Jun 2019 Charity & NFP Law Update
Joint Statement by Federal, Provincial and Territorial Governments
On June 14, 2019, several representatives from federal, provincial, and territorial governments, including ministers responsible for anti-money laundering and beneficial ownership transparency, released a joint statement (the “Joint Statement”) to advance a new initiative to combat money laundering and terrorist financing in Canada.
The Joint Statement highlights the federal, provincial, and territorial governments’ commitment to protecting Canadians and the integrity of Canadian institutions. It also recognizes the importance of coordinated action by the different levels of government to prevent criminals from exploiting gaps and vulnerabilities across jurisdictions.
As well, the Joint Statement reaffirms the commitment to improving transparency of beneficial ownership information for law enforcement, tax and other authorities, with appropriate privacy safeguards, in order to target criminals who use corporations to hide or launder money, without deterring good corporate citizens from conducting their regular business activities.
In terms of next steps, the Joint Statement recognizes the importance of consultations with vulnerable sectors, and announced the creation of a new working group with the Federation of Law Societies of Canada. The representatives also agreed to work together on cross-government anti-money laundering best practices to be reported by January 2020.
Last FATF Plenary Meeting for the 2018-2019 Period
Between June 16 and 21, 2019, the Financial Action Task Force (“FATF”), an independent inter-governmental body that develops and promotes anti-money laundering and anti-terrorist financing policies and standards, had its last Plenary meeting for the 2018-2019 period. At this Plenary meeting, the FATF discussed the mitigation of risks from virtual asset activities and finalized the Interpretive Note to Recommendation 15 which sets out the application of the FATF Standards for the regulation and supervision of activities and service involving virtual assets.
Recommendation 15 and its Interpretive Note are annexed to the FATF’s “Guidance for a Risk-based Approach for Virtual Assets and Virtual Asset Service Providers” (the “Guidance”). The Guidance is intended to further assist countries and providers in complying with their anti-money laundering and counter-terrorism financing obligations. The Guidance describes how the FATF Recommendations apply to virtual asset activities and service providers. In the case of Recommendation 8, the Guidance provides that the risk-based approach to protect non-profit organisations from terrorist financing abuse must consider the clandestine diversion of funds through the use of virtual assets.
In anticipation of the FATF’s Interpretive Note to Recommendation 15 and the Guidance, the G20 Finance Ministers and Central Bank Governors Meeting, held between June 8 and June 9, 2019 in Japan, also reaffirmed their commitment to applying the FATF Standards to virtual assets and service providers for combating money laundering and terrorist financing.
Consortium for Financial Access Releases Guidance to Address Issue of De-risking
The Consortium for Financial Access, comprised of a number of large multi-national financial organizations, community banks, money services businesses, security firms, credit unions, charities, law enforcement, regulators, advisory firms and academics, who all originally came together by initiative of the Association of Certified Anti-Money Laundering Specialists and the World Bank, has released its guidance document entitled Banking Nonprofit Organizations – The Way Forward (the “Guidance”). The Guidance provides policy and practice recommendations for not-for-profits, financial institutions and governments, and it is aimed at improving financial access for not-for-profits.
The Guidance relies on the most recent National Terrorist Financing Risk Assessment by the United States Department of the Treasury, discussed in the March 2019 Anti-Terrorism/money Laundering Update, to emphasize that the not-for-profit sector does not present a uniformly high risk and, as such, financial institutions “should be careful to not require excessive or unnecessary information from [not-for-profits] and should ensure that all information collected from [not-for-profits] is relevant to the stated purpose, remembering that [not-for-profits] have legal and ethical obligations to protect the privacy of their donors, beneficiaries and members.”
Further, the Guidance calls for governments and financial regulators to promote financial access for not-for-profits by emphasizing appropriate due diligence for the sector, which is not inherently risky, clarifying that the policy objectives of combating money laundering and promoting humanitarian and development assistance are complementary goals, and with appropriate policy statements stressing governments’ support for the not-for-profit sector and its humanitarian and developmental efforts.