By Sunny Freeman, Toronto Star, April 7, 2016
Financial institution fined $1.1M by money-laundering watchdog should be named, group says.
That’s what a wide-ranging group of critics – from lawyers to investor advocates to companies whose infractions have been made public – want to know about the first penalty against a bank by the Financial Transactions and Reports Analysis Centre of Canada.
The terrorism and money-laundering watchdog, known as Fintrac, announced Tuesday that it has issued a $1.1-million fine against an undisclosed financial institution for failing to report a suspicious transaction and various other infractions.
“Our criminal and administrative law regime is based on disclosure of wrongdoing, not on secrecy of wrongdoing,” said Christine Duhaime, a lawyer who specializes in anti-money-laundering law.
“Joe Average who is fined for any administrative infraction is not afforded secrecy in this way and the rules should apply to all Canadians, legal and natural personals, equally, from banks to Joe Average.”
Fintrac said Tuesday’s announcement is meant to deter others from failing to report. But the bank’s name was not added to a list of violators published on the agency’s website. The home page shows the name of many smaller companies, such as jewelry stores, independent securities dealers and real estate brokerages.
Fintrac collects millions of pieces of data from 31,000 businesses every year and analyzes them for suspicious activity. Those businesses are legally required to report certain financial activities – anything from cash transactions of more than $10,000 to a disguised customer.
The centre has legal power to use its discretion on whether to publicly name companies it has fined. The recent unnamed financial institution isn’t the only case where it has taken exception – the companies involved in 34 of the 74 monetary penalties the agency has levied since 2008 have not been disclosed, said spokesman Darren Gibb.
In the case of the bank, the agency decided it was in the public interest to publish the details of the penalty to “send a strong message of deterrence” in a timely manner rather than name the institution after a potentially lengthy appeal process. The financial institution has already paid the $1.1-million penalty.
Companies have the right to appeal an imposed penalty – which can include a fine amount and a public notice – to Fintrac’s director Gerald Cossette, who is ultimately responsible for any decision.
Gibb said there are legal reasons why he cannot comment on Fintrac’s decision to withhold the name, but added that neither the types nor the sizes of institutions are factors in whether to disclose a name.
“We’ve named the sector, we’ve named the violations and we think it’s better to send a strong message of deterrence right across the regime than to wait potentially years and years for a review and appeal process to unfold.”
Michael Baumbach is director of Toronto-based Diamond Exchange Toronto Inc. which was fined $12,750 and named by Fintrac in March. He says the agency is unfairly punishing smaller firms like his jewelry business, which is trying hard to comply, while letting bigger players with deeper pockets off the hook.
He believes the bank’s name was kept secret because it has resources at its disposal to give Fintrac a legal headache. Meanwhile, he feels powerless when trying to get answers about why it fined his company, which now faces bankruptcy over what he says is an unjust fine.
“The banks are not just going to sit back and have their names slipped, but a small company – we can’t do anything,” he said. “All they’re doing is putting the smaller businesses out of business and the bigger businesses who have the legal clout to contest it, obviously they’re not naming names because of the fact that these companies will do something.”
The first Canadian bank penalty has come to light amid heightened awareness about money laundering in the wake of the so-called Panama Papers, which implicate numerous Canadians in dubious banking practices around the world.
The name of the violating bank should be disclosed because shareholders should be entitled to know whether they are investing in a company that is violating financial disclosure standards, said Neil Gross, executive director of the Canadian Foundation for Advancement of Investor Rights.
“For the bank in question, shareholders would have a legitimate interest in knowing that the bank management have taken steps to ensure that there is future compliance of Fintrac requirements,” he said.
Fintrac’s Gibb said the legislation is not meant to be punitive, but aimed at changing non-compliant behaviour.
What good are watchdogs who, should one of the children slip downstairs to the cookie jar during the night, wake up the whole household – yet, won’t bark when they detect an armed and hooded stranger in the house? Élan