Proceedings of the Standing Senate Committee on
National Security and Defence
Issue No. 12 - Evidence - Meeting of February 13, 2017
OTTAWA, Monday, February 13, 2017
The Standing Senate Committee on National Security and Defence met this
day at 1 p.m. to continue its study on security threats facing Canada,
including but not limited to: (a) Cyber espionage; (b) Threats to critical
infrastructure; (c) Terrorist recruitment and financing; (d) Terrorist
operations and prosecutions.
Senator Daniel Lang (Chair) in the chair.
The Chair: Colleagues, welcome to the Standing Senate Committee on
National Security and Defence for Monday, February 13, 2017. My name is Dan
Lang, senator for Yukon. On my immediate left is the clerk of the committee,
Adam Thompson. Seated next to him, on the far right of me, is our Library of
Parliament analyst, Marcus Pistor. I would now like to go around the table
and ask each member to introduce themselves, starting with the deputy chair.
Senator Jaffer: My name is Mobina Jaffer, and I'm from British
Senator Kenny: Colin Kenny, Ontario.
Senator Saint-Germain: Senator Raymonde Saint-Germain from Quebec.
Senator Boniface: Gwen Boniface, Ontario.
Senator White: Vern White, Ontario.
Senator Smith: Senator Larry Smith from Montreal.
Senator Tkachuk: David Tkachuk, Saskatchewan.
Senator Beyak: Lynn Beyak, Ontario. Welcome.
Senator Meredith: Don Meredith, Ontario.
Senator McPhedran: Marilou McPhedran, Manitoba. Welcome.
The Chair: Thank you, colleagues. Today we'll be meeting with
three panels under our Senate study reference related to threats to the
security of Canada, specifically terrorism financing. In our 2015 report,
the committee highlighted concerns about terrorism financing, the need for
more prosecutions. To put this in context, when we did our report, there
were 53 designated terrorist entities in Canada. The most recent to be
listed was IRFAN-Canada, the International Relief Fund for the Afflicted and
Needy Canada, a charity designated in 2014 after raising$14.6 million.
This past December, Canada designated two additional entities Al Qaeda in
the Indian subcontinent and the Indian Mujahedin. We now have 55 identified
entities designated by Canada as threats to our national security
Joining us on panel one from the Financial Transactions and Reports
Analysis Centre of Canada, commonly referred to as FINTRAC, are Mr. Barry
MacKillop, Deputy Director, and Mr. Luc Beaudry, Assistant Director.
Gentlemen, welcome. Mr. MacKillop, I understand you have an opening
statement. Please begin. We have one hour for this panel.
Barry MacKillop, Deputy Director, Operations Sectors — Compliance and
Intelligence, Financial Transactions and Reports Analysis Centre of Canada:
Thank you, honourable senators, for inviting us to speak to you today
regarding your broader study on security threats facing Canada. I'd like to
take just a few minutes this afternoon to describe FINTRAC's mandate and the
role we play in helping to protect Canadians and the integrity of Canada's
financial system. I will focus, in particular, on the contribution we make,
in close cooperation with our police and national security partners, in
combatting terrorist financing.
FINTRAC was created in 2000 by the Proceeds of Crime and Terrorist
Financing Act. As Canada's financial intelligence unit, FINTRAC facilitates
the detection, prevention and deterrence of money laundering and the
financing of terrorist activities, while ensuring the protection of personal
information under its control.
As part of Canada's broader anti-money laundering and anti-terrorist
financing regime, FINTRAC houses both supervisory and intelligence
functions. This allows us to effectively assess and enforce the compliance
of 31,000 regulated businesses and produce actionable financial intelligence
for our police, law enforcement and national security partners.
With the financial transaction reports that we receive from regulated
businesses across the country, we are able to provide financial intelligence
that assists Canada's police, law enforcement and national security agencies
in combatting money laundering, terrorism financing and threats to the
security of Canada. FINTRAC also produces strategic intelligence about
trends and typologies of money laundering and terrorist financing.
Mr. Chair, the terrorist threat is real. All of us have seen the terrible
damage and appalling harm done by violent extremists in Paris, Berlin,
Brussels and many other parts of the world, including here in Canada.
