The Committee was informed, by witnesses and through submissions, about the analysis and disclosure of financial information received by FINTRAC, investigations of terrorist financing activities, the prosecution of individuals suspected of terrorist financing, the listing of terrorists and terrorist organizations, and other measures to prevent terrorist financing.

A. Analysis and Disclosure of Financial Information

The Committee’s witnesses focused on FINTRAC’s analysis and disclosure of financial intelligence that is garnered from reports submitted to it by reporting entities. FINTRAC said that it cannot determine whether the funds to which the reports are related are from legitimate or illegitimate sources, but indicated that law enforcement agencies can request information from it in an effort to determine if a particular transaction is related to a criminal offence. It noted that, in isolation, a reported transaction may not seem to be related to a crime; however, it may be useful when it is combined with intelligence known by a law enforcement agency or CSIS.

As well, FINTRAC stated that the financial intelligence it garners from suspicious transactions reports is used to establish links between and among individuals and organizations in Canada and abroad that support terrorist activities, and to identify the funds used to finance those activities. According to it, in 2014, this type of financial intelligence resulted in 234 disclosures to law enforcement and national security agencies that were related to terrorist financing and threats to national security. Christine Duhaime commented that the law enforcement activities resulting from these disclosures were not reviewed by the government to assess the effectiveness of those disclosures.

FINTRAC emphasized that it is not an investigative body; rather, it discloses selected information it receives to the RCMP and local law enforcement agencies for investigation if doing so would be useful in an investigation of terrorist activities. It also remarked that individuals should report suspicious activities to law enforcement agencies; they may also do so through FINTRAC’s tip line.

In giving an example of the manner in which the information it receives is used, FINTRAC stated that the RCMP’s integrated national security enforcement teams in Ontario and Quebec used intelligence provided by FINTRAC during their investigation of the International Relief Fund for the Afflicted and Needy-Canada (IRFAN Canada) that was allegedly linked to Hamas. The RCMP said that, in 2014, IRFAN Canada – which was a registered charity until 2011 – was listed as a terrorist organization under the Criminal Code. It explained that IRFAN Canada had transferred about $14.6 million to various organizations with links to Hamas, and that being listed as a terrorist organization both stopped IRFAN Canada’s financing activities and allowed the RCMP to seize and retain the organization’s property.

FINTRAC also highlighted that the RCMP used financial intelligence provided by it in Project Smooth, which led to the arrest of two individuals who conspired to carry out a terrorist attack against a VIA passenger train travelling from New York to Toronto.

Regarding the October 2014 terrorist attacks in Ottawa, Ontario and in Saint Jean‑sur‑Richelieu, Quebec, FINTRAC stated that it disclosed information to law enforcement agencies related to a series of transactions and to suspicious transactions reports submitted by financial institutions. It also indicated that, after the names were made public, it sent an email to reporting entities identifying the perpetrators, which led to an increase in the number of suspicious transactions reports submitted.

FINTRAC noted that it creates classified strategic financial intelligence reports on suspected terrorist financing activities and trends; it provided the example of analyzing electronic funds transfer reports to identify Syria-related high-risk flows of funds. FINTRAC also indicated that it does not analyze CBSA reports based on country of destination or origin; these reports, which focus on individuals who are travelling with funds exceeding $10,000, do not indicate a traveller’s final destination.

The Anti‑Money Laundering Association suggested that increased communication between FINTRAC and law enforcement agencies would improve FINTRAC’s effectiveness and the quality of its financial intelligence. According to the Clement Advisory Group, FINTRAC’s effectiveness should be assessed on the basis of the number of prosecutions of individuals suspected of terrorist financing, and not necessarily on the number of information disclosures to law enforcement agencies. MNP LLP said that the false-positive rate of reports sent to FINTRAC should be assessed.

Christian Leuprecht noted that financial institutions submit a large number of suspicious transactions reports to FINTRAC, and requested that the format of these reports be standardized in order to improve data analysis. Bill Tupman stated that suspicious transactions reports are being stored and are not being analyzed adequately.

As well, Christian Leuprecht suggested that cooperation between FINTRAC and the Bank of Canada should be improved, as central banks have good intelligence-sharing networks, and that FINTRAC could share information with arm’s-length parties – such as academics – for further analysis.

B. Investigating Terrorist Financing Activities

The Committee’s witnesses commented on investigations of terrorist financing activities by law enforcement agencies, which are assisted by other entities in Canada’s anti–money laundering and anti–terrorist financing regime. According to the RCMP, disrupting terrorist financing affects an individual’s ability to conduct acts of terrorism. It noted that investigating and disrupting terrorist financing activities in Canada is a key component of its response to the threat of terrorism, and that it works with FINTRAC, CSIS and the CRA when investigating these threats. It also observed that terrorist financing is not isolated from other types of illegal international financial activities.

