Canadians were furious last April over a decision by the country’s money laundering watchdog to impose an unprecedented $1.2-million fine against a Canadian bank — and then refuse to name the bank, according to documents obtained by the National Observer and the Toronto Star.
“I am outraged that you would withhold the name of the bank you recently fined for failing to report suspicious transactions,” reads one public comment received by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) and obtained through an access to information request.
The agency tracked public reaction to the decision — internally and online — and noted nearly unanimous criticism from experts, journalists and the public.
The agency’s online announcement drew 548 page views on the first day — a 243-per-cent increase over traffic compared with typical penalty releases, the document says.
Even within government, officials were quietly worrying about FINTRAC’s refusal to name the bank, fearing it would cause all banks facing penalties to expect anonymity and could taint the entire financial industry with the actions of one institution.
Internal emails between officials in the Office of the Superintendent of Financial Institutions (OSFI), which oversees more than 400 federally regulated institutions including the country’s banks, anticipated repercussions.
“As soon as the penalty is published with no name, all the banks will want the same treatment if they are penalized,” reads one of the emails shared between OSFI staffers trying to get a handle on the move by their colleagues at the anti-money laundering watchdog FINTRAC last April.
It’s the same question journalists, financial experts, lawyers and many Canadians have asked since FINTRAC announced the massive fine last April. The name of the penalized bank has been conspicuous in its absence ever since.
In December, the Star and the Vancouver-based National Observer published details of the events that triggered the fine, including 1,200 suspicious transactions involving a convicted fraudster named Andrew Strempler, a Winnipegger who made millions in the online drug market.
The “overemphasis” on privacy that “pervades” Canadian regulatory systems is in stark difference between Canada and the U.S., he says.
In December, FINTRAC officials confirmed that the legal process was complete and that the fine had been paid. But the name of the bank is still being withheld. The reasons remain unclear.
In documents obtained previously by the National Observer and the Star, FINTRAC lays out three criteria for public naming. The mystery bank meets two: It committed a “very serious violation” and its penalty was greater than $250,000.
In emails, OSFI officials lament that withholding the bank’s name casts suspicion across the entire industry.
After the country’s major banks denied that they were the targets of the fine, pressure mounted on smaller banks.
The mystery bank also avoided potential stock price decline, loss of customer trust, “investor wrath,” and potential civil prosecution.
“Directors and officers of the unnamed bank may serve on other boards, be hired by other firms, without full knowledge of what transpired by these other firms under their watch. The unnamed bank has essentially, with regulatory consent, transferred this loss to the entire industry as a result of nondisclosure,” says Leblanc.
The day following the release, “the tone of media coverage became increasingly negative and critical,” FINTRAC’s internal review concludes.
Experts agree the case cries out for action from the federal government.
Legislation should remove FINTRAC’s discretion and clearly lay out the criteria for naming fined institutions, says James Cohen, interim executive director of Transparency International Canada.