Charities and Compliance with Anti-Terrorism Legislation in Canada: The Shadow of the Law

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Charities and Compliance with Anti -Terrorism Legislation in
Canada: The Shadow of the Law
By Terrance S. Carter *
A. Introduction
This article examines Canada’s recent legislative initiatives to combat terrorism, and their impact on
Canadian charities and those who advise them. Charities may understandably ask why they should be
concerned with this new area of the law. While anti -ter rorism legislation may be relevant for criminal
and immigration lawyers, how could this legislation be relevant to charities? This article intends to
demonstrate that recent anti -terrorism legislation directly affects many Canadian charities in relation
to their activities both inside and outside Canada.
Charitable activities thought until recently to be commonplace and uneventful, may now lead to a
charity becoming susceptible to criminal charges for having facilitated “terrorist activities” or
supporting “terrorist groups.” This in turn could result in the charity losing its charitable status and the
corresponding exposure of its directors to personal liability. In addition, financial transactions involving
charities may lead to allegations of terrorist fi nancing or to the surveillance and monitoring of a
charity’s financial activities. Lawyers handling transactions on behalf of charitable clients or on behalf
of estates dealing with charities may also find themselves in situations involving a legal duty to report
under the new money -laundering legislation.
While it is too early to predict with precision the long -term impact of Canada’s anti -terrorism
legislation, it is clear it will have a profound impact on the charitable sector and Canadian society in
gen eral. Even if the new amendments to the Criminal Code , for example, are applied sparingly, their
very existence, and the threat that they might be used against charities, will send reverberations
throughout the charitable sector. In many instances, the enf orcement of the law per se may not be
the key issue. The concern may not be what the authorities will do in enforcing anti -terrorism
legislation, rather the fact authorities may enforce such legislation. As a result, the necessary
response to Canada’s anti -terrorism legislation may have as much to do with coping with fear of the
law as with coping with the law itself. This “shadow of the law” effect has already created and will
co ntinue to create a chill on charitable activities in Canada, as charities hesitate to undertake
programs that might violate anti -terrorism legislation and thereby bring the possible loss of their
charitable status. At the same time, new charities may find it more difficult to obtain charitable status,
since the Charities Directorate of Canada Revenue Agency (“CRA”, formerly Canada Customs and
Revenue Agency) will likely be compelled to exercise greater scrutiny when reviewing applicants for
charitable statu s.
To counteract this implicit fear concerning the new anti -terrorism legislation, it will be important for
charities and those who advise charities to understand the basics of Canada’s anti -terrorism
legislation. In this way, charities can better understa nd what due -diligence steps should be taken in
order to avoid violating the legislation.
In order to see how the various parts of Canada’s anti -terrorism legislation interact with one another,
as well as how the legislation may affect charities, this art icle will examine some of the new anti –
terrorism provisions under the amended Criminal Code , the amendments made to money -laundering
legislation as well as new legislation providing for the deregistration of charities. However, given the
complexities invol ved in the anti -terrorism legislation, the discussion that follows is by necessity
neither detailed nor comprehensive. For additional comments by the author on the topic of anti –
terrorism legislation and charities, as well as access to resource materials, legislation, and
international conventions related to charities and anti -terrorism legislation, reference can be made to
either or .

1. Overview of Canada’s New Anti -terrorism Legislation
Canada’s anti -terrorism legislation has not been enacted in a legal vacuum. Most conceivable acts of
terrorism have for some time been subject to pr osecution in one way or another as criminal offenses
under the provisions of the Canadian Criminal Code .[1] Many other statutes, such as the Immigration
Act ,[2] include provisions that deal with terrorism or people suspected of terrorism. The new
provisions and the legislative amendments provided for under Canada’s new anti -terrorism legislat ion
have likely been under development for some time to supplement the legislation already in place. The
events of September 11, 2001, simply galvanized these efforts, giving them a sense of added urgency
and political justification.
This article focuses p rimarily on the three pieces of Canadian legislation introduced since September
11th, 2001intended to combat terrorism: Bill C -36, An Act to amend the Criminal Code, the Official
Secrets Act, the Canada Evidence Act, the Proceeds of Crime (Money Laundering) Act and other Acts,
and to Enact Measures Respecting the Registration of Charities, In Order to Combat
Terrorism (hereinafter “Bill C -36” or “Anti -terrorism Act” );[3] Bill C -35, An Act to Amend the Foreign
Missions and International Organizations Act (hereinafter “Bill C -35” or “Foreign Missions Act” );[4] and
Bill C -7, An Act to amend cert ain Acts of Canada, and to Enact Measures for Implementing the
Biological and Toxin Weapons Convention, In Order to Enhance Public Safety (hereinafter “Bill C -7
“or “Public Safety Act” ).[5] Although other statutes deal with issues related to terrorism, for the
purposes of this article these four pieces of legislation are collectively referred to as “Canada’s anti –
terrorism legislation”.
a) Anti -terrorism Act
Bill C -36, i.e., the omnibus Anti -terrorism Act proclaimed in force on December 24, 2001, is an
extremely complicated piece of legislation that involves coordinating the provisions of many federal
acts, including the Criminal Code, Canadian Human Rights Act, and the Procee ds of Crime (Money
Laundering) Act (hereinafter “Proceeds of Crime Act” )[6] (including regulations that were issued on
May 9, 2002). Part 6 of the Anti -terrorism Act also creat es the new Charities Registration (Security
Information) Act . The Anti -terrorism Act raises several concerns that innocent charities may be
unwittingly caught within its provisions, which include new criminal offenses contingent on sweeping
definitions of such terms as “terrorist activities,” “terrorist group,” and “facilitation of terrorist
activities”; the establishment of a deregistration process for charities suspected of involvement in
“terrorist activities”; and the development of broad new legislatio n to curtail “terrorist financing.”
b) Foriegn Missions Amendment Act
Bill C -35, An Act to Amend the Foreign Missions and International Organizations Act , was passed by
the House of Commons on December 12, 2001, as part of the Government of Canada’s legisl ative
anti -terrorism commitment and proclaimed in force as of April 30, 2002. The purpose of this Act is to
give effect to Canada’s obligation to protect diplomatic personnel and foreign representatives by
granting certain privileges, immunities, and benef its to foreign diplomatic missions and consular posts,
international organizations, and foreign state subdivisions. The object of the amendments is to
modernize Canada’s privileges and immunities regime to comply with Canada’s existing commitments
under in ternational treaties and to respond to developments in international law. The amendments
radically expand the definitions of “internationally protected person” and “international organization,”
increasing the likelihood a charity pursuing its normal charit able operations might be unwittingly
implicated in Criminal Code offenses.
c) Public Safety Act
Bill C -7, the Public Safety Act , was granted Royal Assent on May 6, 2004. Bill C -7 is the latest version
of the Public Safety Act , which was first introduced in the House as Bill C -42 (22 November 2001), re –
introduced as Bill C -55 (29 April 2002) and again as Bill C -17 (31 October 2002). Among other
provisions, Bill C -7 includes further amendments to the Proceeds of Crime Act propos ing to broaden
the government’s power to collect and distribute financial information considered relevant to money

laundering and terrorist financing. In its latest version as Bill C -7, the Public Safety Act purportedly
removes or softens some of the more c ontroversial provisions of the earlier versions contained in Bill
C-42 and Bill C -55, such as the power to enact “controlled access military zones” and provisions
allowing the Royal Canadian Mounted Police (RCMP) sweeping access to detailed personal inform ation
from airline passenger lists. These provisions would have had a significant impact on charities involved
in international operations or protests at international summits, or donors giving to organizations that
might be involved in activities within ” controlled access military zones.” Notwithstanding the changes
provided for in Bill C -7, there is still reason to be concerned about the scope of the powers that remain
in the current version of the Public Safety Act in Bill C -7 and continued monitoring wi ll be needed.
2. Canada’s Anti -terrorism Legislation in Perspective
a) International Legislative Context
Anti -terrorism legislation is not a phenomenon peculiar to North America or even Western Europe.
Rather, it is a worldwide phenomenon that can be seen in countries as diverse as the United States,
Australia, Singapore, the United Kingdom, and China. As each country is adopting its own unique type
of anti -terrorism legislation based on international conventions, it is becoming essential for charities
that transfer funds or work abroad to be aware of the proliferation of anti -terrorism laws
internationally. These same charities, and lawyers who advise them, must become familiar with the
legislative developments in the countries where they carry on their wor k, as well as the underlying
international conventions that anti -terrorism legislation, in Canada and other countries, attempts to
address in order that those charities do not inadvertently find themselves violating anti -terrorism laws
in Canada or abroad. [7] Charities must also be concerned about who their potential international
partners are with respect to exposing the Canadian charity to anti -terrorism legislation in other
countries, as well as similarly exposing the same international partners to Canada’s anti -terrorism
In order to understand the long -term impact of Canada’s anti -terrorism legislation, Canada’s
legislative initiative must be viewed within the international context in which it has evolved. Over the
last two or three decades, the international community has developed a broad range of measures that
have attempted to combat terrorism. These documents range from non -binding resolutions,
declarations , or recommendations of the United Nations General Assembly and various
intergovernmental bodies, to binding multilateral conventions and Security Counsel Resolutions.
Canada has also been involved in several other international organizations and intergove rnmental
policy -making bodies, such as the G -8, G -20, the Financial Action Task Force on Money Laundering,
the International Monetary Fund, and the World Bank, as part of Canada’s commitment to combat
terrorism. All of these bodies have taken, and continue to take, measures to curtail terrorism and
terrorist financing, requiring considerably different levels of compliance from member states.
The enactment of Canadian legislation is directly related to developments in the international arena.
This is reflect ed in the preambles of the three acts making up the anti -terrorism legislation, which
refer to Canada’s “commitments” to international treaties, its response to developments in
international law, and its participation in a global anti -terrorism initiative. It is beyond the scope of
this article to examine the international context in detail, but the main international documents are
highlighted below to provide a brief overview of the international dynamics behind the recent
legislative initiatives in Canada .
b) United Nations Commitments
The United Nations has issued a number of resolutions and declarations, as well as concluded various
conventions, in an effort to combat terrorism. The Anti -terrorism Act purports to ratify or comply with
11 specific UN conv entions concerning terrorism. Another significant United Nations obligation is
Security Council Resolution 1373, adopted on September 28, 2001 (hereinafter “Resolution
1373”). [8] These documents explain Canada’s international obligations to limit terrorism and shed
light on the extent to which Canada’s initiative is consistent with those obligations. They also provide a

useful background to understanding the new legal paradig m facing charities that operate in multiple
Multilateral Conventions referred to in the Anti -terrorism Act include the following:
 the Convention on the Safety of United Nations and Associated Personnel; [9]  the Convention on the Suppression of Unlawful Seizure of Aircraft; [10]  the Convention for the Suppression of Unlawful Acts against the Safety of Civil
Aviation; [11]  the Convention on the Prevention and Punishment of Crimes against Internationa lly
Protected Persons, Including Diplomatic Agents; [12]  the International Convention against the Taking of Hostages; [13]  the Convention on the Physical Protection of Nuclear Material; [14]  the Protocol for the Suppression of Unlawful Acts of Violence at Airports Serving
International Aviation; [15]  the Convention for the Suppression of Unlawful Acts Against t he Safety of Maritime
Navigation; [16]  the Protocol for the Suppression of Unlawful Acts against the Safety of Fixed Platforms
Located on the Continental Shelf; [17]  the International Convention for the Suppression of Terrorist Bombings [hereinafter
Convention on Terrorist Bombings]; [18] and,
 the International Convention for the Suppression of the Financing of Terrorism
(hereinafter “Convention on Terrorist Financing”). [19] C. “SU PER CRIMINAL CODE”: NEW DEFINITIONS AND IMPLICATIONS FOR CHARITIES
1. Creation of a “Super Criminal Code ”
The amendments to the Criminal Code implemented by the Anti -terrorism Act , and to a certain extent
by the Foreign Missions Act, constitute the creatio n of a new type of criminal offense under the
heading of terrorism. The assumption underlying these amendments is that terrorism offenses,
including the threat of or attempt to commit such offenses, warrant an extraordinary approach in the
methods of inves tigation and punishment due to the very nature of those offenses.
The idea that some criminal offenses are extraordinary in nature is not new. This principle has most
recently received expression in the Crimes Against Humanity and War Crimes Act (hereinaft er “War
Crimes Act” ).[20] However, even the War Crimes Act contains substantially more principles of natural
justice than are to be found in the amendments to the Criminal C ode provided for under the Anti –
terrorism Act .[21] The changes brought about by the Anti -terrorism Act are without precedent in
Canadian legal history and demonstrate a disturbing disregard for the principle of due process and
natural justice. The amendments implemented by the Anti -terrorism Act arguably amount to the
creation of a “Super Criminal Code ” wit hin Canada’s existing Criminal Code . While it is beyond the