Just as terrorism is international, so too is its funding. We know
terrorism funding is obtained from both legitimate and illegitimate sources.
We also know that some of the funds raised to finance these violent crimes
originate in Canada or transit through our country. One only has to think of
the case of Momin Khawaja who was found guilty of, among other charges,
providing funds to facilitate terrorist activities.
With the 23 million financial transaction reports that we receive from
regulated businesses every year, FINTRAC is able to provide actionable
financial intelligence that assists police and national security agencies in
protecting Canada and Canadians.
FINTRAC discloses information to the police, law enforcement and national
security agencies when the centre has reasonable grounds to suspect that the
information would be relevant to the investigation or prosecution of a money
laundering or terrorist activity financing offence or to threats to the
security of Canada.
Our disclosures establish critical links between financial transactions,
individuals or groups in Canada and abroad that support criminal and
terrorist activities, and our financial intelligence has become increasingly
valued by our partners as lead information to expand or define their
investigations and to obtain search warrants and production orders to gather
evidence in pursuit of criminal charges.
Increasingly, the centre's intelligence is also used by our police and
national security partners to identify assets for seizure and forfeiture,
reinforce applications for the listing of terrorist entities and advance the
government's knowledge of the financial dimensions of security threats,
including organized crime and terrorism.
Last year, we provided 1,655 disclosures of financial intelligence to our
regime partners to assist them in their investigations of money laundering,
terrorist financing and threats to the security of Canada.
Of these disclosures, 154 were related specifically to terrorism
financing and threats to the security of Canada. Financial intelligence has
become a key component of our police and national security partners'
For example, the RCMP's integrated national security enforcement team in
Toronto recognized our contribution to an extensive national security
investigation, Project SWAP, which resulted in a terrorism charge under the
Criminal Code in March 2016 The RCMP has also acknowledged FINTRAC's
contribution to Project Smooth, which led to the 2015 conviction of two
individuals for conspiring to carry out a terrorist attack against a VIA
Rail passenger train travelling from New York to Toronto.
Mr. Chair, in order for FINTRAC to disclose financial intelligence to the
Canada Revenue Agency Charities Directorate, two distinct thresholds must
first be met. First, the centre must have reasonable grounds to suspect that
information would be relevant to an investigation or prosecution of money
laundering or terrorist activity financing. In addition, FINTRAC also needs
to have reasonable grounds to suspect that its information is relevant to
determining whether a registered charity, as defined in the Income Tax Act,
has made resources available to a listed entity in the Criminal Code or in
support of terrorist activities
In 2015-16, FINTRAC provided 42 disclosures to the CRA Charities
Directorate related to terrorism financing.
Our legislation prevents us from discussing the details of these
disclosures, the specifics of them, but I'm confident in saying that our
financial intelligence is having a real impact on Canada's broader
For example, in 2014, the RCMP's Integrated National Security Enforcement
Teams in Ontario and Quebec recognized our contribution to a terrorism
financing investigation on the aforementioned International Relief Fund for
the Afflicted and Needy Canada, an organization allegedly linked to the
terrorist entity Hamas
The success of Canada's anti-money-laundering and anti-terrorism
financing regime is dependent on the dedicated efforts of all players, from
businesses on the frontlines of Canada's financial system to prosecutors
securing the conviction of money launderers and terrorist financiers.
Together, we are producing significant results for Canadians. Thank you, Mr.
I would be happy to entertain your questions at this point.
The Chair: Thank you very much. I'm just wondering if you could
clarify for the record because we are looking at your FINTRAC report of 2015
and 2016, and your statistics in what you've provided us here are much
different from what you actually put in your public report. I want to go
The RCMP Integrated National Security Enforcement Team in Toronto
recognized the Centre's contribution to an extensive national security
criminal investigation, Project SWAP, which resulted in a terrorism
charge under the Criminal Code in March 2016. Throughout 2015-16, we
generated 483 disclosures related to terrorism financing, a 43 per cent
increase over the previous year.
Yet in your report here you use a statistic that is, if I'm not mistaken,
much lower and obviously doesn't correlate with your report.
