Systemic Discrimination in De-Risking
Why Muslim-led Charities and Racialized Communities Bear the Brunt of Financial Exclusion in Canada
A Hidden System with Unequal Impact
De-risking in Canada operates largely in the shadows — but its effects are deeply unequal. While framed as a neutral risk management process, it often leads to the disproportionate exclusion of Muslim-led charities, racialized individuals, and organizations linked to high-risk geographies.
Data Gaps and the Need for Transparency
One of the biggest obstacles to reform is the lack of basic data.
- No public reporting exists on how many accounts are closed each year for “compliance risk.”
- No demographic breakdowns are published by regulators like the FCAC or OSFI.
- No explanations are required from banks — even when entire communities are affected.
Without data, there’s no accountability. Charities can’t correct false assumptions, negotiate safeguards, or even defend their record — because they’re not told what triggered the closure.
Example:
In 2022, the National Council of Canadian Muslims (NCCM) published “The Untold Story of De-Banking”, exposing how Muslim charities were losing banking access with no due process. Much of the evidence came from leaked letters — not from official oversight.
What’s needed
Annual de-risking reports from banks to regulators, with sectoral/demographic data
A requirement to provide closure explanations (as in the UK)
A public inquiry or audit to trace 20 years of exclusionary patterns
Disproportionate Impact on Muslims and Racialized Communities
While anyone can be de-banked, Muslim Canadians are hit hardest.
- Muslim-led charities operating in Syria, Gaza, or Somalia are flagged as high risk — even when fully compliant.
- Major mosques and humanitarian groups have had accounts closed overnight, sometimes involving millions of dollars.
- Donation platforms have pulled services, cutting off funding flows and delaying aid to orphans, refugees, and families in crisis.
The pattern is clear: if you’re linked to a “high-risk” region or community, you’re more likely to lose access — not because of what you’ve done, but because of who you are or where your work takes you.
Example:
- Somali money transfer businesses were cut off by major banks, disrupting a remittance system that supports up to 40% of Somalia’s GDP.
- Iranian-Canadians have reported personal accounts closed due to family ties abroad, even without any evidence of wrongdoing.
This is what structural Islamophobia looks like: neutral rules applied in ways that disproportionately target Muslim and racialized communities.
What Happens When You’re De-Banked?
Most get no appeal, no explanation, and no recourse.
The financial consequences are devastating:
What Other Countries Are Doing — And Where Canada Falls Short
| Country | Right to Bank Account | Closure Notice | Explanation Required | Appeal Path |
|---|---|---|---|---|
France
|
Yes – “Droit au compte” | Yes | Written reason required | Banque de France |
Belgium
|
Basic banking for NPOs | Yes | Justification required | Government chamber |
UK
|
Only for individuals | 90 days | Unless police object | FCA oversight |
Australia
|
No legal right | Yes | Partial (via code) | AFCA Ombudsman |
United States
|
No legal right | Yes | No duty to explain | Partial (anti‑bias laws) |
Canada
|
No legal right | 30 days | No requirement | No binding recourse |
What Systemic Discrimination Looks Like
Systemic discrimination doesn’t always mean intentional bias.
It happens when:
Institutions apply rules unequally
Risk models rely on stereotypes
Communities have no seat at the table
Even without explicit targeting, entire sectors are sidelined — Muslim charities, Somali remitters, Iranian families — all labelled risky, with no evidence and no defense.
Our Call to Action
1
Transparency
Require banks to report account closures and explain decisions where no investigation is underway.
2
Oversight
Launch a public audit into how Muslim and racialized communities have been affected.
3
Inclusion
Add civil society voices to AML advisory tables — not just banks, regulators, and police.
4
Access Guarantees
Create a right to basic banking access for registered nonprofits, with appeal rights.
De-risking is not just a compliance issue — it's a civil rights issue.
When entire communities are locked out of the financial system, the result is not safety — it’s exclusion. If we value financial inclusion, human rights, and equitable treatment, then this shadow system must be brought into the light.