scope of this article to discuss in any detail the ramifications of this “Super Criminal Code ,” this article
does review those areas of the amended Criminal Code affecting charities, with particul ar reference to
the new definitions of “terrorist activity,” “terrorist group,” and “facilitation of terrorist activities or
terrorist group,” implemented by the Anti -terrorism Act .
2. Definitions under the Anti -terrorism Act
a) “Terrorist activity”
The de finition of “terrorist activities” in section 83.01(1) of the Criminal Code , as amended by s. 4 of
the Anti -terrorism Act , is split into two disjunctive parts, parts (a) and (b).
Part (a) of the definition of “terrorist activity” incorporates ten offenses that already exist under
section 7 of the Criminal Code , each of which implements a specific UN Convention regarding
terrorism. These provisions include various offenses against “internationally protected persons” under
subsection 7(3). Combined with sectio n 431 of the Criminal Code and specifically the amended
definition of “internationally protected persons” in the Foreign Missions Act , Part (a) of section
83.01(1), as will be seen later in this article, could have a specific impact on charities in some
sit uations.
The more familiar part of the definition of “terrorist activity” is contained in part (b) of .83.01(1). It
defines a “terrorist activity” as:
b) an act or omission, in or outside Canada,
(i) that is committed
(A) in whole or in part for a politi cal, religious or ideological purpose, objective or cause, and
(B) in whole or in part with the intention of intimidating the public, or a segment of the public, with
regard to its security, including its economic security, or compelling a person, a govern ment or a
domestic or an international organization to do or to refrain from doing any act, whether the public or
the person, government or organization is inside or outside Canada, and
(ii) that intentionally
(A) causes death or serious bodily harm to a p erson by the use of violence,
(B) endangers a person’s life,
(C) causes a serious risk to the health or safety of the public or any segment of the public,
(D) causes substantial property damage, whether to public or private property, if causing such
damage is likely to result in the conduct or harm referred to in any of clauses (A) to (C), or
(E) causes serious interference with or serious disruption of an e ssential service, facility or system,
whether public or private, other than as a result of advocacy, protest, dissent or stoppage of work that
is not intended to result in the conduct or harm referred to in any of clauses (A) to (C)
Both of these parts of the definition include conspiracy, attempt, or threat to commit a terrorist
activity, as well as being an accessory after the fact or counseling in relation to any ”terrorist activity.”
The requirement an act be “committed in whole or in part for political , religious or ideological
purposes, objectives or causes” raises particular concerns. It has been said this provision represents

the “criminalization of certain political, religious or ideological motives.” [22] Canada’s international
obligations simply require the government ensure the acts contemplated by anti -terrorist legislation
are “under no circumstances justifiable by considerations of a political, philosophical, ide ological,
racial, ethnic, religious or other similar nature.” [23] The difference between ensuring a political, religious, or ideological consideration cannot be used as a
defense, on the one hand, and incorporating such considerations as an integral part of the definition of
the offense itself, on the other, is significant. This should raise concern at the very least about the
level of care with which such provisions were dr afted, and, more importantly, about the way in which
these provisions may be enforced.
Comments made by authorities about law enforcement related to terrorism do not inspire confidence
the enforcement of these provisions will take into consideration the le gitimate right of dissent of
charities within society. For example, in an article published in October 2001 (before Bill C -36,
the Anti -terrorism Act , was introduced in the House of Commons, but in anticipation of what was to
come in the subsequent legisla tion as evidenced by the fact the article remained posted on the RCMP
web site a year later), a spokesperson for the RCMP stated, “Since there is no definition in
the Criminal Code for terrorism …, the RCMP prefers the term criminal extremism .”[24] [emphasis
added] This is of particular concern when viewed in light of the comment that in the RCMP’s view,
“[protests] against genetically modified food and ongoing e nvironmental concerns about water, forest
preservation and animal rights are issues to watch.” [25] When applied to “political, religious or
ideological purposes or causes,” the definition of “terrorist activity” could encompass not only activities
that are rightly criminal (although not necessarily “terrorist”), but potentially also deter dissident
views that in and of themselves have been and should be tolerated in a free a nd democratic society.
b) “Terrorist group”
A “terrorist group” under subsection 83.01(1) of the Criminal Code , as amended by Bill C -36, is
defined to mean:
(a) an entity that has as one of its purposes or activities facilitating or carrying out any terror ist
activity [as defined in subsection 83.01(1) and discussed above], or
(b) a listed entity, [as defined by section 83.05 and discussed below] The definition of “terrorist group” is very broad and could include unsuspecting charities if they are not
dilig ent. The reference to “entity” casts a broad net by including trusts, unincorporated associations,
and organizations, as well as an association of such entities.
Even the inclusion of “listed entities” [26] is problematic, since, as discussed later in this article, even
some well -known charities could, in theory, find themselves a “listed entity” in consideration of the
nature and location of the international humanitarian wo rk they do, if the government felt it had
“reasonable grounds” to believe the entity had knowingly carried out, attempted to carry out,
participated in, or facilitated a terrorist activity. Given the breadth in the definition of “facilitate” as
explained b elow, the definition of “terrorist group” under either paragraph 83.01(1)(a) and (b) of
the Criminal Code could have application to charitable organizations that have no direct or indirect
involvement or intention to participate in “terrorist activities.” In this regard, the expansive definition
of “terrorist group” in the Anti -terrorism Act may have the result of leaving open the possibility that
many legitimate charitable organizations in Canada could conceivably fall within the definition of a
“terrorist group.”
c) “Facilitation”
The definition of “facilitation” in section 83.19(2) of the Criminal Code , as amended by the Anti –
Terrorist Act , is of even greater concern. The definition is so broad it has the effect of extending the
definition of “terrorist a ctivity” and “terrorist group” to otherwise innocent organizations and people

that unwittingly may have become tarred by association with “terrorist activities” without any
culpability or intent to be part of criminal activity. Subsection 83.19(2) states:
A terrorist activity is facilitated whether or not
(a) the facilitator knows that a particular terrorist activity is facilitated;
(b) any particular terrorist activity was foreseen or planned at the time it was facilitated; or
(c) any terrorist activity wa s actually carried out
This definition diminishes the mens rea element of the offense to the point it verges on a strict -liability
offense. As mentioned previously, the Criminal Code already has in place numerous provisions to deal
with terrorist offenses . One of the primary purposes of amendments to the Criminal Code under Bill C –
36, presumably, should have been to highlight the qualitative difference between an existing Criminal
Code offense and the commission of an offense in circumstances where it woul d be considered a
“terrorist activity.” In other words, the ostensible intention of the Anti -Terrorism Act should have been
to demonstrate that the same act should be perceived to be more reprehensible when committed in
circumstances that attribute an actu al terrorist motivation to the accused as opposed to where the
individual does not have such a motivation, and thereby to enact appropriate punishment under the
assumption that existing penalties inadequately reflect the gravity of such offenses.
It is a w ell -established principle of criminal law that the more serious a crime, the more specific the
required intent needs to be. Consequently, the substantive curtailment of a mens rea requirement for
the definition of “facilitation” of a terrorist offense is d isturbing, since it is far from commensurate with
the assured gravity of the offense or its punishment. Instead, it exposes arguably innocent third
parties who may have had no intention or foreknowledge their acts or omissions would be considered
“facilita ting” a “terrorist activity” in the same manner as individuals who have an actual mens
rea element to their participating in a terrorist activity.
The breadth of the definition of “facilitation” is included in section 83.19, the section setting out the
off ense of “facilitation of terrorist activities,” rather than in section 83.01, which is the general
definitions section. The reason for the placement of the definition was purportedly to ensure that
“facilitation” requires knowledge and intent as a specific mens rea criminal offense. However, the
definition of “facilitate” under subsection 83.19(2), in failing to make any reference to the previous
subsection 83.19(1), means it continues to apply to the entire Part of the Criminal Code instead of to
a particu lar section establishing a requirement of knowledge and intent. Moreover, section 83.01(2)
specifically incorporates the definition of “facilitation” from subsection 83.19(2) to the whole Part of
the Criminal Code. Thus, the broad definition of “facilitati on” applies to all Criminal Code offenses
involving “facilitation” of terrorism without being moderated by any requirement for knowledge or
intent referred to in section 83.19(1).
As a result, where there is a specific requirement for knowledge and intent for a criminal offense,
“facilitating terrorist activity” now requires there be only a very limited mens rea element, and even
less where there is no specific requirement for knowledge and intent at all, for example using and
possessing property for facili tating or carrying out a terrorist activity under section 83.04(a). From a
practical standpoint, charities could very well unwittingly violate the Criminal Code by “facilitating” a
“terrorist activity” without actually intending to support any terrorist activity whatsoever, directly or
indirectly, and without knowing or even imagining the ramifications of their actions.
The relationship between the broad definitio n of “facilitation” with the corresponding lessening of
a mens rea requirement, on the one hand, and Canada’s international commitments to adapt anti –
terrorism legislation, on the other, is itself problematic. Resolution 1373 of the UN Security Council
decl ares in paragraph 1(b) that all countries must:

Criminalize the wilful provision or collection, by any means, directly or indirectly, of funds by their
nationals or in their territories with the intention that the funds should be used, or in the knowledge
that they are to be used, in order to carry out terrorist acts.
The international obligation with which Canada seeks to justify its anti -terrorism legislation requires,
at a minimum, knowledge on the part of the facilitator of the nature of the activity or purpose to which
the funds will be applied. By not requiring a clear mens rea element for Criminal Code offenses, or
even a minimum requirement of knowledge, Canada is stepping beyond its international obligations
and, by so doing, violating well -establis hed principles of natural justice, criminal law, and due process,
without any purported justification from the context of international obligations.
Additionally, it is questionable whether an actus reus element of the offense need occur for the
“facilitat ion” of a “terrorist activity” to take place under the Anti -terrorism Act . This is due to the fact
the definition of “facilitation” does not require a “terrorist activity” actually be carried out, planned, or
even foreseen. This raises the prospect that a charity might be found guilty of facilitating a “terrorist
activity” even though no terrorist act was ever planned, let alone committed. Under the Anti -terrorism
Act a charity might now find itself “guilty by association” without doing anything or intendin g to do
anything that actually ends up facilitating a “terrorist activity.”
d) “Internationally Protested Persons”, “International Organizations” and Political Protests
In addition to the amendments to the Criminal Code under the Anti -Terrorism Act , the combined effect
of Part (a) of the definition of “terrorist activity” under the Anti -Terrorism Act and the provisions of
the Foreign Missions Act will have an impact on political protesters, among others, and raises concerns
about the further applicat ion of the “Super Criminal Code ” provisions in situations of what could now be
labeled domestic terrorism. Of particular concern to charities in this regard ought to be the expanded
definition of the terms “international organization” and “internationally protected person” and the
sweeping powers afforded the RCMP in the part on “Security of Intergovernmental Conferences” in
the Foreign Missions Act .
i) Interaction of Definitions
Under paragraph 83.01(1)(a) of the Criminal Code , as amended by the Anti -Terr orism Act , the
definition of “terrorist activities” includes actions taken against “internationally protected persons.”
Section 2(1) of the Foreign Missions Act expands the definition of “international organization” to
include “an inter -governmental confere nce in which two or more states participate.” In addition, the
term “international organization” is expanded to include an “inter -governmental conference,” such as
a meeting of the WTO or the G -8. In combination with section 2 of the Criminal Code , this ex tends the
status of “internationally protected person” to foreign representatives, including diplomats and other
officials, and possibly even low -level bureaucrats.
The means of transportation for the “internationally protected persons” and the areas in wh ich they
are to meet are now protected under section 431 of the Criminal Code . The interaction between the
expanded definitions in Part (a) of the definition of “terrorist activity” in subsection 83.01(1) of the
amendments to the Criminal Code and in secti on 431 of the Criminal Code means the definition of
“terrorist activity” could include threatening or carrying out any act against such “internationally
protected persons,” “official premises,” or “means of transport” that is likely to endanger the life or
liberty of such persons. Consequently, protesters blocking a road to a WTO Conference or a G -8
Summit could run the risk of committing a “terrorist activity”, where the roadblock is such that it is
likely to endanger the life or liberty of protected perso ns participating in the conference.
ii) Application to Protesters at Inter -Governmental Conferences
As well as expanding the definitions of “internationally protected persons” and “international
organizations,” section 10.1 of the Foreign Missions Act pro vides the RCMP with the mandate to
ensure the “proper functioning” of an “inter -governmental conference” and protection of