Mr. MacKillop: I will clarify that. I apologize, it wasn't 154, it
was actually 329. When we get into numbers it gets confusing. The 483
disclosures relate to a combination of money laundering, terrorist financing
and threats. If we remove the money laundering component it's actually 329,
not 154 as was written in my speech. Unfortunately, I read that.
The Chair: Then it's safe to say that your report is inaccurate
because you specifically state that there's 483 disclosures related to
Mr. MacKillop: Terrorism financing was a component of the 483, but
there was also money laundering involved with that terrorist financing, so
if we remove the money laundering component, the 329 would be simply
terrorist financing without the money laundering component.
The Chair: The report then is obviously inaccurate in respect to
Senator Jaffer: Thank you very much for your presentation and also
thank you for the work you do on our behalf.
From what I understand, FINTRAC's mandate includes monitoring of all
financial intelligence in terms of its connection with terrorist threats,
not just that of financing. It's all kinds of financing. The report that was
tabled by Finance was important because it states that terrorist financing
from Canada is varied in nature. There's not one major source but there are
several kinds of threats, and those identify the most vulnerable category or
very high vulnerability. Those are corporations, domestic banks, express
trusts, national food service, money, businesses and small independent money
From what I understood, the charities were considered to be one tier
below the ones I have stated as to vulnerability level; is that correct?
Mr. MacKillop: In terms of overall threats and risks, yes. There
is always a risk associated with the use of charities or the misuse of
charities. However, given the number of charities we would have versus, for
example, the number of transactions we see from reporting entities from
banks or money service businesses or others, it would be more likely that we
would see it going through the financial service system rather than through
charities, but we have seen it being used through charities but at a volume
stage it's a lower risk.
Senator Jaffer: It's a lower risk than the ones I mentioned to you
Mr. MacKillop: Yes.
Senator Jaffer: Can you comment on whether the Department of
Finance report is still accurate today or whether the landscape has changed?
From my understanding, things are moving very fast and it changes. Can you
describe, since 2015, how has the landscape changed?
Mr. MacKillop: The report remains accurate, and we do update the
national risk assessment on a regular basis, and we do keep track of what's
going on and we do amend it accordingly.
In terms of what's changed, we're seeing probably more on the high-risk
travellers that have come out quite a bit more in the last couple of years.
We're seeing a lot more of the self-funding or friends funding within
Canada. There's a little bit of virtual currency but not much. There's a lot
of focus put on virtual currency, but it's not usually used very much with
respect to the terrorism side yet that we see. We've seen it more in terms
of human trafficking, for example, where they'll use virtual currencies to
purchase ads on back pages, for example, so we'll see it more on the human
trafficking side. In Canada, terrorism remains what we're seeing on the
self-funding or high-risk travellers.
Senator Jaffer: My understanding is that charities are still less
vulnerable than some of the other groups I mentioned, isn't that correct,
when it comes to terrorist financing?
Mr. MacKillop: They're vulnerable to exploitation; however,
there's a fair amount of oversight and regulation on charities. The ability
to identify when they're being misused is perhaps slightly easier. We will
see, for example, from FINTRAC's perspective, if there's money being donated
to a Canadian charity and it's a service charity, so they're providing money
overseas, if the money is going to areas of conflict or areas of particular
concern where we see that, it may be a little easier, perhaps, to identify
if the funds are being misused in terms of the amount of money coming in and
then a wrong amount or a disproportionate amount going overseas may be seen.
They're vulnerable, but there's probably more regulation oversight from
CRA and others on the charities.
Senator Boniface: Thank you very much for being here, and thank
you for your opening comments.
I wanted to go back to the 329 number with reference to disclosure. That
I assume, if I interpret correctly, is an increase over the previous year.
I'm wondering what you would attribute that increase to. You did mention
that you're working much closer together and working through with other
agencies. If you took a guess or if you have factual information, what you
would attribute the increase to?
Mr. MacKillop: Probably a couple of things. One is definitely our
relationship with law enforcement, national security partners, and the fact
that we work very closely with them to identify and establish priorities.
The use of financial intelligence is becoming increasingly common for just
about every investigation, so we're seeing many more voluntary information
records coming in requesting our assistance.
