Canada's banks let customers down over the Emergencies Act

To hear Canada's big banks tell it, they simply love their customers and want them all to feel safe, happy and validated. Just think of TD's plush green chairs. Or Royal Bank's ads affirming “We believe in you.” They want you to feel very, very comfortable leaving your money with them.

But watch out if the federal government tells them otherwise. During the Emergencies Act, the banks suddenly became the tip of Ottawa's spear in its shutdown of the trucker protest. They deliberately caused extreme financial pain for some of their customers by freezing the accounts of alleged protesters and their supporters. And they did so without ever publicly questioning the legitimacy of the government's order or challenging its constitutionality in court. Not every industry abandons its supposedly beloved clientele so quickly or so meekly.

On Feb. 15, a day after the invocation of the Emergencies Act, the federal government issued an Emergency Economic Measures Order compelling Canadian banks and other financial institutions to cease all dealings with individuals “engaged, directly or indirectly, in an activity” deemed illegal by the government.

The banks were essentially handed a list of names by the RCMP, as Angelina Mason, vice-president of the Canadian Bankers Association, explained to the House of Commons Finance Committee in March. If the names and transactions matched their customer records, the accounts were immediately frozen. At least 257 accounts were blocked in this way. Given the expansive manner in which the order was described, however, anyone who gave even $20 to the protest movement could have found themselves unable to access their own money, had the RCMP put them on its list.

The most unsettling aspect of this new and unprecedented financial threat is confusion about who actually wields the power. In his committee testimony, RCMP Assistant Commissioner Michel Arcand claimed the emergency order “gave financial institutions the ability to freeze financial products of individuals and companies suspected of involvement in prohibited activities.” To hear the cops tell it, they just provided a list of suggested names and the banks took it from there. But when asked if it was possible for a bank to refuse to freeze an account of someone whose name appeared on the RCMP's list, Ms. Mason of the bankers' association said it was “a legal obligation” to lock down every name.

Claims that the banks decided which accounts to freeze are meant to perpetuate the idea that the Canadian Charter of Rights and Freedoms remained in effect throughout the Emergencies Act. A bank can lock down any customer's account based on its own internal risk assessment without affecting anyone's Charter rights. But if governments want to do that, they need a court order. It's called due process. Bypassing of the courts means the Charter wasn't in effect.

Following due process may be inconvenient and time-consuming for a government panicked about a raucous trucker protest. But it is certainly not impossible. Ontario obtained just such a court order five days before the federal government opted to go the nuclear route.

The legally slippery nature of the freeze orders clearly redounds on the Trudeau government. But it is equally remarkable that the banks went along with such a betrayal of their customers' best interests without raising a ruckus of any kind.

Not every industry so willingly abandons its clients without a fight. In 2014, for example, police in the Peel Region of Toronto ordered Rogers and Telus to hand over a massive set of data from dozens of cellphone towers in an attempt to solve a puzzling rash of robberies. While both companies say they respond to routine production orders on a regular basis, the Peel Region “tower dump” order was so sweeping — entailing information on the location of over 43,000 law-abiding citizens — that they felt compelled to challenge its legality on behalf of their customers.

A final court ruling in 2016 both affirmed the companies' standing to defend their customers' privacy rights and chastised the original order as “unconstitutional.” It was a clear win for Canadian citizens. But such an outcome was only possible because private businesses stood up to the government in court. Whatever you might think about Canada's cosseted cellphone industry, Telus and Rogers spent their own resources in a principled defence of their customers' rights. Put in the same squeeze, Canada's banks embarrassed themselves with their lack of gumption and principles.

“Any of the banks could have challenged the lawfulness of the order made pursuant to the Emergencies Act, and applied for an injunction pending the hearing of the case,” says Queen's University law professor Bruce Pardy in an interview. It might not have succeeded but “at least it would have sent a signal that they regarded their customers' interests as sacrosanct and objected to being strong-armed by the government.”

And how were the banks rewarded for being such loyal servants of the federal government? A few weeks later, Ottawa's 2022 budget hit the banking sector with billions in new taxes, including a special, higher corporate tax rate.

Perhaps now the banks appreciate how their customers felt in February.

ANY OF THE BANKS COULD HAVE CHALLENGED THE LAWFULNESS OF THE ORDER.