“internationally protected persons.” Citing this legislation as authority, the RCMP established an
“access control area” in downtown Calgary, nearly 100 km from the June 2002 G -8 Summit in
Kananaskis. The RCMP established this “access control area” in anticipation of protests surrounding
the G -8 Summit, claiming that it was not meant to affect “legitimate business in the area.” [27] In a
notice published on the G -8 Summit Security website entitled “Legal Information for
Protesters,” [28] the RCMP advised that in order to ensure the “proper functioning” of the conference
and the “protection of internationally protected persons,” the RCMP would retain th e authority to limit
the Charter -guaranteed rights and freedoms of protesters when deemed necessary. It is apparent the
amended Foreign Missions Act is being used, and will be used, for the purpose of controlling political
protest at the discretion of the RCMP at events such as the G -8 Summit.
The predecessors of the current version of the Public Safety Act , Bill C -55 and Bill C -42, proposed to
amend the National Defence Act by giving the Minister of Defence power to proclaim a broad “military
security zone” or “controlled access military zone.” Among other things, many feared this power could
be used to subdue legitimate democratic dissent, a right guaranteed in the Canadian Charter of Rights
and Freedoms .[29] Bill C -7, as passed by the House of Commons on February 11, 2004, removes this
provision in response to numerous concerns raised about the expansive powers it afforded to the
government. Nevertheless, the Government may still create limited access zones by using royal
prerogative or by justifying their actions, as they did during the G -8 Summit, by referring to the duties
imposed on law -enforcement authorities under the Foreign Missions Act .
As the legislative guidelines for security and safety are redrawn through the anti -terrorism legislation,
charitable organizations will need to be vigilant in ensuring they will not be violating the law where
their charitable activities lead them to assist individuals who may be exerci sing rights of political
dissent at such gatherings. This should be of particular concern to charities that may become involved,
even peripherally, in areas of potential controversy and confrontation, such as native rights, the
environment, animal rights, and the pro -life/abortion debate.
Charities, such as hospitals, that might provide medical assistance to protesters who infringe on a
zone that has been designated limited access or interfere in a meeting that qualifies as an
“international organization,” or churches that might offer accommodation or other forms of assistance
to such protesters, will need to be aware of the consequences that could result from aiding or
facilitating protesters in these situations. As well, Canadian charities that are involve d in humanitarian,
social justice, or civil libertarian issues and participate in public rallies or demonstrations may
unwittingly become subject to martial law. Consequently, measures taken by the authorities for the
protection of “internationally protect ed persons” and “international organizations,” as well as any
areas declared limited access zones, may pose a threat to the members and volunteers of charitable
organizations that operate and provide assistance in these theaters of potential conflict and
3. Practical Implications for Charities
Whether or not a particular charity will be subject to prosecution under the “Super Criminal Code ”
provisions provided for under the Anti -terrorism Act remains conjectural at this time. However, the
imm ediate practical concern for charities is not that they will be prosecuted under the Criminal
Code provisions. Rather, it is that a charity may be vulnerable to deregistration under the Charities
Registration (Security Information) Act , where it may have b ecome unwittingly involved in activities or
with groups that meet the Criminal Code definition of “terrorist activity” or “terrorist group,” even if no
criminal charges are brought against the charity. At the same time, a charity may find it meets the
broa d and inclusive definition of “facilitating” a “terrorist activity” or “terrorist group” under the Anti –
Terrorism Act , which could result in the seizure or freezing of its assets. Considering the stigma,
suspicion, and loss of goodwill such actions would h ave on a charity, the implications are both
disturbing in theory and devastating in practice.
a) Specific Criminal Code Offences That May Affect Charities

It is difficult to speculate concerning what sections of the amended Criminal Code will in fact affec t
charities, in recognition of the complexities of the anti -terrorism legislation, the coordination of several
federal Acts, and the lack of evidence to date concerning how the legislation may be implemented
because of its relative novelty and the fact muc h of the enforcement is being and will be conducted in
secrecy. The most that can be done is to draw a few examples from the applicable Criminal
Code provisions as amended by the Anti -terrorism Act where charities might be caught under those
provisions. In this regard, some of the relevant Criminal Code provisions that may affect charities
include the following:
 s. 83.02: Directly or indirectly providing or collecting property that is intended to be
used or knowing it will be used in whole or in part in a terrorist activity;
 s. 83.03: Directly or indirectly providing or inviting the provision of property, financ ial or
other related services that facilitate or carry out a terrorist activity or benefits a terrorist
 s. 83.04: Directly or indirectly using or possessing property to facilitate a terrorist
 s. 83.08: Dealing with property owned or cont rolled by or on behalf of a terrorist group,
facilitating, directly or indirectly, transactions or financial or related services for the
benefit or at the direction of a terrorist group;
 s. 83.18: Directly or indirectly participating or contributing to an y actions that enhance
the facilitation of a terrorist activity;
 s. 83.21: Directly or indirectly instructing a person to carry out activities for the benefit
of a terrorist group;
 s. 83.22: Directly or indirectly instructing a person to carry out a terr orist activity; and,
 s. 83.14: The Attorney General may apply for an order of forfeiture of property of a
terrorist group if property had or will be used, in whole or in part, to facilitate or carry
out a terrorist activity.
The interaction between the Cr iminal Code provisions amended by the Anti -terrorism Ac t, the Foreign
Missions Act , and the Public Safety Act could lead to charities unwittingly violating the Criminal
Code in numerous situations, including the following:
A charity, through a fundraiser, requests the donation of medical supplies for a humanitarian
organization in the Middle East to be used at a particular hospital, which might happen to treat a
member of a “terrorist group” in an emergency situation.
A charity, through a fundraiser, solicits funds for a program to conduct aerial drops of food packages
to the civilian population in Afghanistan. A few remaining members of al Qaeda, a “listed entity,”
might conceivably receive a few of the food packages.

A hospital foundation raises funds for the general operations of a hospital, which provides medical care
to student protesters who, participating in an anti -globalization protest, block a road leading to an
international economic summit.
A religious denomination provides funding or other assistance to a local church that assists the student
protesters in scenario #3 by providing sleeping facilities in its church basement.
A church bulletin publicizes a prayer vigil to tak e place on a continuous basis over two weeks in front
of a new abortion clinic. Some members of the church participate on behalf of the church. During the
two -week vigil, clients of the clinic complain they cannot adequately access services at the clinic
because of fear of intimidation from members of the prayer vigil, even though those participating in
the vigil utter no threats against them. The owners of the abortion clinic are also upset because they
lose revenue during the vigil.
A charitab le organization that deals with refugees finds a church or a group of individuals willing to
sponsor a refugee claimant from a Southeast Asian country. The organization has interviewed the
refugee, but does not know that the refugee’s brother, who occasion ally receives financial help from
the refugee, may be linked to al Qaeda.
In each of the above scenarios, the charity, along with its donors, agents, and fundraisers, where
applicable, could all be found to have been involved, directly or indirectly, in “t errorist activity.” Even
if the charities are not directly engaging in a terrorist activity, they could be “facilitating” a “terrorist
activity” or a “terrorist group.” Accordingly, any charitable organization considering the provision of
aid or assistanc e in circumstances such as those described above needs to confront the possibility that
doing so will violate the Criminal Code as amended by Bill C -36.
b) Consequences of Violating Criminal Code Offenses
A charity found to be in violation of the Criminal Code provisions applicable to terrorism could face
consequences on many fronts. Not only might the charity be subject to the relevant penalties under
the Criminal Code , and inclusion as a “listed entity”, but it could also be subject to possible loss of
ch aritable status under the Charities Registration (Security Information) Act , as well as the freezing,
seizure, restraint, and forfeiture of its charitable property.
i) Criminal Code Offenses
The Criminal Code offenses carry heavy penalties and directors of a charity could face fines, penalties,
and even imprisonment if the charity is found to have engaged in terrorist -related activities. For
example, financing terrorism is an indictable offense carrying a maximum sentence of ten years, which
could apply to directors of a charity found guilty of the offense. [30] Dealing in property or assets that
have been frozen as belonging to a “terrorist group” could lead, on summary convi ction, to a fine of
not more than $100,000, or to imprisonment for a term of not more than one year, or to both; or, on
indictment, to imprisonment for a term of not more than ten years. [31] Facilitating a “terrorist
activity” is an indictable offense with a maximum penalty of imprisonment for a term not exceeding
fourteen years. [32] ii) Inclusion as a “Listed Entity”

While the Criminal Code provisions apply to charities, a further concern for charities lies in the latent
potential a charity could be included as a “listed entity” under section 83.05 of the Criminal Code .
Specifically, sectio n 83.05 of the Criminal Code authorizes the Governor in Council to:
establish a list on which the Governor in Council may place any entity if, on the recommendation of
the Solicitor General of Canada, the Governor in Council is satisfied that there are reasonable grounds
to believe that
(a) the entity has knowingly carried out, attempted to carry out, participated in or facilitated a
terrorist activity; or
(b) the entity is knowingly acting on behalf of, at the direction of or in association with an entity
referred to in paragraph (a).
As of May 17, 2004, this list has expa nded to include 35 organizations. [33] The procedure for being
placed on the list or removed from it is set out in sections 83.05 -83.07 of the Anti -terrorism Act , and
is ver y similar to that used in the charities deregistration process, which is discussed in Part E of this
article. However, the listing process is even more problematic, since there is no notification or
automatic quasi -judicial review process for a decision to list an entity, leaving the onus on each
organization to review the list and to apply for removal because of mistaken identity. Each charity
must also review the list on a regular basis to ensure it is not dealing, and has not dealt in the past,
with any “listed entity.”
There is also a separate United Nations list of terrorist organizations that is not necessarily the same
as “listed entities” under section 83.05 of the Criminal Code . Canada has an obligation under UN
Security Council Resolutions 1267 and 1390 to freeze the assets of any organization appearing on the
United Nations list. Therefore, an entity not on Canada’s anti -terrorism list could still find itself in
effectively the same position in a situation where a foreign government asked the Unite d Nations to
place the organization on the UN list. Moreover, the UN list applies to individuals as well as entities.
Canada maintains a separate list of UN -listed organizations under the United Nations Suppression of
Terrorism Regulations , pursuant to the United Nations Act .[34] As changes are made to the UN list,
organizations and individuals are automatically added or removed from the corresponding Canadian
list through a mendments to the regulations. [35] This separate UN list of terrorist organizations should
be of particular concern to organizations that work in or have contacts in areas o f conflict. A human
rights or mission board organization could even find itself subject to a concerted effort on the part of
the government of a country in which it works to have the charity, or an agent with whom the charity
works, placed on the list even though neither it nor the agent is made a “listed entity” by the
Canadian Government.
iii) Freezing or Seizure of Assets
The potential consequences of being listed or meeting the definition of a “terrorist group” are grave.
Under section 83.08 of the Cr iminal Code , the assets of all “terrorist groups” can be frozen. No person
in Canada and no Canadian overseas may, either directly or indirectly, deal with any property of a
“terrorist group”, or facilitate any transactions regarding such property, or prov ide any financial
services in relation to such property. Under sections 83.13 and 83.14, a judge may make an order for
the seizure or forfeiture of property owned or controlled by or on behalf of a “terrorist group” or that
has been or will be used, in who le or in part, to “facilitate” a “terrorist activity.”
These provisions could mean that if a charity was found to be a “terrorist group,” either by being listed
or by virtue of “facilitating” a “terrorist activity,” its charitable assets could be subject t o seizure and
forfeiture by the government. Likewise, if the charity accepted a donation from a “terrorist group,” its
assets could be subject to forfeiture for dealing in frozen assets. The judge would then make an order
for the disposal of the assets, wh ich in turn could expose the directors to civil liability for breach of
their fiduciary duties to protect and preserve the charitable assets of the charity. Deregistration of the
charity’s charitable status could bring similar consequences for the director s and the charitable assets

