Legal Question in Criminal Law in Canada
Fraud
A bank in Canada is doing business with a corporation in the U.S. The bank in Canada initiates a hold on the account of the u.s. corporation. What level of authority must the canadian bank have? What is the reposonsibility of the bank in the U.S. to its corporate customer? Can the u.s bank remove the funds without informing the corporate client? is there a time limit to be observed by the banks?
1 Answer from Attorneys
Fraud
When the corporation first places funds in the bank, a debtor-creditor relationship is established. The corporation is the creditor and the bank is the debtor. Thereafter the relationship between the bank and the corporation is governed by debtor-creditor law.
When the bank refuses to release the funds, the recourse of the corporation is to sue the bank. If the bank was justified in establishing the hold, the bank will prevail in the suit. If the hold was not justified, the corporation will prevail. Whether the bank was or was not justified in placing the hold would be determined generally using the legal standards established where the bank is located.
If the hold arises as the result of a court order obtained by some other entity, such as the government, then the corporation's recourse is not against the bank (which is merely complying with the court order) but, rather, with the entity that obtained the court order.
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