Arguably the most alarming part of Canada’s 1988 Emergencies Act, set into operation by Prime Minister Justin Trudeau, are its provisions exhorting financial services industry members to seize the assets of suspected malefactors and their associates, with protection from liability.
In the “great minds work alike” category, I see Nick Corbishley has a related post going live on systems going haywire at Canada’s biggest banks on the same timetable as the intended Emergencies Act trucker intervention. I had assumed that any process of trying to shut off conduits to protestors like GoSendMe and freezing accounts of what at this point would presumably be a small number of named suspects would be a manual process, as explained below. If the authorities actually tried to get a rushed code implementation, no wonder things fell over.
Note that, at least according to the writeups in the Canadian press, these provisions ave more draconian and Stasi-like than even the much-hated US asset forfeiture laws. In the US, it is the government that confiscates the property; the owner then has to go to court to try to get it back.1 By contrast, the Canadian Emergency Powers Act is an extrajudicial process, and banks and financial firms are being urged to grab assets of mere suspects and those with links to them.
From Global News:
The government published details late Tuesday on the requirements covering a wide range of the financial industry including banks, credit unions, insurance companies, portfolio managers and investment counselling services…
The emergency orders direct financial institutions to suspend services to both individual and business clients who they suspect are aiding the blockades.
They also require the institutions to conduct due diligence to identify accounts linked to the protests, and to disclose to the RCMP or CSIS any property or transactions they have identified as owned or controlled by those designated people….
Cryptocurrency platforms are also covered by the order and some, including Toronto-based BitBuy, say they’ve already received guidance on cryptocurrency addresses from law enforcement….
In a media briefing Wednesday, senior government officials said they are in ongoing discussions with financial institutions on the applications of the order.
And the National Review:
Canada’s Deputy Prime Minister and Minister of Finance Chrystia Freeland said Monday that the government could use the Emergencies Act to cut off the financial pipelines of those involved in the blockades.
“As of today, a bank or other financial service provider will be able to immediately freeze or suspend an account without a court order. In doing so, they will be protected against civil liability for actions taken in good faith,” Freeland said…..
Freeland specified that crowdfunding sites and the payment service providers must be approved by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), the national financial intelligence agency. These companies are also required to report large and suspicious transactions to FINTRAC.
“The illegal blockades have highlighted the fact that crowdfunding platforms, and some of the payment service providers they use, are not fully captured under the Proceeds of Crime and Terrorist Financing Act,” Freeland said. “We are making these changes because we know that these platforms are being used to support illegal blockades and illegal activity which is damaging the Canadian economy.”
Now even though this all sounds and is very ugly, it’s not as far reaching as it sounds. Or perhaps to put it more clearly, there is a significant gap between intent and what will happen.
First consider a big fly in the ointment: this sweeping measure could be moot in a week. From the BBC:
The Emergencies Act, passed in 1988, requires a high legal bar to be invoked. It may only be used in an “urgent and critical situation” that “seriously endangers the lives, health or safety of Canadians”. Lawful protests do not qualify….
The powers announced by Mr Trudeau go into effect immediately – but his government has to present it to the House of Commons and the Senate within a week and needs a green-light or the proclamation would be revoked.
All main Canadian federal political party leaders have said it’s time for the protests – which have had an impact on supply chains, the national economy and the country’s relations with the US – to end.
But they aren’t all necessarily on board with Mr Trudeau’s unprecedented move.
Conservative leader Candice Bergen voiced concern it could inflame the situation.
The support of NDP leader Jagmeet Singh may give Mr Trudeau enough votes to pass it through the House – though the Senate could still be a hurdle.
Now if you are a bank, how are you going to respond? You’re going to slow walk cooperation.
First, note that even though the Emergencies Act attempts to pin the tail of identification of bad guys on financial players, they can quite reasonably say that they aren’t in the business of policing and have no idea who is at the protests. So in practice, the government will need to name names and suspect money sources and ask the banks to clamp down on them.