I believe another factor would be the professionalization of our
analysts. The analysts who work for me on the intelligence side are getting
better and better, and they're able to identify and provide proactive
disclosures much better than we were even five years ago.
The third thing, I think, is really our reporting entities. Our banks,
our MSBs and our other reporting entities are getting increasingly adept at
providing very good suspicious transaction reports, which allows us to then
provide even proactive disclosures to our law enforcement and national
It's not necessarily that there's more. It's on a one-to-one relationship
with terrorism per se, but the information that we're receiving from our
reporting entities, the relationships that we've developed with our
reporting entities as well, the work we're doing with particularly the major
banks, because they provide close to 90 per cent of the reports that we
receive, and the work that we've done with them both in providing terrorist
financing indicators, indicators on human trafficking, those kinds of things
where it leads to both an increase in volume and an increase in quality and
the suspicious transactions we receive that allow us to do the disclosures.
Senator Saint-Germain: Good afternoon. Thank you for your time and
for the relevance of your remarks. I have a question and a sub-question,
which I will ask at the same time. My question has to do with the current
and emerging trends in terrorist financing, both in Canada and around the
world. You talked about it a little bit in your presentation. Could you
highlight the main terrorist groups that are raising money in Canada and how
they are collecting it?
My sub-question is: what advice would you give to Canadian companies,
institutions and even individuals who would like to make a proactive
disclosure? In other words, how can people question the legality of the
financing and, if necessary, how can they disclose it?
Mr. MacKillop: In terms of current financing trends, what we are
seeing in Canada and around the world is the financing is almost personal.
Charities still exist. They receive donations and use them for purposes not
planned in the work they must do. Those who want to help either build houses
in other countries or help to solve problems in specific countries.
We found that it does not take a lot of money to finance a terrorist act.
With the events in Paris and elsewhere, we have realized that very little
money is needed and that money can be raised through legitimate channels,
which makes our work and that of the police more difficult. It is more
difficult to determine who the money is for and how it will be used. They
may be friends who do not know what the money will be used for and who give
money to other friends. These transactions are detected only in the context
of suspicious transaction reports. The transactions are always under
$10,000. We will never see this in transaction reports of over $10,000,
which underscores the need for us to continue to work with our partners, the
banks and the money services that are capable of detecting these
If I understand your question correctly, you want to know what the
general public should do to make a statement.
Senator Saint-Germain: I would also like to know what might raise
doubts. Are there any profiles or characteristics?
Mr. MacKillop: Indicators have been provided to our reporting
entities, as were international indicators. Without going into the details,
it may be a person who suddenly decides to pay all their debts, because they
do not want any more debt, or decides to sell their belongings. The bank
will find that the person is selling their personal belongings and that an
abnormal deposit, in cash, has been made. Anyone can send us voluntary
information. A neighbour can make a statement. There is a place on our
website where people can make a statement, and our law enforcement partners
can do that as well. We monitor this, and we can make a disclosure to the
police or national security agencies.
Senator Tkachuk: Before I get to the question, just so I'm clear,
when you say "charities,'' are they all the ones that receive a benefit from
Revenue Canada, or would they be a non-profit that may not be issuing income
Mr. MacKillop: If we were to do a disclosure to the police, it
wouldn't matter. If we were going to CRA Charities, it would be those that
are registered as charities that can provide receipts for donations
Senator Tkachuk: As well as those that would be considered
charitable institutions, but non-profits.
Mr. MacKillop: Correct. If we're doing a disclosure to law
enforcement or security, regardless of who is involved, whether it is a
company, a non-profit or an individual, we would include them in our
disclosure and provide that information to intelligence.
Senator Tkachuk: I believe you mentioned in your opening statement
there are 42 such entities of the 483 disclosures.
Mr. MacKillop: Forty-two disclosures went to CRA Charities.
Senator Tkachuk: So what would trigger that? What is a disclosure?
What do you mean by that exactly?
