By Terrance S. Carter, Nancy E. Claridge and Sean S. Carter

Guidance on Bill C-41 Expected Soon

The fall of the democratically elected government of Afghanistan in August 2021 caused an ongoing humanitarian crisis. The main obstacle for Canadian charities and not-for-profits wanting to provide aid in Afghanistan has been the fact that Afghanistan is now controlled by the Taliban, a listed terrorist group in Canada. Subsections 83.03(1) and (2) the Criminal Code make it an offence for any person to “directly or indirectly makes available property or financial or other related services for terrorist purposes or for use by terrorist groups”. This AML/ATF Update includes general information we have received from the Department of Justice on the expected release of a much-anticipated guidance document for Bill C-41, An Act to amend the Criminal Code and to make consequential amendments to other Acts.

As a result of intense lobbying from the charitable sector in 2022, the federal government finally passed Bill C-41 on June 20, 2023. The details of Bill C-41 were covered in detail in our August 2023 AML/ATF and Charity Law Alert No. 53 (“Alert 53”). In essence, Bill C-41 provides a blanket exemption for “humanitarian assistance activities” and a narrower exemption for a list of certain activities that requires an organisation to apply for and receive authorisation from the federal government in order to carry out certain activities in a geographic area controlled by a listed terrorist group.

While the federal government’s passing of Bill C-41 has been a welcome development, there has been no direction to date from the government concerning the practical aspects of working under the exemptions set out in Bill C-41 for those organizations wanting to provide aid to the people of Afghanistan, or elsewhere in the world under the control of a listed terrorist group.

While Bill C-41 provides important exemptions to the Criminal Code, there remain many grey areas where charities, not-for-profits, and concerned individuals may be unsure if they are compliant with the provisions of Bill C-41. In our Alert 53 we reported that the Department of Public Safety (Canada), in a presentation given July 14, 2023, had indicated that it expected to make a guidance document available in the near future. Since a guidance document has yet to be posted, one of our Alert 53 authors recently spoke to a senior official from the Department of Justice (the “Senior Official”) to gain a better idea of the timing of when a guidance would be released. We received permission to report on the ensuing conversation in general terms.

The Senior Official said the federal government is planning to release the much-anticipated guidance by the end of 2023. As well, the guidance is expected to assist in determining if proposed aid can be classified under the general exemption of “humanitarian assistance activities” or under the listed exemptions for which a request for authorization from the government would be required.  However, the Senior Official pointed out that the guidance, while vital to the sector once released, should not be treated as a legal or binding document as in the end, it will be up to the courts to interpret how Bill C-41 is applied in practice.

Pending judicial interpretation, any guidance from the federal government will no doubt prove to be an essential tool for those wanting to work in Afghanistan or other conflict areas controlled by a listed terrorist group, including Gaza. Clearly, the guidance cannot come soon enough.

Office of the Privacy Commissioner Makes Submission to Finance on AML/ATF Consultation Paper

The 2023 Federal Budget announced that the federal government would launch a Parliamentary Review of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (“PCMLTFA”), to examine Canada’s anti-money laundering/anti-terrorist financing (“AML/ATF”) regime. The Department of Finance (the “Finance”) released a Consultation Paper (the “Paper”) on this Parliamentary Review, which ran until August 1, 2023. In response to the Paper , the Office of the Privacy Commissioner (“OPC”) released a Submission to Finance on August 10, 2023 (“Submission”), discussing the privacy aspects of AML/ATF law, oversight of the Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”) and what effect changes to that system could have on Canadian privacy rights.

The Submission underscores the significance of safeguarding privacy rights while ensuring the effectiveness of AML/ATF measures. It introduces several key areas and recommendations concerning privacy protection:

Protection of Privacy Rights:

In its Paper, Finance recognizes that privacy is integral to an effective AML/ATF regime, advocating for a privacy-focused approach. Proportionality is emphasized, calling for measures to justify privacy intrusions and minimize them.

In its Submission, the OPC expresses concern about government objections leading to refusals of access to information requests under the Personal Information Protection and Electronic Documents Act (“PIPEDA”), emphasizing the need for improved notifications and information quality.

Beneficial Ownership Registry:

Finance recommends a collaborative and harmonized approach for collecting and reporting beneficial ownership information, consistent with the G20 developed High-Level Principles on Beneficial Ownership Transparency.

In response, the OPC notes that many in government wish to establish a beneficial ownership registry, but there must be safeguards for personal and sensitive information that would be included in this registry, and access should be under the pretext of a “legitimate interest” rather than “unfettered”. The Submission recommends that privacy impact assessments be used as a first step in establishing a beneficial ownership registry.