A second question is how well Canada’s intel state can link particular faces seen at protests or truck license plates with names and bank accounts. Since Canada has only five large banks, it might not be hard. But the banks can (again oh so reasonably) contend that aside from blocking transfers in from certain sources, and perhaps also freezing the accounts that were on the receiving ends of those transfers, everything else will be highly manual and that takes time.
In addition, it’s not clear how Canada can reach the fundraising platforms if they are not chartered in Canada and have no physical presence there. However, any movement of funds into a Canadian financial institution from a non-Canadian source and/or over a certain size could trigger an alert, and as I am sure Freedland would like, a seizure not just of the transferred funds but also the entire recipient account.
Mind you, there are work-arounds, particularly given the proximity of the protests to the US: have the funds transferred into an account on the US side, withdraw cash, and take it across the border physically. Or perform the same operation and send from the US to Canada via Western Union in small lots to friendlies. Ideally send it to a store in an immigrant area or near a uni.
From what I can tell, the protestors do not yet need a lot of funding (they will when those arrested get hauled into court), so it also appears the monies raised on GoFundMe and later GiveSendGo were in excess of their needs.
As an aside, recall that the shutdown of GoFundMe, and its tardiness in saying it would return the donated funds, led attorneys general in several conservative states to say they were launching investigations. This is long overdue. Even though PayPal is also unregulated, there are some checks on its operations, the big one being that it is used almost entirely for one to one transactions. So both sides know what they are paying and receiving.
By contrast, a many to one platform is rife for abuse. Pray tell, what protection do GoFundMe donors have against GoFundMe simply pocketing 20% of the gross?
Nevertheless, anything that makes US asset forfeiture look good is plenty bad. And consider the high potential for error. What happens to those incorrectly identified as protestors or “linked” to them? “Linked” is not defined and could conceivably amount to what a vindictive or clueless administrator wants it to mean.
What happens if your accounts are incorrectly frozen? The provisions sound lame:
To have financial accounts unfrozen, either because someone has stopped protesting or because of mistaken identity, officials said individuals would have to reach out to their financial institutions who would then validate the information and take necessary measures.
Banks are not in the business of “validating” actions taken in the real world. Given the lack of liability, it sounds as if there is no recourse (aside from enlisting the press) if they are uncooperative or just slow. Look at the recent reporting on the UK Post Office scandal, where IT errors from 2000 to 2014 resulted in dozen of branch managers being falsely accused of stealing and in many cases suffered huge financial penalties and went to prison. There, due process went off the rails because no one wanted to consider that the systems were wrong. Here, there’s not even a pretense of due process. Canada is implementing a financial-services-run star chamber.
1 Wikipedia on US civil asset forfeiture (note the burden of proof is lower in a civil than in a criminal case):
There are two types of forfeiture (confiscation) cases, criminal and civil. Approximately half of all forfeiture cases practiced today are civil, although many of those are filed in parallel to a related criminal case. In civil forfeiture cases, the US government sues the item of property, not the person; the owner is effectively a third-party claimant. The burden is on the government to establish that the property is subject to forfeiture by a “preponderance of the evidence.” If it is successful, the owner may yet prevail by establishing an “innocent owner” defense.
Federal civil forfeiture cases usually start with a seizure of property followed by the mailing of a notice of seizure from the seizing agency (generally the DEA or FBI) to the owner. The owner then has 35 days to file a claim with the seizing agency. The owner must file this claim to later protect his property in court. Once the claim is filed with the agency, the U.S. Attorney has 90 days to review the claim and to file a civil complaint in U.S. District Court. The owner then has 35 days to file a judicial claim in court asserting his ownership interest. Within 21 days of filing the judicial claim, the owner must also file an answer denying the allegations in the complaint. Once done, the forfeiture case is fully litigated in court.
In civil cases, the owner need not be judged guilty of any crime; it is possible for the government to prevail by proving that someone other than the owner used the property to commit a crime (this claim seems outdated and as such would be contradicted by the “innocent owner” defense). In contrast, criminal forfeiture is usually carried out in a sentence following a conviction and is a punitive act against the offender.