On August 4, 2023, ICLMG sent our submission to the Department of Finance’s Consultation on its review of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). As per our mandate, we focused on the anti-terrorist financing aspect of the act.
You can read the full 26-page submission here. Below is a summary of our concerns with anti-terror laws in general, the anti-terrorism financing (ATF) regime specifically and this consultation. Click on a title in this table of content to jump to a section of interest.
Table of contents
1. The broader context of the “War on Terror”
2. Key concerns with aspects of the ATF regime covered in the consultation
a. The return of “lawful access” and attacks on privacy
b. Expanding the use of intelligence as evidence in court
c. Information sharing
i.Private-to-Private Information Sharing
ii. Public-to-Private Information Sharing
iii. Private-to-Public Information Sharing
iv. Public-to-Public Information Sharing
d. Virtual Currency, Digital Assets, and Technology-Enabled Finance
e. De-risking
f. Monitoring smaller transactions risks mass surveillance
g. No expansion of the definition of threat to national security necessary
3. Issues with the consultation
a. The fallacies of effectiveness and risk
b. The framing of non-profit sector outreach
c. Lack of concern for the protection of civil liberties and human rights
The broader context of the “War on Terror”
First, any evaluation of the PCMLTFA and the broader anti terrorism financing (ATF) regime around it must be considered in the broader context of Canada’s approach to countering terrorism since 2001, and the adoption of the first Anti-terrorism Act (ATA).
The September 11, 2001, terrorist attacks in the United States gave grounds for the Canadian government’s creation of broad anti-terrorism policies which granted various departments, and particularly security agencies, sweeping new powers. Over the past two decades, these powers have been criticized for undermining rights, increasing secrecy, and broadening state surveillance programs. Researchers have also documented their use to target specific political or religious groups, particularly the Muslim community, along with Indigenous and other racialized communities. This includes the expansion of Canada’s Anti-Money Laundering (AML) regime to include anti-terrorist financing (AML/ATF) with the passage of the Anti-terrorism Act (ATA). This bill modified Canada’s Proceeds of Crime (Money Laundering) Act to include terrorist financing, creating the new Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). It also modified the role of the Financial Transactions and Reports Analysis Centre (FINTRAC) to include countering terrorist financing in addition to its work countering money laundering.
To effectively enforce these new ATF regulations, the government created the Financial Transactions and Reports Analysis Centre (FINTRAC), granted new powers to various national security and financial entities, including Canadian Security Intelligence Service (CSIS), the Royal Canadian Mounted Police (RCMP), the Canada Border Services Agency (CBSA) and the Canada Revenue Agency (CRA), and created coordinating bodies to facilitate intelligence gathering and sharing. This also included increased information and intelligence sharing, and harmonization of policies, with foreign governments and agencies as well as multilateral international organizations.
Over the course of the ensuing two decades, anti-terrorism legislation and policies, including the ATF regime, have created an environment conducive to surveillance; restrictions of civil liberties and human rights; and violations of Charter rights, including freedom of expression, freedom of association, due process rights, privacy rights, and the right to non-discrimination. In particular, we have documented occurrences of systemic racism, racial profiling, targeting and bias towards Muslim Canadians, as well as other racialized communities, and significant impacts on the work of international assistance and humanitarian organizations.
Finally, like many federal agencies involved in national security, Canada’s ATF regime – including the implementation of the PCMLTFA – has long operated without independent review or oversight.
Key concerns with aspects of the ATF regime covered in the consultation
The return of “lawful access” and attacks on privacy
Despite the consultation document repeating dozens of times the importance of considering and protecting privacy rights, the government once again raises the spectre of one of the biggest privacy concerns of the past two decades: “lawful access.” So-called “lawful access” proposals would lower the standard that would allow law enforcement agencies access to basic subscriber information (BSI) – the private information that telecommunication and Internet service providers hold about us. This issue has been raised and defeated before, and notably was at the heart of a key Supreme Court ruling, know as the Spencer decision, which has been fundamental in interpreting the privacy rights associated with subscriber information held by Internet service providers.
In 2016, the summary of submissions to the most in-depth public consultation held on Canada’s national security laws made it clear that opposition to proposals for easier access to basic subscriber information (BSI) was one of the most unifying and resounding responses.
