Christine Duhaime is a lawyer with a specialized law practice in financial crime mitigation and the founder of the Digital Finance Institute, a Canadian financial-tech think tank.
One of the biggest stories in Canada last week was the news that the Financial Transactions and Reports Analysis Centre of Canada (FinTRAC) had issued a $1.1-million administrative fine to a Canadian bank but decided to keep the institution's name a secret.
The fact that the name of the bank is being kept a secret became a secondary story all its own. Canadians had a visceral reaction to it because the secrecy offended and shocked us. It runs contrary to what we believe about the rule of law. If there is one thing that unites Canadians from coast to coast and for which we are immensely proud, it is our Charter of Rights and Freedoms, which recognizes, above all else, the supremacy of the rule of law on which our democracy is based.
The rule of law not only renders us all equal before and under the law, but it ensures that justice, including administrative justice, is applied evenly to all persons – whether they be a legal person, such as a bank, or a natural person, such as you or me. Administrative secrecy was a popular legal principle in the days of absolute monarchy, but our ancestors spilled an awful lot of blood on battlefields hundreds of years ago to replace it with the rule of law.
The $1.1-million fine was not for minor infractions of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA); it was for multiple violations, one of which is among the most serious offences under the PCMLTFA – namely, a failure to report a suspicious transaction, for which the highest penalties apply and for which the bank and its directors and officers could be prosecuted criminally. A failure to report a suspicious transaction means that the bank noticed, or should have noticed, that the financial system was being abused for serious criminal activity such as tax evasion, terrorist financing, drug trafficking or insider trading and did absolutely nothing about it.
Canadians rightly feel that a fine of $1.1-million – paid by a secret corporate defendant for serious administrative offences that imperil the integrity of our financial system and affect Canada's reputation in the international financial community – lacks the transparency and accountability that are hallmarks of the rule of law, particularly when you and I have no right to have our name protected if we commit much less serious administrative offences that do not harm Canada.
There is another equally important constitutional principle that the FinTRAC secret bank fine offends: the principle of open justice, which is fundamental to maintaining integrity and confidence in our judicial process in the eyes of the public. In 1982, then-justice Brian Dickson of the Supreme Court of Canada articulated this best when he wrote: "Where there is no publicity, there is no justice."
As a society, we insist on open justice so that Canadians may know how justice is being rendered and against whom. There is no room for secret defendants in the open justice system and we ought not to countenance it now – particularly when it involves a critical government agency like FinTRAC, whose mandate involves protecting Canada's financial system against serious financial crimes such as tax evasion, money laundering and terrorist financing.
Other countries publicize fines imposed on or negotiated with banks, which are routinely named when it involves failure to comply with anti-money-laundering and counter-terrorist-financing laws. Those fines are usually in the hundreds of millions, if not billions, of dollars. And they go much further, publishing settlement orders that detail the violations committed by a bank and the bank's failures and orders against it to ensure that banks take remedial steps in anti-money laundering law to protect the financial system.
The reason they do this is not only because the rule of law demands it, but for denunciation and deterrence. When a corporate defendant is kept secret, there is no denunciation and certainly no deterrence. So what prevents them from committing further offences? Nothing, is the answer.
I shared this story last week with attendees of Money 20/20 in Copenhagen, the biggest financial conference in the world, where I was speaking about financial technology and its attendant financial crime risks. The unanimous reaction of the global banking and fintech community – banks, payment firms, foreign regulators, lawyers, journalists, tech companies and foreign government representatives – was the same as in Canada: They were shocked.
It's not the size of the fine that naturally offends people (although it is quite low), but the secrecy and apparent preferential treatment. "One would expect that in the Third World, not Canada" was the kind of comment I heard frequently.
Indeed. We can and should do better.