BCLC Anti Money Laundering Year-End Audit GPEB File # COMM

Transcription

1 GAMING POLICY & ENFORCEMENT BRANCH AUDIT REPORT BCLC Anti Money Laundering Year-End Audit GPEB File # COMM EXECUTIVE SUMMARY An audit of BCLC s compliance with FINTRAC guidelines was conducted for the period August 4, 2010, to December 31, 2010, to verify compliance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), FINTRAC guidelines, and the Gaming Control Act and Regulation. The review included an analysis of large cash transaction and suspicious transaction reporting systems in place at BCLC gaming sites and head office in Vancouver, BC. BCLC FINTRAC training programs and gaming workers understanding of legislative requirements were reviewed as well. Procedures were performed on a test basis. A notable exception was identified during the course of the audit; that is, BCLC s understanding and implementation of FINTRAC Interpretation Notice No. 4 (August 31, 2009) The 24-Hour Rule. Detailed examples clarifying the divergence of BCLC s procedures from FINTRAC s directive are included below. 2.0 AUDIT OBJECTIVES The objectives of the audit were to: Verify compliance with FINTRAC reporting requirements under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA); Verify compliance with FINTRAC guidelines applicable to BCLC and its gaming sites; Verify compliance with the Gaming Control Act (GCA) and Regulation (GCR). Ministry of Public Safety and Solicitor General Page 1 of 7 Phase 1 Page 1

2 3.0 AUDIT SCOPE A risk assessment was performed to identify areas to be reviewed. Specific fieldwork was performed in the following areas: FINTRAC compliance regime; FINTRAC record keeping systems; FINTRAC reporting systems. The audit was performed for the period August 4, 2010, to December 31, AUDIT PROCEDURES Field work was conducted throughout the audit period at BCLC gaming sites, and February 2011 at BCLC s head office in Vancouver, BC. Audit procedures were conducted on a sample testing basis to provide reasonable assurance of compliance. The auditor(s) performed on-site compliance work through observation, interview and testing. Substantial additional testing was performed off-site through the review of records provided by service providers and BCLC. A sample made up of 305 Large Cash Transaction Records (LCTRs) resulting from buy-ins, disbursements and foreign exchanges, occurring during the period August 4, 2010, to December 31, 2010, was reviewed for compliance with FINTRAC requirements. A sample of 41 Suspicious Transaction Records occurring during the same period was also reviewed for compliance with FINTRAC requirements. 5.0 FINDINGS Details of findings resulting from audit procedures: 1) FINTRAC Guideline 4: Implementation of a Compliance Regime, Section 7 states, in part, If you have employees, agents or other individuals authorized to act on your behalf, your compliance regime has to include training. This is to make sure that all those who have contact with clients, who see client transaction activity, who handle cash or funds in any way or who are responsible for implementing or overseeing the compliance regime understand the reporting, client identification and record keeping requirements. This includes those at the front line as well as senior management. Section 7 also states, in part, Standards for the frequency and method of training, such as formal, on-the-job or external, should be addressed. New people should be trained before they begin to deal with clients. Ministry of Public Safety and Solicitor General Page 2 of 7 Phase 1 Page 2

3 BCLC currently requires all new employees to complete training prior to commencing work on the gaming floor. Employees are also required to be retrained within two years of having last successfully completing training. Training is delivered in two ways - online or classroom instruction. For the purposes of this review BCLC Anti Money Laundering Training (version 7a) online course and BCLC Anti Money Laundering Training (PowerPoint presentation slides - revised October 2010) were reviewed. The training is designed to be completed in approximately two hours and is broken into a number of sections including: an introduction to anti money laundering terms, a review of regulatory bodies and their functions, applicable legal acts and regulations, legal requirements within gaming facilities, examples of attempted money laundering and suspicious transaction scenarios, and gaming employee duties including record keeping, identification, and reporting requirements. The training package also includes questions and answers (no marks) to test and reinforce knowledge as employees make their way through the material. Training ends with a multiple choice test. Twenty questions are randomly selected from a pool of 36 questions. Employees must achieve a mark of 70% in order to pass. Employees that do not pass must retake the test until it is passed. A review of the online and classroom training materials determined the current training material is sufficient to prepare employees regarding anti money laundering and suspicious transactions. A review of BCLC training records indicated 12 active employees, of a total 5,401 employees working at 33 gaming sites, had not completed training within the prescribed time frame. BCLC records indicated 100% training rates at 26 of 33 sites. Overall, the number of employees not trained is less than 1%. BCLC acknowledges that 99.78% of the 5,401 casino employees were trained. Since the audit was completed, all identified employees have completed the requisite AML training. All training records have been updated. BCLC continues to emphasize to Service Providers and staff the importance of AML training in order to meet our training obligations and to remain compliant with Fintrac guidelines. 2) FINTRAC Guideline 6F: Record Keeping and Client Identification for Casinos, Sections 3.2, 3.6 and 3.10 specifies record keeping requirements for large cash transactions. During site audits, GPEB auditors interviewed gaming facility staff to determine their level of understanding regarding identifying and reporting large cash transactions and suspicious Ministry of Public Safety and Solicitor General Page 3 of 7 Phase 1 Page 3

