Some jurisdictions' laws make it a criminal offence for banks to disclose client information. If a bank becomes involved in Canadian proceedings, those foreign laws may conflict with the disclosure obligations imposed on litigants in Canada. This raises questions about when foreign law can provide a basis to excuse production or refuse the answering of a question in Canadian proceedings, and under what circumstances a Canadian court will compel disclosure despite potential foreign legal jeopardy.
The Financial Consumer Agency of Canada (FCAC) has issued a statement and a new compliance bulletin in response to recent allegations that certain employees of banks were pressured to upsell to consumers. The bulletin states that its purpose is to reinforce FCAC expectations that federally regulated financial institutions obtain consumers' express consent for new products and services in accordance with regulatory requirements.
The government recently tabled its 2017 Budget. The financial services proposals are aimed at facilitating a more resilient financial sector, a modernised deposit insurance framework that continues to protect the deposits of Canadians and promote financial stability and increased powers to combat money laundering and terrorist financing.
In April 2016 the Financial Transactions Reports Analysis Centre (FinTRAC) levied a penalty of over C$1 million against a Canadian bank, but failed to name the bank in question. The director of FinTRAC recently released a statement expressing that the message of deterrence was effective despite the decision not to publicise the bank's name. However, he acknowledged that withholding the name of the bank may not have met public expectations in relation to openness and transparency.
Financial services regulation continued to be busy in Canada in 2016. Pending changes, developments and consultations to watch in 2017 include the new draft guidelines from the Office of the Superintendent of Financial Institutions, draft guidance from the Financial Transactions and Reports Analysis Centre of Canada and the possible review and revision of the Bank Act financial consumer protection framework.
Proposed amendments to the Bank Act (Canada) which would add a financial consumer protection framework have been withdrawn from Bill C-29 in response to objections from the Quebec government. The Financial Consumer Agency will now review the framework to ensure that it provides consumer protections that are at least as strong as those available under provincial law.
The federal government has announced further restrictions that will make it more difficult for some borrowers to get mortgage loans and more costly for foreigners to speculate in the real estate market. The government has also announced that it intends to launch a consultation on the existing lender risk sharing regime, where the government takes on 100% of the risk relating to an insured mortgage.
The Federal Department of Finance recently launched a review of the legislation governing banks, insurers and trust companies under federal jurisdiction by issuing an initial consultation paper. The paper sets out some key facts relating to the sector and comments on trends that are affecting and expected to continue to affect the sector. It concludes by inviting comment on certain high-level policy questions.
The federal government has published the final version of the long-awaited regulations to amend various regulations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. Among other things, the methods for verifying identity in a non-face-to-face context have been amended to provide greater flexibility, and the definition of 'signature card' has been amended to allow signature cards to be signed electronically using "electronic data".
The high-paced growth of residential house prices is continuing to generate concern from both the Bank of Canada and the Office of the Superintendent of Financial Institutions (OSFI). OSFI recently took the somewhat unusual step of publishing a letter that was sent to all federally regulated financial institutions reminding them of OSFI's expectations for prudent mortgage lending practices as described in Guideline B-20.
The Bank of Canada recently designated the Automated Clearing and Settlement System (ACSS) operated by the Canadian Payments Association as having the potential to pose payment system risk (a 'prominent payment system'). This designation means that the ACSS will now be overseen by the Bank of Canada in accordance with the Payment Clearing and Settlement Act.
The Competition Bureau of Canada recently launched a market study of the financial technology sector. The purpose of the study is to advise financial sector regulators and other authorities on how to ensure that regulation does not unnecessarily impede competition in the sector. Among other things, it will examine peer-to-peer banking, e-wallets, mobile wallets, mobile payments, crowdfunding and online financial advisory services.
The Financial Transactions Reports and Analysis Centre of Canada (FINTRAC) recently imposed its first-ever penalty on a bank. While it is not unusual for FINTRAC to impose a penalty on a reporting entity, this case is noteworthy because FINTRAC has provided no official notice of the case; nor has it disclosed the name of the bank. In addition, the penalty of C$1 million imposed on the bank is the highest to date.
The government of Ontario has announced that it plans to update the Credit Unions and Caisses Populaires Act to implement recommendations made in a recent report prepared by the parliamentary assistant to the minister of finance. Credit unions and caisses populaires are financial institutions formed under the jurisdiction of the province that provide essentially the same services as federal banks, but have cooperative ownership.
Traditionally, banks in Canada cannot provide competitive operating leases or uninsured high loan-to-value mortgage lending. However, following GE Capital's decision to divest itself of most of its financial assets and businesses, the federal government is willing to allow banks to acquire and maintain these previously impermissible assets and businesses for a limited period, in order to replace the provision of these services.
The Office of the Superintendent of Financial Institutions recently held its annual seminar to update both in-house lawyers and outside counsel on recent activities undertaken by its legislation and approvals division. Discussion highlights included new deposit-taking institutions, leasing activities, disclosure of supervisory information, final operational risk guidance, international capital reform and cybersecurity.
With the election of a new Liberal government comes the appointment of a new minister of finance, with responsibility for the federal financial services sector. While the Office of the Superintendent of Financial Institutions provides day-to-day administration of the legislation, the minister must approve all important transactions relating to the financial institutions governed by federal legislation, as well as determining questions of policy direction.
The Department of Finance Canada recently released its initial assessment of the inherent money laundering and terrorist financing risks in Canada. The risk assessment will assist financial institutions, which are required to report suspicious transactions under Canada's anti-money laundering and anti-terrorist financing laws, to understand the risks that are present in Canada and their potential exposure to these risks.
The Office of the Superintendent of Financial Institutions has released its annual feedback on Internal Capital Adequacy Assessment Process submissions filed in 2014. The feedback relates to banks and other deposit-taking institutions that use the standardised approach to credit risk with respect to their Capital Adequacy Requirements Pillar I capital levels.
Canada has recently introduced measures to regulate some aspects of virtual currencies. Under amendments to Canada's anti-money laundering and terrorist financing legislation, the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, dealers in virtual currencies will have to register under the act. However, to date there has been limited experience in Canada with respect to fraud or money laundering involving virtual currencies.