A day after Prime Minister Justin Trudeau invoked emergency powers to choke off funding to protests against COVID-19 restrictions, Canada’s banks were still waiting Tuesday for details on how they’re supposed to enforce the government’s orders.

Finance Minister Chrystia Freeland said Monday that banks would be required to report relationships with people involved in blockades and would be given the authority to freeze accounts without a court order, among other measures.

The banks still had numerous questions about how to implement the measures as of Tuesday morning, according to people familiar with the matter. Outstanding questions include which types of accounts the order covers, what recourse customers will have to make the banks reconsider account closures and how the banks will be indemnified, the people said.

Chief executive officers of Canada’s major banks have held two calls with government officials about the orders: one over the weekend, while the policy was being considered, and one on Monday evening, after it was announced, the people said. Public statements about the crackdown by public officials have been consistent with what the banks have been told, one of the people said.

The legal text of the government order was made public on Tuesday, but it didn’t clarify many of the banks’ questions. It says only that the government will require payment processors to report certain transactions to regulators and will require financial-services providers to “determine whether they have in their possession or control property that belongs to a person who participates in the blockade.”

Protests that began with a trucker convoy to Ottawa last month have gridlocked Canada’s capital city and closed border crossings. Although the bridge that carries a quarter of Canada’s commerce with the U.S. was reopened Sunday night, two major border crossings in Western Canada were blocked on Monday by semi-trailers and farm equipment.

As part of the financial crackdown, the government is also broadening its anti-money-laundering rules to cover cryptocurrency trading platforms and crowdfunding sites such as GoFundMe, both of which have been used to funnel donations to protesters. 

Even before the government announced the emergency measures, Toronto-Dominion Bank last week froze accounts containing $1.4 million (US$1.1 million) that was donated to the protests and asked a court to take control of the funds.

Some of the additional measures -- including the crowdfunding rules -- are already in place in other countries’ banking systems and have been in the works in Canada, said Sue-Ling Yip, a partner in KPMG’s risk consulting and financial crimes practice.

Communication between the government and the banks will be key in implementing the order correctly and preventing problems like freezing the wrong accounts, she said. The government may also need to allow the banks time to make the appropriate operational changes, she said.

“For them to start monitoring for additional things and add additional criteria to what is deemed suspicious -- it doesn’t happen overnight,” she said in an interview. “We have to be mindful that it’s not something that banks can snap their fingers and make it happen. There’s a lot of work involved.”

Because of their experience in anti-money-laundering procedures, the banks may be most effective in cutting off the flows of funds from outside the country or from specific accounts, said Andreas Park, a professor of finance at the University of Toronto. Other channels that largely bypass the banks, such as cryptocurrency credit cards and marketplaces, may be harder to police, he said.


'SOME DISRUPTION'

The banks may be concerned about running afoul of the government if they don’t do the job well and some transaction “slips through that later on bites them,” he said. That concern could prompt them to overreact.  

“The banks are risk-averse and don’t want to get in trouble,” Park said in an interview Tuesday. “They may very well catch a lot of normal people in the process, like international students and snowbirds. We’re going to see some disruption probably.” 

While he said he has “zero sympathy” for the protesters who have been blocking Canada’s infrastructure, he has concerns about the precedent the act sets in limiting people’s ability to use their money and going outside normal law-enforcement channels to target protesters.

“Essentially what we’re doing now is deputizing the private sector to do monitoring of citizens on behalf of the government and act on the basis of suspicions without due process,” he said.