of a charity. For a discussion of the deregistration process and its implications for charities, see Part E
of this article, “Deregistration Under Part 6 of the Anti -terrorism Act .”
The Proceeds of Crime (Money Laundering) Act was enacted in 1991, and overhauled in the year 2000.
It was originally enacted to combat organized crime in furtherance of Canada’s international
obligations (particularly its commitments t o the Financial Action Task Force, discussed in the next
section of this article) but, after the events of September 11th, 2001, it was amended again through
Part 4 of the Anti -terrorism Act , which expanded its scope to include terrorist financing. The ame nded
Act was renamed the Proceeds of Crime (Money Laundering) and Terrorist Financing
Act (hereinafter “Proceeds of Crime Act” ).[36] Regulations were adopted under the amended Proceeds
of Crime Act and promulgated on May 9, 2002 (hereinafter “Proceeds of Crime Regulations” ).[37] “Money laundering” is the process by which proceeds of criminal activity are processed to disguise
their origin so the criminal(s) involved might be able to benefit from them without drawing attention
to the criminal activity. [38] Money -laundering legislation aims to combat crime by making it more
difficult for criminals to convert the proceeds of their criminal activity into a more useable form, thus
making criminal activity less profitable and ther eby purportedly less attractive.
Criminals laundering money and terrorists seeking to finance terrorist activities use similar methods to
achieve or maintain the appearance of legitimacy with respect to their activities. [39] Hence, it is
assumed that terrorist activity can be minimized by cutting off finances from terrorist organizations
through the use of money -laundering -type legislation . The validity of this assumption is open to
question, especially when the definition of terrorism itself is predicated on the requirement that such
an act be based on a religious, political, or ideological motivation. In such cases, finances may be only
one element in a plan to commit a terrorist activity. Where the motivation exists to carry out a
terrorist act, the perpetrators may find a way to execute their plan within whatever means are
available, even if finances are limited.
In this respect, it is i nteresting to note comments made by the Horst Intscher, Director of the Financial
Transactions and Reports Analysis Centre of Canada (FINTRAC), the government agency established
to implement Canada’s money -laundering legislation, [40] on the recent publication of the agency’s
first annual report. Intscher stated that “suspected cases of terrorist financing often involve only small
amounts of money, such as $8,000 transactions , but there are often many ‘clusters’ of transactions
that make them suspicious…The numbers on the terrorist financing side will always be
smaller.” [41] He also stated th at, of the approximately $100 million in suspicious transactions the
agency reported to law enforcement agencies in the first five months of reporting, only one percent, or
less than $1 million, was related to suspected terrorist -financing activities. [42] Although only a very
small amount of suspicious transactions were attributed to charities, the full impact of the Proceeds of
Crime Act continues to apply to charities, incl uding thousands of legitimate charities which operate
both inside and outside of Canada and have nothing to do with financing terrorist activities.
Regardless of the validity of the assumptions underlying terrorist financing legislation, the fact
remains t hat these laws will now have a significant impact on Canadian charities as well as on lawyers
involved in advising charities. Under the new provisions, charities may be subject to the prescribed
recordkeeping and reporting duties outlined in the Proceeds o f Crime Act and its Regulations. These
duties have been referred to as a new compliance regime for financial entities, the definition of which
may well include charities. However, even if charities do not fall within the definition of a reporting
entity, a charity could, without its knowledge, still be subject to reporting by other reporting entities,
such as a bank, an accountant, or a life insurance company.
Lawyers are currently exempt from the reporting and recordkeeping provisions of Part I of
the Proc eeds of Crime Act pending the results of a constitutional challenge by the Federation of Law
Societies. [43] If this appeal is unsuccessful, then lawyers will be subject to Part I reporting
requirements. Even if the appeal is successful, however, lawyers will continue to be subject to the
current reporting obligations under the Act dealing with large cash transac tions in excess of $10,000

and cross -border transactions, which could result in lawyers having to report their charitable clients.
In any event, lawyers will need to be able to advise their charitable clients regarding their legal
obligations in this area. Furthermore, as volunteer directors on boards of charities, lawyers will have a
fiduciary obligation to be aware of the Proceeds of Crime Act and how it will affect their organizations.
Even where lawyers or their charitable clients are not themselves sub ject to any duty to report,
actions under the Proceeds of Crime Act for the purposes of detecting criminal behavior will likely entail
intrusive monitoring of the financial activities of otherwise -innocent charities and organizations that
deal with them. Th e amendments to the Proceeds of Crime Act brought about by both the Anti –
terrorism Act and the Public Safety Act mean that charities, their fundraisers, and their legal counsel
may be drawn into the ambit of the Act, possibly as entities required to report in addition to being the
subjects of such reports.
1. International Context
The amendments to the Proceeds of Crime Act are clearly part of a larger international drive to curtail
the financing of terrorism involving large international organizations, such as the International
Monetary Fund, the World Bank, the G -8 and G -20 Finance Ministers’ groups, and various regional
organizations. The amendments reflect the implementation of Canada’s commitment to comply with
the International Convention on the Suppres sion of Terrorist Financing and Canada’s desire to
implement the recommendations of the Financial Action Task Force on Money Laundering (“FATF”).
FATF was established by the G -7 Summit in Paris in July 1989 to examine measures to combat money
laundering. F ATF is an intergovernmental body whose purpose is the development and promotion of
policies, both at the national and international levels, to combat money laundering and terrorist
financing. Therefore, the Task Force is a policymaking body, which works to generate the necessary
political will to bring about national legislative and regulatory reforms to combat money laundering. In
addition to its 29 member countries, FATF works with FATF -style regional bodies and representatives
of bodies such as the IMF, Interpol, and the European Central Bank (ECB).
FATF issues recommendations, and member countries commit to bring their legislation into compliance
with the recommendations. Following the events of September 11th, FATF held an extraordinary
session in Washi ngton, D.C., on October 29 -30, 2001. At that meeting, FATF expanded its mandate to
include terrorist financing and to establish standards for preventing terrorist financing, tracking down
and intercepting terrorists’ assets, and pursuing individuals and co untries suspected of participating in
or supporting terrorism. As a result of this meeting, FATF issued a set of eight Special
Recommendations on Terrorist Financing, which commit members to:
1. Take immediate steps to ratify and implement the relevant United Nations instruments;
2. Criminalize the financing of terrorism, terrorist acts and terrorist organisations;
3. Freeze and confiscate terrorist assets;
4. Report suspicious transactions linked to terrorism;
5. Provide the widest possible range of assistance to other c ountries’ law enforcement and
regulatory authorities for terrorist financing investigations;
6. Impose anti -money -laundering requirements on alternative remittance systems;
7. Strengthen customer identification measures in international and domestic wire
transfe rs; and

8. Ensure that entities, in particular non -profit organisations, cannot be misused to finance
terrorism. [44] The last recommendation deals specifically with nonprofit organizations, highlighting the potential for
their misuse in the financing of terrorism. The full text of the recommendation provides as follows:
VIII. Non -profit Organizations
Countries should review the adequacy of laws and regulations that relate to en tities that can be
abused for the financing of terrorism. Non -profit organizations are particularly vulnerable, and
countries should ensure that they cannot be misused:
(i) by terrorist organizations posing as legitimate entities;
(ii) to exploit legitimat e entities as conduits for terrorist financing, including for the purpose of
escaping asset freezing measures; and
(iii) to conceal or obscure the clandestine diversion of funds intended for legitimate purposes to
terrorist organizations. [45] Subsequent to identifying nonprofits as an area of concern in its Special Recommendations on
Terrorist Financing , the FATF issued a report on October 11, 2002, entitled Combating the Ab use of
Non -Profit Organizations: International Best Practices .[46] This report identifies nonprofits as “a
crucial weak point in the global struggle to stop such funding at its source” because of their perceived
potential misuse as conduits for terrorist financing. The report outlines specific recommendations,
expressed as “international best practices,” that apply to both nonprofits and regulatory
authorities. [47] This special focus on nonprofits is reflected in the expansion of the definitions in
the Proceeds of Crime Act to include charitable organizations within its scope, and in the creat ion of
the deregistration process under the Charities Registration (Security Information) Act . This same focus
is also highlighted in FINTRAC’s first annual report, which states:
Terrorist financing operates somewhat differently from money laundering but n o less insidiously. While
terrorist groups do generate funds from criminal activities such as drug trafficking and arms
smuggling, they may also obtain revenue through legal means. Supporters of terrorist causes may, for
example, raise funds from their loc al communities by hosting events or membership drives. In
addition, some charity or relief organizations may unwittingly become the conduit through which
donors contribute funds that may eventually be used to commit a terrorist act. The funds are then
rout ed to the recipient terrorist organizations through both informal networks and the formal financial
system. [48] 2. Proceeds of Crime (Money Laundering) and Terrorist Financing Act and Regulations
a) Creation and Role of FINTRAC
One of the objectives of the amendments to the Proceeds of Crime Act in 2000 was to establish
FINTRAC. The amendments to the Proceeds of Crime Act under the Anti -terrorism Act significantly
expand the role and powers of FINTRAC. It was originally created as an independent government
agency to combat organized crime with a mandate to collect, analyze, assess, and disclose informa tion
in order to assist in the detection, prevention and deterrence of money laundering. However, after the
events of September 11th, 2001, its mandate was expanded through Part 4 of the Anti -terrorism Act to
include terrorist financing.
The Proceeds of Cri me Act makes it mandatory for various persons and entities to keep and retain
records containing specific detailed information about certain financial transactions and to report these
transactions to FINTRAC. FINTRAC reviews the information and, where fina ncing of terrorist activity or

money laundering is suspected, it may release some of the reported information to law enforcement
and other government agencies. As already mentioned, FINTRAC reported approximately $100 million
in transactions to law enforce ment and government agencies in its first five months of reporting with
only partial reporting requirements in force. Based on the information provided, the government
agencies may proceed to investigate the subject transactions, to detain and search the s ubject
persons, and possibly to seize and forfeit the property in question.
The amendments to the Proceeds of Crime Act strengthen the ability of FINTRAC and other
government agencies to collect and share compliance -related information with various agencie s that
regulate and supervise banks, trust companies, securities dealers, lawyers, and accountants. The
amendments also expand FINTRAC’s power to collect information from federal and provincial
government agencies for purposes related to law enforcement or national security. Bill C -7, The Public
Safety Act , contains a corresponding amendment to the Office of the Superintendent of Financial
Institutions Act , which will permit the Superintendent to disclose to FINTRAC information related to
compliance by a fi nancial institution. In other words, FINTRAC will be permitted virtually unlimited
access to information from government databases related to national security, law enforcement, and
financial regulation. [49] Since such a broad power to share financial information could affect charities
and donors, as well as lawyers acting on behalf of charitable clients or serving on boards of charitable
organizations, it should be of vital concern for lawyers to know the nature of the information FINTRAC
will be sharing, and how it will obtain the information. This is all the more important given the
possibility that lawyers themselves may find they are under a duty to report to FINTRAC unde r certain
b) General Description of Reporting Entities
Not every person or entity has the statutory obligation to record and report the transactions defined in
the Proceeds of Crime Act . Section 5 of the Act defines the reporting persons and entities as follows:
(a) authorized foreign banks within the meaning of section 2 of the Bank Act in respect of their
business in Canada, or banks to which that Act applies;
(b) cooperative credit societies, savings and credit unions and caisses populaire s regulated by a
provincial Act and associations regulated by the Cooperative Credit Associations Act ;
(c) life companies or foreign life companies to which the Insurance Companies Act applies or life
insurance companies regulated by a provincial Act;
(d) companies to which the Trust and Loan Companies Act applies;
(e) trust companies regulated by a provincial Act;
(f) loan companies regulated by a provincial Act;
(g) persons and entities authorized under provincial legislation to engage in the business o f dealing in
securities, or to provide portfolio management or investment counselling services;
(h) persons and entities engaged in the business of foreign exchange dealing;
(i) persons and entities engaged in a business, profession or activity described in regulations made
under paragraph 73(1)(a);
(j) persons and entities engaged in a business or profession described in regulations made under
paragraph 73(1)(b), while carrying out the activities described in the regulations;
(k) casinos, as defined in th e regulations, including those owned or controlled by Her Majesty;

