Finance Minister Chrystia Freeland speaks during a news conference in Ottawa, on June 18.Adrian Wyld/The Canadian Press
Finance Minister Chrystia Freeland has alleged, in documents filed in federal court, that three principal shareholders in Wealth One Bank of Canada were vulnerable to coercion by China’s ruling Communist Party and may have engaged in money laundering as part of Beijing’s foreign-interference operations in this country.
Lawyers for three of the bank’s founders went to court last year to seek a judicial review of Ms. Freeland’s April, 2023, decision to order them to divest their shares in Wealth One, a Schedule 1 bank established in 2016 that caters to Chinese-Canadian clients. A Schedule 1 bank in Canada is considered a domestic institution, not a subsidiary of a foreign bank, and is authorized to accept deposits and provide mortgages.
The businessmen had requested that the case be subject to a sealed confidentiality order and that the proceedings be held in camera, but earlier this summer, they withdrew their motion and the confidentiality order was recently lifted.
The trio’s team of lawyers had originally argued that publication of their appeal could ruin the bank and jeopardize their clients’ investment in it. Collectively they own 73.4 per cent of the bank’s common shares, according to a May, 2023, filing, where they also placed the estimated value of this stake at $94-million.
In letters to the key shareholders beginning in December of 2022, obtained from the proceedings in federal court, Ms. Freeland raised concerns that the “Chinese Communist Party and the government of the PRC may use Wealth One Bank to further objectives that are detrimental to Canada’s national security.”
She noted that China’s consul-general in Toronto had advised Chinese Canadians to bank with Wealth One, “a statement likely intended to be interpreted as a Beijing command among Canadians of Chinese descent.” Moreover, Ms. Freeland said there are grounds to suspect that the three men were allegedly involved in money laundering.
Because the trio controlled nearly 75 per cent of the bank’s common shares and are suspected of money laundering, Ms. Freeland raised concerns that they could serve as proxies to funnel money through Wealth One on behalf of the Chinese government.
The three individuals in their court filings denied the allegations made by Ms. Freeland, arguing that they were unfairly targeted “due to the rise in geopolitical tensions with China” that, they say, led to “an unwarranted challenge to their loyalties to Canada.”
They said the bank hired PricewaterhouseCoopers and Borden Ladner Gervais to conduct independent investigations related to Ms. Freeland’s concerns but said both probes were unable to substantiate the allegations.
In the spring of 2023, Ms. Freeland ordered the Toronto-based financial institution to comply with extraordinary national-security conditions intended to create firewalls in its operations against the three.
The businessmen, Toronto insurance executive Shenglin Xian, Vancouver property developer Morris Chen and Toronto grocery tycoon Yuangsheng Ou Yang, were ordered in April, 2023, to sell their shares in the bank. At the time, Wealth One was also ordered to sever all ties with them, and to put in place stringent security measures to guard against money laundering and unauthorized sharing of sensitive information.
Ms. Freeland alleged in her 2022 letter to Mr. Xian that he engaged in “persistent structuring of cash deposits over five years which is indicative of a deliberate attempt to circumvent financial institutions reporting requirements to FinTRAC,” the federal watchdog that combats money laundering.
She alleged that he also was the “primary subject of numerous suspicious transaction reports (STRs) by Canadian financial institutions” during a seven-year period prior to 2016. She added, however, that he had not been the primary subject of further STRs since Wealth One Bank commenced business.
Mr. Xian in court documents denied “being involved in or taking any such actions” and asked to see the STRs, so he could provide a more detailed response to the concerns raised.
In her letter to Mr. Ou Yang, Ms. Freeland made allegations regarding his business, saying “nearly two dozen employees of Yuan Ming Supermarket engaged in suspicious transactional activities involving the structuring of cash deposits where each of the employees engaged in consistent structuring techniques to one another.” She said Mr. Ou Yang was known to have “direct and personal” business connections with some of these employees.
Mr. Ou Yang in court documents denied “being involved in or taking any such actions” and requested the STRs to provide a more detailed response.
In the letter to Mr. Chen, Ms. Freeland alleged that he had “been identified on the periphery of multiple” suspicious transaction reports. “For example, Chen’s company, Mei-Jia Antiques, was a counterparty in an STR regarding a real estate company. The economic purpose of the transactions between Chen’s antique company and this real estate company was unclear.”
Mr. Chen in court documents said he transferred the assets and cash from his antique business to his real estate companies upon the closing of his antique business. He denied “being involved in or taking any such actions” alleged by Ms. Freeland and requested the STRs to provide a more detailed response.
In the letters to all three major shareholders where she summarized her concerns, Ms. Freeland added: “Given the activities among the named individuals that may be related to PRC foreign interference, it is also possible that these activities are for the purpose of obfuscating the flow of funds relating to PRC foreign interference in Canada.”
Glen Jennings, a lawyer for the Wealth One shareholders, could not immediately be reached for comment Thursday.
In the other conditions imposed on the three founders last year, Ms. Freeland prohibited them, and parties related to or controlled by them, from accessing the bank’s data. They were also prohibited from entering Wealth One facilities under most circumstances. And Ms. Freeland is requiring the bank to ensure that its offices and buildings are unconnected to the three men.
The bank’s staff were also required to report “any communications or attempted communications” by the three shareholders “for any reason unrelated to compliance with these terms and conditions.”
She ordered the bank to move its headquarters from a building owned by Mr. Xian in Toronto’s North York. The bank has since moved its headquarters to the city’s downtown financial district.
Wealth One was also required to sweep for surveillance devices “at all of the bank’s locations and for all corporate devices designated or approved for remote use.” The orders said it had to be done immediately and at least annually afterward, “to ensure the integrity of the bank’s independence and operations.”
The Globe first reported on Mr. Xian in May, 2016, when he and 32 other business executives attended a private fundraiser for the Liberal Party of Canada, where Prime Minister Justin Trudeau was the guest of honour.
At the time, Mr. Xian was waiting for final approval from federal bank regulators to launch Wealth One. That was granted shortly after the fundraiser. Mr. Xian told The Globe in 2016 that he did not discuss Wealth One with Mr. Trudeau.