Is the money in your trust account really there?

Via email:

Judith Hamel, Director General, Financial Services Division, Financial Sector Policy Branch, Department of Finance Canada judith.hamel@fin.gc.ca

Anne Butler, Managing Director Supervision, Bank of Canada abutler@bankofcanada.ca

Donna Kinoshita, Chief Payments Officer, Payments Canada dkinoshita@payments.ca

Jude Pinto, Chief Delivery Officer, Payments Canada jpinto@payments.ca

Paula Dunlop, Vice President, Policy, Government Relations and Research, Payments Canada pdunlop@payments.ca

Lisa Ford, Chief Legal and Policy Officer, Payments Canada lford@payments.ca

Dear Sir/Madam:

Re: Canadian Banking Lack of Transparency

We are writing on behalf of the Canadian Bar Association’s Real Property and Small, Solo and General Practice Sections (CBA Sections) to raise concerns about a persistent transparency gap in Canada's payments system. This gap undermines our banking system and limits any benefit obtained by faster payments.

The CBA is a national association of over 40,000 lawyers, law students, notaries and academics, with a mandate to seek improvement in the law and the administration of justice. The Real Property Section represents members practicing in all areas of real estate law, including ownership, mortgages, taxation and trusts. The Small, Solo and General Practice Section is the national voice of lawyers at firms with fewer than 10 lawyers and supports their professional activities.

For lawyers handling client funds, it is often difficult to determine whether an incoming payment is final and irrevocable, or only a provisional credit that may later be reversed. Clear, recipient-facing confirmation of payment status is essential if modern payment systems are to deliver the certainty, efficiency and reliability they are intended to achieve. This letter sets out the transactional risks, the current gap in Canada’s payments system, a proposal for reform, and the public-interest rationale for that reform.

Transactional risk for lawyers and clients

Lawyers depend on the safe, efficient and transparent transfer of funds to complete transactions for their clients. In real estate transactions, commercial closings and financial settlements, the timing and reliability of funds are often critical. Where lawyers cannot confirm whether funds received are irrevocable and available for immediate use, they are left to assume transactional risk without access to the information needed to manage that risk responsibly.

Lawyers experience risk daily when handling client funds. Financial institutions may place holds on incoming funds or fail to process wire transfers expeditiously, leaving lawyers unable to determine whether funds can safely be relied on to complete a transaction. These delays can complicate trust accounting, increase client risk, delay closings and, in some cases, cause transactions to fail because funds do not arrive or become available in time. The result is a payments system that may be technically fast, but not sufficiently transparent or reliable for the legal and commercial transactions that depend on it.

Gap in Payments Canada system

Payments Canada sets the rules for all financial institutions in Canada regarding fund transfers. It presently has two systems to transfer funds, with a third under development. According to Payments Canada, the Automated Clearing Settlement System (ACSS) support 99% of daily transaction volume, where funds are received as an instantaneous credit that is still being processed and may be settled later. Recipients are not given information about the progress of the processing or the ultimate settlement. The exception is the Lynx system, which allows for irrevocable transfers. A key limitation is that the recipients are not given clear information confirming that the funds were transferred through Lynx.

Lynx creates a Payment Confirmation Reference Number (PCRN) once it accepts the transfer from the payee. Payments Canada’s Bylaw 9 provides that the financial institution must provide the PCRN to the payee, but only on request.

Payment Canada’s Bylaw 9(39) states:

“A receiving participant must provide a payee with the payment confirmation reference number if the receiving participant has the number and it is requested by the payee.”¹

In practice, when lawyers are transferring funds to complete client transactions and request the PCRN, branch personnel typically respond that they do not know what a PCRN is or that it is only available through a special inquiry into internal systems, often hours or days later. Lawyers depend on the efficient, safe and transparent transfer of funds to close Canadian home purchases, business deals or other financial settlements for their clients. In the absence of timely confirmation, they are left to assume heavy responsibility for the transfer and hope the system will deliver. This uncertainty affects not only individual transactions, but the Canadian economy more broadly. Furthermore, it unfairly shifts risk from financial institutions, which are best positioned to assess and manage it, to the lawyers facilitating these transactions.

Payments Canada is also working on launching the real-time-rail (RTR) in Q4 2026, which is being explicitly built to facilitate the irrevocable transfers of funds. We understand there will be messaging to both the payor and payee of the transfer, but it remains unclear if the message will identify to the recipient whether the funds are specifically originating from the RTR system. If the RTR is not identified, the recipient will not know if they have received a credit that will be settled later, or if they have received irrevocable funds that can be used immediately. Without clear recipient-facing confirmation that an RTR payment is final and irrevocable, the speed of the transfer (10 seconds) will not, on its own, give recipients the certainty needed to rely on the funds immediately. This is particularly important for lawyers handling client funds, where RTR could become a useful mechanism for amounts clients commonly bring to their lawyer to complete transactions, subject to the proposed transaction limit of $100,000.

There are currently two and as of Q4 2026 will be three ways to irrevocably transfer funds:

1. Lynx, but requires divulging the PCRN to identify and qualify the funds received;
2. ON-US, not a Payments Canada system but is treated by major financial institutions as irrevocable. Transfers are deposited without notation of its status; and
3. RTR, but requires confirmation of the system used to deliver the funds and not simply a notice of a deposit. (e.g. the Unique End-to-End Transaction Reference (UETR), similar to Lynx’s PCRN, could be provided to the payee to confirm they received irrevocable funds).

There is much being made of the new ISO 20022 internationally rich-data standard that is being integrated into the payments systems, yet no information is being transmitted about the status of the funds being transferred. All three irrevocable methods to transfer funds should be clearly identified to any recipient.

Proposal for reform

The CBA Sections ask that the Government of Canada and the Bank of Canada act to ensure that the Canadian banking system is transparent, reliable and efficient. We recommend that Payments Canada be required to enforce, and, when necessary, amend its bylaws so that financial institutions automatically provide recipients clear information at the time of receipt about the status of incoming funds, including whether the funds are provisional, settled or irrevocable.

Furthermore, the proposed $100,000 transaction limit for the RTR will significantly restrict its utility for many legal and commercial transactions. As the funds required to complete these closings frequently exceed $100,000, the CBA Sections urge the Government of Canada and the Bank of Canada to expand this limit at the earliest opportunity. This expansion is essential to ensure the RTR system becomes a practical and effective tool for the high-value transactions that depend on it.

Public interest rationale

The Government of Canada, the Bank of Canada and Payments Canada have emphasized the importance of a reliable, efficient and resilient banking system that allows Canadian businesses to have better cashflow, and financial stability. This objective cannot be achieved unless the system is also transparent to the people and businesses that rely on it.

As cheques and bank drafts become less common, and in some cases discouraged or discontinued, digital payment systems must offer a comparable level of certainty.

The CBA Sections have engaged with the Canadian Bankers Association and Payments Canada for several years on the need for greater payment transparency, but the issue remains unresolved.

As the voice of the Canadian legal profession, the CBA Sections ask that transparency be made a core feature of Canada’s payment system. Automatic, recipient-facing confirmation of payment status would reduce avoidable transaction risk, improve confidence in digital payments, and help lawyers better serve their clients across Canada.

Yours truly,

(Original signed by Yasmin Khaliq, on behalf of the Chairs)

c.c. Varun Srivatsan, Director of Policy, Minister of Finance varun.srivatsan@fin.gc.ca