(l) departments and agents of Her Majesty in right of Canada or of a province that are engaged in the
business of accepting deposit liabilities or that sell money orders to the public, whil e carrying out the
activities described in regulations made under paragraph 73(1)(c); and
(m) for the purposes of section 7, employees of a person or entity referred to in any of paragraphs (a)
to (l).
While none of these categories directly name chariti es, charities could be brought into the scope of
the Proceeds of Crime Act indirectly, either as companies to which provincial trust company legislation
applies or as entities authorized under provincial legislation to engage in the business of dealing in
securities. These possibilities are described in more detail below.
c) General Description of Subject Transactions
Not every financial transaction needs to be reported, although the scope of the Act is very broad.
According to the Act, reporting persons or entities must record and report the following transactions
that occur in the course of their business activities:
i) Suspicious Transactions
Part 1 of the Proceeds of Crime Act requires the individuals and entities defined in the Act to report:
every fin ancial transaction that occurs in the course of their activities and in respect of which there
are reasonable grounds to suspect that the transaction is related to the commission of a money
laundering offence [50] [emphasis added] The Act neither defines “suspicious transaction” nor provides details as to what would constitute
“reasonable grounds” to suspect a transaction is related to the commission of a money -laundering
offense. [51] Some possible considerations include the identity of the parties, the destination country
of the funds, and patterns in transactions. Under the latter, “suspicious transactions” could in some
circumstances capture tax -structured transactions, which might include certain large
donations. [52] Under such broad definitions, Canadian charities carrying on international operations
could become t he subject of such reports without any awareness that they have been reported when
they transfer funds to foreign jurisdictions such as the support of missionary bases.
ii) Prescribed Transactions
In addition to suspicious transactions, the Proceeds of Crime Act creates an absolute obligation for
reporting entities to report “prescribed” transactions. The Act requires that reporting entities keep
records of and report “every prescribed financial transaction that occurs in the course of their
activities.” [53] Under the current and proposed regulations, the “prescribed transactions” can be of
two kinds: large cash transactions or transfers of cross -border currenc y and monetary
instruments. [54] Large cash transactions are essentially any cash transactions of $10,000 or more
within Canada, whereas cross -border currency and monetary i nstruments applies to any import or
export of $10,000 or more, either in cash or by monetary instruments. [55] Combined with the
possibility that “suspicious transactions” w ill be reported, the automatic reporting of large cash
transactions and cross -border currency and monetary instruments means that virtually any
transaction involving a substantial amount of money to a Canadian charity which engages in overseas
work could b e the subject of a report by a reporting entity.
3. Impact of the Proceeds of Crime Act and Regulations on Charities
a) Information Gathering under the Proceeds of Crime Act

The expansion of the federal government’s power to share and collect information w ith respect to
terrorist financing compliance issues may have an indirect, but significant, impact on charities. The
information collected by FINTRAC, and shared with various government and law enforcement
agencies, could produce any of the consequences af fecting a charity discussed in Part C.4(b) above,
including investigation, criminal charges, listing, deregistration, and the freezing and seizure of assets.
Whether any of these consequences materialize or not, the knowledge that the authorities are
monit oring the activities of charities will have a detrimental chilling effect on the motivation and ability
of charities to pursue their charitable objectives, particularly in the international arena.
In this regard, a charity that funds international programs may unwittingly become the subject of a
reported transaction without even being aware of it. For example, a charity’s bank, its lawyers, or its
accountants may now either individually or collectively be required by law to report to FINTRAC any
suspicious transactions (currently not applicable to lawyers), large cash transactions, or cross -border
transactions of the charity as specified in the legislation and regulations. Moreover, such reporting
entities are specifically enjoined not to let the organizatio n that is the subject of the report know,
either directly or by implication, that they have made such a report. [56] If FINTRAC suspects terrorist
financing or money -launder ing activity based on its analysis of the reports, it may release the
information to law enforcement and other government agencies. Based on this information, the
government agencies may investigate the subject transactions, retain and search the subject p ersons,
lay charges, and seize the property in question for forfeiture.
The information reported to FINTRAC can also affect charities through the broad power, granted under
Part 6 of the Anti -terrorism Act (the Charities Registration (Security Information) Act ), to the Solicitor
General and the Minister of National Revenue to revoke or refuse to grant charitable status to a
charity based on information collected by FINTRAC. [5 7] The reporting requirements may also have an impact on charitable fundraising involving any large
cash donations or the funding of international projects. This may unduly deter bona fide donors from
making significant donations to Canadian charities, esp ecially organizations with which the donors are
not intimately familiar, and discourage Canadian charities from transferring much -needed funds to
projects in foreign jurisdictions. A Canadian charity that transfers charitable funds to a foreign charity
und er an agency or joint -venture agreement may find itself the subject of a reported transaction to
b) Reporting Requirements under the Proceeds of Crime Act
The reporting requirements included in the amendments to the Proceeds of Crime Act may also affect
charities, to the extent that some charities involved in certain activities may be found to fall within the
definition of entities required to report under the Act. This may occur indirectly under paragraph 5(g)
of the revised Act, which st ates that persons and entities “authorized under provincial legislation to
engage in the business of dealing in securities” have a statutory obligation to record and report the
financial transactions referred to in the amended Proceeds of Crime Act . Paragr aph 5(g) could apply to
charities. For example, charities in Ontario are exempted from the requirements for registration under
the Securities Act and therefore could in some situations be considered “authorized to engage in the
business of dealing in securi ties” under section 5(g) of the revised Proceeds of Crime Act , whether or
not they in fact engage in said activities.
In this regard, Paragraph 35(2)7 of the Securities Act [58] states that registration under the Securities
Act is not required in order to trade in securities issued by:
an issuer organized exclusively for educational, benevolent, fraternal, charitable, religious or
recreational purposes and not for profit, whe re no commission or other remuneration is paid in
connection with the sale thereof.
In Ontario, where a charity fulfills the exemption requirements under paragraph 35(2)7 of
the Securities Act , it is possible that a charity that becomes involved in a relat ed business of issuing
securities for a profit, such as a church issuing bonds at a low interest rate in order to reinvest the

monies received in market securities, may have become both “authorized” as well as “engaged” in the
business of dealing in securi ties for the purposes of paragraph 5(g) of the Proceeds of Crime Act . If so,
a charity in Ontario, and possibly in other provinces with similar securities legislation and in similar
fact situations, might become subject to the mandatory recording and repor ting obligations imposed
under the Proceeds of Crime Act .
Charities may also be included within the expanded definition of reporting entities set out in the
regulations under the Proceeds of Crime Act , released on May 9, 2002. The regulations now include
definitions of “financial entity” and “money services business,” which in some situations may include
charities. Specifically, the regulations state that a “financial entity” includes “a company to which
the Trust and Loan Companies Act applies.” In this re gard, where a national charity incorporated by a
special Act of Parliament or under the Canada Corporations Act receives monies from other charities in
order to pool those monies for investment purposes, the receiving charity might be involved in trust
act ivities that could require it to be registered under the federal Trust and Loan Companies Act . If so,
the charity would have become a reporting entity for the purposes of the Proceeds of Crime Act .
Further, the same regulations define a “money services bus iness” as “a person or entity that is
engaged in the business of remitting funds or transmitting funds by any means or through any person,
entity or electronic funds transfer network, or of issuing or redeeming money orders, traveller’s
cheques or other si milar negotiable instruments.” [59] These activities could include a charity involved
in the related business of transferring funds to third -party agents internationally or even domestically
in return for an administrative service fee. Whether CRA would find such an arrangement to be an
acceptable charitable activity is doubtful, given CRA’s position that a charity cannot act as a conduit to
forward funds to non -qualified don ees even when they have entered into an agency agreement.
However, the reality is that many charities at times do become involved in transferring monies to
third -party agents for a fee. They therefore may unwittingly come under a duty to report such
transa ctions under the Proceeds of Crime Act .
Whether or not the reporting requirements under the Proceeds of Crime Act apply to a charity depends
on whether or not the charity’s activities in these areas can be considered a “business” or a “related
business” und er the Income Tax Act . The term “business” is not defined in either the Proceeds of
Crime Act or the Regulations. The Income Tax Act ,[60] by contrast, broadly defines “business.” In
section 248(1) it states:
“business” includes a profession, calling, trade, manufacture or undertaking of any kind whatever and
… an adventure or concern in the nature of trade but does not include an office or e mployment.
[emphasis added] This definition might conceivably apply to the activities of a charity. CRA, however, does not consider
a charity engaged in pursuing its charitable objectives to be a “business.” In a recent consultation
paper on this topic, CR A states it does not apply the broad definition of “business” stated in
the Income Tax Act to charities, rather “business” in the charitable context is limited to “commercial
activities, or more precisely, the seeking of revenue by providing goods and serv ices to people in
exchange for a fee.” [61] A charity that CRA permits to carry on a business under the Income Tax
Act is, with regard to a “related business” where the busin ess is linked to and subordinate to its
charitable purpose, similar to the example referred to above. [62] However, even if a charity is not involved in “carrying on a busin ess” or a “related business” under
the Income Tax Act , the charity might still be found to have been “authorized to be engaged in a
business” or “engaged in a business” for the purposes of the Proceeds of Crime Act , since “business”
in the Proceeds of Crim e Act may not be interpreted the same as under the Income Tax Act . The
courts may need to determine the definition of “business” under the Proceeds of Crime Act .
If charities do fall within the definitions of entities required to report under the Proceeds of Crime Act ,
there are serious consequences for charities that fail to do so. Accordingly, charities will need to be
diligent in monitoring whether circumstances may have imposed a duty to report under the Act.