4 transactions. A review of GPEB audit reports for 10 site audits conducted during the period reviewed determined one instance where a cashier was unable to identify the threshold for recording foreign currency exchange transactions (CDN$3,000). Training for the Floor Managers and Cage Supervisors responsible for LCTR completion was conducted at this site. LCTRs are now verified by another supervisor and BCLC will continue to monitor AML reporting. 3) FINTRAC Guideline 7A: Submitting Large Cash Transaction Records to FINTRAC Electronically, Section 3.2 requires reports to be sent to FINTRAC within 15 calendar days after transactions occur. A review of a sample of 305 Large Cash Transaction Records (LCTRs) determined one record where itrak records indicated a transaction was reported to FINTRAC more than 15 days after the transaction occurred. In this case, the disbursement was delayed as the patron was unable to produce identification at the time of the transaction (a slot jackpot). The transaction was reported to FINTRAC once identification was provided and the slot jackpot was awarded. LCT # Date of Transaction Transaction Type(s) Amount Days to Report July 18, 2010 Disbursement $10, The player tried to claim a prize on July 17 but the jackpot payment was denied as the player could not produce identification. The jackpot was held by BCLC and there was no disbursement of cash on this date. The prize was paid to the player on August 18, when the player provided identification. The Fintrac disbursement report was processed on August 23, five days after the disbursement of the prize. BCLC contends that the submission of the disbursement report was within 15 days of the transaction. GPEB Response: Upon review of FINTRAC Guideline 10A: Submitting Casino Disbursement Reports to FINTRAC Electronically, Section 2.2, GPEB concurs with BCLC s assertion that, in the event of a delayed jackpot, reports are to be submitted to FINTRAC within 15 days after the date of disbursement. Ministry of Public Safety and Solicitor General Page 4 of 7 Phase 1 Page 4

5 4) FINTRAC Interpretation Notice No. 4 (August 2009) The 24-Hour Rule states, in part, You... have to submit an LCTR if you conduct two or more cash transactions of less than $10,000 each within 24 consecutive hours of one another... that add up to $10,000 or more... The Interpretation Notice includes a number of examples to explain how LCTRs are to be calculated. The examples illustrate situations where individual amounts may be included in more than one LCTR. A review of BCLC LCTR reports determined that this procedure is not being followed when determining whether an LCTR should be created and reported to FINTRAC. Therefore BCLC is underreporting LCTRs to FINTRAC, e.g.: LCT # Date & Time Amounts Reported by BCLC FINTRAC Minimum Requirement Description s.22 Note: Due to the nature of the examples in the interpretation notice, reporting entities have been granted an option in reporting. For example, for LCTR # above, by strictly Ministry of Public Safety and Solicitor General Page 5 of 7 Phase 1 Page 5

6 applying the rule, the 24-hour period begins with each new transaction of less than $10,000. transactions b, c, and d above could also be reported in a separate LCTR totalling $10,674. However, FINTRAC has indicated that this report is optional because all information is present in the previous LCTR. (In order to simplify computer programming and to ensure that all reportable amounts are reported to FINTRAC, BCLC may want to consider strictly applying the 24-hour as stated in the interpretation notice and begin 24-hour periods with each new transaction.) This is a repeat finding, originally identified in GPEB s year-end audit (and addendum). BCLC reviewed the options set out in the Interpretation guideline of the 24 hour static and the 24 hour rolling clock and elected to use the static option. BCLC has sought a legal opinion on this issue and will update GPEB upon receipt. GPEBs recommendation in the last paragraph of this report will be followed up on: GPEB recommends BCLC meet with FINTRAC to ensure the requirements of FINTRAC Interpretation Notice No. 4 (August 2009) The 24-Hour Rule are satisfied. 5) FINTRAC Guideline 3A: Submitting Suspicious Transaction Reports to FINTRAC Electronically, Section 3.2 states, in part, Once you have determined that there are reasonable grounds to suspect that the transaction is related to a money laundering or terrorist financing offence, your report, including all required and applicable information, must be sent within 30 calendar days. This 30-day reporting time limit begins when you or any one of your employees first detects a fact about a transaction that constitutes reasonable grounds to suspect that it is related to a money laundering or terrorist financing offence. A review of a sample of 41 STRs for the period August to December 2010 determined all reports were submitted within the prescribed time frame. Ministry of Public Safety and Solicitor General Page 6 of 7 Phase 1 Page 6

7 A number of issues were identified during the course of the audit. BCLC has acknowledged the exceptions in this report and has provided responses indicating issues have been addressed as noted. GPEB recommends BCLC meet with FINTRAC to ensure the requirements of FINTRAC Interpretation Notice No. 4 (August 2009) The 24-Hour Rule are satisfied. Commercial Gaming Audit Audit and Compliance Division May 20, 2011 Distribution List: Mr. Murray Dugger, Regional Director Western Region, FINTRAC Ms. Sue Birge, A/Assistant Deputy Minister, GPEB Mr. Terry Towns, Vice President Corporate Security and Compliance, BCLC Ms. Terri Van Sleuwen, Executive Director, Audit and Compliance, GPEB Ministry of Public Safety and Solicitor General Page 7 of 7 Phase 1 Page 7