Wednesday, January 31, 2024

What does the recent ruling on the Emergencies Act mean for your banking rights?

A Federal judge ruled last week that the emergency banking measures taken to end the Ottawa convoy protest in 2022 contravened the protestor's rights. In this post I want to provide my reading of this particular ruling and what is at stake for Canadians and their bank accounts. 

To be clear, Justice Mosley's ruling touched on far more than the banking measures, and extended to the broader legality of the government's invocation of the Emergencies Act on February 14, 2022, subsequently revoked on February 23. However, since this is a blog on money, I'm going to limit my focus to the banking bits of the court ruling.

(By the way, I've written about emergency banking measures a few times before.)

To remind you, there were two emergency banking measures enacted in February 2022 that affected regular Canadians. The most well-known measure was the freezing of bank accounts. The RCMP collected the names of protestors, and forwarded these to banks and credit unions, which used this information to locate protestors' accounts and immobilize their funds. In the end, 280 bank accounts were frozen.

The second and less well-known banking measure was the requirement that banks share protestors' personal banking information with the RCMP and the Canadian Security Intelligence Service (CSIS), including how much money the protestor had in their account and what sorts of transactions they made.

Justice Mosley has ruled that these banking measures  both the freezing and the sharing  violated the Canadian Charter of Rights and Freedoms. Specifically, they contravened Section 8 of the Charter, which specifies that everyone has the "right to be secure against unreasonable search or seizure."

The best way to think about Section 8 is that all Canadians have privacy rights. These rights cannot be trodden on by the government. The police can't conduct unjustified personal searches of your body or home, say by snooping on your credit card transactions. Nor can they seize your bank statements or your computer in order to gather potentially incriminating information on you.

This doesn't mean that a Canadian can never be subject to searches and seizures. Section 8 doesn't apply when the person who is subject to a search or seizure has no privacy rights to be violated. So for example, if I leave my old bank statements in the trash on the curb, it's likely that I've forfeited my privacy rights to them, and the police can seize and search them without violating Section 8 of the Charter.

An interesting side point here is that Canadians don't forfeit their privacy rights by giving up their personal information to third-parties, like banks. We have a reasonable expectation of privacy with respect to the information we give to our bank, and thus our bank account information is afforded a degree of protection under Section 8 of the Charter.

My American readers may find this latter feature odd, given that U.S. law stipulates the opposite, that Americans have no reasonable expectation of privacy in the information they provide to third parties, including banks, and thus one's personal bank account information isn't extended the U.S. Constitution's search and seizure protections. This is known as the third-party doctrine, and it doesn't extend north of the border.

Canadians can also be lawfully subject to searches and seizure by the police if these actions are reasonable, as stipulated in Section 8 of the Charter. There are a number of criteria for establishing reasonableness, including that a search or seizure needs to be authorized by law, say by a judge granting a warrant. In addition, the law authorizing the warrant has to be a good one. (Here is a simple explainer.)

Before we dive into why Justice Mosley ruled that the government's bank account freezes and information sharing scheme violated Canadians' rights, we need to understand the government's side of argument.

On the eve of invoking the emergency measures, Prime Minister Justin Trudeau promised that the government was "not suspending fundamental rights or overriding the Charter of Rights and Freedoms." He reiterated this a week later after the Emergencies Act had been revoked:

But what about the legal specifics of the banking measures? Were they compliant with the Charter, and how? Government lawyers argued from the outset that the requirement for banks to share personal banking information with the RCMP and CSIS did not violate Section 8 of the Charter. While the sharing order constituted a search under Section 8, it was a reasonable search, they said, and reasonable search is legitimate.

As for the freezes, and here things get more complicated, the government maintained that they did not constitute seizures at all, and thus weren't protected under Section 8. The government begins with a literal argument. The funds in the 280 frozen bank accounts were not taken or seized; rather, banks were simply asked to "cease dealing" with some of their customers in such a way that these customers never lost ownership of their funds. This was a mere freeze, the government claims, rather than a harsher sort of government "taking" of funds , say like a Mareva injunction, warrant of seizure, or restraint order, all of which are seizures under Section 8 of the Charter.

As back up, the government offered a more technical argument. According to Canadian legal precedent, it is only certain types of government searches and seizures that trigger Section 8 protections. These are laid out in a case called Laroche v Quebec (Attorney General). Specifically, only those seizures occurring in the process of an investigation and prosecution of a criminal offence are protected. The government maintains that the freezes it placed in February 2022 were not related to a criminal offence  they were merely designed to "discourage" participation in the protest  and so they were not the sorts of seizures protected by the Charter. (The government's full argument that it laid out for Justice Mosley here.)

