Nichola Saminather

TORONTO (Reuters). Canada brought in banks this week to cut funds to COVID-19 protestors. However, the required speed and wide scope of these measures leave financial institutions free to enforce most of them on their own, according to industry watchers.

On Monday, Prime Minister Justin Trudeau invoked the seldom-used Emergencies Act. He imposed sweeping measures which require banks to immediately freeze any accounts connected to protests without the need for court orders. It also asks insurers to cancel coverage for blockade vehicles and places crowdfunding platforms under terrorist financing oversight.

Late Tuesday night’s regulations widened the net. They ordered banks, investment companies, credit societies and crowdfunding platforms to cease providing financial services for people who are suspected of supporting protests.

Canadian Bankers Association stated that all financial institutions must “diligently implement the necessary measures”, and it will not impact the majority of their customers.

However, some people had issues with this approach.

Marius Zoican (assistant professor of finance at University of Toronto) said, “It’s framing in a very vague manner… it is a broad transfer of accountability from the government to private sector.” This would be difficult for the banks. They find themselves caught between public opinion and order.

The rules are framed similarly to existing regulations dealing with sanctioned individuals or entities, said Jacqueline Shinfield, co-lead of the Financial Services Regulatory group at law firm Blake, Cassels & Graydon.

Shinfield explained that Shinfield believes the problem lies in its speed of implementation – which should be almost instantaneously. Shinfield said that there is uncertainty about who will decide which clients are subject to these new measures.

MULTILAYERED INCREASE

According to Vanessa Iafolla (antifraud intelligence consulting), banks need to make sure that payment processors adhere to the regulations. In turn, they will want to see crowdfunding platforms comply.

Trudeau stated that the time limit for emergency measures will be set by Trudeau. They must be approved within 7 days of receipt and can not exceed 30 days.

Brian Madden (chief investment officer, First Avenue Investment Counsel) stated that this is likely to be more symbolic than anything with teeth.

It is a very urgent and short-term task. However, it isn’t of sufficient magnitude or duration to warrant that financial institutions hire 500 individuals for anti-truck blocking compliance regulations.

However, the banks will need to upgrade their systems in order to manually and flag suspicious transactions. This is especially true for those that are related to cryptocurrency and crowdfunding platforms.

Madden, Zoican and Zoican stated that there are no defined guidelines for banks, like dollar thresholds to detect suspicious transactions. This means the actions of banks will not be as extensive as government wants.

Zoican stated that if you give C$10,000 to C$20,000 you are really involved. If you just put C$25 into a GoFundMe, you won’t be considered a terrorist financial.

This is taking a knife to kill a fly.