It was a quintessential Canadian response to suspected national security threats and possible money laundering.
Deputy Prime Minister and Finance Minister Chrystia Freeland sent a strongly worded letter to three of the founding shareholders of Wealth One Bank of Canada after learning they could be susceptible to coercion by China’s government. What’s more, her correspondence stated that other domestic financial institutions have alleged the trio may have engaged in “the commission of money laundering,” The Globe and Mail reported last week.
Yes, you read that correctly. Faced with possible national security threats and money laundering violations – unearthed by the Canadian Security Intelligence Service and senior officials in her own department, no less – Ms. Freeland wrote a letter to express her displeasure.
That’ll show ‘em. There’s nothing like a ministerial missive to make alleged transnational criminals and authoritarian foreign powers shake in their boots.
Apparently, this needs to be stated because our federal officials are proving to be obtuse: Writing a letter, even if vociferous in tone, is a wholly inadequate response to potential existential threats. It signals to our allies and enemies alike that Canada still isn’t serious about safeguarding our sovereignty and fighting financial crime.
Although Wealth One has confirmed the three men no longer sit on the bank’s board of directors, Canadians have been left to guess what further actions, if any, financial regulators are taking against those individuals or the bank itself.
Both the government and Wealth One have previously declined comment on whether the lender is subject to any continuing regulatory scrutiny.
Sure, federal laws prohibit all parties from discussing specific regulatory interventions. But this issue is now squarely in the public domain – and Canadians deserve answers.
“We are unable to speak to any specific discussions we have with any of the regulators that oversee the Bank’s operations,” wrote Barry Ferguson, Wealth One’s chief operating officer, in an e-mail to The Globe and Mail this week.
He added: “We can assure you, though, that WealthONE remains focused on providing the innovative banking products and services we are known for to individuals, business owners, entrepreneurs, newcomers and Canadians across the country.”
It certainly appears to be business as usual at Wealth One, which is offering juicy interest rates on its GIC products to attract new deposits. The bank also offers loan products.
But if Ms. Freeland has such serious concerns, should Canadians be giving their business to this bank? Regulators shouldn’t be leaving consumers to guess.
Some financial-crime experts are also expressing their dismay about the government’s handling of the Wealth One affair.
“A stern letter does nothing to remedy that situation,” said Kim Manchester, founder of ManchesterCF, an online financial intelligence training company based in Toronto.
As he points out, individuals rarely launder money on their own. A bank’s clerical staff and middle management are often needed to facilitate the washing of illicit funds or to turn a blind eye toward suspicious transactions.
“Wealth One Bank’s ability to launder funds in Canada has not been diminished through the removal of these three individuals,” he said.
Mr. Manchester argues that the Office of the Superintendent of Financial Institutions (OSFI) and the Ministry of Finance should be reviewing Wealth One Bank’s operations, while the Financial Transactions and Reports Analysis Centre of Canada (FinTRAC) ought to be conducting an on-site audit and review of the lender’s anti-money laundering (AML) compliance regime.
Wealth One’s board of directors, meanwhile, should be making an effort to prove the bank “remains worthy” of its chartered status, he added.
Perhaps federal regulators are taking action behind the scenes. But right now all Canadians have are vague assurances from Ms. Freeland’s communications director, Alex Lawrence, that his boss “is empowered to act to address risks to any bank in Canada.”
But given that red flags were initially raised about this bank shortly after it received its licence in 2016, there needs to be transparency and accountability.
While FinTRAC is responsible for AML compliance, OSFI concerns itself with a range of issues, including the suitability of a bank’s directors and senior management, along with operational, credit and capital risks.
So was this a failing of federal regulators or their political masters? Given broader concerns about Chinese interference in Canada’s internal affairs, Canadians are owed an explanation about who ignored CSIS’s advice.
Disregarding our own intelligence experts sends a terrible message about Canada’s commitment to find and freeze dirty money.
“For transnational organized crime, this becomes another good reason to launder the proceeds of crime in Canada,” Mr. Manchester said.
Ottawa plans to review the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and other laws. But incidents such as this underscore why Canada’s approach to AML requires a comprehensive overhaul rather than more incremental tinkering.
“Our allies must be shaking their heads. They depend on Canada as a reliable partner in detecting and disrupting international money laundering and terrorist financing networks,” Mr. Manchester said.
“Collaboration is key when combatting economic crime, however if Canada’s reputation is in tatters, why would other nations wish to share the results of their hard work in financial intelligence with Canada?”
Worse still, it reinforces Canada’s image as a secrecy jurisdiction that can be exploited by financial criminals from around the world. That undermines Ottawa’s sanctions against officials in rogue states such as Russia and Iran.
“This is not the time for mediocre responses to national security threats,” Mr. Manchester said.
“If cabinet continues to demonstrate its lack of understanding of the gravity and consequences of money laundering activity, then cabinet’s decision makers need to be replaced by competent professionals that can guide the nation.”