After almost a year of speculation, Manulife Bank of Canada was unmasked on Monday as the bank hit with a $1.15 million penalty for violating Canada's money laundering rules over 1,200 times.

The outing comes nearly a year after Canada's financial intelligence agency announced the unprecedented penalty, the first of its kind for a Canadian bank. At that time, the agency at the heart of the controversy, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), was flooded with phone calls and complaints for failing to identify the penalized bank or details of its violations. However, some of that information, involving a client who was known to be under criminal investigation, was uncovered in December following a joint investigation by National Observer and the Toronto Star.

Manulife finally broke its silence through a statement that admitted it had made "administrative" mistakes which triggered the violations. But it denied enabling or facilitating any money laundering.

Hours after Manulife came forward on Monday, FINTRAC's top boss admitted his agency "may not have" met public expectations of transparency, but still refused to confirm the bank's identity. Although FINTRAC has committed to reviewing its policy for disclosing names of businesses that get fined, the apparent contradiction in its existing approach has prompted some critics to allege that the federal agency allows big banks to play by a different set of rules than the rest of the businesses under its jurisdiction.

“I can give you one word for that: that's unfair,” said Mahdi Al-Saady, CEO of Altaif Inc., an Ottawa-based money exchange and transfer company hit with a $42,600 FINTRAC fine in 2014. He spoke to National Observer and the Star before Manulife made its statement.

Al-Saady's company was fined for five violations, including two of the violations Manulife committed 1,178 times: failing to report the sending or receipt of money transfers of more than $10,000.

Smaller businesses got named

But unlike Manulife, Altaif's name was published online in July 2014, months after the fine was imposed.

For a small business, the FINTRAC penalty is a one-two punch, Al-Saady said: the fine, plus the long-term embarrassment of having the company's name listed online as a violator of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. The notice will remain on FINTRAC's website until 2019.

“Even still, when you search our name on Google, you’ll find our name on a list. How are we going to get rid of this?” Al-Saady asked. Business has suffered since the fine, he said: “I’ve been rejected from many institutions. Even suppliers, like for currencies, as soon as they see our name, they just refuse to deal with us.”

FINTRAC told National Observer in December 2016 that the organization had chosen not to name the bank in order to “send a timely message of deterrence” to other institutions in Canada. That decision was also widely criticized by money laundering experts.

“In exercising my discretion to withhold the name of the bank, I understand that it may not have met public expectations in relation to openness and transparency,” FINTRAC director Gérald Cossette said in a statement on Monday.

Cossette said FINTRAC would work with Finance Canada to “review the legislation in relation to our penalty program.

“We are also examining our administrative monetary penalty policies to ensure, among other things, that they strike an appropriate balance between the need for transparency and the requirements of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act,” Cossette wrote.

FINTRAC kept 55 other names secret

Altaif is one of 40 companies named publicly by FINTRAC in the past eight years. The agency has chosen to keep secret the names of 55 more.

On the same day that the $1.15 million fine was first reported, notices of fines aimed at three smaller companies were posted on FINTRAC's website. All three were found to have committed fewer violations than Manulife.

“It’s very unfair to name someone and not name someone else,” said Michael Baumbach, director with The Diamond Exchange, a jewelry store in downtown Toronto with three sales staff that was fined $12,750 by FINTRAC for violating three administrative regulations.

“Regardless of the money involved it’s about the principle. They were out to make a point: Don’t mess with FINTRAC …Why would you damage the reputation of a small company — which is the backbone of the country — and not a bank which was, as I understand, engaged in transactions deemed to be suspicious?” Baumbach said in an interview.

Unlike Manulife, which among other violations failed to report 1,178 incoming or outgoing transfers over $10,000 as well as 45 cash deposits over $10,000, The Diamond Exchange's violations were purely administrative. FINTRAC found that the jewelry company had failed to maintain compliance procedures and risk assessments and hadn't developed and maintained a compliance training program for its employees.

Fines levied against a Toronto securities dealer and a Regina jewelry store were also published on the same day, adding up to $54,750 in fines. Manulife was fined about 20 times more than all three combined.

Some other Canadian banks maintain silence

Journalists with National Observer and the Toronto Star recently contacted every one of Canada's 32 Schedule I banks, asking each clearly state whether or not they had been fined.

Nearly all denied that they were the bank in question. But Manulife refused to say. “We do not comment on any matters regarding our regulators, whether they are rumour, speculation or fact,” a spokesperson wrote in an emailed statement on February 22.

In a statement on Monday, Manulife Financial Corporation, which owns Manulife Bank, confirmed that it had received the $1.15 million fine, which it said was the result of “administrative lapses.”

“Although we operate at the highest ethical standard, we are capable of administrative errors,” the statement said, adding that Manulife “did not enable or facilitate money laundering” and that errors at the bank that led to the violations had been “remedied in the first half of 2014.”

Of the 32 banks contacted by National Observer and the Star, TD Canada Trust, CS Alterna, DirectCash Bank, Rogers Bank and Wealth One Bank of Canada did not reply. Bridgewater Bank, a Calgary-based bank owned by the Alberta Motor Association, said in an email that the bank was "unable to respond." BMO also declined an interview request to respond to questions.

