ATF/AML Update
June 2022 Charity & NFP Law Update
Published on June 29 2022

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

Urgent Recommendation that Federal Government Allow Humanitarian Efforts in Afghanistan

A report from the House of Common’s Special Committee on Afghanistan, “Honouring Canada’s Legacy in Afghanistan: Responding to the Humanitarian Crisis and Helping People Reach Safety” released in June 2022 (the “Report”) recommends that Canada take immediate action to provide clarity and assurance so that Canadian organizations can deliver humanitarian assistance to Afghanistan without fear of prosecution under Canada’s anti-terrorism laws. Following the return to power of the Taliban in Afghanistan in August 2021, several crises ensued, including a dire need for humanitarian aid. A report on Afghanistan was commissioned by the House of Commons on December 8, 2021 and subsequently released in June 2022.

The report is extensive, with 37 recommendations for the federal government and 117 pages of content. It notes that having a designated terrorist entity (the Taliban) controlling an entire state apparatus “is [virtually] an unprecedented situation.” The Canadian humanitarian organizations who testified to the Special Committee “urgently called for the Government of Canada to provide clarity and assurances in relation to Canada’s sanctions and anti-terrorism financing law and regulations” noting that without such actions, they could not operate in Afghanistan. These organizations explained that Canada’s actions were “out of step” with international practices and that what exemptions to legislation might be available to them involved lengthy processes, did not specifically concern humanitarian actions, and would not mitigate risk to charities under legislation such as the Criminal Code. Many of these humanitarian organizations had also been provided with interpretations from Global Affairs Canada indicating that they were prohibited from using any Canadian funding to directly or indirectly pay ordinary and incidental taxes linked to humanitarian work, such as taxes on rent or salaries. However, without the ability to pay taxes, the humanitarian operations of these organizations would be impeded and face increased risks. Even funding directed from Canada to the United Nations system (such as UNICEF), which enjoys distinct privileges and immunities, could only be used for expenses outside of Afghanistan.

Following its review, the Special Committee expressed its concerns that “many months have passed since the Taliban takeover in Afghanistan, [and] the needs of the population are known to be dire.” Therefore, it made three recommendations:

Recommendation 9

That the Government of Canada act immediately to implement United Nations Security Council Resolution 2615 [which acknowledges the humanitarian crisis in Afghanistan and decides that provision of humanitarian assistance to Afghanistan does not violate past UN resolutions that affirmed freezing the assets of the Taliban and associated entities].

Recommendation 10

That the Government of Canada act immediately to ensure that registered Canadian organizations have the clarity and assurances needed–such as carve-outs or exemptions–to deliver humanitarian assistance and meet basic needs in Afghanistan without fear of prosecution for violating Canada’s anti-terrorism laws.

Recommendation 11

That the Government of Canada review the anti-terrorism financing provisions under the Criminal Code and urgently take any legislative steps necessary to ensure those provisions do not unduly restrict legitimate humanitarian action that complies with international humanitarian principles and law.

Readers are encouraged to read the Report in its entirety which also covers other areas of concern, such as refugee resettlement efforts. In light of the dire humanitarian needs in Afghanistan, it is hoped that the Government of Canada will act quickly on the recommendations in the Report.

Paper from UN Special Rapporteur Raises Concerns about Misuse of AML/ATF Legislation

The United Nations Special Rapporteur on the promotion and protection of human rights and fundamental freedoms while countering terrorism has released a position paper which expresses deep concern that countering the financing of terrorism (“CFT”) measures are being misused and misapplied in contravention of human rights [Note that CFT and AML/ATF are terms that may be used interchangeably]. The position paper, “The Human Rights and Rule of Law Implications of Countering the Financing of Terrorism Measures” (the “Paper”), published June 2022, considers CFT legislation at a broad, international level with some examples provided from different countries.

While Canada and its AML/ATF legislation is not referenced directly, the Paper provides several relevant observations. In particular, the Paper cautions against “vague, imprecise or overbroad formulations of the definition of terrorist financing, which may be expansively and arbitrarily applied to criminalize and penalize protected, non-violent conduct and groups such as … humanitarians”. This is a real issue in Canada because, as reported in the immediately preceding note, Canadian charities are concerned about their legal liability under Canada’s Criminal Code if they pursue humanitarian activities in a country such as Afghanistan. Broad AML/ATF criminal provisions are concerning because the Paper also documents instances where such “criminal proceedings and apparatuses have been misused as a convenient tool to target and silence civil society actors, human rights defenders, and others critical of the State.”

The Paper is an excellent resource for individuals wishing to learn more about the broader concerns at an international level about AML/ATF legislation and how it may be balanced with human rights and humanitarian obligations. It is especially relevant following the release of the Special Committee on Afghanistan’s report, as described above, which highlights some of the concerns with Canada’s AML/ATF legislation.

FATF Holds Plenary, Commits to Updating NPO Best Practices

The Financial Action Task Force (FATF) – the global money laundering and terrorist financing watchdog – held a plenary from June 14-17, 2022 which, among other things, included an agreement to start new work to update the FATF best practices paper on combating the abuse of non-profit organizations (NPOs) in relation to terrorist financing. Currently, FATF’s Recommendation #8 directs countries to “review the adequacy of laws and regulations that relate to non-profit organizations which the country has identified as being vulnerable to terrorist financing abuse.” Recommendation 8 was last updated in 2016. However, as described in greater detail in the Nov 2021 Charity & NFP Law Update, a high-level synopsis from the FATF published in October 2021 highlighted the negative consequences the FATF Standards can have on NPOs, such as de-risking, financial exclusion, undue targeting of NPOs and the curtailment of human rights. Updated best practices for regulating NPOs with AML/ATF risks could help address some of these negative consequences.

Bill C-19 introduces changes to Canada’s Sanctions Laws

Bill C-19 received Royal Assent on June 23, 2022, introducing changes to Canada’s sanctions laws. The amendments are seen as a response to Russia’s invasion of Ukraine and Canada’s stated commitment to take steps to confiscate or forfeit the assets of persons sanctioned in connection with the invasion. The changes include a broadening of the definition of property under the Special Economic Measures Act. In addition, paragraph 4(2)(a) of that Act is amended so that the Governor in Council may make orders or regulations restricting or prohibiting:

(a) any dealing by any person in Canada or Canadian outside Canada in any property, wherever situated, that is owned — or that is held or controlled, directly or indirectly — by that foreign state, any person in that foreign state, or a national of that foreign state who does not ordinarily reside in Canada;

Because a very broad range of property, including, potentially, humanitarian aid, could be caught by this provision which can apply to any property held indirectly by any person in a foreign state, it is important that the amended legislation also includes the ability for the Governor in Council to authorize certain classes of activities and transactions by way of permit or general permit under subsections 4(4) and (5).

   
 

Read the June 2022 Charity & NFP Law Update