I can take a shot at the mechanism; ferric chloride acts as a lewis acid, and bind to the lone pair on nitrogen and thus activating it, next the lone pair on oxygen pushes down to the carbon it's connected to, and the pi bond on the alkene proceeds to move to the activated nitrogen and the ferric chloride then leaves the nitrogen with its lone pairs. Now you end up with an iminium (previously the primary amine), and a ketone (previously an alcohol), the next steps is just hydrolysis of the iminium (like a reverse of iminolysis) which would ultimately convert the iminium ion into the ketone (byproduct is ammonia). And voila you end up with the 1,2 diketone