Mr. MacKillop: A disclosure is our main financial intelligence
product. It's essentially a package that has both a summary and tells the
story of the transactions that we see in our database. It has fact sheets on
every individual involved, and it has an i2 chart, usually, which
demonstrates in a pictorial form the connections and links between all the
subjects of our disclosure. We communicate the financial intelligence case
to law enforcement and national security. So in the case of charities, if we
looked at IRFAN, for example, we would have seen the money going in and out
that was inappropriate, and we would have highlighted the flow of financial
transactions for law enforcement.
Senator Tkachuk: When you talk about the disclosures, how much
money would those 42 of the 483 entail? And of the 42 charitable
institutions that you disclosed, were they all donating their money to
fulfil their charitable requirements to international organizations, or were
they donating their money to national organizations?
Mr. MacKillop: Usually it would be international. Money would be
coming in to the charity and going out to international partner agencies or
agencies in areas of conflict or areas of concern, for example.
With respect to the total number of dollars, it's hard to say with the 42
because not all the money in those disclosures would have been necessarily
related to the charity. I may see that in one disclosure we may have six
different subjects, and they're using the charity for some of the
flow-through money, but it wouldn't have been all the money.
IRFAN, for example, was somewhere around $14 million. In others, we've
seen much smaller amounts, but it's usually not the total amount that's
important for us when we provide it to law enforcement, national security or
the CRA Charities in this instance. Rather, it is the unusual flow of funds
that is more important for us so that they can go ahead and do their own
Senator Tkachuk: Of the references to the CRA, did they
investigate all of them, and did that result in any prosecution or any
referral to police? What happened?
Mr. MacKillop: That, unfortunately, I do not know. We provide the
intelligence to our partners, and it's up to them to do the enforcement or
the investigations. CRA Charities would have several different ways of
dealing with charities. They could revoke their charitable status, or they
could use other administrative oversight mechanisms that they have at their
disposal, and I can't really speak to that.
We don't necessarily know unless we're recognized publicly or when we're
following the media. We'll know somewhere down the road what's happened and
whether they've used our intelligence, but it's never, or very rarely, a
one-to-one where we would use a disclosure and see an arrest and
prosecution. Our intelligence is but one component of the broader
investigation, whether it's with CRA Charities or the Criminal
Investigations Program, or with law enforcement, CSIS or anyone else. We're
but one component of the investigation.
The Chair: Just before we go on, I think it's important to
understand this: you provide the information to some other agencies, and
then you don't necessarily ever hear what happens, and you don't necessarily
ever inquire to find out what happens?
Mr. MacKillop: We will see if there are charges laid, and if there
are convictions, we do follow up, but we do not necessarily follow a
disclosure all the way to the end to find out if there was an arrest or a
We would have made disclosures in 2009 where the investigation would have
finally concluded in 2015. Yes, we know that we've contributed to it, but
again, our contributions are but one part of the whole regime.
Senator Beyak: Thank you, gentlemen, for being here.
According to a Department of Finance report in July 2015, Hamas and
Hezbollah have fundraising networks in Canada, and last year their
fundraising efforts actually increased.
I wonder if you could tell me how much the charities have to do with
that, and how lucrative they actually are. Where do the charities rank in
Mr. MacKillop: It's hard to say. I can't speak to specifics
necessarily. Charities would be one way that they would raise funds, and it
may not be their biggest fundraiser. Put it that way. I can't really get
into the specifics on how much they would or would not have used charities.
Senator Beyak: Further to Senator Jaffer's question too, are the
charities more vulnerable simply because of their criteria?
Mr. MacKillop: I guess. They will all have their vulnerabilities.
The transactions that CRA sees and the disclosures that we can make would
render the charities relatively high profile. They are a risk but it's hard
when you compare the risk. It depends on what. Even terrorist financing is a
smaller proportion of the work that we do, compared to money laundering and
organized crime, for example. If we're looking at risk, we would see a lot
more on the fraud and the drug side than we would necessarily with terrorist
financing, for example.
Senator Beyak: Canadians who watch these broadcasts at home are
alarmed by the numbers, no matter what they are, and don't understand how
this can happen in Canada. Do you have any reassurances for them?
Mr. MacKillop: I guess the reassurance is the fact that we are
doing that many disclosures means that we're actually seeing the flow of
funds. We are highlighting the flow of funds and providing that intelligence
to our law enforcement partners.
