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February 2020 Charity & NFP Law Update Terrance S. Carter, Nancy E. Claridge and Sean S. Carter Anti-Terrorism/Money Laundering Update Further Amendments to Regulations under the PCMLTFA On February 15, 2020, new proposed Regulations Amending the Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, 2019 (the “Proposed Amending Regulations”) were published in the Canada Gazette, Part I, and will be open for comment from interested persons for thirty (30) days from the date of publication. The Proposed Amending Regulations introduce further amendments to the previously amended regulations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the “PCMLTFA”), discussed in the August 2019 Anti-Terrorism/Money Laundering Update. The Proposed Amending Regulations would align Canada’s AML/ATF Regime with recommendations of the Financial Action Task Force (“FATF”), including the FATF’s Guidance for a Risk-based Approach for Virtual Assets and Virtual Asset Service Providers, discussed in the June 2019 Anti-Terrorism/Money Laundering Update, the recommendations from the 2018 five-year parliamentary review of the PCMLTFA, discussed in the AML/ATF and Charity Law Alert No. 48, as well as the Dirty Money reports commissioned by the Government of British Columbia and released in 2018 and 2019. Of note, the Proposed Amending Regulations would introduce stronger customer due diligence requirements for designated non-financial businesses and professions (“DNFBPs”), such as accountants and accounting firms, British Columbia notaries, casinos, departments and agents of the Crown, dealers in precious metals and stones, as well real estate brokers, sales representatives and developers. As such, when required to verify the identity of an entity, DNFBPs would have to collect beneficial ownership information describing the ownership, control and structure of an entity, including corporations and trusts. DNFBPs would also be required to take reasonable measures to confirm the accuracy of the information obtained and keep records of the information and the measures taken to comply. The Proposed Amending Regulations would also help address new emerging risks involving virtual currencies. Consistent with the FATF’s 2019 guidance on virtual assets, the Proposed Amending Regulations would introduce the “travel rule” of customer due diligence as a requirement for banks and other financial institutions such as money services businesses. US 2020 National Strategy for Combating Terrorist and Other Illicit Financing On February 6, 2020, the US Department of the Treasury released its 2020 National Strategy for Combating Terrorist and Other Illicit Financing (the “2020 Strategy”). The 2020 Strategy provides a “whole-of-government approach to guide the public and private sectors in addressing 21st century illicit finance challenges”, identifying the most significant threats and vulnerabilities that allow illicit proceeds to enter the US financial system, such as the abuse of charitable organizations and unlicensed money transmitters to move money around the world. A central focus of the 2020 Strategy is the adoption of a risk-based approach applying simplified or enhanced measures in response to different risks and focusing resources in the areas of highest risk in order to make the greatest impact. In this regard, the 2020 Strategy also identifies enforcement priorities and supporting actions, such as improving communication of priority illicit finance threats, vulnerabilities, and risks. In this regard, the 2020 Strategy states that: U.S.-based tax-exempt charitable organizations play an important role in delivering aid to communities worldwide and in countering terrorist propaganda and recruitment. Treasury and interagency partners will continue to engage with charitable organizations and financial institutions to evaluate and communicate the actual risk that these organizations may be misused to support terrorism and that financial institutions apply the risk-based approach to the opening and maintenance of charity accounts, as the vast majority of U.S.-based tax exempt charitable organizations are not high risk for terrorist financing. We note that this language is consistent with the US Treasury’s 2018 National Terrorist Financing Risk Assessment, discussed in the March 2019 Anti-Terrorism/Money Laundering Update, which stated that US tax-exempt charitable organizations operating domestically in the US faced a low risk of abuse but that a “small number of US tax-exempt charitable organizations that operate in high risk regions” faced a greater risk. The 2020 Strategy also identifies vulnerabilities and enforcement priorities in relation to the collection of beneficial ownership information of legal entities, as well as money services businesses, broker-dealers, and casinos. As well, the 2020 Strategy acknowledges the value of artificial intelligence and data analytics to support law enforcement. UN Working Paper on Impact of Counter-terrorism Legislation on Humanitarian Action On February 13, 2020, the Inter-Agency Standing Committee (“IASC”) of the United Nations (“UN”) General Assembly published a working paper containing key recommendations from a desk review of main articles and papers published between 2011 and 2019 on the impact of counter-terrorism legislation and measures on principled humanitarian assistance (the “Paper”). The Paper identifies a number of problems caused by counter-terrorism legislation on humanitarian work, such as:
In this regard, the Paper also offers a few key recommendations targeted to the UN Security Council, donors and the FATF. These recommendations include adding humanitarian exemptions and exceptions to counter-terrorism legislation and measures; improving wording and language of UN Security Council Resolutions; increased systematic monitoring of and reporting on the impact of sanctions regimes and counter-terrorism measures on humanitarian work; greater transparency and accountability of UN counter-terrorism bodies; and the development of risk-sharing measures among donors, humanitarian organizations and financial institutions. Competition Bureau’s Role in Digital Advertising: Implications for Charities and Not-for-Profits |
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