1. The Process: Part 6 of Bill C -36 Charities Registration (Security Information) Act
Part 6 of the Anti -terrorism Act enacts the new Charities Registration (Security Information)
Act .[63] This Act enables the government to revoke the charitable status of an existing charity or
deny a new charitable status application if it determines the charity has supported or will support
terrorist activity. Such deregistrat ion is initiated by the issuance of a “security certificate” against the
charity or applicant for charitable status, which could have consequences beyond deregistration.
a) Grounds for the Issuance of a Security Certificate
Under the new legislation, a sec urity certificate can be issued against an existing charitable
organization or an applicant for charitable status where there are “reasonable grounds” to believe the
organization has made, makes, or will make resources available, directly or indirectly, to an entity that
has engaged or will engage in a “terrorist activity” as defined in subsection 83.01(1) of the Criminal
Code . The process is initiated by the Solicitor General of Canada and the Minister of National Revenue
who, if reasonable grounds are fou nd, jointly sign the security certificate. However, the Act does not
define “reasonable grounds” or give examples of the kinds of factors that could be considered
reasonable grounds.
b) Judicial Consideration of the Certificate
The judicial consideration s tage of the deregistration process is meant to address the issue of
procedural fairness and to give the charity an opportunity to respond to the claims made against it.
However, the judicial consideration process itself raises several concerns about proced ural fairness.
The charity must be served notice of the issuance of a certificate as soon as this has been signed by
the Ministers. A minimum of seven days after the charity has been served, the certificate must be
submitted to a judge of the Federal Court for a determination of its reasonableness. The charity is
then given the opportunity to respond to the issuance of the certificate. However, this right is severely
limited by a number of factors related primarily to the lack of information.
During the jud icial consideration stage, the judge must give the charity or applicant for charitable
status a summary of the grounds for issuance of the security certificate. This summary comprises
security and criminal intelligence information that, in the judge’s opin ion, may be disclosed under the
Act. In practice the charity’s right to respond is limited by the resulting imbalance of information. The
deregistration process therefore raises concerns about the breadth of information available to the
judge and the Minis ters, on the one hand, and the potential lack of information available to the
charity, on the other hand.
c) Evidence
Section 7 of the Charities Registration Act states that “any reliable and relevant information” may be
admitted into consideration by a Federal Court judge “whether or not the information is or would be
admissible in a court of law.” The determination of the reasonableness of the security certificat e would
be based in part on this broad base of information available to the court for its consideration. This
should concern charities, since it means that, despite the serious consequences of a security
certificate, section 7 of the Charities Registration Act effectively waives the ordinary rules governing
the admissibility of evidence for the purposes of the Federal Court review.
Another provision in the Charities Registration Act that raises concerns about the fairness of the
process is paragraph 8(1)(a) , which also deals with evidence to be considered by the Federal Court
Judge. Paragraph 8(1)(a) states “information obtained in confidence from a government, an institution
or an agency of a foreign state, from an international organization of states or fr om an institution or
agency of an international organization of states” can be relied on in determining the reasonableness

of the certificate, even though it cannot be disclosed to the charity. Furthermore, the judge is to
decide on the relevance of such i nformation after hearing arguments from the Minister seeking to
include it. The charity is not given an opportunity to argue the relevance of such evidence or to
challenge its credibility. Even if it were granted the opportunity, the charity could not argu e the
relevance or credibility of evidence to which it has no access. Whether the information is ultimately
relied on or not, the determination takes place entirely in the absence of the charity or its counsel.
Paragraph 6(1)(b) of the Charities Registrati on Act grants the judge considering the certificate
discretionary power to decide whether any information “should not be disclosed to the applicant or
registered charity or any counsel representing it because the disclosure would injure national security
or endanger the safety of any person.” Combined with the possible exclusion of foreign or government
evidence, this raises the possibility that much of the security information and intelligence reports
considered by a Federal Court Judge might be considered too sensitive for national security reasons to
be disclosed to the affected charity. In fact, it is altogether possible for a charity to be deregistered
based entirely on information to which it has no access.
d) Effect of Certificate
After a Federal Court judge has determined a security certificate is reasonable, the Ministers must
publish the certificate in the Canada Gazette for it to take effect. Once it is published, the charity is
stripped of its charitable status. The certificate is effective for sev en years, after which the Ministers
would have to start the process over again if they feel the organization is still a risk. However, by that
time the charity would most likely no longer exist, given the fact it has not had charitable status in
seven year s.
e) Appeal
After a certificate is issued, subsection 11(5) of the Charities Registration Act precludes any judicial
appeal or review beyond a limited right to apply to the Ministers to review the certificate if there has
been a material change in circums tances. However, considering a charity might not even know the
information on which the security certificate was based, it would be very difficult for it to know when
its circumstances might have changed materially. In any event, once a charity has been de registered,
it is highly unlikely any organizational infrastructure or support base would remain capable of
launching an application to reconsider the certificate for a material change in circumstance.
f) Concerns about the Deregistration Process
The secur ity certificate and deregistration process raise several concerns from the point of view of
basic principles of natural justice and due process. These factors are of even greater concern in light
of the serious consequences of the issuance of the security certificate. Deregistration not only entails a
charity losing its ability to enjoy the tax benefits of charitable status, but there is also a possibility the
issuance of a security certificate might expose the charity and its directors to investigation and
prosecution under the enhanced “Super Criminal Code ” provisions. More important, from a practical
standpoint, is the strong possibility that issuance of a security certificate could lead to the freezing or
seizure of the charity’s assets under sections 83 .08 or 83.13 -83.14 of the Criminal Code . Whether as a
result of tax consequences or the seizure of assets, the issuance of a security certificate could bring
about the bankruptcy, insolvency, or winding up of the charity. This in turn could expose the char ity’s
directors to civil liability at common law for breach of their fiduciary duties by not adequately
protecting the assets of the charity.
In light of these potentially serious consequences to a charity and its directors, the lack of procedural
safeguar ds available to a charity subject to deregistration is of serious concern. Some specific
concerns about the process include the following:
 No knowledge or intent is required;

 The provision is retroactive —past, present, and future actions can be considered;
 Normal rules for the admissibility of evidence do not apply;
 “Confidential” information considered may not be disclosed to the charity even if relied
on in making the determination of reasonableness, which may severely handicap the
ability of the charit y to present a competent defense;
 No warning is issued or opportunity given to the charity to change its practices; There is
no ability for appeal or review by any Court;
 The justification for the certificate is based on the low standard of “reasonable b elief”;
 The burden of proof is shifted, requiring the charity to respond and prove its innocence,
even where it may not really know the charges.
The charity is given the opportunity to respond during the judicial consideration of the certificate.
Howe ver, because of the limitations on disclosure of information, a charity’s knowledge of the case
against it and its ability to respond may be severely limited. The limitations on the ability of the
charity to respond will in essence impose a burden of proof on the charity it cannot meet. The
“reasonability” of a security certificate under these circumstances may effectively be a foregone
conclusion. In fact, this concern is borne out by experience under similar provisions in the Immigration
Act that have been in force for over ten years, which indicate Federal Court judges usually endorse
security certificates. [64] If the security certificate is found reasonable by the Federal Court judge, the certificate is valid for
seven years, during which time a registered charity is stripped of its charitable status or an applicant
for charitable status is ineligible to obtain that status. Given that there is no right to appeal a security
certificate, the ordinary rules of evidence have been waived, and evidence deemed injurious to
national security or a person’s safety is not to be disclosed to the charity, it is difficult to see how the
deregistration process could be considered fair, not withstanding CRA’s recent suggestion to the
The range of activities contemplated by the anti -terrorism le gislation is very broad. The potential
consequences facing charities include everything from loss of charitable status to possible conviction
for violating Criminal Code and money -laundering provisions, which can entail monetary penalties,
seizure or forfe iture of charitable property, and even incarceration for the directors of the charity.
These consequences are all the more serious when considered against the lack of procedural
safeguards that are taken for granted in other areas of Canadian law.
1. Fairn ess
Bill C -36 raises several concerns about lack of fairness. Most importantly, there is a lack of procedural
fairness that results from limited access to and disclosure of information. In light of the far -reaching
ramifications of a decision to issue a ce rtificate, which include the possibility the directors of the
charity might, by implication, be subject to criminal investigation under the terrorism provisions of
the Criminal Code , it is of serious concern that the normal rules of evidence do not apply t o the
deregistration process.
2. Limited Defense

No due -diligence defense is available for charities in the event of “Super Criminal Code ” offenses or
the loss of charitable status. Defenses usually available for other Criminal Code violations are not
available. Furthermore, the knowledge or intent required for offenses involving facilitation of terrorist
activities has a lower threshold than for other comparable Criminal Code offenses, and is not even
necessary for the provisions lea ding to loss of charitable status. This abrogates Canadians’ rights in
order to fulfill Canada’s international obligations and, in doing so, goes far beyond the requirements of
those obligations. The lack of information available to the charity about the g rounds for the issuance
of the certificate severely limits its ability to put forth an adequate response or defense to the
allegations against it.
3. Discrimination
Under this legislation, charities with political, religious and ideological purposes will n ow become
inherently suspect because they in part meet the definition of “terrorist activity.” As a result, religious,
ethnic, and environmental charities may be scrutinized more than other charities, possibly resulting in
discrimination against charities that have “religious or ideological” purposes. These could include, for
example, organizations involved in issues related to the environment or genetically modified foods. It
could apply to charities related to minority religious groups and ethnic social g roups, but also to
charities related to mainline religious groups. For more information in this regard, reference can be
made to Antiterrorism and Charity Law Alert No. 1 (30 April 2002) , available
at .
4. Negative Impact on Charities From Bill C -36
a) Public Perception
The enactment, implementation, and enforcement of the anti -terrorism legislation will have an
ongoing negative impact on the general public’s perception of chariti es by associating charities in
general with the possibility of assisting the financing of terrorism. People will be less open to give to
charitable operations, especially to organizations they are unfamiliar with, when their donation might
expose them to c riminal charges for facilitating terrorist activities. However, even if a donor is willing
to give to an organization, or if the donor is a long -time supporter of a given organization, the donor
may hesitate to give large donations as the public becomes mo re aware of the full impact of anti –
terrorism legislation, in particular the Proceeds of Crime Act , realizing a large donation might expose
the financial activities of a donor to government scrutiny.
Even if donors are not protective of their privacy, they could still hesitate to donate to a charity when
there is a possibility their donation might not end up going to fulfill their intended purpose in the event
the charity’s assets became subject to seizure. This would have a significant impact on the charit y’s
ability to pursue its charitable objectives in a climate where many charities are already struggling to
secure sufficient support to be able to continue their operations.
b) The “Chill Effect” on Future Charitable Activities
The legislation could also have a “chill effect” on future charitable activities, particularly for
international religious and humanitarian NGO’s working in other countries. Organizations might
become much more reluctant to get involved in overseas operations, humanitarian or otherw ise, when
such activities may lead to loss of charitable status or even Criminal Code violations. Due diligence to
avoid situations that might bring about liability will be costly, difficult, and often ineffective, using up
valuable resources that should be going to the pursuit of the charitable or humanitarian objects of the
Co -operative efforts between domestic and international organizations may also be hindered because
international organizations may be concerned about exposure to Canadian anti -terrorism legislation,
especially when they realize how far Canada’s laws go beyond its actual international obligations.

Conversely, Canadian charities will be deterred from involvement overseas because of concern about
becoming subject to Anti -terro rism laws in other countries.
Canada’s anti -terrorism legislation will also have a significant impact on the day -to-day operations of
charities, which, in determining whether to accept a donation, must now look not only at the donor
and its funds, but also at the means by which the donor raised the funds. Directors of charities could
be exposed to criminal charges under the “Super Criminal Code ” for “terrorist activities” of other
organizations without having knowledge whether “terrorist activities” might r esult. Actions committed
by an agent of a charity involved in international operations can now expose both the charity and its
directors to liability without their knowledge or any terrorist intent on their part.
c) Financial Consequences
The financial con sequences of the anti -terrorism legislation are potentially disastrous to charities and
their directors. In addition, charities could also be exposed to third -party liability claims on behalf of
victims of September 11th -type terrorist attacks, such as a $ 1 trillion law suit naming Canadian
charities along with Saudi Arabian charities commenced by the victims of the attacks. [66] The risks to
the charity include loss of tax b enefits, freezing and seizure of charitable property, being included as a
“listed entity,” and the possible winding up of the corporation.
d) Director and Donor Liability
Directors are also accountable for their common law fiduciary duties with regard to c haritable
property. This could lead to personal liability for directors if the charity is found to have contravened
anti -terrorist legislation and unnecessarily exposed the property of the charity to government scrutiny
or seizure. Charities and directors may also be vulnerable financially as a result of a possible lack of
insurance, since fines, penalties, and Criminal Code charges may not be included in normal insurance
coverage for directors and officers.
A donor’s gifts to a charity that is a terrorist group may also put the donor, whether another charity or
an individual, at risk of violating the Criminal Code , which will therefore require donors to make
appropriate inquiries of intended recipient charities.
e) Indiscriminate Application
The broad defin itions of terms such as “terrorist activity” and “terrorist group” fail to distinguish
between organizations working under a dictatorial regime and those working under a democratic
regime. These definitions raise the question whether citizens of a repressi ve country who are
legitimately fighting for freedom might be considered “terrorist groups.” Some relevant examples
might include the African National Congress, student groups in China involved in demonstrations such
as the one at Tiananmen Square in 1989, or, more recently, student groups supporting independence
in East Timor or southern Sudan.
If these groups can be caught under the anti -terrorism legislation, Canadian charities that provide
medicine, food, and other assistance to such groups might be con sidered to be committing criminal
offenses such as “facilitating” and financing these “terrorist groups.” By contrast, a company that
operates in the same country through a partnership with the government, thus effectively financing
the dictatorship, would be free to pursue its business interests. In that case, the definitions would be
too broad or vague. In the absence of judicial interpretation clearly defining the limits of these terms
to avoid such indiscriminate application, the result may severely cur tail Canadians’ ability to support
freedom and democracy throughout the world.
f) The “Shadow of the Law”
As significant as the impact of the anti -terrorism legislation can be, a major concern about the
legislation may not be in its direct application, but rather in its indirect impact in creating a fear by

virtue of the “shadow of the law.” Even if none of the Anti -terrorism Act is enforced against a charity,
the very existence of the legislation will have a prejudicial impact on charities.
5. Impact on La wyers
Lawyers need to realize that anti -terrorism legislation, as it relates to charities, can have a direct
impact on them. They could find themselves under a duty to report, or as subject of a report, under
the Proceeds of Crime Act when handling monies o n behalf of a charity. Lawyers could also find that
advising, counseling, or facilitating the activities of a charity under some circumstances could be
considered facilitating a “terrorist activity.” Finally, the Anti -terrorism Act may have an impact on
lawyers who serve as volunteer directors for charities involved in international and in domestic
activities that may fall under the provisions of the anti -terrorism legislation.

