On June 18th, 2015 Canada's Standing Committee on Finance (the "Committee") released its report entitled, Terrorist Financing in Canada and Abroad: Needed Federal Actions. The report summarized various presentations and submissions made to the Committee on topics such as the various models of terrorist financing, Canada's anti-terrorist financing regime, and Canada's terrorist financing detection, investigation and prosecution methods. Of particular importance were the comments and submissions made with respect to the role of charities in financing terrorism.
In addition to businesses and supportive sovereign states, charities were cited as sources of revenue, and in particular identified as popular conduits through which terrorist operations transfer revenue. Some witnesses noted that because it is difficult to determine the types of transactions that are normal for a charity and because the amount donated to charities is variable over time, it is difficult for regulators and financial institutions to determine suspicious transactions. On the other hand, some witnesses pointed the finger at the lack of transparency in public registers and submitted that charities registered in Canada are actually required to report less information than those registered in other countries.
The Canada Revenue Agency ("CRA") was cited by some witnesses as playing an integral role in combating terrorist financing. In particular, CRA itself noted that its three main responsibilities in relation to terrorist financing include:
- Protecting the charity registration system from abuse by terrorist;
- Sharing information with other federal departments and agencies to support the detection and suppression of domestic terrorist financing activities and
- Assisting Canada in meeting its international obligations related to combating terrorist financing.
In considering each of the submissions made with respect to terrorist financing in Canada, the Committee made fifteen recommendations aimed at increasing the effectiveness of Canada's anti-money laundering and anti-terrorist financing regime. The following two recommendations are relevant for charities:
- The federal government, in light of the numerous global cases of charities being used to raise and transfer funds for terrorist financing purposes, continue its efforts to bring increased transparency to the charitable sector in Canada. As part of these efforts, the CRA should be encouraged to work more closely with charities to ensure their compliance with anti–terrorist financing laws. Increased transparency in the charities sector should not unnecessarily burden legitimate charities.
- The federal government initiate a study to clarify the role of charitable organizations in order to protect legitimate entities in Canada's charitable sector and to prevent charities from being used as vehicles for terrorist financing.
CRA currently publishes several documents aimed at assisting charities avoid terrorist abuse. These include a checklist for charities on avoiding terrorist abuse which may be found here and a document on the role of charities in the international context which may be found here.
Charities, and particularly those charities working in conflict zones and regions where terrorists are known to operate, should ensure that they review the Charities Directorate's publications with respect to terrorist financing and adopt anti-terrorism policies and procedures to ensure that they are not used as conduits to finance terrorist operations. Charities must ensure that they know the organizations and individuals with whom they work and from which they receive donations, that they are familiar with the terrorist watch lists published by Public Safety Canada and other international bodies, and that they familiarize themselves with international best practices in this area. Charities should also ensure that they keep up to date with the states that are listed as state sponsors of terrorism (currently Iran and Syria are the only two countries which appear on the list). As previously reported, charities are not permitted to receive funds from state sponsors of terrorism.
We will continue to monitor the implementation of the Committee's recommendations. All that said, we do continue to be troubled by the willingness of the government to see terrorist funding – a very serious accusation – as happening often in the charitable sector. Since the accusation is so serious, it is one that should be backed by real evidence.
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