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A patron walks into the River Rock Casino in Richmond, B.C., on Jan. 28, 2015.Ben Nelms/The Globe and Mail

The B.C. government is giving the province's gambling regulator new powers to impose fines directly and even strip operating licences from casinos for the first time, part of a string of measures aimed at tackling money laundering by organized crime.

Attorney-General David Eby said on Monday that his government has established new service agreements for casinos giving the BC Lottery Corp. (BCLC) more authority to ensure compliance and security, including progressive disciplinary measures.

Mr. Eby, who was appointed to the portfolio in July after the minority NDP government tipped the Liberals out of office, said the former government allowed the province to develop an international reputation for being soft on crime – even to the point that the type of money laundering taking place in B.C. casinos has earned a distinct brand known as "the Vancouver model."

In an interview on Monday, Mr. Eby described what he said were shocking briefings as the incoming attorney-general, when the provincial Gaming Policy Enforcement Branch outlined to him allegations of serious, large-scale, international laundering of the proceeds of crime in B.C. casinos.

He said the Vancouver model has been called the tool of a complex network of criminal alliances. It involves Chinese underground banks at the heart of Chinese criminal activity; money laundered from Vancouver into China and other locations; North American illegal drug networks supplied by Chinese and Latin American gangs; and the facilitation of capital flight from China.

"The challenge to date has been a lack of political will to deal with this issue in any kind of significant way," Mr. Eby said.

Casinos in B.C. must have agreements with BCLC to operate. Under the new agreements with gambling operators, casinos will obtain their 5-per-cent commission, based on revenue after prizes are paid out, so long as their commitments to maintain the integrity of their systems is met.

If BCLC finds them "substantially out of compliance," regulators can suspend commission payments – or suspend the operator's licence. No casino in B.C. has had their agreements suspended to date.

"As we transition to a higher level of enforcement, we do need tools that are immediately responsive and that speak the language of service providers, and one of the ways they speak is around these commissions," Mr. Eby said. "So tying penalties to the commissions is a way to get their attention if there is a problem."

He said penalties are "very rare" under the existing system, because police have to be involved and a charge-approval process can take time.

Mr. Eby acknowledged that the crackdown he is planning will likely result in reducing the $1.3-billion in annual revenue the province collects from gambling.

"I understand that if we take the steps we have to take on this issue, there will be an impact on gambling revenue – I don't see any way around it, because the people who are alleged to be involved in money laundering are also significant gamblers," he said.

"But it's a mistake to think that money that could be coming from, for example, the sale of addictive illicit drugs and laundering through the casinos doesn't have some cost somewhere else in our system. You may be making money on the gambling side but you are losing on the health side."

On Tuesday, Mr. Eby will release preliminary recommendations from Peter German, a former deputy commissioner of the RCMP and Correctional Service Canada, who was appointed in September as an independent expert to review money laundering in the gambling industry. Mr. German's final report is due next spring.

Mr. German was appointed in October following concerns about the possibility of money laundering at the River Rock Casino in Richmond, B.C. The head of Great Canadian Gaming Corp., which runs River Rock, has said in a statement that it is committed to "a culture of integrity and transparency" and will work to ensure compliance with regulations.

However, the issue has drawn the attention of the opposition Progressive Conservatives in Ontario and Mr. German's report on Tuesday could have repercussions there.

Ontario is negotiating the terms of a deal in which Great Canadian Gaming and two business partners would take control of the province's casinos in the Greater Toronto Area. The contract is lucrative, as the region's casinos had more than $1-billion in revenue last year. Progressive Conservative Leader Patrick Brown has called for the deal to be revisited, but the province's Liberals have refused to look into the agreement with Great Canadian Gaming.

With a file from Justin Giovannetti in Toronto.

The Verdant Creek wildfire is estimated to have burned over 70 square kilometres of British Columbia’s Kootenay National Park. Take an aerial tour of the damage.

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