Paul Kennedy, who appeared as an individual, pointed out that while the Security Offences Act gives the RCMP primary responsibility for investigating terrorist activities, it has multiple demands on its resources because it provides municipal, provincial and federal police services as well; two thirds of RCMP officers perform non-federal policing functions. He also said that, through contracts with provinces that lack provincial police forces, the federal government subsidizes 30% of the cost of RCMP policing in certain municipalities and 10% of such costs at the provincial level. Bill Tupman suggested that the law enforcement funding models in Germany, the Netherlands and the European Police College should be examined.

As well, Paul Kennedy emphasized that the RCMP has taken few actions with respect to terrorist financing, partially because of two reasons: the lack of trained personnel; and the current recruiting and development model for officers involved in investigating and prosecuting terrorist financing offences and related criminal activities. Christian Leuprecht also said that the RCMP lacks the skills needed to undertake complex financial investigations. In the view of Martin Rudner, the RCMP tends to promote generalists, rather than specialists, and terrorist financing investigations require RCMP officers who are highly specialized.

Paul Kennedy proposed that the federal government should reallocate its funding of RCMP policing at the non-federal level to recruiting and training federal officers for the investigation of complex crimes, such as terrorist financing; as well, the RCMP should be a national police force that deals only with complex crimes. According to the Clement Advisory Group, the RCMP’s role should be changed so that its focus is federal issues, rather than provincial or municipal concerns.

The Clement Advisory Group also said that the RCMP needs to recognize that combating terrorist financing requires a high level of expertise, and that – like the U.S. Federal Bureau of Investigation – it needs to build and retain expertise in relation to such financing. It indicated that the prosecution of criminal financial offences is inadequate in Canada, and stated that experienced prosecutors are needed for the investigation and litigation of financial crimes, which can be complex. In its view, judicial consideration of the PCMLTFA’s provisions would lead to the identification of gaps in the law, which may indicate whether the RCMP needs more resources to conduct terrorist financing investigations. Bill Tupman said that existing laws are adequate for prosecuting terrorist financing, but that investigators must be better trained.

As well, the Clement Advisory Group suggested that public-private partnerships for investigations of financial crimes should be considered, such as with accountants and lawyers in order to access their expertise. It also noted the model for the integrated proceeds of crime initiative, which brings together the federal government and law enforcement agencies. In the opinion of the Egmont Group of Financial Intelligence Units, FINTRAC, the RCMP and CSIS should consider working together on task forces as a means to bring people from different agencies together.

Christian Leuprecht said that there are challenges in recruiting and training personnel to prosecute terrorist financing activities. Regarding the career training provided in other federal departments, he commented that the Department of National Defence has a comprehensive professional development program for employees, and supported a similar program for entities in Canada’s anti–money laundering and anti–terrorist financing regime.

As well, Christian Leuprecht noted that FINTRAC is effective in collecting financial information, but that the RCMP is ineffective in using this information to investigate and prosecute terrorist financing offences; amending the PCMLTFA to enhance the detection of terrorist financing will not enhance the RCMP’s effectiveness unless it receives more resources.

Martin Rudner suggested that FINTRAC, the RCMP and other Canadian intelligence agencies should have expanded investigative capacities that are focused on terrorist financing methodologies in Canada and abroad; these capacities should assist in preventing and prosecuting terrorist financing.

According to the RAND Corporation, efforts should be directed to finding and seizing ISIL’s financial reserves. The Foundation for Defense of Democracies highlighted that, in 2014, a Canadian court ordered that $7.1 million in Iranian assets that were located in Canada be seized.

Bill Tupman urged law enforcement agencies to focus on investigating certain private websites, such as “Tor and the deep web.”

C. Prosecuting Criminal Code Offences

According to the Committee’s witnesses and submissions, prosecuting terrorist financing offences specified in the Criminal Code is difficult and the Code lacks clarity. Martin Rudner said that, because information sources and investigative methods are secret, and – consequently – investigators and prosecutors may not want to reveal them in an open court, there are few terrorist financing prosecutions in Canada; investigators prefer to focus on disrupting terrorist financing. In this respect, he provided the example of the litigation involving the Lebanese Canadian Bank, in which it was argued that the bank was used to transfer money to Hamas and Hezbollah.

