Access to basic banking services: refusal to open a retail deposit account on the basis that it will be used for illegal or fraudulent purposes

Updated: April 10, 2024 (previous version)

Original publication date: July 2007

Effective date: April 10, 2024

I. Issue

The Financial Consumer Agency of Canada (FCAC) is aware of cases where Banks^{Footnote 1}  have relied on s. 627.18(1)(a) of the Bank Act to refuse to open a retail deposit account for a consumer^{Footnote 2}  where the consumer has outstanding debts with the Bank or has issued cheques with non-sufficient funds (NSF cheques) from an account previously held with the Bank.

II. Context

Section 627.17 of the Bank Act requires Banks to open retail deposit accounts for consumers when certain conditions are met.

Section 627.18 of the Bank Act sets out the circumstances under which Banks may refuse to open a retail deposit account for a consumer.

Paragraph 627.18(1)(a) of the Bank Act establishes that a Bank that is a member of the Canada Deposit Insurance Corporation may refuse to open a retail deposit account (account) if it has reasonable grounds to believe that the account will be used for illegal or fraudulent purposes. This provision recognizes the need for Banks to be able to limit the risks associated with opening accounts that could be used for such purposes.

In order to rely on illegal or fraudulent circumstances for refusing to open a retail deposit account, Banks must have some evidence to support a reasonable belief that the account will be used for illegal or fraudulent purposes. Outstanding debt with the Bank or issuance of NSF cheques from an account previously held with the Bank are not, in itself, sufficient evidence to establish reasonable grounds to believe that the consumer will use the account for illegal or fraudulent purposes.

III. FCAC interpretation

Banks relying on illegal and fraudulent circumstances to refuse to open a retail deposit account will require evidence that establishes reasonable grounds to believe that the account will be used for illegal or fraudulent purposes. Evidence that the consumer had NSF cheques or an amount owing from an account previously held with the Bank may be considered, but this does not, in itself, constitute reasonable grounds for refusing to open a retail deposit account. Banks would require further evidence to establish reasonable grounds to believe that the account will be used for fraudulent or illegal activity.

IV. Legislative references

This Bulletin specifically references paragraph 627.18(1)(a) of the Bank Act:

627.18 (1) Subsections 627.17(1) to (3) do not apply

(a) if the member bank has reasonable grounds to believe that the retail deposit account will be used for illegal or fraudulent purposes;

For further context, see Bank Act section 627.17 and section 627.18. 

V. Concordance

The Trust and Loan Companies Act and the Insurance Companies Act do not contain similar provisions.

VI. Miscellaneous

Questions relating to this Bulletin should be sent

1. by email addressed to compliance@fcac-acfc.gc.ca or
2. by mail addressed to:
   
   Financial Consumer Agency of Canada
   Attention: Deputy Commissioner, Supervision and Enforcement Branch
   427 Laurier Ave West, 5^th Floor
   Ottawa, ON K1R 1B9