AML/ATF Update
Oct 2021 Charity & NFP Law Update
Published on October 28, 2021

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


FATF Downgrades Canada as Less Compliant in Regulating NPOs Vulnerable to Terrorist Financing

The Financial Action Task Force (“FATF”) published a report titled “Anti-money laundering and counter-terrorist financing measures: Canada” (the “2021 Report”) on October 1, 2021, the fifth mutual evaluation of Canada that the FATF has conducted concerning its compliance with the FATF Recommendations concerning anti-money laundering and anti-terrorist financing (“AML/ATF”) measures. The previous FATF report (the “2016 Report”) was released on September 15, 2016, as reported in Anti-Terrorism and Charity Law Alert No. 47. In the 2016 Report, Canada fared well in general, but was non-compliant in five recommendations. In the 2021 Report, Canada demonstrated improvement in many areas, but remained non-compliant with Recommendation 25, which calls for transparency and beneficial ownership in legal arrangements. Most importantly for charities and not-for-profits, Canada was downgraded from compliant to partially compliant with regard to Recommendation 8, which requires the application of focused and proportionate measures to protect non-profit organizations (“NPOs”) from terrorist financing abuse. This Alert examines the issues involved in Recommendation 8 and provides a brief overview along with other changes in the 2021 Report.

For the balance of this Alert, please see AML/ATF and Charity Law Alert No. 50.

FATF Makes Statement Regarding NPOs in Afghanistan

As a result of the Taliban takeover of Afghanistan, the Financial Action Task Force (“FATF”) has issued a statement highlighting the importance of ensuring that non-profit organizations (“NPOs”) continue to provide vital humanitarian assistance in the region. The statement, issued on October 21, 2021, reiterates the “utmost importance” of ensuring that NPOs provide humanitarian assistance “without delay, disruption or discouragement.” At the same time, the FATF emphasizes the need for authorities to “protect NPOs from being misused for terrorist financing.” The FATF will closely monitor the situation in Afghanistan and consider options to help promote security, safety and the integrity of the global financial system.

Canadian charities and not-for-profits operating in Afghanistan either on their own or through an intermediary need to be aware of SOR/99-444, Regulations Implementing the United Nations Resolutions on Taliban, ISIL (Da’esh) and Al-Qaida (the “Regulations”), which generally prohibits providing any property, financial services, or related services to the Taliban, ISIL (Da’esh) and Al-Qaida (all three of which are listed terrorist entities under the Criminal Code), unless they are granted a certificate under section 10 of the Regulations. As such, the statement by the FATF encouraging humanitarian assistance in Afghanistan needs to be read subject to applicable Canadian law.


Read the October 2021 Charity & NFP Law Update