The Untold Story of “De-banking” in Canada’s Muslim Community

Preamble

Some months ago, several NCCM staff members voiced their concerns over what they saw as a troubling, yet under-reported problem: more and more Muslim organizations across Canada—mosques, community centres, schools, humanitarian groups, etc.—are being effectively embargoed by the banks and financial services that they depend on.

Examples include mosques being asked to move all their money out within a month, or online payment processors abruptly refusing to serve a Muslim charity. The results have been devastating. Unable to efficiently process donations or store reserve funds, some groups have contemplated closing up shop. Yet this oppressive problem has not made any headlines in Canada.

Anecdotal evidence piled up over the years and the topic seemed ripe for a deeper investigation.

So I took the time to talk to five major Canadian Muslim organizations, including mosques, community centres, and humanitarian groups. They shared their internal documents with me to paint a broader systemic picture of a problem that should alarm our community here in Canada. The following report is the result of my interviews and research.

It is the first report to begin scratching the surface of this sordid post-9/11 reality— a reality that has huge legal and practical implications. But this is not just a story about the inconveniences of switching banks or the need for more human rights legislation and banking regulations. It’s not even just about the unchecked hysteria that helped birth a post-9/11 world where Muslims are viewed with extreme suspicion.

This is fundamentally a story about shame. It is shame that has kept this story shrouded in obscurity for so long. I want to be clear here: all of the organizations noted are registered charities. Their directors have never been charged with any crime or have any apparent links to nefarious entities.

Yet they all asked to remain anonymous for this report. That’s because the shame and social stigma of getting “de-banked” remains to this day.

Thanks for reading.

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Introduction

Major Canadian banks and various online financial services have been abruptly stopping Muslim organizations from doing any business with them.

This includes banks telling mosques in Canada to clean out millions of dollars in reserves within weeks, as well as online fundraising services ceasing to process donations for large Muslim charities with little notice. The Muslim groups are given no reasons for why they had been dropped. Often, the two sides had been doing business for years. Some Muslim organizations have received general reasons related to “risk assessment” from the financial institution, but nothing more.

This pattern of unaccountable business relations between Canada’s major banking and financial services sector and the Muslim community results in serious harm to the latter’s ability to function, be it in providing basic religious services or humanitarian aid overseas.

I spoke with five of these Muslim institutions, each having been dropped by a major Canadian bank, online financial service, or both, within the past few years. These include two major mosques (that also provide a variety of religious and communal services), two humanitarian organizations, and a community organization that provides an array of Islamic services.

The panic, difficulties, and damage that results from being dropped and effectively banned by some of Canada’s biggest financial institutions has produced lots of fear and anxiety. And so all these organizations, most of which have shared with me their internal financial and organizational documents, have asked not to be named in this piece.

Mosques

One of Canada’s largest Muslim organizations that operates everything from mosques to other community facilities says it now cannot do any business with Canada’s major banks.

Due to an audit from the Canadian Revenue Agency (CRA) some years ago, this organization was suspended for a year and fined a hefty sum for allegedly sending money to a banned international group.

Though the organization complied with these punishments and continues full operations, it was dropped by the Bank of Montreal (BMO) months after the suspension and fine were doled out in 2018. BMO sent the organization a curt and unexpected email, informing the latter that they had a month to move all their money into another bank. This email was shared with me.

“We were completely shocked,” said a board member of this mosque, which serves thousands of people in the Greater Toronto Area. “We had been doing business with BMO for years and years and they dropped us so suddenly, with no real explanation at all.”

The mosque surmised that the ban had something to do with their CRA woes and asked for meetings with BMO executives to get a better explanation. The board member said they did not get a clear-cut reason from at least one of these follow-up meetings.

A BMO representative refused to comment on this case. “We carefully consider every situation prior to deciding to end a banking relationship and provide time to our customers to make alternative banking arrangements,” he said.

In its letter sent to the mosque in 2019, BMO simply said that their client’s business activities had fallen outside of the bank’s “risk appetite.” The board member noted that they consulted with lawyers and decided not to transfer their money into any other major Canadian bank, for fear of getting kicked out again. Today, the mosque relies on several small credit unions to handle their money.

Another mosque in the GTA has suffered a similar experience, but with Scotiabank, where they’d been storing their money for years.

A charitable organization, the mosque depends on donations from community members, which it then puts into the bank. A former manager of the facility said that one day in the fall of 2020, a letter appeared unexpectedly in the mail telling the mosque to move all their money out of Scotia within 40 days. I got a copy of this letter through the mosque’s treasurer.

“We recommend that you take immediate steps to make alternative banking arrangements with another financial institution,” the letter reads. It provides absolutely zero reasoning for the decision to cut off the mosque. A former manager at the mosque said that leadership initially thought about suing the bank, but ultimately decided against it.

He also said that they had the same problem with CIBC, which sent a similar message to them years ago, which forced the mosque to move the money into Scotiabank in the first place. The mosque treasurer did not respond to requests to share the CIBC message with me. The former manager also said mosque leadership sent a stern letter to the CIBC head office asking for reasons as to why they were let go, but never got a response. The best they could secure was a few weeks extension to move their money out.