The invocation of the Emergencies Act required the independent inquiry be launched, the results of which were released in February 2023. The commissioner of that inquiry, Justice Rouleau, ended up siding with the government's assessment of the legality of the bank account freezes. The freezing of accounts was "not an infringement" of section 8 of the Charter, wrote Rouleau, because they were not a seizure.

Here I'm going to briefly inject my own personal thoughts as a citizen blogger.

Look, I think it's a good thing that the government has various financial buttons at its disposal that it can press to lock or restrict my funds, like restraint orders. But I also think its a good thing that these buttons are subject to certain controls, one of which is that they must respect my basic rights, even in an emergency situation. I find it somewhat worrying that in this particular case the government seems to be arguing that it has at its disposal a new type of "immobilize funds" button that is completely exempt from charter oversight due to the fact that it, somewhat arbitrarily, escapes definition as a seizure. This seems like a distinction without a difference to me.
Disagreeing with both Justice Rouleau and the government's logic, Justice Mosley in his judicial review ends up siding with the counter-arguments deployed by two civil liberties organizations that opposed the government in the case. (Their respective arguments are laid out here and here).

First, regarding the sharing of information with the RCMP and CSIS, Mosley rules this constituted a search covered by Section 8. Contra the government, these searches were not reasonable, and thus they violated the protestors' Charter rights.

While the government had argued that the searches were reasonable due to their limited duration and targeted focus, the judge finds that they lacked an "objective standard." Banks only needed a "reason to believe" that they had the property of a protestor before reporting the information to the RCMP or CSIS, but according to Mosley this criteria was too wide and ad hoc to qualify as reasonable. Would a hunch or a rumour qualify as a "reason to believe"? Perhaps.

The searches were also unreasonable, according to Justice Mosley, because they had none of the other well-defined standards for reasonable search, including a lack of prior authorization for each search by a neutral third party like a judge. In February 2022 it was bankers, not judges, that carried out the searches, assembly line-like.   

As for the freezes, Justice Mosley disagrees with the government's arguments, finding that the freezing of bank accounts did indeed constitute a seizure of the sort protected by Section 8. Adopting the viewpoint of a regular Canadian, he first argues that a "bank account being unavailable to the owner of the said account would be understood by most members of the public to be a 'seizure'."

Mosley proposes an alternative opinion that it was the forced disclosure of the financial information by banks to the RCMP and CSIS that constituted a seizure. In this reading, what was being seized was personal payments and ownership data. The protestors had a "strong expectation of privacy" in these financial records, and thus Section 8 is applicable.

So to sum up, a Federal court has deemed that the bank accounts freezes placed on protestors in February 2022 were indeed seizures, and not some other strange sort of freeze-not-a-seizure, and therefore they were subject to the Charter. As for the searches, they were unreasonable (as were the seizures). The government will be appealing to the Federal Court of Appeal, so these arguments will be re-litigated. Stay tuned.

My take is that Justice Mosley's rulings are reasonable and helpful guidelines for future governments seeking to levy banking measures in subsequent emergencies. The ruling doesn't expressly ban the levying of bank freezes, and that's probably a good thing. Let's not forget that the requirement for banks to cease dealings with protestors, albeit illegal in this particular case as per Justice Mosley, was a fairly effective measure. The threat of having their money immobilized helped get the protestors to leave, right? And not a single person was injured. Think of bank account freezes as the domestic version of foreign sanctions, a way to bloodlessly defuse an emergency situation and avoid sending in the more deadly cavalry. This seems like a good tool, no?

The catch, as Mosley suggests, is that the government needs to tighten up the the process of freezing bank accounts come next emergency so that they are constitutional. How tight? One might argue that the standard for freezes shouldn't be as high as a regular restraint order on funds during a non-emergency. On the other hand, freezes shouldn't become some sort of dark tool for circumventing the Charter.


  1. My guess is many of Canada's allies will actually be more deeply disturbed by this ruling than the Canadian govt itself(thinking of the US and UK). A Canada with Swiss style bank secrecy type policies with constitutional force of law under the Charter is not exactly something that many of Canada's allies will be welcoming. As a Congressional staffer in Washington, DC once told me the Supreme Court of Canada while not exactly a well known body is a respected one and more respected than anyone say associated with the Swiss Banking industry. Remember the a UK judge just two weeks ago(admittedly the UK doesn't have a written constitution or charter of rights) ruled that foreign targeted sanctions related to Russia's invasion of Ukraine could be applied to a UK citizen who promoted Russian propaganda for example.

    1. Not sure if I'd read this ruling as imbuing Canadian bank accounts with "Swiss style bank secrecy," though. It seems less ambitious than that.