Documents obtained by National Observer and the Star under access to information legislation show that officials at the Office of the Superintendent of Financial Institutions (OSFI), the federal body which regulates banks, were concerned about the precedent set by choosing not to name Manulife. “As soon as the penalty is published with no name, all the banks will want the same treatment if they are penalized,” OSFI senior advisor Nicolas Burbidge wrote.

Bureaucrats informed Bill Morneau's office about National Observer and Toronto Star investigation

But a senior strategist in communications at Finance Canada, which was informed by FINTRAC about questions raised by National Observer and the Star in December, said he had no concerns about the responses prepared by the agency as it defended its refusal to name the bank: "Nothing raises significant concern, either for policy or communications," the Finance Canada strategist wrote.

Altaif CEO Al-Saady said he doesn't have a problem with the system, even if he disputes Altaif's fine – the result of "a huge misunderstanding," he said. But he added that it didn't make sense that a larger institution wouldn't also have its name published.

In the U.S., big banks are often named publicly when they receive fines, he said, noting the recent cases of Deutsche Bank, which was fined fined $7.2 billion USD in January, as well as HSBC, fined $33 million USD in 2016. “It’s good to let people know, because we are a free society and a civil society, and we need to be clear and transparent,” Al-Saady said.

It's even more important for a bigger institution to be named publicly, he said, because the financial penalty is easier for a big bank to absorb. "For me, $42,000 is huge. But for the banks, pennies. The penalty they have is nothing," he said.

FINTRAC has also refused to identify Manulife's client, and documents released by the agency have redacted the client's name and identifying information. But the description of the client's criminal history and activities line up with those of Andrew Strempler, a Manitoba-based online pharmacy entrepreneur who was convicted of mail fraud in the U.S. in 2012, after some of the drugs he shipped to American clients were found to be counterfeit.

Facebook, Andrew Strempler, Fintrac, bank
Former Canadian Internet pharmacy entrepreneur Andrew Strempler in November 2009. Facebook photo

The client's name was also redacted from FINTRAC and OSFI documents obtained under access to information legislation by National Observer. Documents show that a media officer with Finance Canada noted the conclusion that Strempler was the client stands on "circumstantial, but extensive, evidence."

Those documents also show that, after National Observer and the Star contacted FINTRAC in December 2016, FINTRAC contacted Finance Canada to give the department advance notice that a story on the fine would be published soon. Bureaucrats at the department also notified Liberal political staff in the office of Finance Minister Bill Morneau that the story was coming. The department was unable to locate any documents showing that Morneau's office responded to this heads up.

with files from Bruce Livesey

Editor's Note: This article was updated at 9 p.m. ET with additional details about the case, including information from newly-released documents from Finance Canada.

Along with a fine at least 15x the measly 1.15 million levied, they should be forced to issue a public apology admitting & taking full responsibility for their financial crimes. A clause in the plea bargain requiring an automatic fine of 100x the original amount for any denial, minimizing, or spinning of the crimes would send a message. Like the CRA protects and shields tax thieves as well as dirty accountants like KPMG (then they go work for them!), FINTRAC is itself corrupt and criminal.

Canada has become a haven for international money launderers with the price being a horribly distorted housing market and valuable agricultural land and now even BCs biggest care homes going to Chinese investors. There is no way even a fraction of this money is legal and our governments are turning a blind eye with agencies like FINTRAC or the CRA not doing their jobs--either from political interference or lack of staff? This article in Seattle Times shows that the U.S. Department of Justice has far more teeth and willingness to track down and sanction foreign money. And notice the route the laundered money took! It came through Canada. I'd sure like to know what bank enabled this crime. http://www.seattletimes.com/seattle-news/crime/chinese-immigrant-who-bou...

StoriesHaveTwoSides, thanks for the link - huge difference from Canada. Immigration fraud is another crime being welcomed here, especially if they claim to be wealthy. China claims billions of stolen dollars have been invested in Canada's real estate and many lawsuits have been filed. With the recent BC court decision (https://www.google.ca/amp/www.cbc.ca/amp/1.3998380) this will increase lawsuits from overseas and cause more court delays for everyone. I am alarmed at the lack of discussion about China's motives. If China claims ownership of billions of dollars MORE in property and courts agree, instead of having to sell the property, pay the taxes, and take the cash, could they retain ownership? If so, it is a loophole that would not only transfer large swaths of real estate into corrupt foreign ownership, potentially takes even more housing off the market since there is no guarantee it will not be left empty and would allow a foreign government to wreak absolute havoc on the housing market in Canada with their vast holdings. I hope I am alarmed over nothing and that laws would force the sale of all holdings, but I have no faith in the system. From building mansions on ALR in BC to offshore corporations and/or developers buying farmland across the country, the 21% of our food grown in Canada isn't even secure.

Really? The US Department of Justice?! You mean, we're worse than the people who INVENTED "deferred prosecution"? That's pretty sad.

So, like, a thousand bucks per violation? Whoa, that'll deter 'em!