At the time, several privacy, internet and human rights experts pointed out that the consultation documents failed to make the case that such indiscriminate powers are needed, and relied on long standing claims that current access mechanisms are “inconsistent and slow.”
We see no different or new information or evidence presented in this current consultation; indeed, the primary argument seems once again to be concerns about the speed at which information can be obtained. Read more on page 5 of the submission linked at the top.
Expanding the use of intelligence as evidence in court
While recognizing that terrorist financing cases can be complex, we do not believe that sufficient information has been presented to justify further changes to rules on the use of intelligence in court proceedings. This is especially true in regard to further reducing the amount of government disclosure required in either criminal or civil cases. The current system, using national security and international relations as reason to keep information, intelligence and evidence secret and unavailable to defendants, is rooted in the concept of “state secrets,” which is already prejudicial against defendants in several ways.
A defendant should at all times have access to the evidence used against them in order to mount an adequate defence and to ensure a fair and just trial. Read more on page 6.
Information sharing
The consultation raises proposals that would grant greater information-sharing powers to government agencies, particularly FINTRAC, as well as to private companies. Overall, we find these proposals lack justification or evidence to their necessity, alongside other specific concerns.
Private-to-Private Information Sharing
Little detail is given in the consultation document regarding the necessity to increase information sharing between private entities, especially given the clear and heightened risks that information sharing between companies such as banks and financial service providers can entail (as highlighted by the Financial Action Task Force in its 2017 guidance on private sector information sharing). The consultation document presents no evidence that Canadian financial institutions are facing increased difficulties in tracking terrorist financing (TF) crimes, nor that existing powers are insufficient or that new powers of private-to-private information sharing is needed. Read more on page 8.
Public-to-Private Information Sharing
The consultation document notes that FINTRAC already has the ability to engage in public-private partnerships, including sharing information, and has done so successfully in various areas. FINTRAC also engages with the private sector through the Advisory Committee on Money Laundering and Terrorist Financing (ACMLTF). From the available information, it does not appear that there is any need for changes to allow greater “public-to-private” information sharing, and certainly no need that would outweigh the risks.
Private-to-Public Information Sharing
The consultation raises concerns that while FINTRAC can only request narrowly defined “required” information from private entities, but could benefit from being able to request information that goes beyond what is required, including to verify or clarify information. Given that we have seen how the sharing of inaccurate and unverified information can have severe negative consequences in regard to profiling and the protection of civil liberties and human rights, a narrow provision allowing FINTRAC to request specific information in response to a submitted report from a reporting entity, for the sole purpose of clarifying or verifying the information in the report, could be acceptable. Provisions should be put in place for the disposal of any extraneous information provided by a reporting entity in its response, as well as requiring FINTRAC to document any request for clarifying information and the reasons for it.
On the other hand, we would oppose any attempt to give FINTRAC broad powers to request information from reporting entities for the vague reason of “analysis of suspected terrorist financing.” This would grant vast new surveillance powers that would put at risk the privacy and other rights of the public who are clients of banks and other financial services that report to FINTRAC. This is especially true due to the existing vast information sharing powers within government, where information collected by FINTRAC can be shared with nearly twenty other government agencies, as well as with foreign agencies. Read more on page 10.
Public-to-Public Information Sharing
We would not support changes to increase FINTRAC’s access to information held by other government departments, to facilitate FINTRAC’s release of financial disclosure materials or to expand the list of organizations to whom such disclosures can be sent. Unlike other sections where minimal information is provided to support possible new powers, no evidence is provided whatsoever to back the proposals in this section of the consultation. Further, it largely ignores the already substantial powers that FINTRAC and ATF regime partners have that allows them to access as well as to disclose information required to carry out their work.
FINTRAC is also allowed to enter into information sharing agreements with foreign governments, agencies and international bodies. However, FINTRAC is not one of the agencies reuired by law to have directives in place to limit the sharing or requesting of information that could lead to foreign mistreatment, including torture. The government should immediately add FINTRAC to the list of agencies where a directive under the Avoiding Complicity in Mistreatment by Foreign Entities Act (ACMFEA) is required. Under the current law, a future government could repeal the existing optional directive and essentially eliminate any restrictions on FINTRAC’s information sharing with foreign entities. While including FINTRAC as one of the required entities in the ADCMFEA would address some concerns, the most effective solution would be to integrate safeguards regarding FINTRAC’s information sharing into the PCMLTFA. Read more on page 14.
