Canada's U.S. Treasury holdings stood at US$426.3 billion in July, the U.S. Treasury reports, about five times their level at the end of 2016. Over the same period, the holdings recorded against mainland China fell by about two-fifths, to US$618.0 billion. While there is no official investigation announced, the concentration is beginning to raise eyebrows.
International money laundering experts are increasingly calling Canada a hotbed for transnational organised crime and state actor money laundering. From 2015 to 2020, suspected money laundering grew by 174 per cent, to $113 billion, according to CISC. A number that has only increased over time. In 2024, TD Bank was fined US$3 billion by the US Treasury Department for allowing three money-laundering networks to transfer more than US$670 million through TD Bank accounts over six years, as reported by the CBC. This unexplained increase in U.S. Treasuries is setting off similar alarm bells, but Canadian regulators seem to be sleeping.
The Office of the Superintendent of Financial Institutions, the federal bank regulator, is the Canadian institution responsible for investigating such claims. A possible way to assuage any concerns would be for the regulator to publish an aggregate account of the country of origin for the holders of these accounts. Ottawa can ask it to do so without exposing any client privacy, and the case for asking may be growing the longer the gap goes unexplained.
Brad Setser, a senior fellow at the Council on Foreign Relations, wrote in May that "Canada—or someone using a Canadian custodian—took a sudden interest" in U.S. agency bonds around 2020. He argued that the official figures "need to be adjusted for the bonds that China keeps on custody in Canada and in Europe." In October, Bloomberg reported that Vitaliy Liberman of DoubleLine had tracked the rise in Canadian holdings and that investors suspected China was behind it.
Unless Canada adopts more transparent banking, the mystery will continue. Treasury's data system, known as TIC, collects reports from American custodians and dealers about the foreign accounts they serve. Each holding is then assigned to the country where the account sits. A German investor who holds a Treasury bond through a Swiss bank is therefore counted as Swiss, according to Treasury's own guidance.
Treasury itself warns that its country breakdown "does not necessarily indicate the country of beneficial owner." It calls the effect "custodial bias" and says it inflates recorded holdings in financial centres such as Belgium, Luxembourg, and the Caribbean. A Federal Reserve note in February made the same point about overseas securities depositories, which are recorded where they are based.
Custody attribution describes the mechanism accurately, but it can only show how a gap of this kind could arise. That still leaves the question of whose money is sitting in these Canadian accounts. Canada would benefit from adopting a similar mechanism to the Treasury's TIC.
Why does this matter?
Canadians have a direct interest in the answer. If large foreign official holding is parked in Canadian accounts, that would make Canada part of another country's reserve strategy without any public decision to that effect. It would also expose Canadian institutions to whatever sanctions, disputes, or sudden sales that strategy might bring. Setser put the broader point bluntly to Bloomberg: "China has been much better at hiding its dollars than it's been about getting out of the dollar." If he is right, one reason Beijing may prefer foreign custody is that holdings booked elsewhere draw less attention in Washington than holdings booked under China's own name.
OSFI supervises the institutions through which these holdings would pass. Asked by Bloomberg, it said it does not comment on the client activity of those it oversees. Its reticence likely reflects that standing policy on client confidentiality more than any view of the China question.
However, such a table could be published by OSFI on its own or at the request of the Department of Finance. It would break Treasury custody down by broad class of owner: domestic institutions, foreign private investors, and foreign official accounts. It would name no bank and no client, and it would tell Canadians whether the holdings are mostly their own savings or mostly someone else's reserves.
If Ottawa wants Canada to be seen as a trusted partner in Washington, and improve an opaque financial system that is becoming more untrusted around the world; they should consider adopting some of these transparency measures. Until the gap is explained, speculation will continue to fill it.
