Published in the Financial Post, March 25, 2002, p. 15
Canadians concerned about their privacy take note. The best-kept secret in Canada is that you can open a bank account or get a credit card without providing your social insurance number.
A 1999 Canadian Bankers Association submission states that a bank will open an account, and "will not deny credit to a customer just because the customer does not provide a S.I.N." In an e-mail dated March 5, 2002, a CBA spokesman confirms: "Financial institutions are required by the Income Tax Act to request a Social Insurance Number (SIN) for any interest bearing deposit for income tax reporting purposes but they are not legally required to obtain and it [sic] will open an account without it if the person does not provide it."
Since Sept. 13, 1988, clause 201(1)(b)(ii)(B) of the Income Tax Regulations requires financial institutions to fill out a T5 form for payments on deposits. This form has a box for the SIN, but Section 237 of the Income Tax Act only requires financial institutions "to make a reasonable effort to obtain it," according to a finance department spokesman. It is the individual who refuses to provide his SIN who could be hit by the long arm of the law: Subsection 162(6) of the Income Tax Act imposes a penalty of $100 for each refusal.
On March 5, I e-mailed the six largest banks, asking them to confirm that they would open a bank account (including an interest-bearing account), and issue a credit card or a loan, to an individual who refused to provide his SIN. Four of the banks (Scotia, National, BMO and TD) acknowledged receipt of my e-mail but, at the time of writing, only Scotia and National had replied to my questions. A customer, said a Scotia spokesman, "is not required by the Bank to provide a SIN and their decision not to do so has no bearing on the services they receive from the Bank. Applications to open accounts, issue credit cards or approve personal loans are processed in the same manner with or without a customer's SIN." National Bank's reply was substantially similar, except that the spokesman insisted on the fact that providing a SIN was in the customer's interest, and that the bank encouraged him to do it.
Neither bank had the data to reply to my question requesting "an estimate, even if rough, of the proportion of your individual retail customers for whom you do not have SINs."
To summarize, according to CBA, banks officially don't require SINs, as the law does not prevent them from doing business with somebody who does not provide one. However, the large banks (with the exception of Scotiabank and National) are not very talkative on this topic.
The second best-kept secret is that enforcing your rights to keep your SIN private will not prevent the state from monitoring your affairs and picking your pockets -- at least if you are a new customer -- for the banks are now very much part of the state surveillance system.
Unlike the SIN number, banking rules make other official ID papers compulsory. "To open an account at a financial institution," writes a CBA spokesman, "you are required to provide two pieces of signed identification. Financial institutions must comply with the Proceeds of Crime (Money Laundering) Regulations which require financial institutions to obtain at least one piece of government-issued ID that can be recorded." This means of surveillance was imposed by the 1991 Proceeds of Crime (Money Laundering) Act adopted before the Parliamentary recess in June, and the ensuing regulations of Feb. 11, 1993.
The situation is even worse since the new Proceeds of Crime (Money Laundering) Act, adopted (again) just before Parliament's recess in June, 2000. This law transformed financial institutions into government spies, requiring them to snitch on suspicious customers and file Suspicious Transaction Reports. One of the official "guidelines" on how to identify suspicious customers reads: "Client refuses to produce personal identification documents."
The banks can't have it both ways. They can't have both the benefits of being private businesses serving their customers, and the privilege of being an obedient component of the state's surveillance system. Perhaps it is true that they don't have much of a choice, and have been forced into the second alternative by what the late libertarian economist Murray Rothbard called "the visible fist of the state." But then, let's not kid ourselves in thinking that banker cops and spied-upon customers make up a free banking system.