This Is Why Journalism Is Vital To Healthy Democracies

At a time when traditional journalism is weathering both economic and political storms, we should all take a moment to reflect on the vital role it plays in healthy democracies. The following story, about a joint investigation by The Toronto Star and The National Observer of FINTRAC, (Canada’s money laundering and terrorist financing enforcement agency), is illustrative of this truth.

As I previously wrote, FINTRAC chose to keep secret the identity of a bank that it penalized for failing to report a suspicious transaction and committing hundreds of other violations in its dealings with a controversial client. Thanks to journalism's dogged determination (which is not cheap, by the way), the mystery is over.

It took 10 months of media scrutiny and public outrage before Canadians learned Manulife Bank of Canada was the mysterious financial institution behind a $1.2-million fine for money-laundering violations.

The decision to confer anonymity upon this giant financial institution was puzzling, given that the same day in April, a handful of much smaller companies — facing far less severe fines — were publicly named by FINTRAC. This is all part of a pattern:

Over the past eight years, FINTRAC has named 40 companies for violating the law while keeping secret another 55.

Left unanswered is the reason for this double-standard, especially disturbing given the scope of Manulife's malfeasance:

-Manulife’s fine, which was reduced twice from an initial $1.8 million, was for five different types of violations of anti-money laundering and anti-terrorism financing law, involving a failure to report transfers totalling at least $12.2 million.

-The bank failed to report one suspicious transaction to FINTRAC — labelled a “very serious” violation that experts say undermines Canada’s system to detect financial crimes and trace dirty money.

-Manulife also failed to report 1,174 outgoing international electronic transfers of $10,000 or more, 45 deposits of $10,000 or more in cash and four incoming international electronic transfers of $10,000 or more.

-The bank was also fined for failing to “develop and apply compliance policies and procedures.”

Curiously, for much less serious violations, FINTRAC showed no such penchant for secrecy. Those named and shamed included one whose misdeeds seem relatively minor:

Mahdi Al-Saady, CEO of Altaif Inc., an Ottawa-based money exchange and transfer company, was hit with a $42,600 FINTRAC fine — and publicly named — in 2014.

The violations for which Altaif was fined included failing to report the sending and receipt of money transfers of more than $10,000 — two of the same violations the unnamed bank was found to have committed.

The fact that Altaif was named is, of course, not the issue. The real question is why all who run afoul of FINTRAC are not treated the same, with the rules rigidly applied.

I have my own suspicions, but I leave it to informed readers to draw their own conclusions.

A Special Understanding

Under successive neoliberal administrations in both Canada and the U.S., it has long been demonstrated that those occupying the upper echelons of our fractured societies are granted a myriad of benefits, not the least of which seems to be a virtual moratorium on prosecutions when wrongdoing is uncovered and proven. The fact that no one went to jail over the 2008 financial meltdown is but the most egregious example. Indeed, such is their power and arrogance that corporate executives were given bonuses from the very bail-out money that taxpayers funded for those institutions and enterprises deemed "too big to fail." When there is punishment of any kind for malfeasance, it is usually just fines which the errant entity can then use as tax write-offs.

Although the strongest examples of special treatment can be found stateside, Canada has its own way of dealing with financial malfeasance that should anger all of us, reflective as it is of the neoliberalism that pervades our land.

Thanks to a joint investigation by The Toronto Star and The National Obsserver {a fine online newspaper that offers subscriptions and solicits donations to support its journalism), we have yet another example in the deeply offensive special treatment by Fintrac, Canada’s money laundering and terrorist financing enforcement agency, of a major Canadian bank.

Canada’s money-laundering agency is refusing to name the bank hit with an unprecedented penalty for failing to report a suspicious transaction and committing hundreds of other violations in its dealings with a controversial client. Details of the failures — including one the agency described as “very serious”...

For nearly two years, the bank failed to report a series of unusual transactions in its client’s account, despite news reports at the time revealing he was under criminal investigation in the U.S. The transactions included dozens of large cash deposits and hundreds of international transfers worth more than $12 million, reveal the newly-released documents.

Despite the fact that the law requires reporting of transaction amounting to 10,000 or more, from

early 2012 to the end of 2013, the unnamed bank processed 1,179 international electronic transfers of $10,000 or more from the mystery client, who used a “potential shell company” and operated out of an unnamed country associated with money laundering. It also accepted 45 cash deposits of $10,000 or more, all without ever reporting the transactions to Fintrac, Canada’s money laundering and terrorist financing enforcement agency, as required by law.