Regarding questions around prosecutions for terrorism and why aren't we
seeing more prosecutions, I like to think it's because a lot of the
intelligence being provided is being used to prevent and to intervene, which
in my mind is a lot better than waiting for the act to happen and
Senator Beyak: Thank you.
Senator Meredith: Mr. MacKillop, you indicated you track 23
million transactions each year. The Senate committee recommended to the
government last year, in a 2015 report, stringent measures to ensure that
funds coming into Canada, and those that are linked to individuals or
organizations here in Canada, are prevented in some way. What is your
opinion on that with respect to why more stringent measures haven't been put
in place to prevent these kinds of transactions you mentioned? What is the
total value of these transactions? Can you give us a grand total? You
mentioned $14 million.
To Senator Beyak's point, with respect to conviction rate, you said that
the 154 threats only led to two convictions. I have a second question on
that as well, regarding the RCMP.
Mr. MacKillop: We do see 23 million transactions every year. A
small minority of those would be problematic transactions. We see every
electronic fund transfer, for example, coming in or out of Canada over
$10,000. There is no judgment placed on that by the institutions right away
when the funds are coming in or out. When there are suspicions, they will
submit suspicious transaction reports as well. If you wanted numbers in the
transactions over that, we would be talking billions and billions of
dollars. We only use a small minority of those in our disclosures, because
we would only take those transactions and disclose those transactions
related to a particular threat, be it money laundering, terrorist financing
or whatever. They would be included in our transactions. We have had
disclosures where they were worth a billion dollars, over a billion dollars,
and we have had other disclosures that were much less. The important thing,
again, for us in providing the intelligence is not necessarily always the
amount of money, but rather the flow of funds, and which bank accounts is it
going in that we can identify through the transactions to help the police,
for example, get their production orders and their search warrants and the
actual documents from the reporting entities, usually the big banks. From
that perspective, lots of money is coming in and out of Canada. We see lots
of large cash transactions that are happening, but as I said it's a minority
that are problematic. A lot of it is simply legitimate business going in and
Senator Meredith: Without disclosing any individuals or
organizations that might potentially be in their investigation, can you give
us a number that would be problematic and should be of great concern to this
committee or to the government at large?
Mr. MacKillop: I can't give you a number, per se. As I said, a lot
of our transactions and a lot of the disclosures that we make are actually
related much more to organized crime and other criminal activity than they
would be to terrorism. The terrorism disclosures that we would do tend to be
smaller dollar amounts. If we're looking at dollar amounts, it would be
small compared to a large drug ring, for example, moving lots of money. We
would see much more financial activity and much greater financial activity
related to the organized crime and the criminal elements than we would
necessarily related to the terrorism side.
Senator Meredith: Obviously, when charges are being laid, you
disclose that to the appropriate authorities. We heard from the police
associations — and I'm just relaying what they have indicated to us here —
with respect to the appetite to proceed with some of these charges or
leading to some charges. Why is there a lack of willingness or desire to
ensure that these go to full prosecution?
Mr. MacKillop: I think I would be remiss to try to speak for the
public prosecution side, so I'll leave them to speak to that. I wouldn't
think it's a lack of desire or interest to go forward. In many cases, I
think what we tend not to discuss enough is the disruption component. If we
can get our disclosures out early enough, if we can assist our police or our
law enforcement national security agencies to do their job and their work
entails disruption of the activities, then we wouldn't have the prosecution,
but we would have the disruption. That's perhaps something that Canadians
hear a little less about because it's not as sexy, and it doesn't get to the
front pages. However, disruption is a key activity, especially when it comes
to the terrorist financing side.
Senator White: Thanks to both of you for being here. Good see you
again, Barry. Really, what you're saying is that your focus is on less
crime, not more arrests, and ultimately that's a success story. I think back
about 15 years now, policing in Canada has talked about disruption of
criminal organizations as being the greater focus than arrests. You're
following that same path?
Mr. MacKillop: I think generally, yes. We don't do the enforcement
Senator White: No, I understand.
Mr. MacKillop: The goal is always to prevent the worst things from
happening. If we can disrupt things, it's like the money-laundering charges.
