A civil liberties report calls for greater transparency, case-by-case assessments and meaningful avenues of appeal when financial services are withdrawn.
Canadian policymakers and financial institutions are facing renewed calls to strengthen safeguards around the withdrawal of banking services from non-profit organisations and individuals suspected of presenting terrorist-financing risks.
A report released in September by the International Civil Liberties Monitoring Group (ICLMG) argues that organisations affected by so-called “de-risking” have very few practical avenues to challenge decisions that restrict or terminate their access to financial services. The group describes de-risking as the withdrawal or limitation of banking facilities because an institution considers a particular customer, activity or jurisdiction to carry heightened regulatory, compliance or reputational risks.
The report focuses on the interaction between Canada‘s anti-money-laundering and anti-terrorist-financing framework and the internal compliance systems used by banks and payment providers. According to the ICLMG, organisations working in humanitarian assistance, international development and communities with links to higher-risk jurisdictions can face particular difficulties.
The report proposes stronger procedural safeguards before terminating accounts. These include providing customers with clearer explanations for closures, allowing organisations an opportunity to respond to concerns, and establishing an independent review mechanism separate from the original decision makers. The report contains 12 recommendations directed at federal authorities, supervisory bodies, financial institutions and payment processors.
The issue presents a difficult policy balance. Financial institutions have obligations to identify and manage money-laundering and terrorist-financing risks, while charities and other non-profit organisations require reliable access to banking systems to receive donations, pay employees and suppliers, and transfer funds for legitimate humanitarian activities.
The Canadian Bankers Association has emphasised that banks do not take account closures lightly. The association said banks operate independently while considering applicable legislation, regulatory requirements and institution-specific circumstances.
The federal government has also indicated that it continues to engage with stakeholders on maintaining effective and proportionate anti-terrorist-financing measures, although officials had not immediately responded to the report’s recommendations when the findings were published.
The debate therefore centres not on whether Canada should combat illicit financing, but on how those controls should operate when legitimate organisations become subject to heightened scrutiny. The ICLMG argues that clearer procedures and independent review may give affected customers a way to contest mistakes without weakening the country’s financial-security framework.
As Canada’s financial system continues to rely heavily on risk-based compliance, the question of how banks distinguish between genuine security threats and legitimate but higher-risk customers is likely to remain an important regulatory issue.
