Aug 2019 Charity & NFP Law Update
Regulations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act
On July 10, 2019, the Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, 2019 (the “Regulations”) were published in the Canada Gazette. The Regulations introduce a number of changes to the draft regulations proposed in June 2018, which were discussed in the June 2018 Charity & NFP Law Update, and includes a number of new additions that will be of interest to charities and not-for-profits. The Regulations require financial entities, as defined therein, to verify the identity of each authorized user and keep records regarding every “prepaid payment product account,” such as those tied to prepaid cards programs, and which permit funds or virtual currency that total $1,000.00 or more to be added to the account in a 24-hour period or a balance of funds or virtual currency of $1,000.00 or more to be maintained in the account. However, the Regulations exclude accounts tied to prepaid payment products, which would include disaster relief prepaid cards, used for purposes of humanitarian aid by registered charities.
Public Safety Canada Updates List of Suspected Terrorist Groups
On June 21, 2019, the list of entities believed to be involved in or associated with terrorism, which is a list maintained by the Governor in Council on the recommendation of the Minister of Public Safety and Emergency Preparedness pursuant to section 83.05 of the Criminal Code, was updated to include five new organizations. The new entities are Al-Ashtar Brigades, Fatemiyoun Division (FD), Harakat al-Sabireen (HaS), operating in the Middle East, as well as, for the first time, two neo-Nazi groups, namely, Blood & Honour (B&H) and Combat 18 (C18), operating in Europe and the US.
Charities involved in activities both outside as well as inside Canada should have adequate due diligence procedures in place to reduce the risk of unknowingly providing any kind of support to any of the entities listed by Public Safety Canada as suspected terrorist groups.
FATF Releases Terrorist Financing Risk Assessment Guidance
On July 5, 2019, the Financial Action Task Force (“FATF”), an inter-governmental body founded to set standards and promote policies to combat money laundering and terrorist financing, released its Terrorist Financing Risk Assessment Guidance (the “Guidance”) to assist participants and countries, particularly those with lower capacity to regulate and enforce a counter terrorist financing regime, in assessing terrorist financing risk. The Guidance acknowledges that there is no one-size-fits-all approach for assessing terrorist financing risk, so it provides considerations and examples for different contexts.
Part 4 of the Guidance deals specifically with how to assess the terrorist financing risk associated with non-profit organizations (“NPOs”), as defined by the FATF. In this regard, and relying on Recommendation 8 which was discussed in the Anti-Terrorism and Charity Law Alert No. 46 dated September 29, 2016, the Guidance highlights the experience of the UK in its 2017 domestic review of the NPO sector, which included a review of what information each regulatory body/agency collected to help assess levels of transparency and oversight within the UK NPO sector, as well as any self-regulatory measures and the adequacy of relevant outreach and guidance to the sector. The Guidance also makes reference to the Charity Commission of England and Wales’ review of 2014/15, which led to the amendment of the Charities Act 2011 in 2016 in order to expand the automatic disqualification of certain individuals from holding the position of charity trustee, including individuals convicted of terrorism offences or subject to financial sanctions. Other case studies referred to in the Guidance include Australia, Malaysia, Kosovo and Kyrgyzstan.