With some deductive sleuthing, the newspapers were able to determine that the individual involved in these transactions was

Manitoba online pharmacy entrepreneur Andrew Strempler, 42, who pleaded guilty to mail fraud charges in the U.S. after his shipments were found to contain counterfeit medication.

While Strembler served his time and was released in October of 2015, Fintrac has treated the bank, which, under existing law, it could name, to anonymity after levying a $1.15 million fine, certainly a modest penalty given what the law allows:

Anyone who knowingly fails to report a suspicious transaction to FINTRAC can face a $2 million fine and up to five years in prison, under Canadian legislation on money laundering and terrorism financing. The maximum administrative monetary penalty for the bank's hundreds of violations would have been $1.8 million, the documents said.

The original penalty was $1.5 million, but Fintrac reduced it after 'negotiating' with the bank, which argued that the harm done was minimal.

I beg to differ with its decision to protect a major bank's reputation. Flagrantly violating the law 1,225 times in this case is damaging both to confidence in our banking system annd deeply demoralizing to the average person's sense of fair play. As Christine Duhaime, a lawyer who specializes in anti-moneylaundering law says,

“Joe Average who is fined for any administrative infraction is not afforded secrecy in this way and the rules should apply to all Canadians, legal and natural personals, equally, from banks to Joe Average.”

Yet Fintrac somehow seems to feel that they have really brought down the hammer in this case:

Fintrac said Tuesday’s announcement is meant to deter others from failing to report.

But the bank’s name was not added to a list of violators published on the agency’s website. The home page shows the name of many smaller companies, such as jewelry stores, independent securities dealers and real estate brokerages.

Quite unapologetic, Fintrac, according to The Observer report, feels it has done exemplary work in this case:

FINTRAC said it was trying to be discreet.

“The process has concluded and FINTRAC exercised its discretion not to name the entity so that we could send a timely message of deterrence to the 31,000 businesses that are subject to the Proceeds of Crime, Money Laundering and Terrorism Financing Act”.

I'm afraid that the only message Fintrac has managed to convey is confirmation that there is indeed one law for the 'giants' who walk among us, and quite another for the rest of us. It is far past time that this special understanding (wink, wink, nudge, nudge) between certain societal segments and the massive insult to the rest of us ended.

What Are They Hiding?

You tell me.

The federal agency that levied a $1.1-million fine against a Canadian bank for failing to report a suspicious transaction had intended the hefty penalty to send a stern message to the financial sector. Instead, it has fuelled an outcry over why the name of the penalized bank has been kept a secret.

On Wednesday, all of the Big Six Canadian banks said they were not fined by Financial Transactions and Reports Analysis Centre of Canada, or FinTRAC, leading to speculation that the offending bank is a smaller entity or the Canadian branch of a foreign institution.

FinTRAC said that the fine, the first of its kind levied against a Canadian bank and paid two weeks ago, was supposed to act as a deterrent against taking a loose approach to reporting standards. Rules have been toughened up in recent years in response to money laundering and terrorism financing activities.

But it is unclear how this deterrent is supposed to work when the offender is granted anonymity and whether an unintended consequence of the fine is that it casts suspicions upon the entire financial sector.

While FinTrac has been happy in the past to name names, its reluctance to identify a big player is perhaps best explained this way:

Michael Baumbach is director of Toronto-based Diamond Exchange Toronto Inc. which was fined $12,750 and named by Fintrac in March. He says the agency is unfairly punishing smaller firms like his jewelry business, which is trying hard to comply, while letting bigger players with deeper pockets off the hook.

He believes the bank’s name was kept secret because it has resources at its disposal to give Fintrac a legal headache. Meanwhile, he feels powerless when trying to get answers about why it fined his company, which now faces bankruptcy over what he says is an unjust fine.

“The banks are not just going to sit back and have their names slipped, but a small company — we can’t do anything,” he said.

“All they’re doing is putting the smaller businesses out of business and the bigger businesses who have the legal clout to contest it, obviously they’re not naming names because of the fact that these companies will do something.”

Yet another reminder that the thing we call justice can too frequently be a fluid and elusive concept, more honoured in the breach than in the observance.