was not given the opportunity by FINTRAC to meaningfully provide input into the examination.
In the court document, BCLC claimed that FINTRAC “erred” on several counts and “miscontrued” numerous things in its investigation and decision.
“The Director relied on her subjective view, or the subjective view of the FINTRAC examination team, that the patron was simply gambling too much,” asserted BCLC. “The amount gambled, in and of itself, is not a relevant factor in FINTRAC’s money laundering and terrorist financing indicators. The Director’s reasoning reflects a moral or value-based judgment rather than an objective application of the regulatory framework.
“In addition, the Director’s position that high-volume gambling is prima facie suspicious is unsustainable and unsupported by the regulatory framework. It improperly equates high-volume gambling with illegal activity, without regard to the broader context or individual circumstances.”
BCLC told Canadian Gaming Business that it could not comment further as the matter is before the courts. In FINTRAC’s public release, Pacquet stated that FINTRAC “works with businesses to help them understand and comply with their obligations” under PCMLTFA.
Non-profit CNE Casino also appealing FINTRAC fine
BCLC’s notice of appeal was filed on the same day that Canadian Gaming Business reported on another Federal Court appeal against a FINTRAC fine.
The temporary, non-profit Canadian National Exhibition (CNE) casino is contesting that its fine of almost $200,000 for allegedly failing to conduct either an adequate risk assessment procedure or a biannual review of its compliance program is unfair and unwarranted.
CNE Casino denied committing any PCMLTFA violation and, like BCLC, pointed to a lack of criminal activity, a lack of opportunity to stick up for itself, and erroneous FINTRAC actions and conclusions as reasons that the fine should be thrown out by a judge.