In its submission to the Committee, Carters Professional Corporation noted that section 83.19 of the Criminal Code makes it an offence to facilitate a terrorist activity “knowingly.” Its submission suggested that subsection 83.19(2) eliminates the criminal intent or mens rea of “knowingly” facilitating a terrorist activity, which may make humanitarian aid that is sent by charities subject to criminal sanctions if the funds are later found to be used for terrorist purposes. It suggested that Canada’s legislation goes beyond FATF standards regarding terrorist financing, and is the most broadly worded in the world.

As well, Carters Professional Corporation’s submission to the Committee requested two amendments to subsection 83.19(2): the addition of a requirement for criminal intent before a person is found guilty of an offence in that subsection; and an exception for humanitarian aid where this aid may indirectly support or benefit a terrorist or terrorist organization. The Canadian Bar Association advocated clarification of the Criminal Code so that charities have a better understanding of the actions that constitute criminal activities.

Carters Professional Corporation’s submission to the Committee also highlighted that the Charities Registration (Security Information) Act’s certificate procedure that is used to refuse the registration of – or to deregister – a charity, lacks an appeal process, and that charities are not provided with reasons for the certificate of refusal or deregistration. It made three proposals: the establishment of a clear criminal intent before a certificate is issued; the creation of a due diligence defence for charities; and the hearing of appeals of a certification by the Federal Court of Appeal.

D. Listing Terrorists and Terrorist Organizations

The Committee’s witnesses described the process by which terrorists and terrorist organizations are listed pursuant to the Criminal Code and the United Nations Act; listing prevents these individuals and organizations from obtaining financial services and funds. The Department of Finance noted that 90 individuals and organizations have been listed as terrorists or terrorist organizations pursuant to the Criminal Code and the United Nations Act, and that DFATD is in the process of streamlining the private sector’s ability to implement such sanctions as denial of financial services. As well, the Department of Finance said that while it does not know the amount of terrorist assets that has been frozen in Canada as a consequence of sanctions, this information is reported to the RCMP and CSIS.

The Department of Finance also highlighted recent changes to the PCMLTFA that give the Minister of Finance the power to issue a directive requiring a reporting entity to implement countermeasures in relation to transactions to and from any foreign state or foreign entity in a jurisdiction that has ineffective anti–money laundering and anti–terrorist financing controls.

The Canadian Bankers Association noted that its member financial institutions compare the names of their existing and potential clients to the names on lists of terrorists and terrorist organizations, and that they monitor transactions to detect terrorist financing typologies, such as credit card fraud. Anthony Amicelle suggested that information about the individuals or organizations that appear on these lists is limited, which makes it difficult for financial institutions to identify the accounts of listed terrorists or terrorist organizations.

MNP LLP remarked that the United Nations Act and the Criminal Code require certain reporting entities, but not money services businesses, to compare the names of existing and potential clients to the names on lists of terrorists and terrorist organizations on an ongoing basis. In its view, although such a comparison is the most significant counterterrorist financing tool that is used by reporting entities, it has not been effective, as these lists lack sufficient details about the identity of the individual or the organization, or are outdated.

According to Christine Duhaime, Canada’s procedure for listing terrorists and terrorist organizations is an effective tool. However, she also stated that – when compared to the United States – Canada rarely reviews the extent to which individuals and organizations listed as terrorists and terrorist organizations are denied financial services and funds, or the extent to which individuals or organizations are prosecuted for violations of the Criminal Code and the United Nations Act regarding the provision of financial services or funds to listed terrorists and terrorist organizations. Christian Leuprecht observed that the lists of terrorists and terrorist organizations are ineffective, as these organizations regularly change their name and split into different entities; consequently, individuals belonging to these organizations could be listed instead. The Anti‑Money Laundering Association noted that terrorist organizations have many affiliates, and it is difficult to sanction every related entity.

E. Other Measures to Prevent Terrorist Financing

In speaking about Canada’s efforts to assist other countries in preventing terrorist financing, the Department of Finance noted that it provides assistance through DFATD’s capacity-building program in certain countries in the Americas, the Middle East and South Asia.

According to Christine Duhaime, there would not be an Islamic State today or the current extent of terrorist activities if counterterrorist financing laws and sanction laws were respected throughout the world. The Royal United Services Institute proposed that Canada should restrict the flow of funds to ISIL by ensuring that the countries that surround Syria and Iraq comply with international obligations and sanctions in relation to the prevention of terrorist financing and that they are able to monitor financial flows.

The Anti‑Money Laundering Association called on the government to request information from the UN Al-Qaida Sanctions Committee Monitoring Team and the Counter-Terrorism Committee Executive Directorate on the effectiveness and impacts of UN Security Council Resolutions 1267 and 1373; these resolutions imposed sanctions against Al-Qaida and the Taliban and implemented anti‑terrorism measures respectively.