Finance Minister Chrystia Freeland has issued a series of directives targeting Wealth One Bank of Canada, calling for significant actions to address national security concerns related to three of the bank’s founding investors. These individuals, Shenglin Xian, Morris Chen, and Yuangsheng Ou Yang, have faced federal scrutiny over alleged ties to the Chinese government.
In April, Minister Freeland instructed these investors to divest their shares in the bank. Simultaneously, she imposed stringent national security conditions aimed at safeguarding the institution against potential threats from these individuals. Wealth One Bank, which primarily serves Chinese Canadian clients, was initially founded in 2016 with a $50-million investment and has since grown to hold over $400 million in assets. It operates as a domestic institution, authorized to accept deposits and provide mortgages.
Minister Freeland’s actions are unprecedented in recent Canadian banking history and come during a period of heightened tension concerning Chinese involvement in Canadian domestic affairs. These directives are rooted in federal Bank Act powers designed to protect national security, international relations, and banking system integrity.
The government’s concerns regarding the three shareholders date back to at least November when Minister Freeland warned them of potential susceptibility to Chinese government influence and raised money laundering concerns. Subsequently, the individuals resigned as directors of the bank but did not divest their shares.
Reports indicate that the Canadian Security Intelligence Service had been investigating the bank and its shareholders since 2021, with further scrutiny from the federal Finance Department. The exact details of these investigations and their conclusions remain undisclosed.
Minister Freeland’s directives to Wealth One include the immediate severance of all banking relationships with the three investors and any related parties. The shareholders are prohibited from holding formal or informal positions within the bank or providing goods and services to the institution.
Furthermore, the bank is required to implement robust national security measures, including thorough employee vetting, relocating its Toronto headquarters to a secure location, and conducting regular sweeps for surveillance devices. The use of the Chinese social-media messaging app WeChat for banking business is also prohibited.
The bank must appoint an independent third-party monitor and hire compliance officers for security and anti-money laundering purposes. Employees are mandated to undergo advanced training in compliance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
This use of ministerial authority to remove founders and impose security measures on a Canadian bank is unprecedented, prompting concerns from former finance and national security figures. They acknowledge the unique national security circumstances leading to these actions but caution that such measures cannot guarantee the complete elimination of foreign influence.
In March, Canada’s anti-money-laundering watchdog fined Wealth One $676,500 for failing to comply with the PCMLTFA. The bank’s violations included failure to submit suspicious transaction reports related to potential money laundering offenses.
Minister Freeland’s directives also prohibit the three founding shareholders from accessing the bank’s data and mandate reporting of any unauthorized access attempts. They are barred from entering Wealth One facilities under most circumstances. The bank must also ensure that its offices and buildings are not connected to the three investors.
Wealth One Bank must relocate from its Toronto headquarters as soon as possible, with the new location and proposed security measures subject to ministerial approval. In the interim, the bank is subject to strict surveillance measures, including alarm and camera installations and regular sweeps for surveillance devices.
Information for this briefing was found via The Globe and Mail and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
