How Casino Chips Are Used to Launder Money
When we think of money laundering, we usually think of people generating huge amounts of money through criminal activity. This can come from drug trafficking, tax evasion, embezzlement or even terrorist funding, for example, and it is made to appear as though it has come from a legal source. Any money coming from criminal activity is considered to be dirty money, and laundering it makes it clean, so to speak. It is for this reason that many companies have introduced their own anti-money-laundering policies, as a way of both detecting and preventing the activity from happening.
Yet it has probably never crossed most people’s minds that casino chips have also been used to partake in money laundering. But how is this possible? Proceeds from money laundering are often funnelled back into the criminal world, and doubtless, casinos have created their own methods of both detecting and dealing with this happening. Has this ever been pulled off successfully by criminals in the past, and how are casinos tackling today’s new ways of money laundering? Join us as we take a look at how casino chips are used in this criminal world.
How Casino Chips Are Utilised For Laundering
If you have ever visited a land-based casino, you will know that the money you take with you is not what is used at the tables. Instead, you exchange your cash for casino chips, which can then be used on poker tables, roulette games, blackjack tables, and so on. At the end of your time gaming, any chips that you have left can be converted back into standard currency to take out with you. That’s just the general practice of land-based establishments.
It is through these chips that casinos have actually provided a way for criminals to launder their criminal proceeds. Essentially, a criminal will enter into a casino with the dirty cash and then exchange it for casino chips. They then take these chips and playing with them, although not excessively it must be pointed out. A criminal would never risk their money in such dramatic ways. Instead, they play a little on the available games and then claim the chips back as winnings. These are converted into a cheque at the exchange desk or via a receipt to utilise as cash later on. This way, the original dirty money is essentially left within the casino itself and the criminal has withdrawn money that has been “won” by playing games.
And while the online casino world is also targeted as a market where money laundering can take place, casino chips are not involved in this process. After all, physical chips can only be utilised in brick-and-mortar establishments, not online.
It may seem very blatant and unscrupulous for someone to proceed with money laundering via casino chips, but it has actually been done on multiple occasions. And as it happens, it is often referred to as the Vancouver Model in British Columbia, Canada. This is because it has been serving as a way for both foreign and domestic criminals to launder their illegitimate funds by exploiting the lax regulatory laws within the country regarding financial crime. According to an Inquiry into Money Laundering by the Cullen Commission, the system has been used for illegal funds from China as well as revenue from drug trafficking to take place, and the number of times it has been utilised is overwhelming.
Stephen Schneider spoke about the process involving large amounts of money taken from China via informal value transfer systems as a way of avoiding the limitations in China on money leaving the country. That money is then merged with cash taken from the drug trade before being cleaned at British Columbia’s casinos, as well as through private mortgages. Estimates in 2018 suggested that more than $7 billion had been laundered in the Canadian province.
During testimony, Schneider noted that the casinos themselves are quite central to the Vancouver Model when it comes to money laundering. This is because in many cases, the illegal cash was converted into chips, as noted, and then exchanged later on for a cheque payout after brief gaming sessions.
The Vancouver Model takes the following steps to be successful:
- Chinese citizens wanting to move money out of the country transfer their money into bank accounts within China that are controlled by Chinese criminal gangs.
- The citizens then travel to Canada and meet up with the associates of the gangs, where their money is handed back to them as cash in Canadian dollars.
- The Chinese citizens then visit casinos within Vancouver, exchange the dollars for casino chips before making a series of low-value bets inside.
- The casino chips remaining after the minimal bets are then exchanged back into Canadian dollars and can be considered clean of their criminal origin.
What About Bets Placed With The Chips?
It makes little difference what sort of outcome the small bets that the money launderers place have. The money itself is effectively laundered when it is converted from Canadian dollars (or any other currency, depending upon where in the world it is happening) into casino chips. With regard to the Vancouver Model, the financial proceed are invested back into the acquisition of fentanyl supplies by the criminal gangs. Alternatively, they will be invested into real estate within British Columbia by the Chinese citizens. This way, they can avoid the Chinese regulations and taxes.
Yet through this method of criminal activity, it was determined that the casinos unwittingly helped to launder more than 100 million Canadian dollars over the past decade to 2018. It also proved to be a jolt into the real world for David Eby, who had begun his job as the attorney general in British Columbia just a few days prior to being shown a video of the activity in motion. Footage was passed on to Eby which displayed individuals wheeling suitcases or hockey bags stuffed with $20 bills into the casinos and then exchanging the cash for chips.