Is it important to get money laundering or is it important to get the
predicate offence and have the person off the streets and do the seizure?
Senator White: I notice we listed a couple of more organizations
in the past couple of months as terrorist organizations. Does it assist
FINTRAC if they are all a listed group versus not listed? If so, can you
walk us through how that helps?
Mr. MacKillop: It really helps the reporting entities. If we're
looking at banks, MSBs, real estate, accountants, casinos, or anybody like
that, having the entity listed allows them to immediately flag transactions
related to that entity, and to provide FINTRAC with suspicious transaction
reports that would identify the financial activity linked to the account of
that particular entity. If we do see that, and if our reporting entities see
that, they would give it to us. So yes, it will assist us in doing
disclosures. It will assist us when we're analyzing all the other
transactions that we have in our data base. We have now somewhere over 250
million transactions in there. It does help to have them listed, but it
helps more for our reporting entities to get us the information that is key
for us to do our analysis.
Senator White: I appreciate that. So when a terrorist organization
is listed, then you look for other individuals who may be connected to that
terrorist organization, which allows you to report better. Have you had
discussions with the federal government about listing criminal organizations
as well? Because realistically, if that's true — and I believe you — it
would make sense that we started listing criminal organizations and anybody
connected to those organizations as well.
Mr. MacKillop: We have participated in those discussions but, as
you are well aware, that's a difficult discussion to have. There are a
number of different aspects to that discussion that others smarter than
myself have to look at and think about before moving forward with listing of
criminal organizations. There are benefits; there are challenges, and there
are a number of people that are still considering that. I know the Canadian
Association of Chiefs of Police is still looking at that and has been
looking at that for a while. The amount of time that has passed since it
initially started in terms of a discussion topic is a good indicator of how
complicated that actually is. We know who many of the criminals are, so we
will continue to disclose them.
Senator White: I take it, though, you would recommend that's a
good step to take, from an organizational perspective, for tracking purposes
Mr. MacKillop: I don't know that I would recommend that. From
FINTRAC's perspective, I don't think it would change much, because we
actually have the names of everybody who would be considered members of
these criminal organizations. That list will change. In terms of membership,
it would probably change quite considerably in very short periods of time.
So for our reporting entities, what is more important is to be able to have
the discussion with them, and to be able to identify and work with them in
partnership when we're targeting specific individuals, organizations or
entities. From a FINTRAC perspective, it's really what our reporting
entities can give us, because our intelligence is only as good as the
reports we receive. The more we can share with our reporting entities, the
better it is, as opposed to the other end.
Senator McPhedran: We have covered a fair bit of territory in both
your presentation and the questions. I wanted to ask if you had suggestions
as to a few key areas for increased effectiveness in the current
counterterrorism financing efforts, if you have a wish list that you would
like to leave with us as a summary of desires.
Mr. MacKillop: That's open-ended.
Senator Meredith: You only have five minutes, though.
The Chair: You only have to give us two ideas.
Senator McPhedran: Priority areas.
Mr. MacKillop: As I said, we're only as good as the information we
receive. The more reports we can get, and the better-quality reports we get,
the better our analysis and disclosures can be to our partners. We know, for
example, that terrorism is funded at a relatively low level, so it's how to
access smaller, below-threshold amounts that would be beneficial to us in
terms of identifying, tracking and providing disclosures with respect to
financial transactions related to terrorism.
We have recently seen a significant increase in the quality of reporting
from our reporting entities, based on more and more conversation with them
and based on our ability to provide them indicators. For me, the wish list
would be the ability to train and provide education — and more and more
education — to our reporting entities. When you have big banks that have 300
or 400 anti-money laundering, anti-terrorist financing people working for
them, it's getting the information out to them so they can provide us with
better-quality information, and having the time to do that and the ability
to get out there to see everybody. I think where we'll ultimately make the
biggest difference is in the quality of reports we receive, so that we can
then move on and do the analysis that we can provide to our partners.