Luckily, the mosque has been able to get their money into RBC and TD since withdrawing from Scotiabank. A Scotiabank representative says ,“we do not comment on specific client matters,” and that, “Scotiabank reserves the right to formally end customer relationships” based on “legal and regulatory” considerations.

A Community Organization

An almost identical situation unfolded for another Islamic organization in the GTA that provides mosque services as well as community and educational programs.

This organization, which operates, as many Muslim community institutions do, in the millions, had been banking with the Royal Bank of Canada for over a decade.

But in 2016, according to a current director at the centre, the organization’s leaders got a tip from a regional RBC manager that the bank had taken a special interest in the Muslim group, partly because of issues regarding risk tolerance and assessments.

This vague warning was almost forgotten by the centre’s team until about a year later in March 2017, when RBC sent the centre an unexpected message asking for explanations on a list of transactions, according to the centre’s director.

Then another year of silence went by until an unexpected notice came through the mail from RBC, asking the centre to withdraw all their money from RBC accounts within two months. Again, according to the director, no explanations were given for the decision.

“It was a huge issue for us,” he says, “because we had millions of dollars’ worth of transactions for all our services and it can’t just all stop suddenly because we need to switch banks.”

He adds that they contemplated taking legal action against RBC’s decision but were told by counsel that victory was a long shot, and that doing business is not a right, but a privilege. It was better, they concluded, to just put all the money into another bank, which turned out to be TD Bank. The transition, he adds, went relatively smoothly after the organization provided no less than six months’ worth of their financial history to TD Bank.

When asked about this whole episode, an RBC representative sent a statement saying that, “For its part, RBC makes such a decision only after careful consideration of the circumstances.” The bank has yet to provide any concrete reasons for why they decided to essentially boycott this Muslim centre after years of business.

“Each bank does its own independent assessment of clients that they might feel to be high risk,” says a seasoned analyst of a major bank in Canada who specializes in sanctions, and who agreed to speak with me on condition of anonymity. “But overall, these banks also share some resources or databases that profile various organizations around the world, including charities.”

These profiles include whether the organization in question has had trouble with the law or any connections to entities that may be banned in certain countries. If you show up as having links with, say, a banned terrorist group, then chances are you’ll get “de-banked” — aka. let go and banned.

“They are what I would call due diligence databases, and there are many, provided by a lot of financial companies like Bloomberg, Thomson Reuters, LexisNexis, World Check — many of them source their information from government and media sources.”

He also adds that each bank generally does independent assessments of organizations who bank with them as clients. Some clients are assessed more often than others, depending on what level of risk the bank deems that client to be.

Humanitarian Aid Groups

Mosques and religious charities are not the only ones being subject to this frustrating financial experience. And it’s not always banks that give the Muslim community a hard time.

For example, a major Muslim humanitarian organization here in Canada that supports global relief work, particularly in Muslim majority countries, has been refused all services by American Express.

The organization has charity status and receives donations from across the world. In 2018, they were informed by their main online donations processor that American Express decided to shut down all its services to the group. This means no one can donate to the organization using Amex. It also means all the organization’s Amex credit cards got cancelled.

Emails I obtained through the organization, which takes in millions of dollars in donations per year, show that a representative from the organization’s online donations processor repeatedly asked Amex why they refuse to serve one of their biggest vendors.

After lots of back and forth, a representative from Amex disclosed that even he could not get “the specifics of this,” and that was that. Nothing else could be done.

Then, in the fall of 2019, this humanitarian organization ran into more trouble. This time, its finance department got an unexpected email from another of their major online processor, saying that the latter’s “financial partners” found the Muslim organization’s account to have “exceeded their risk tolerance” after recent review. As a result, the Muslim organization’s account with them had to be terminated within a month.

In an extensive email chain between a representative of this online donation processor and the Muslim organization’s finance team, the latter is shown to push back against this “unilateral decision.” They asked which of the online donation processor’s financial partners raised the alarm and why.

About a day later, the Muslim organization got an email specifying that the financial partner in question is Stripe, the payment processing company. Moreover, the email notes that it was Stripe’s “acquiring bank,” HSBC, that perceives the Muslim organization as too risky.

The email also says that Stripe was trying to get a “waiver” from HSBC to keep doing business with the Muslim organization, but that it needed answers to several questions, including “comment” on negative press that the Muslim organization had gotten, its relationship with the Canadian government, along with details regarding the relief services and supplies it provides to Syria.

This was followed by another extensive list of questions regarding minute details of the organization’s work in Syria, including a description of the “movement” of medical supplies between point of purchase in the US to its delivery point in Syria. The Muslim organization’s finance team provided answers to all these queries, only to get even more questions a few days later about its work in Syria.

The finance team then pointed out how none of the money raised via its work with their online donation processor, which took on Stripe and HSBC as Canadian partners as of October 2019, was used for any disaster relief work in Syria. Stripe then sent the formal request for a “waiver” to HSBC so business could resume with the Muslim organization.

