EDMONTON - GPay, a Sherwood Park company that arranges electronic money transfers, has asked the federal Competition Tribunal to stop the Bank of Nova Scotia from cancelling its accounts.

The bank claims that GPay violates bank policies and supports Internet gambling which could be linked to money laundering or international terrorism.

President Ray Grace started GPay in 1999 to let consumers buy on the Internet by transferring funds from bank accounts to participating merchants -- much like using a debit card in a store.

Grace's filing with the tribunal states that GPay fees from such transfers exceed $100,000 per month.

This service has involved the use of Bank of Nova Scotia accounts. Grace says the bank, on May 11, 2005, gave notice that it would cancel banking services to GPay.

At about the same time, he claims, the Bank of Nova Scotia and the other four major Canadian banks announced that they would start a service to directly compete with GPay.

Grace objects to the exclusion of GPay from the market -- but not to new competition from the banks.

He asks the Competition Tribunal to order the bank to continue serving GPay.

All major banks provide similar electronic money transfers to other banks, but only the Bank of Nova Scotia and the Royal Bank of Canada provide them to non-bank businesses, Grace claims -- and the Royal Bank has refused to handle the volume of transactions needed by GPay.

The Bank of Nova Scotia has filed an objection, claiming it recently discovered that GPay uses its accounts for purposes that violate numerous bank policies and governing regulations.

"The primary purpose of (GPay's) business appears to be to facilitate the transfer of monies from the accounts of bank customers in order to make payments for offshore Internet gambling," the bank claims.

Grace agreed on Tuesday that "at the present time, a majority of our merchants are gaming and online poker sites."

Although the gaming industry was an early adapter to online money transfers, he said, other retailers now provide a rising share of his business -- along with dating services and charities.

The bank claims that "offshore Internet gambling businesses give rise to concerns with respect to money laundering and terrorist financing."

Grace said he was "disappointed" that the bank would use such "scary language."

The bank also argues that GPay money transfers require customers to disclose confidential passwords and card numbers.

"This contravenes the bank's agreement with its customers and raises vital concerns of bank security."

The bank insists that it has not refused any normal bank service, but that GPay wants services that are not available in the banking marketplace.

The bank has formally notified GPay that its accounts will be terminated in mid-September. Meanwhile, Grace said, he continues to serve his merchant clients.

© Copyright 2004 Edmonton Journal