Access to Subscriber Information/Electronic Devices:

While the Paper encourages the introduction of new criminal investigative powers, such as orders for subscriber information, the OPC in its Submission emphasizes the need for precise definitions and privacy safeguards, including clear thresholds, transparency measures, and statutory use limitations.

Other Investigative Powers:

The Submission from the OPC is somewhat critical of Finance’s Paper regarding investigative powers. The Minister of Finance’s suggestions included expanding search and seizure powers to allow law enforcement to confiscate the electronic devices of anyone present in a location where a search warrant is executed.

Such proposals by the Finance to amend search warrant provisions raise significant privacy concerns, according to the OPC. The Submission highlights the need for necessity and proportionality considerations, recommending privacy safeguards if these tools are adopted.

Politically Exposed Persons (“PEPs”):

PCMLTFA requires reporting entities to engage in reporting for Politically Exposed Persons (“PEPs”) or Heads of International Organizations (“HIOs”). The Finance sought public input on the viability of a federal database of domestic and foreign PEPs, HIOs, and their families. 

In response, the OPC notes that, for such a database to be effective to law enforcement, it would necessarily have to include sensitive personal information, such as personal addresses, transaction history, and date of birth.

Along with complying with PIPEDA, which would be mandatory, the OPC’s Submission recommends that privacy best practices be included in the construction of such a database, including access restrictions, audits for data quality, threat risk assessment and testing the security of the database. The OPC offers to engage in shaping the initiative to uphold privacy principles.

Collecting Publicly Available Personal Information:

PCMLTFA currently allows for the collection of relevant publicly available information for use by law enforcement, but does not explicitly allow for “acquisition and analysis” of these datasets. Finance’s Paper asks whether expanding law enforcement to collect and analyze this information raises privacy concerns; the OPC Submission answers this in the affirmative.

Information Sharing — Private Sector:

The Paper states that the government is considering methods to “enhance” the sharing of information in the private sector to assist in the elimination of money laundering and terrorist financing, noting that other jurisdictions are more lenient than PIPEDA in this regard. Finance proposes that a “safe harbour provision” be instituted which will allow private entities to share information among themselves to curtail malicious use of their services. 

In response to this, the OPC Submission recommends the use of privacy impact assessments when considering these changes, as well as collaboration between lawmakers and the OPC in establishing these new provisions.

Information Sharing — Within Federal Agencies:

In its paper, Finance recommends widening the scale and scope of information that is shared by federal organs. This would be a change of direction policy-wise, as there are multiple prohibitions under PCMLTFA regarding what can be shared amongst law enforcement and other authorities.

In response, the OPC submits that an expansion of information sharing among federal agencies needs to adopt a risk-based approach, with regular review and robust privacy safeguards. Privacy-enhancing technologies from global organizations can provide valuable insights.

Reporting Framework — Suspicious Transaction Reports (STRs):

Finance recommends that having a non-monetary threshold for STRs allows for flexibility in detection and enforcement, noting that such reports are valuable in “the development of financial intelligence”, but also that they create a regulatory burden on the financial industry.

The OPC recommends improved communication with and guidance for reporting entities to enhance privacy practices, which practically translates into a clearer understanding of responsibilities and a reduction of uncertainty for these reporting entities. This, according to the Submission, would be achieved through collaboration and dialogue between the Finance and the OPC.

Exemptive Relief for New Technologies:

The Paper notes that the financial service providers are early adopters of new business practices and technologies to deter money laundering and terrorist financing issues. While Finance wishes to promote the use of technology to make AML/ATF initiatives more efficient, it also stated that any exception to PCMLTFA regulations would “only be contemplated under limited circumstances, with clearly defined parameters, checks, and balances.”

The Submission states that innovations in AML/ATF should uphold data protection and privacy laws. While the utilization of new technology is welcome, experimenting with their implementation must comply with privacy law and principles. Clarity on scope and technology considerations are sought by the OPC, which proposes that Finance work with them to develop a coherent technology policy.

Broadening of Canada’s AML/ATF Regime:

Finance recommends broadening the scope of activities caught under AML/ATF law, with the stated goal of combatting evasion of sanctions, screening foreign investments for potential harm and promoting economic security.

In response, the OPC states that further expansion of the AML/ATF regime, since it has already rapidly increased its powers over the past two decades, requires careful consideration of necessity and proportionality. Robust oversight mechanisms, including regular audits, are recommended.

Conclusion:

In conclusion, the OPC highlights how the role of intelligence agencies, like FINTRAC, are critical to national security, while their secretive nature must be balanced with significant government oversight. The role of audits in ensuring accountability for intelligence agencies like FINTRAC and emphasizing the importance of considering necessity and proportionality in any changes or expansions to the AML/ATF regime are essential in achieving this balance. The OPC expressed its openness to further engagement with Finance on these crucial privacy-related issues.

​Read the October 2023 Charity & NFP Law Update