Canada has designated the Proud Boys as a terrorist entity, meaning that banks and other financial service providers will no longer be allowed to process or facilitate transactions involving assets controlled by the group. The restrictions will apply to US financial institutions in their activities in Canada and will extend to the activities of Canadian institutions outside Canada.
On February 3, 2021, the Canadian government officially designated the Proud Boys as a terrorist entity. Described by Public Safety Canada as “a neofascist organization engaged in political violence”,[i] the group has now been added to the list of entities that the government reasonably believes to have carried out, attempted, participated in or facilitated terrorist activity.[ii] Pushed by January 6e insurgency on the United States Capitol, the move follows a unanimous resolution passed by the Canadian House of Commons calling on the government to enforce such a designation.[iii]
The action sets in motion a series of requirements that will have serious ramifications for financial institutions operating in Canada. It is now illegal for any person in Canada or any Canadian outside of Canada to provide financial services or facilitate transactions for the group; they may not knowingly
- deal directly or indirectly with any property owned or controlled by or on behalf of the group;
- enter into or facilitate any transaction concerning property controlled by or on behalf of the group; or
- provide financial or other related services relating to any property controlled by or on behalf of the group, for the benefit or under the direction of the group.[iv]
These bans will likely force internationally operating banks to reconsider their AML policies and procedures with respect to their operations in Canada.
In addition to the prohibitions described above, the Canadian Criminal Code also includes disclosure requirements. Any person in Canada and any Canadian outside of Canada must promptly disclose to the Commissioner of the Royal Canadian Mounted Police or the Director of the Canadian Security Intelligence Service (a) the existence of property in their possession or control known to be owned or controlled by or on behalf of the Proud Boys; and (b) information on any transaction concerning property controlled by or on behalf of the group.[v] This means that financial institutions now have an ongoing obligation to identify and report any property or transaction that they know or suspect is controlled by or on behalf of the Proud Boys. In addition, any institution that identifies assets in its custody that are owned or controlled by the group may not allow the group access to property, and the institution may not process or alienate property.
In accordance with Article 83.11 of the Criminal Code, institutions providing financial services must certify to their primary regulatory authority whether they are in the possession or control of any property belonging to the group at least once a month.[vi] The types of entities that are subject to this monthly reporting requirement are:
- Foreign banks authorized to do business in Canada under section 2 of the Bank Act;[vii]
- Cooperative credit associations and savings and credit cooperatives;
- Insurance companies, including foreign insurance companies licensed to do business in Canada under subsection 2 (1) of the Insurance Companies Act;[viii]
- Trust and loan companies; and
- Entities authorized by the Canadian authorities to carry on securities trading activities or to provide portfolio management or investment advisory services.[ix]
[i] Public Safety Canada, Currently listed entities, (https://www.publicsafety.gc.ca/cnt/ntnl-scrt/cntr-trrrsm/lstd-ntts/crrnt-lstd-ntts-fr.aspx).
[ii] Canada Gazette Part II, Flight. 155, SOR / 2021-8 (February 3, 2021).
[iii] Journals No. 49 – January 25, 2021 (43-3) – House of Commons of Canada.
[iv] Criminal Code (RSC, 1985, c. C-46), subsection 83.08 (1) (2001).
[v] Criminal Code (RSC, 1985, c. C-46), subsection 83.1 (1) (2001).
[vi] Criminal Code (RSC, 1985, c. C-46), subsection 83.11 (2) (2001).
[vii] Bank Act (SC 1991, c. 46)
[viii] Insurance Companies Act (SC 1991, c. 47)
[ix] Criminal Code (RSC, 1985, c. C-46), subsection 83.11 (1) (2001).