Virtual Currency, Digital Assets, and Technology-Enabled Finance
This is a new and emerging field that requires more study, and we would caution against rushing to regulate before the implications of such regulation is more fully discussed and consulted upon. As the United Nations Special Rapporteur on the promotion and protection of human rights and fundamental freedoms while countering terrorism (SR) has reported, many jurisdictions have rushed to regulate virtual currencies, digital assets, etc., based on perceived, as opposed to documented vulnerabilities of these new technologies that have led them to exaggerate the level of the threat posed. This is despite limited empirical evidence to date regarding the actual terror-financing threat posed by new financial technology, especially in regard to the non-profit sector, but also across sectors more generally. Read more on page 16.
De-risking
As pointed out in the consultation document, de-risking by financial service providers under the auspices of combatting terrorist financing is an important concern among non-profit and charitable organizations in Canada and internationally. “De-risking” can be defined as “instances in which a financial institution seeks to avoid perceived regulatory risk by terminating, restricting, or denying services to broad classes of clients, without case-by-case analysis or consideration of mitigation options.” This can include specific acts by banks that are overzealous, unnecessary, disproportionate or discriminatory.
In particular, recent reports have detailed how Muslim organizations in Canada have been specifically impacted by so-called “de-risking.” Other reports have demonstrated how de-risking has impacted non-profit organizations more broadly and on a global scale.
The accounts include banks suddenly refusing service after decades because it falls outside of their “risk appetite,” and difficulties finding alternative banking options. Steven Zhou of the National Council of Canadian Muslims documents how several major Canadian banks as well as international money processing services have engaged in de-risking without transparency, clear criteria or avenues for appeal, leading to unfair treatment and crippling the organizations in question. Zhou’s research also makes the link with the impacts on Canadian-based international NPOs, who are impacted by the global de-risking system.
This reflects research from the New York University legal clinic in Paris on the impact of de-risking on NPOs globally. As they note, while banks may not treat NPOs differently than they treat other corporate clients, NPOs have suffered disproportionate restrictions on access to financial services, and there are cases of governments instituting ATF provisions with the purpose of hindering the ability of NPOs to solicit, receive and utilize financial resources.
While more research is required in the Canadian context in order to collect empirical data of the impact of de-risking, it is clear that de-risking is happening in Canada, reflects the international trend around de-risking impacting NPOs and particularly international and Muslim-led NPOs, and must be addressed by the Canadian government. Read more on pages 18 & 21.
Monitoring smaller transactions risks mass surveillance
While we agree with the overall concern that more must be done to address and prevent acts of violence, we disagree with the premise that further monitoring the financial activities of lone actors will achieve that goal. Multiple studies, including by the US government, the FATF, and even the Canadian government, have demonstrated that financing is neither a prime indicator, nor a prime tool, of lone attackers. Moreover, the harm caused by granting FINTRAC or other government bodies the ability to further monitor small transactions carried out by individuals for activities that are indistinguishable from legitimate financial transactions would outweigh any potential benefit. Read more on page 23.
No expansion of the definition of threat to national security necessary
We believe that the definition of threats to the security of Canada under the CSIS Act is sufficient for the spy agency’s mandate and should not be broadened. We would also be concerned if FINTRAC’s mandate was further expanded to include “activities that could compromise Canada’s economic integrity and prosperity.” Such wording is vague and overly broad. Provisions introduced by the federal government this past year allowing the Minister of Finance to “direct businesses to take enhanced due diligence measures when needed for national security reasons” appears to be both sufficient and narrow enough to be effective without allowing for over-reach. It would be important to observe and monitor how these new provisions are used before considering any further expansion of FINTRAC’s powers.
Further, beyond the PCMLTFA, there are provisions within Canadian privacy laws for private entities to collect and disclose information related to national security threats to government bodies, as well as the provisions of Security of Canada Information Disclosure Act allowing for the disclosure of information between government departments, including FINTRAC. While we maintain concerns regarding both provisions, they demonstrate there are existing tools that can be used to collect and disclose information relating to threats to national security, which would ostensibly include economic threats (vague as that is).