With that, Eby introduced measures to try and curb the persistent casino money laundering. New legislation meant that the land-based casinos had to demand proof of a legitimate source for casino payments over $10,000, and round-the-clock security surveillance was also to be introduced by regulators at the more high-risk establishments. After those measures were set up in the province, suspicious transactions at the casinos plummeted, according to the government estimates.
Money Laundering Not Only Done With Chips
Casinos have been linked to money laundering for many years already, and this has never been truer than what came to light about the Australian Crown Casino in Perth in 2021. According to a report following an investigation, the Crown Perth had been utilised to launder money ever since 2014, with criminal organisations making use of a $2 shell company to do so. An inquiry into the casino operator was conducted, and it discovered that a company called Riverbank Investments Pty Ltd. was the conduit that led to hundreds of millions of dollars making their way to the casino.
The casino watchdog of Western Australia was made aware of the account, but despite the fact that many allegations of money laundering had been made regarding it and the Crown Perth, it seemed to take minimal interest in it.
Yet after the investigation, Patricia Bergin, Commissioner in Western Australia, said that Riverbank and another similar company known as Southbank (which had been caught channelling money to the Crown Melbourne establishment), were both “infiltrated by criminal elements”, and this, she noted, probably included “international criminal organisations”.
“There can be no doubt that the processes adopted by Crown enabled or facilitated money laundering through the Southbank and Riverbank accounts”, it was noted in the investigative report.
The records actually showed that Riverbank Investments Pty Ltd. was owned by Crown Resorts Limited as a $2 company, and the chief executive of the casino Ken Barton is labelled as its sole director, with secretary Mary Manos as company secretary. Through the scheme, Crown patrons would proceed with depositing money into the account, and this would then be transferred over to Crown Perth and credited into their deposit account at the casino itself.
Many of the deposits occurring through this method were below $10,000, meaning that they did not have to be reported to AUSTRAC, a financial transaction monitor. But certain red flags were raised six months after Riverbank opened an account with the ANZ bank. Unfortunately, the watchdog did little over the reports made in 2014, and the scheme was able to continue as a result.
Once the practice was uncovered, it pushed forward a reckoning over financial crimes taking place within the country’s largest gaming group. Barton was forced to step down from his position as CEO (although was likely to receive a $3 million payout upon doing so), and Crown Resorts had to take urgent steps in order to restore its credibility and suitability.
Preventing Money Laundering
It is true to say that governments all over the world have stepped up their efforts to fight money laundering. And this doesn’t just relate to that which occurs within casinos, but in general. Regulations have been introduced in multiple locations, which require financial institutions to put systems in place that detect and report suspicious activity.
A big issue that stands in the way of modern casinos tackling money laundering in a big way comes in the form of a conflict of interest. Casinos, of course, are a large source of tax revenue for governments in the aforementioned countries of Australia and Canada, as well as in the United Kingdom. The Crown Resorts brand is also known for making sizeable donations to political parties, and not just in favour of one specific party, but to both sides. Therefore, government bodies that regulate the gambling activities in their respective countries have a bit of a dilemma. They want to continue ensuring maximum profit from the casinos, but there is a reliance on them also stamping out money laundering and other illegal activities.
Of course, the two areas of interest are directly conflicting to one another. What is actually being done to prevent money laundering at casino establishments?
Well, major investigations were set out in both Canada and Australia after their respective issues with casino money laundering activity. In Germany recently, the market was regulated so as to protect its consumers, with implementation of deposit limits and a national shared user database coming into effect in 2021. Both of those measures limit the amount of money laundering that can occur in the online gambling sphere. And even at land-based establishments, it is necessary to check into who is playing the games.
When it comes to the United Kingdom, a recent update to the AML guidance for operators was published. Through this, an emphasis was put on the importance of thorough employee training, as well as regular risk assessment. It is also mandatory to report any suspicious behaviour occurring within casinos and other gambling establishments. A lot of operators exist within the UK market, meaning that no singular casino provides a disproportionate share of the tax revenue. That works in the country’s favour where money laundering is concerned, as there is less of an incentive to turn a blind eye to anything out of the ordinary happening. The UK Gambling Commission has also displayed its willingness to revoke licences and issue fines to casino operators as well.
All customers within the United Kingdom are now required to provide proof of identity and address as well, while also being required to provide a source of funds for any large deposits taking place. The Commission isn’t shy about penalising historic failings of companies either, as a large casino group, Casumo, which bases itself out of Malta was recently issued with a £6 million fine for poor implementation of protocol. And that took place back in 2012 when the brand first started operating in the UK.