Feb 16, 2022
Banks in awkward position to enforce Emergencies Act: Experts
Emergencies Act concerns raised
The federal government's Emergencies Act may be placing banks and other financial institutions in the awkward position of being forced to take action on account owners suspected of taking part in – or providing financial support to - an illegal protest but are yet to be formally charged, experts say.
Regulations outlined in the Emergencies Act published late Tuesday in the Canada Gazette state that financial entities ranging from banks to payment processors to insurers can cease dealing with people suspected of being associated, either directly or indirectly, with nationwide convoy protests. The measures were taken to force demonstrators to end their protests, which have lingered on for nearly a month in Ottawa.
"It doesn't just raise eyeballs, it makes your head explode," said Andreas Park, a finance professor at the University of Toronto, in an interview on Wednesday.
Park said he believes Canadians have a "fundamental right to participate in the economy" but that these new regulations withhold due process that ultimately places the private sector in charge of enforcing the law.
"What we're doing is we're taking people who have not been charged with a crime and we're threatening them with financial ruin. It strikes me as the mob rule," Park added.
Stephen Williamson, the Stephen A. Jarislowsky Chair in Central Banking at Western University, expressed concerns about how long the regulations outlined in the Emergencies Act that empower private businesses would last.
"You're asked to trust the government that this is actually a dire emergency that requires this kind of extraordinary measures," Williamson said.
"There's a question on how you trade off the need for extra legal enforcement against the potential errors or misuse that could be made of the Emergencies Act."
During a technical briefing with media on Wednesday, government officials said that if people who had no ties to the protests found their accounts frozen, they should get in touch with the bank, which would take additional measures to validate their identities.
The government officials also highlighted that any suspicious transactions, especially those over $10,000, made using cryptocurrencies would also need to be reported by trading platforms or other payment providers as required by the Emergencies Act. Cryptocurrency payments that are suspected of being part of money laundering or terrorist financing are typically flagged by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).
While transactions made within cryptocurrency markets are typically done anonymously to avoid regulatory scrutiny, Williamson said given nearly all retail transactions are made using fiat currency like the Canadian dollar, that anonymity is stripped the moment any crypto is converted into cash.
"Whoever is running this protest operation, they have to make purchases with Canadian dollars," he said. "The money has to find its way back into the financial system and then that transaction would be flagged as suspicious and you're back to square one."
Representatives from Canada's major banks deferred comment on the Emergencies Act to the Canadian Bankers Association (CBA), an industry trade group. Mathieu Labrèche, a CBA spokesperson, told BNN Bloomberg that banks in Canada follow all laws and regulations to help protect the integrity of the country's financial system.
"All financial service providers, including banks, covered by the federal Emergencies Act will need to diligently implement the required measures, as stipulated by the government in the corresponding Emergency Economic Measures Order, which are not expected to impact the vast majority of customers,” Labrèche said in an email.