1. Need for Due Diligence
As mentioned earlier, due diligence is not a defense for violations of the new terrorism provisions of
the Criminal Code as amended by the Anti -terrorism Act , or against revocation of charitable status
under these new laws. At the very least, due diligence is necessary to show a des ire to comply. On the
other hand, maintaining due diligence is mandatory in accordance with the common law fiduciary
duties of directors to protect charitable property. While due diligence is not a defense against the anti –
terrorism charges, the anti -terro rism laws do not abrogate directors’ fiduciary duties to the charity and
its donors. As such, due diligence can provide a powerful protection for directors against complaints at
common law. If a charity’s assets are frozen or seized, the directors and offi cers could be exposed to
civil liability for breaching their fiduciary duty to protect the charitable assets of the charity. If they are
found to have been negligent, this could be a very significant liability quite apart from any possible
criminal sanctio ns. By evidencing their intent to comply through exercising due diligence, directors and
officers may be able to protect themselves against a finding of negligence.
On a more practical level, however, the greatest benefit from exercising due diligence may be in its
preventive effect. While it may not provide a defense after a violation has occurred, it is one measure
that a charity can use in advance to protect itself from unwittingly committing a violation. Due
diligence can help avoid the occurrence of th e kind of event or association that might lead a charity to
be implicated under the anti -terrorism laws. By being more knowledgeable about the charity and its
operations, officers will have more power to respond appropriately.
Through exercising due dilige nce, the charity can identify potentially problematic individuals or
organizations before it is too late. Due diligence can highlight programs that need to be restructured
or discontinued in order to avoid exposure. It can alert officers to the need to dec line donations from
questionable donors. While no one can guarantee due diligence will identify all possible risks, it can
certainly help to minimize a charity’s exposure by eliminating obvious risks.
2. In -House Due Diligence
a) Due Diligence Through Education
First and foremost, lawyers must educate their charitable clients, especially the executive, staff, and
directors, about the requirements of Bills C -35, C -36, and C -7, encouraging them to develop a
proactive response and assisting them in creating and implementing an effective anti -terrorism policy.
Charities should continually educate their directors, staff, members, donors, and agents about the
applicable legal requirements. They should develop access to general resource materials on anti –
terrorism legislation in Canada and in all other countries in which they operate.

Further, charities need to compare and coordinate educational materials with other charities, either
directly or through umbrella organizations. Communicat ing with other organizations can help charities
learn from one another’s experiences, as everyone struggles to understand the full implications of
these legislative initiatives. As they develop a body of material on the legislation and on their unique
risk s, charities need to provide ongoing educational materials and presentations to board members,
staff, volunteers, donors, and agents of the charity to keep them up to date about developments in
the laws and their enforcement.
b) Due Diligence at the Board Level
In light of the heightened expectations on charities under the anti -terrorism legislation, it will be
important to choose the directors of a charity very carefully. The importance is obvious for the
organization to avoid association with a director w ho has ties to terrorist organizations. In this regard,
it would not be unreasonable to assume the CRA may conduct Canadian Security Intelligence Service
(CSIS) security checks of board members of both new and existing charities. The discovery of even a
su ggested link between a director and a terrorist group could expose the charity to deregistration.
Potential board members should therefore be advised that a CSIS security check might be carried out
on them.
As the charity implements its new anti -terrorism policy statement and procedures, all new and
existing board members should be required to complete disclosure statements so an assessment of
compliance with anti -terrorism legislation can be made. These disclosure statements should include a
consent to sha re the results with legal counsel, board members, executive staff, and nominating
committee members, if applicable. Moreover, such disclosure statements should be required yearly in
order to enable the charity to determine compliance with anti -terrorism le gislation on an ongoing
basis. Directors should immediately report any material change in their circumstances that might
affect the disclosure statements.
Once directors have passed the charity’s screening procedures to meet the requirements of the anti –
terrorism initiatives, they must exercise continued vigilance and due diligence in the conduct of the
charity’s affairs. Directors should continually educate themselves and the members and donors of their
charity about legal developments in this area. They m ust also familiarize themselves with the activities
of their own organization and about possible risk areas with respect to the day -to-day work and
programs of the charity itself as well as its affiliated organizations, donors, and agents. Directors must
also continue to actively supervise the staff and volunteers of the organization and ensure staff and
volunteers meet the organization’s policy requirements.
c) Due Diligence at the Staff and Volunteer Level
Like directors, existing and potential staff memb ers in key positions should be advised CSIS security
checks might be carried out on them. Staff and volunteers, both current and prospective, should be
required to complete disclosure statements and consents along with an agreement to report any
material c hange in circumstance that might be relevant to the disclosure statements. Staff and key
volunteers should also be requested to complete yearly disclosure statements to permit an ongoing
review of compliance with anti -terrorism legislation.
d) Due -Diligenc e Checklist of Charitable Programs
A due -diligence checklist should be developed in keeping with the characteristics of each charity. The
checklist should identify and eliminate potential risk areas for the particular charity, taking into
consideration how the new legislation will apply to its unique programs. At the same time, it must be
designed to guide the charity on how to continue to be effective in meeting its charitable objects and
avoid unnecessarily limiting its activities. The due -diligence check list should be designed to enable the
charity to assess the level of compliance of its charitable programs with anti -terrorism legislation and
the level of risk each of its programs might pose. All relevant aspects of anti -terrorism legislation and
of the charity’s anti -terrorism policy that apply to its charitable programs should be incorporated into
the due -diligence compliance checklist. The checklist should reflect the “Super Criminal Code ,” money –

laundering and terrorist financing provisions, and any r elevant provisions in the Foreign Missions
Act and the Public Safety Act .
Each existing and proposed charitable program should be evaluated in accordance with the due –
diligence compliance checklist. All new and proposed programs should be screened using th e due –
diligence checklist as part of the initial decision of whether to undertake a program or not. A
comprehensive review of all ongoing charitable programs should also be conducted on a regular basis,
for example, once a year. The results of all such due -diligence audits should be communicated to the
board of directors promptly.
e) Due Diligence with Umbrella Associations
Umbrella associations to which a charity belongs can expose the charity, the umbrella association
itself, and other members of the asso ciation to the risk of being part of a “terrorist group.” Charities
should demand a high standard of diligence from any umbrella associations to which they belong and
be vigilant in monitoring the associations’ compliance. Members of an umbrella associatio n should be
required to submit disclosure statements to determine compliance with anti -terrorism legislation.
These disclosure statements should include consents to share the results of the statements with the
directors of the umbrella association as well as with its members. The consents from members should
also include an undertaking to immediately report any material change in the disclosure statements.
Members of the umbrella association should be required to submit updated disclosure statements
annuall y to confirm ongoing compliance with anti -terrorism legislation. Charities should also
encourage umbrella associations to require their members to adopt their own anti -terrorism policy
3. Due Diligence Concerning Third Paties
a) Due Diligence C oncerning Affiliated Charities
Charities should also conduct a comprehensive anti -terrorism audit of the organizations, individuals,
and institutions they are affiliated with. This would include (as mentioned above) umbrella
associations to which the chari ty belongs or, if the charity itself is an umbrella organization, other
organizations that are members of the charity. It would also include other registered charities with
which the charity works, whether through informal cooperation or formal joint ventu re or partnership
agreements. Affiliated charities that either receive funds from the charity or give funds to the charity
can put the charity at risk if they are not complying with Bill C -36.
b) Due Diligence with Regard to Third -Party Agents
All third -pa rty agents of a charity, including agents that act on behalf of a third -party agent for a
charity, can expose the charity to liability by directly or indirectly being involved in the facilitation of a
“terrorist activity.” In addition to reviewing third pa rties for potential risks, charities should encourage
their agents to take their own steps to ensure compliance with the law by establishing anti -terrorism
policies and regular audits, due -diligence checklists, etc. Agents should be required to provide rel eases
and indemnities to the charity in the event of non -compliance with anti -terrorism legislation.
c) Due Diligence Concerning Donors
Charities should exercise vigilance in monitoring incoming donations, including the identity of the
donor, the manner in which the donor obtained the funds, and any donor restrictions on donated
funds that could put the charity in contravention of anti -terrorism legislation. Charities must regularly
review their donor lists for “listed entities” or organizations that may be terrorist groups, affiliated with
terrorist groups, or inadvertently facilitating terrorist activity. They must also ensure a donor would
not be able to use any of the charity’s programs to permit the flow -through of funds directly or
indirectly to a terr orist activity.

All third parties with which the charity is associated, including donors, agents, and affiliated charities,
should be required to provide appropriate disclosure statements as well as releases and indemnities in
the event of non -compliance w ith anti -terrorism legislation.
4. Documenting Due Diligence
a) Anti -terrorism Policy Statements
An anti -terrorism policy statement is a charity’s obvious first line of defense to show that it has
addressed the possible risks and is making every effort to comply with applicable legislation. Along
with the due -diligence checklist, it is also a very effective tool to educate a charity’s directors and
officers about the charity’s potential risks and liabilities. An anti -terrorism policy statement must be
caref ully thought out with the guidance of legal counsel. The full cooperation of the charity’s board and
officers is necessary in order to make the policy statement reflect the individual needs and risks of
each charity and to enable it to continue to meet its charitable objectives with the least possible
interference. The process of preparing such a statement will, of course, require a comprehensive
review of the charity’s operations in order to identify the charity’s risks and objectives. In fact, a
charity’s anti -terrorism policy statement should include a requirement to complete a comprehensive
audit of the charity’s existing programs on a regular basis and of all new program proposals as part of
the initial review to decide whether to undertake a new progra m. These audits should be executed in
accordance with the due -diligence checklist that reflects the unique characteristics of each charity.
An appropriate policy adopted with the direction of legal counsel will give the organization guidance on
how to docu ment all other aspects of due diligence related to anti -terrorism, including all applicable
documents, such as statements of disclosure and checklists. It will identify documents that could be
filed with third parties, such as CRA, as a preventive measure, and describe how to meet reporting
requirements in the event of an actual or potential violation. The anti -terrorism policy may be
published on the charity’s website, with excerpts possibly reproduced in reports and brochures as well
as in communications to donors.
b) Evidencing Due Diligence with CRA
The charity should forward as much evidence of due -diligence compliance to CRA as possible. This
would include a copy of the anti -terrorism policy along with a request CRA advise of any deficiencies in
the po licy statement. If the charity is considering embarking on a new program and it is not clear
whether the proposed program would result in non -compliance, a letter granting advance approval of
the program should be sought from CRA. Also, copies of all agenc y agreements should be filed with
CRA with a request CRA approve the agreements specifically as they relate to compliance with the
anti -terrorism legislation.
c) Evidencing Due Diligence with Legal Counsel
Legal counsel is an important part of the due -diligence strategy of a charity. The very act of involving
legal counsel can provide tangible evidence of due diligence and can assist in insulating the charity
and its directors from liability. However, legal counsel can also help to identify risk areas and
recommend strategies for addressing actual or potential risks. Legal counsel should review, comment
on, and amend anti -terrorism policy statements, disclosure statements, due -diligence compliance
checklists, and the particulars of a charitable program. Legal counsel can also assist in communicating
with CRA in evidencing due -diligence compliance.
The passage of the anti -terrorism legislation has, in many respects, brought about a new day for
Ca nadian charities operating in Canada and abroad. The creation of the “Super Criminal Code ” means
many traditional charitable activities will now be vulnerable to being construed either as “terrorist