Finally, we are concerned that the expansion of the definition of national security is another element of “national security creep,” whereby more and more elements are added to the concept of national security and therefore responded to with a security-based response. Such “creep” results in more and more resources going to national security agencies, as opposed to efforts at peace building, investment in domestic and international socio-economic programs or other efforts to protect human rights and civil liberties. Such investments have a proven record of improving safety and livelihoods, all while respecting fundamental rights. Read more on page 25.
Issues with the consultation
This isn’t our first rodeo. Much like in the federal consultation on national security in 2016, several of the questions and their accompanying context for this consultation had questionable premises and/or were clearly framed to encourage an answer that would give the regime and agencies more powers – including powers that have been rejected again and again by the public, the courts and/or human rights organizations and experts.
The fallacies of effectiveness and risk
For example, in Chapter 3 part II, the consultation document suggests that the ATF regime struggles to be effective because “federal money laundering and terrorist financing charges, convictions, and forfeiture of proceeds of crime have all decreased over the past decade, which is not in line with Canada’s risk profile”.
We are concerned that the measure of success in ATF is based on the level of prosecution in relation to Canada’s “risk profile.” As explained in the federal 2023 National Inherent Risk Assessment (NIRA), the risk profile is based upon inherent risk before mitigation measures. There is strong regulation and mitigation in place across most sectors – especially the NPO and charitable sector – in order to counter potential terrorist financing. To argue for greater operational powers based on inherent risk without considering existing mitigation powers raises concerns of overreach. Moreover, in analyzing the profiles of the entities viewed as posing a terrorist financing risk in Canada, most are described as having “limited” fundraising activity, having “low” capacity, as having “greatly declined”, as being “small” and “less organized” than in 2015, and having “diminished.” This therefore does not support the argument that more operational powers are needed, and instead indicates current powers – at least in regard to ATF – are sufficient. Further, as we discuss in other sections, we have deep concerns around how the government’s risk assessment is carried, both in how it has unduly singled out Muslim, Arab and other racialized communities as being a focus of “risk,” as well as the lack of involvement of the broader NPO sector in carrying out risk assessments. Read more on page 4.
The framing of non-profit sector outreach
Engagement with the non-profit sector on addressing ATF is essential to ensure government measures are assessed for their impact on important areas ranging from privacy rights, the rights to freedom of association and expression, due process rights and equality/non-discrimination. It is disappointing that the consultation document does not engage with this question more, given the existing research on the impact of Canadian and international ATF measures on the sector. Read more on page 11.
Lack of concern for the protection of civil liberties and human rights
It is also disappointing that the consultation does not engage more with concerns around the protection of civil liberties, human rights and even Charter rights in relation to the PCMLTFA, FINTRAC and the ATF regime more broadly.
For example, while the consultation document explicitly engages multiple times with issues of privacy and section 8 Charter rights, it does not engage with concerns around impacts on freedom of expression, freedom of assembly or freedom of association (s. 2), or equality rights (s. 15). Each of these rights have been amply demonstrated to be impacted by, for example, surveillance and other privacy infringing activities, as well as issues of racial, religious and political profiling in the carrying out of intelligence and law enforcement activities. Examples of specific areas where these issues have arisen are included in our submission, specifically regarding the impact on Muslim charities in Canada and the activities of international assistance organizations.
This concern is not limited to domestic law; Canada also has international obligations, both under treaties and conventions, as well as under international human rights law. As the UN Special Rapporteur on the promotion and protection of human rights and fundamental freedoms while countering terrorism (SR) has documented, ATF activities also implicate:
- Freedom of opinion and expression
- Freedom of peaceful assembly and association
- Freedom of religion or belief
- Right of minorities
- Right to enjoy property, including through financial access
- Rights to education and work
- Equal rights of women
- Right to freedom from interference with privacy, family, or home, or unlawful attacks on one’s honour and reputation
- Rights to freedom of movement and nationality
- Right of every citizen to take part in public affairs, and associated public consultation rights
- Due process and procedural rights, including the right to fair trial, the presumption of innocence, the right to appeal, and a right to effective protection by the courts
- Right to an effective remedy
Read more on page 3.
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