Unfortunately, in February 2022, months after the initial email exchanges, the Muslim organization was told that HSBC wanted even more documentation, answers, and materials before deciding whether to approve a waiver.

This time, they wanted an external legal opinion that the Muslim organization understands and complies with Canadian sanctions law, proof that it has no affiliations with groups that have directs or indirect ties to Syria, and various answers regarding its charitable status in Canada.

“This was completely ridiculous,” says a former member of the organization’s finance team, “the questions were already totally ridiculous, and we finally decided it wasn’t worth it.”

The organization decided this February that enough was enough: it would move on entirely from Stripe and HSBC to another set of partners to help process their online donations.

“There are instances where services are declined by those payment providers if certain risks are present,” reads a statement from Blackbaud for this article. It said it “would not arbitrarily terminate services to any customers.”

“However, if an external payment provider decides certain risks are present, they can withhold services, and this is something we cannot control.” In these cases, the online payment provider is Stripe, which did not reply to several requests for comment.

In a similar vein, another major Canada-based Muslim global relief organization had its own battle with Blackbaud, Stripe, and Raiser’s Edge in 2019, when all three services dropped the organization with little notice.

This severance came within a few weeks of one of the organization’s managers in Pakistan getting accused by authorities there for using corporate funds to help terrorists. The manager and his employers vehemently denied the charges and was acquitted in a Pakistani anti-terrorism court a year later.

But it was too late. Right when the manager was charged in the summer of 2019, the Associated Press published a short article noting the arrest and severity of the charge, including mentioning the Muslim organization by name.

A current director of the organization told me that Scotiabank, which they had been banking with for years, almost immediately told them to move all their money out within a month.

“We asked for meetings with Scotiabank, with account and branch managers,” said the director, “but they couldn’t tell us anything. The most we could do was ask for a two-month extension to get our money out.” Blackbaud, Stripe, and Raiser’s Edge ended their relationship with the organization shortly after this.

The frustration is that the manager in Pakistan, where the organization has been doing work for years, was found to have done nothing wrong. And the charity was also in good standing in Canada.

The organization then tried to apply to Western Union to store their funds but got rejected. The same thing happened when they tried to apply to do business with several other financial services, including Global Payment and the Exchange Bank of Canada. It is a disaster for the organization, which feels crippled.

Whether the organization or their manager in Pakistan was guilty didn’t seem to factor into the decision. As with all these incidents of severing business ties, the banks and other financial services can simply decide to pull out whenever they want, with or without explanation. They hold much of the power in the relationship. In other words, the right of the banks to preserve their business interests is well-protected in Canada; the clients’ and individual consumers’ right to bank is not.

When asked about doing business with these two Muslim humanitarian groups, Blackbaud indirectly noted that the incidents concerned their “external financial payment processer” partners.

Time for Solutions

“This business of risk assessment can be a very biased thing,” says Caroline Shenaz Hossein, a Professor of Global Development and Political Science at the University of Toronto at Scarborough who focuses on alternative banking. “Those who do the assessing of clients work for corporate banks that are responsible to their shareholders, not their members.”

So if the bank feels like the client doesn’t fit their corporate direction for whatever reason, they reserve the right to kick that client out and ban them.

“They don’t have to give any reasons,” Hossein adds, “they often hide behind this idea of a client being too risky or exceeding ‘risk appetite,’ but really, they don’t have to reveal their exact motives if they don’t want to.”

Banks are also trying to keep away from any possibility of being seem by government authorities for laundering criminal money. This includes terrorist entities, various sanctioned countries or bodies, and all other criminal entities. The Financial Transactions and Reports Analysis Centre of Canada, or FINTRAC, is the finance intelligence unit that gathers information on possible money laundering and terrorism activity as defined by a regime of legislation.

Complying with the rules can be a complex task. It includes, among other things, constantly vetting clients through various due diligence channels to make sure that they are not doing anything unlawful. If they see anything suspicious, the financial services have to dutifully report it to FINTRAC. This possibly accounts for the near-paranoid levels of vetting, questioning, and often de-banking of various Muslim organizations, some of which do relief work in countries ravaged by both state violence and non-state terrorism.

Hossein, whose work contains sharp criticisms of Canada’s major banks, also notes that in her experience and academic research, clients given a hard time by banks — such as a frozen account, or being asked to leave, or being barred from opening accounts — have largely been people of colour, including Black and visibly Muslim women who constantly feel harassed.

“Canadian financial institutions have a history of systemic racism,” Hossein says, “they are not very accountable, and they have a history of not valuing their customers for their humanity, particularly when it comes to marginalized communities.” She stresses that marginalized groups are starting to willingly move their money out of these major commercial banks and into “mutual aid financial cooperatives” or smaller credit unions.

In any case, the Muslim organizations I spoke to for this report feel hung out to dry every time they are asked out of the blue to get lost. That they often have had good working relationships with these financial institutions seem to be of no real importance. It doesn’t count for much. They cannot plead their case and have no recourse when dropped and effectively barred.

Steven Zhou is a Writer and Investigator for the National Council of Canadian Muslims (NCCM)