Name and shame

Canada’s watchdog against financial crime, including money laundering and terrorist financing, needs to get its priorities straight.

For more than a year now, the Financial Transactions and Reports Analysis Centre of Canada (known as Fintrac) has refused to identify the only bank known to have broken its rules. This, despite the fact that it regularly names smaller companies that fail to follow its regulations.

There is no reason not to name the mystery bank, and plenty of reasons to do so.

The agency has said it wants to send a strong message that it intends to make sure banks and other institutions follow the law.

It took a major step in that direction by levying a penalty of $1.15 million against a bank for failing to report 1,200 suspicious transactions carried out by a convicted fraudster named Andrew Strempler, according to documents obtained by reporters at the Star and National Observer.

But Fintrac then decided to keep the name of the bank secret. It chose to exercise its discretion not to identify the bank, even though it met two of the agency’s criteria for public naming. It committed a “very serious violation” and the penalty exceeded $250,000.

Not naming the bank creates a host of problems. And indeed, some staff members at the Office of the Superintendent of Financial Institutions, which oversees the country’s banks, have warned about these consequences in documents obtained by reporters.

Naming and shaming an institution that flouts the law is part of the punishment and should act as a deterrent to others. If being publicly identified is discretionary, both the penalty and the deterrent effect are softened.

Other innocent banks and financial institutions may fall under suspicion because the guilty party is not named.

Directors and officers of the unnamed bank may go on to serve on other boards or be hired by other firms, without anyone knowing what happened under their watch.

Further, as Richard Leblanc, a professor of corporate governance at York and Harvard universities notes, the mystery bank avoided a potential stock-price decline, loss of customer trust, anger from investors and possibly even civil prosecution.

It’s no surprise, then, that public reaction to the decision to keep the bank’s identity secret has been strongly negative, as the Star reported on Thursday.

Fintrac should listen to the criticism and correct its mistake. The public expects much greater transparency and accountability in these matters. The agency should publicly identify the bank in question and let it suffer the consequences of its actions.

There is no reason not to name the mystery bank, and plenty of reasons to do so