INQUIRY NOT SO TOUGH ON BANKERS
RCMP believed millions cleaned in casinos came from Big Six, but we may never know
The Achilles heel of B.C.'s Inquiry into Money Laundering was on full display in its walking-on-eggshells treatment of Canada's Big Six banks.
The supposedly tough-nosed commission that was going to name names and assign blame went in camera to hear key testimony from a panel of bankers.
And it treated with kid gloves the first bank executive to testify — Michael Bowman, the global chief of anti-money laundering for the Toronto-Dominion Bank Group.
Casino operators, realtors, lawyers, accountants, ATM operators and plenty of others have been dragged through the mud, but the banks so far seem Teflon coated. Consider that in March 2018, the Mounties told the national institutions that from an investigation that found 3,000 anonymously purchased bank drafts negotiated through B.C. casinos worth $150 million, $147 million — or 98 per cent — was from the Big Six.
“The top two financial institutions … would be TD and the next bank, that together represent 66 per cent of the dollar value and about 63 per cent of the count volume, roughly $100 million between the top two banks of which TD bank is the first,” commission lawyer Nicholas Isaac said.
The RCMP suspected money laundering.
Although other banks such as HSBC responded to the concern immediately — instructing tellers to write the purchaser's name on the draft — it took TD two years.
Meanwhile, it moved at least another $27 million anonymously.
When Transparency International lawyer Toby Rauch-Davis tried to hold Bowman to account, the objections began.
“You are confined to the ambit of the summons (Bowman had been sent to appear),” Commissioner Austin Cullen said.
The objections continued when Rauch-Davis asked if the Financial Transactions and Reports Analysis Centre (Fintrac) had given TD any advice after the problem came to light, or if it had it paid any fines.
“The relationship TD has with its federal regulators is beyond the jurisdiction of this commission,” lawyer Jill Yates said. Cullen conceded it may be. Not only has Ottawa dragged its feet providing documents to the commission, it and the banks clearly look askance at its jurisdiction.
“This is a very complex legal question that you, Mr. Commissioner, have already flagged for participants in your interim report,” federal lawyer Jan Brongers told Cullen.
“Ultimately, Mr. Commissioner, submissions are going to be made around the time of closing submissions with respect to whether the information can be used. ... This isn't the first time questions have been asked, asking for opinions from witnesses with respect to issues that at the end of the day, it's not evident this commission has any jurisdiction to opine on.”
“I think the jurisdiction of the commission — the intersection of what are legitimate provincial interests in pursuing questions of barriers to effective investigations of money laundering and what are beyond my capacity to make recommendations about,” Cullen said, “I think that's really an issue that needs to be decided with more comprehensive legal argument at the end of the day.”
According to documents tendered as exhibits but not yet made public, police in 2018 met with the banks as part of what was called Project Athena.
Anna Gabriele, an anti-money-laundering manager for TD, said she attended meetings along with representatives from the other Big Six banks.
Without providing a production order or a normal legal authorization, she said the Mounties wanted the banks to go through a list of individuals, identify and investigate any that were clients, and report any suspicions to Fintrac to trigger a police investigation.
The RCMP also wanted the banks to change the way they issued drafts so they bore the purchaser's name, she added.
Gabriele recommended TD comply or risk becoming an outlier, but in July 2019, was told an executive committee would take over.
“I think it's fair to say I was disappointed it didn't make it up to me,” he said. “But I can't say I'm surprised, given the way the (anti-money-laundering) resources were engaged.”
Bowman said he didn't even learn of the issue until late 2019.
He thought legal and privacy concerns had been overlooked and questioned, “whether the (Project Athena) flow and exchange of information as proposed (by the RCMP) is acceptable and appropriate with the legal constraints.”
On top of that, “other priorities took precedence.”
On Sept. 14, 2020, TD finally implemented the change to its bank drafts by manually adding the purchaser's name in B.C., and it plans to have a national automated system in place next year.
The Big Six were major suppliers of the unsourced money that flowed through B.C. casinos, but the public must wait until Cullen's final report to learn what they said behind closed doors — or maybe not, it seems, depending on how the jurisdictional question is settled.
“As I am sure people can understand, there could be a serious negative impact — not just for the banks, but also for public interest — to have people learn the specialized knowledge of what money launderers are doing and how banks are addressing the issue,” said Brock Martland, senior commission counsel who brought the application to go in camera.
“It would give rise to a realistic likelihood that bad actors would learn what works and what doesn't, what the banks do and don't do, and what gaps exist that they can take advantage of.”
So the system's porous and we can't handle the truth?
The world's banks are at the centre of the money-laundering problem because of the digital and regulatory integration of the global economic system.
Since the 2008 financial crisis, they have been fined billions (primarily by the U.S.) for turning a blind eye and for involvement in money laundering.