Finance Minister Chrystia Freeland is raising national-security concerns about Wealth One Bank of Canada, telling three of its founding shareholders that they could be susceptible to Chinese government coercion, according to two sources.
The shareholders are also facing allegations from other Canadian financial institutions that they have engaged in money laundering, according to a letter sent by Ms. Freeland to the three individuals late last year.
Toronto-based Wealth One and these principal shareholders have been under national-security investigation by the Canadian Security Intelligence Service since 2021, and most recently by officials in the federal Finance Department who deal with national security, according to the two sources. The Globe and Mail is not identifying the sources because they risk prosecution under the Security of Information Act.
The bank, which caters to Chinese Canadians, was founded by Shenglin Xian, president of Shenglin Financial Group Inc., wealthy real estate developer Mao Hua (Morris) Chen and grocery-store magnate Yuansheng Ou Yang. Shortly after receiving the Freeland letter, the three men resigned their bank directorships in December and Mr. Xian stepped aside as vice-chair of the board.
Two of the founders, Mr. Xian and Mr. Ou Yang, have property and investments in China, according to information recently taken down from the Wealth One website.
The bank, which was approved as a Schedule 1 domestic bank in 2016, handles deposits and provides mortgages. In a 2021 news release, Wealth One said it had grown into a financial institution “with over $400-million in assets.” It was established with an initial investment of $50-million.
The letter from Ms. Freeland expresses concern that the three shareholders “could be vulnerable to coercion” from China. It also says that the government believes “you may have been involved in financial activities that other regulated institutions have assessed provide reasonable grounds to suspect such transactions are related to the commission of money laundering.”
Ms. Freeland’s letter offers the three Wealth One Bank shareholders an opportunity to respond to Ottawa’s national-security concerns.
One of the sources said the government is prepared to rescind the bank’s charter but would likely take no further action providing the three men sold all their shares or significantly reduced their holdings in Wealth One. It is not clear if they had done so.
Attempts to reach the three founders were unsuccessful. Barry Ferguson, chief financial officer of Wealth One, declined to discuss the Finance Minister’s letter.
“We are not in a position to speak to any specific communications we may have with any regulatory authority but can confirm that the three shareholders you asked about are no longer directors of the bank and none of our shareholders have ever had a role in the bank’s operations,” Mr. Ferguson said in a statement.
“We are a Canadian bank, with an independent board of directors and an executive leadership team of banking professionals who have extensive experience in operations under the Canadian banking regulatory framework, and who are fully aware of the need for the highest standards of integrity and regulatory compliance.”
Alex Lawrence, communications director for Ms. Freeland, said the government could not comment on its dealings with Wealth One.
“The Minister of Finance takes very seriously her responsibility for the security and stability of the Canadian financial sector. As Minister of Finance, she is empowered to act to address risks to any bank in Canada,” Mr. Lawrence said. “Given her role as a regulator, it would be inappropriate to comment on any specific institution or any specific regulatory process that may be under way.”
Ms. Freeland, speaking in Washington last October, talked of the need to embrace policies that shift trade to friendly partners and like-minded democracies: a “friend-shoring” approach that would reduce commercial relations with adversarial countries.
In recent months, the Canadian government has forced three of China’s state-controlled corporations to sell their stakes in three Canadian critical minerals companies and announced it would no longer fund any Canadian research with military institutions in countries such as China.
CSIS has warned how Beijing “is pursuing a strategy for geopolitical advantage on all fronts – economic, technological, political and military – and using all elements of state power to carry out activities that are a direct threat to our national security and sovereignty.”
The Globe first reported on Mr. Xian in May, 2016, when he and 32 other business executives attended a private fundraiser for the Liberal Party of Canada where Prime Minister Justin Trudeau was the guest of honour.
At the time, Mr. Xian was waiting for final approval from federal bank regulators for Wealth One to start business in Canada as a Schedule 1 bank. Such banks are domestic, not foreign, and authorized to accept deposits in Canada.
Also attending the 2016 fundraiser at the Toronto home of Chinese Business Chamber of Canada chair Benson Wong was Chinese billionaire Zhang Bin, a political adviser to the Chinese government in Beijing and a senior official in the network of Chinese state promotional activities around the world.
Mr. Zhang, along with a partner, later donated $1-million to the Pierre Elliott Trudeau Foundation and the University of Montreal Faculty of Law. The law school, from which the former prime minister graduated and later taught law, received $750,000 for scholarships and grants for Canadian students to visit China. The Trudeau foundation received $200,000 and the remaining $50,000 went to funding for a statue of Pierre Trudeau.
Mr. Ou Yang, owner of a string of Yuan Ming supermarkets in Canada and businesses in China’s Fujian province, has asserted having close ties to China’s Communist regime.
Mr. Ou Yang’s biography on the Wealth One website in 2016 said that before he immigrated to Canada in 1990, he was a member of the National People’s Congress, which is China’s legislature, and the Chinese People’s Political Consultative Conference, a political advisory board for China’s leaders.
Wealth One later told The Globe, in November, 2016, that Mr. Ou Yang’s assistant misrepresented her boss’s credentials and inflated his achievements.
Mr. Chen, along with his wife, Mingyan Lin, who is also a shareholder in Wealth One Bank, operate the North America Investment and Trade Promotion Association, which pushes for close economic ties between Canada, China and the United States.
In June, 2021, Wealth One announced that former Ontario Liberal finance minister Charles Sousa had joined the board. He departed in December, 2022. That same month, he was elected in a federal by-election as the Liberal member of Parliament for Mississauga – Lakeshore.