[Joven Narwal’s article, “Fallout from Dirty Money and Its Threat to Privacy”, was previously published on May 29, 2020, by The Lawyer’s Daily (https://www.thelawyersdaily.ca/criminal/articles/19257 ), a division of LexisNexis Canada and is reproduced below]
In the fallout from Peter German’s sensationally titled and state-sponsored studies, Dirty Money and Vancouver at Risk, looms the spectre of their aftermath which include the eventual recommendations from the Commission of Inquiry into Money Laundering in B.C., political wrangling and policymaking. Thus far, policymakers have called for “greater transparency,” financial reporting requirements, unexplained wealth legislation, enhanced statutory compulsion powers and the creation of vast government databases detailing “beneficial ownership.”
These proposals all involve substantially increased state surveillance and an erosion of the privacy protections of all British Columbians. This may be a case where the cure is worse than the disease, but distressingly, the current public discourse has yet to grapple with this possibility.
Every transaction we engage in reveals something about ourselves; it reflects our lifestyle, habits and associations. The right transaction may even reveal our preferred political party, social beliefs or sexual orientation. This exceptionally private information should not be sacrificed on the altar of “transparency.”
So-called transactional reporting requirements enlist intermediaries such as businesses and professionals into the government’s surveillance scheme, requiring that they collect and report the private information of their clients for the state. Consequently, the private information of countless innocent people, the vast majority of whom will have nothing to do with money laundering, will be at risk of being in the hands of the government. It amounts to scooping up the entire ocean to catch a fish.
The danger here is more than a merely theoretical affront to a philosophical ideal of privacy: government intrusion poses a very real threat to our daily lives. For instance, the information collected and disclosed is not subject to any real quality control at the collection level. Instead, the declaration of “suspicious transaction” is left to the whim of the person accepting money, or to arbitrary state definitions. This information is then submitted to a financial intelligence database, where it can then be shared with other agencies such as the Canada Revenue Agency (CRA), who in turn have free rein to conjure fantasies of illegal activity, sparking costly nuisances such as inquiries, audits and investigations of innocent people.
Compounding these threats to liberty and well-being are calls for publicly available databases of beneficial ownership, which will not allow us to arrange personal affairs for lawful privacy-related and other justifiable reasons. Revealing this deeply private information exposes us all to substantial risks from non-state actors as well: it can make us more vulnerable to identity theft, extortion, burglary or even make it easier for us to be stalked.
I am particularly concerned about calls for the expansion and greater use of statutory compulsion powers, particularly in the capital markets, that force individuals and entities to answer questions under oath and by the steady increase in the use of orders to freeze assets during investigations, before formal allegations are ever made and where they may never be made.
Representing innocent people caught within the Kafkaesque nightmare of government suspicion every day, I know first-hand the devastation caused by unjustified state scrutiny, and the toll it takes emotionally, financially and reputationally. While we demand the state use its awe-inspiring machinery justifiably, in the real world the demand is not always met. For instance, I recently defeated an allegation of fraud before a full panel of the B.C. Securities Commission who, in an unprecedented move in this province, accepted our argument that the case should be dismissed against our client, while the hearing was ongoing, because there was simply no evidence of fraud. The weak scaffolding of the case was built on strong use of statutory compulsion. Notwithstanding our client’s exoneration, he suffered through the investigation and the public hearing.
There are other non-obvious forms of collateral damage caused by unjustified state intrusion. For example, there is a rising tide of cases in which banks and other financial intermediaries will terminate banking relationships if they receive a simple inquiry from an enforcement agency about an individual. Where successive inquiries follow individuals to other financial institutions, the termination pattern becomes a blacklisting from the financial system but with no findings of misconduct having been alleged or made.
These are real-world concerns that must be addressed within the politics of lawmaking over money laundering lest government be permitted to co-opt the aspirational mission of anti-money laundering to impose the scheme that Orwell had warned us about.