activities” or, more likely, as directly or indirectly su pporting or “facilitating” those who may have
participated in or supported a “terrorist activity.”
Furthermore, outside of the realm of carrying out or facilitating terrorism, charities are faced with the
“New Compliance Regime” in financial transactions a nd recordkeeping. Thus, the legislation not only
requires adherence to the “Super Criminal Code ,” but may compel the individual charity to take on the
responsibility of reporting those entities or transactions that may violate the legislation.
The deregist ration process particularly brings the legislation home to charities if they were to be
singled out as contributors to terrorism. There should be no illusions about the issuance of a security
certificate, a process devoid in many ways of normal legal safeg uards and potentially cloaked in
confidentiality and secrecy.
The ramifications of anti -terrorism legislation for charities in Canada are broad and unprecedented.
The legislation will necessitate a concerted proactive and vigilant response on the part of c harities and
their directors, executive staff, and legal counsel. A substantial part of the anti -terrorism legislation is
now in force, and charities need to diligently educate themselves about its requirements, and
undertake all necessary due -diligence me asures to ensure compliance as best they can. Lawyers who
either advise charities or volunteer as directors of charities need to become familiar with this
challenging and increasingly complex area of the law.
* Terrance S. Carter practices with Carter & Associates in Orangeville, Ontario, a firm that
concentrates on charities and not -for -profit organizations. He is a member of the Charities Advisory
Committee of the Canada Revenue Agency, a consulting editor of Charities Law, 2003 -2004 ed.,
published by Butterworths, and a contributing author to the Primer for Directors of Not -for -Profit
Corporations, published by Industry Cana da.
[1] R.S.C. 1985, c. C -46. See for example s. 7 for offenses committed on aircraft. See also K. Roach,
“The New Terrorism Offences and the Criminal Law” in R.J. Danie ls, P. Macklem & K. Roach,. eds., The
Security of Freedom: Essays on Canada’s Anti -terrorism Bill (Toronto: University of Toronto Press,
2001) 151 at 152 -154 (hereinafter “New Terrorism Offences and Criminal Law” ); see also K.
Roach, September 11: Conseque nces for Canada (Montreal & Kingston: McGill -Queen’s University
Press, 2003) at 29 -33 (hereinafter “September 11: Consequences for Canada” ).
[2] R.S.C. 1985, c. I -2.
[3] 1st sess., 37th Parl., 2002 (assented to 18 December 2001, S.C. 2001, c. 41; proclaimed in force
24 December 2001).
[4] 1st Sess., 37th Parl., 2001 (assented to 30 April 2002, S.C. 2002, c. 12; proclaimed in force April
30, 2002.
[5] 3rd Sess., 37th Parl ., 2004 (1st reading in Senate 11 February 2004).
[6] Now renamed the Proceeds of Crime (Money Laundering) and Terrorist Financing Act , S.C. 2000,
c. 17. This Act is disc ussed in greater detail in Part D of this article.
[7] For an update on the United Kingdom’s regulatory authority responsible for charities, its anti –
terrorism policies, and the consequences for Canadian charities, see Antiterrorism and Charity Law
Alert No. 2 , available at .
[8] UN SCOR, 4385th Mtg., UN Doc. S/RES/1373 (2001).

[9] Convention on the Safety of United Nations and Associated Personnel , 9 December 1994, UN Doc.
[10] Convention on the Suppression of Unlawful Seizure of Aircraft , 16 December 1970, 860 U.N.T.S.
[11] Convention for the Suppression of Unlawful Acts against the Safety of Civil Aviati on , 23
September 1971, 974 U.N.T.S. 177.
[12] Convention on the Prevention and Punishment of Crimes against Internationally Protected
Persons , Including Diplomatic Agent s, 14 December 1973, 1035 U.N.T.S. 167.
[13] International Convention against the Taking of Hostages , 17 December 1979, 1316 U.N.T.S.
[14] Convention on the Physical Protection of Nuclear Material , 3 March 1980, 1456 U.N.T.S. 124.
[15] Protocol f or the Suppression of Unlawful Acts of Violence at Airports Serving International
Aviation , 23 September 1971, 1589 U.N.T.S. 474.
[16] Convention for the Suppression of Unlawful Acts Against the Safety of Maritime Navigation , 10
March 1988, 1678 U.N.T.S. 221.
[17] Protocol for the Suppression of Unlawfu l Acts against the Safety of Fixed Platforms Located on
the Continental Shelf , 10 March 1988, 1678 U.N.T.S. 304.
[18] International Convention for the Suppression of Ter rorist Bombings , 12 January 1998, UN Doc.
[19] International Convention for the Suppression of the Financing of Terrorism , 10 January 2000,
annex to UNGA R es. A/RES/54/109.
[20] S.C. 2000, c. 24.
[21] S. 10 specifically applies the rules of evidence and procedure in force at the time of proceedings,
and s. 11 allows the defendant all defenses and justifications otherwise available under Canadian or
international law at the time of the offense or proceed ings.
[22] “New Terrorism Offences and Criminal Law,” supra note 1 at 156; for a discussion about the role
of motive in criminal law and the ramifications of this approa ch, see the surrounding text. For further
discussion, refer to September 11: Consequences for Canada , supra note 1 at 25 -28. See also J.
Travers, “9/11 fears turn chance remark into visit by Mounties,” The Toronto Star (26 September
2002) A31.
[23] See Article 5 of the Convention on Terrorist Bombings , supra note 17, and Article 6 of
the Convention on Terrorist Financing , supra note 18.
[24] H. Hamilton, “The Hands of Terror: Is Canada safe from the grasp of terrorists?” RCMP Online (4
October 2001) online: RCMP https://www.rcmp (last
modified: 1 October 2002) at part I, para. 4.
[25] Ibid., at part II, para. 4.
[26] Discussed in greater detail below.

[27] Royal Canadian Mounted Police, News Release, “Access Control Area to B e Established in
Downtown Calgary” (21 June 2002) online: RCMP -02 –
04.htm (last accessed: 24 June 2002)
[28] This document is no longer available under the section “Information for Visitors”
at but was accessed in June 2002.
[29] Part 1 of the Constitution Act, 1982, being Schedule B to the Canada Act 1982 (U.K.),1982, c.
[30] ss. 83.02 -83.04.
[31] s. 83.12(1).
[32] s. 83.19(1).
[33] The list is available online at Solicitor General of
Canada https://www.sgc.g -terrorism/Entities_e.asp (last
modified: 24 November 2003).
[34] United Nations Suppression of Terrorism Regulations , SOR/2001 -360.
[35] The Consolidated List of Names subject to the Regulations Establ ishing a List of Entities made
under subsection 83.05(1) of the Criminal Code or the United Nations Suppression of Terrorism
Regulations is available from the Office of the Superintendent of Financial Institutions (OSFI) website
at https://www.osfi – .
[36] For an in -depth discussion of the Act, see A. Manzer, A Guide to Canadian Money Laundering
Legislation (Markham: Butterworths, 2002).
[37] Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations , SOR/2002 -781, s.
[38] For a general discussion concerning the methods of money laundering, see Manzer, supra note
34, at 5.
[39] The primary difference is with respect to the phase of the suspicious transaction that is of
concern. While tracking down money -laundering transactions, the aim is to discover the criminal
source of the funds, while with terrorist financing legislation the aim is to find the intended recipient
who is expected to use the money in order to engage in terrorist activities. See Manzer, su pra note
34, at 19.
[40] For more on FINTRAC, see part D.2(a), below.
[41] A. Daws on, “Agency flagged $100 million in illicit cash,” The National Post (6 November 2002)
online: National Post ry.html?id={EEE19D84 –
193D -44FE -9EC6 -7A20E2B0D2E2 } (last accessed: 6 November 2002).
[42] Ibid. The first reporting requirements came into force on November 8, 2001, and the report
covered the period to March 31, 2002.
[43] Law Society of Upper Canada, “Update on money laundering legislation” (Notice to the
Profession) in Ontario Reports (25 October 2002) viii (hereinafter “LSUC notice”).

[44] FATF, News Release, “FATF Cracks down on Terrorist Financing” (31 October 2001) online:
OECD -20011031_en.pdf (last accessed: 8 November 2002)
(hereinafter “FATF News Release”).
[45] Ibid.
[46] For a summary and commentary on the FATF report Combating the Abuse of Non -Profit
Organizations: International Best Practices and the consequences for Canadian charities, refer
to Antiterrorism and Charity Law Alert No. 3 (7 August 2003), available at
[47] Special Recommendations on Terrorist Financing , online:
[48] Report of the Financial Transactions and Reports Analysis Centre of Canada: Building a Solid
Foundation , online:
FINTRAC (last modified:
5 November 2002) at 10 (hereinafter “FINTRAC Report”).
[49] The FINTRAC Report states, a t 6: “As well, we identified government and commercial databases
of interest to FINTRAC and concluded an agreement with the RCMP to gain access to a national law
enforcement database.”
[50] s. 7.
[51] FINTRAC and FATF have both issued suggested guidelines on how one might identify suspicious
transactions. For more information, see FINTR AC, Guideline 2: Suspicious Transactions (Ottawa:
FINTRAC, 9 May 2002), online:
FINTRAC (last modified: 31 May 2002);
and FATF, Guidance for Financial Institutions in Detecting Terrorist Financing (Paris: FATF, 24 April
2002), online: Organisation for Economic Co -Operation And
Development 01_en.pdf (last accessed: 7 November
[52] Manzer, supra note 34, at 20.
[53 ] s. 9(1).
[54] See Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations , SOR/2002 -184;
and Cross -Border Currency and Monetary Instruments Reporting Regulations , C. Gaz. 2002.I.1949.
[55] See, for example, Proceeds of Crime Regulations , ss. 12 -13, 21 -22, 24 -25, 28 -29, and 32 -33.
[56] Proceeds of Crime Act , s. 8; see also Manzer, supra note 34, at 10 -11, regarding the difficulties
this creates for reporting entities. Essentiall y, the reporting entities are required to obtain detailed
information for all transactions, not only reported transactions, in order not to tip a client off about an
intended report.
[57] This process is discussed in greater detail under the next part (Part E) of this article.
[58] R.S.O. 1990, c. S.5.
[59] Proceeds of Crime Regulations , supra note 35, s. 1(2).

[60] R.S.C. 1985 (5th Supp.), c. 1. Other legislative de finitions for “business” can be found in
the Canada Evidence Act R.S.C. 1985, c. C -5, s. 30(12); and the Competition Act , R.S.C. 1985, c. C –
34, s. 2, which specifically includes “the raising of funds for charitable or other non -profit purposes”
under the de finition of “business.”
[61] CRA, The Related Business Provisions for Charities in the Income Tax Act (Consultation
Document) online: CRA https://www.ccra –
e.html (last modified: 5 May 2002) at para. 6 (hereinafter “Related Business”).
[62] Ibid.
[63] Charities Registration (Security Information) Act (being part VI of the Anti -terrorism Act , supra n.
[64] C. Freeze, “Powerful antiterror tool rarely employed by Ottawa,” The Globe and Mail (30 October
2002) A9.
[65] “The New Anti -terrorism Law: Impact on Charities,” Registered Charities Newsletter (Spring
2002, No. 12) online: CRA https://w ww.ccra –
e.html#P15_2557 (last modified: 30 July 2002). See also Charity Law Bulletin No. 16 (20
September 2002) online: Carter &
Associates (last accessed: 11
November 2002).
[66] S. Bell, “Canadian organizations named in U.S. $1 trillion law sui t over September 11,” The
National Post (29 August 2002).