Senator Jaffer: I have been listening to you very carefully. We
are looking at whether our charities are more vulnerable to terrorist
financing. The finance report that I mentioned said that they were less
vulnerable, from what I understood, and you agreed. At the end of today, it
would be very helpful if you could tell us if there is any other tool you
need in your job to oversee or look at the work the charities are doing to
Mr. MacKillop: I don't think it's a question of tools. I think we
have the tools that we currently need to do our job. The disclosures we make
to CRA charities, for example, have increased over the last couple of years.
That's not necessarily because charities are worse than they were. It's more
a reflection of the partnership that we have with them and that we are
developing with them. We are still relatively young in that partnership with
CRA. I think that as we go on and as that partnership increases, the number
of voluntary information records we will receive from them, identifying
areas that they are concerned about and where we can help them, as well as
our proactive disclosures to them, we'll see an increased ability of our
financial intelligence to be of assistance to them and the job they have to
do. So it's not a question of tools, per se.
Senator Jaffer: If I have understood you clearly, you're saying
that you don't need a recommendation from us to do your job better as far as
charities are concerned; you have all the tools in your tool box?
Mr. MacKillop: I believe so. We're currently in the process of
modernizing our analytic capacity in terms of the software technology we're
putting into place, which will be of assistance as well. I believe we have
the tools necessary to do our job.
Senator Tkachuk: Just so it's clear, a financial institution can
report a financial transaction to you that they would consider suspicious.
It doesn't have to meet the $10,000 threshold; they can actually report it
if it's $5,000, can they, if they think it's suspicious?
Mr. MacKillop: Correct.
Senator Tkachuk: So if they observe something suspicious, they can
Senator Tkachuk: How many of those would you get?
Mr. MacKillop: One hundred and fourteen thousand last year.
Senator Tkachuk: So that would be banks? Who else would be sending
you the reports besides the banks?
Mr. MacKillop: Credit unions, banks, money service businesses,
real estate, accountants, casinos, B.C. notaries.
Senator Tkachuk: How many charities are there in Canada that raise
money for international causes?
Mr. MacKillop: I'm not sure. I believe there are 70,000 charities
in Canada. I'm not sure how many do it for international purposes.
Senator Tkachuk: Most of them would be Canadian?
Mr. MacKillop: I would assume.
Senator Tkachuk: So out of the 70,000, do you have any idea how
many would be international? I think that would be important to know. How
many would be raising money that would go to Europe, Saudi Arabia, the
Middle East, or where all the terrorist organizations are?
Mr. MacKillop: I would assume CRA could answer that. I don't have
those stats because I don't track the charities, per se. I track the ones
that are included in my disclosures, but I don't run a tracking system on
Senator Tkachuk: Just one more question here. Let's say there are
10,000 international. One year you reported on 300; the next year you may
have reported on 500; and the next year you may have reported on 750.
Wouldn't it be important to know, of that 750, how many there really were?
In other words, is it because there are more international charities each
year? People incorporate every year. So you don't know if that amount is
reflected because of the increase in the amount of charities? This is
complicated. So I'm trying to make sure that I have the right answer on
this. But do you understand what I'm saying?
Mr. MacKillop: Not exactly. There may be more charities, but it
doesn't mean that more charities would show up in my disclosures. We deal
with a limited amount of financial intelligence that we provide for specific
reasons, and it wouldn't really matter whether that was 5 per cent of the
charities, 1 per cent of the charities or 90 per cent of the charities. It
would be the ones that we're looking at, that we're providing intelligence
on, to our law enforcement and national security partners only. We wouldn't
worry about the other —
Senator Tkachuk: If you had 100 new charities established, and,
all of a sudden, the number of charities reported went up, wouldn't that be
a trigger for you saying that people are incorporating charities to raise
money for terrorism? Wouldn't that help lead to that conclusion?
Senator Kenny: This is really not a helpful line of questioning.
It could have been an earthquake in Italy. It could be people starving in
the Sahara. There are any number of reasons.
Senator Tkachuk: I wasn't asking you, Senator Kenny.
Senator Kenny: I understand. I got recognized by the chair. I'm
making a comment.
Senator Tkachuk: Ask a question.
The Chair: Colleagues, order. I think we have had enough of this
line of questioning. I'm going with Senator Beyak and then Senator Meredith,
but it will be very short. We're coming to an end here.
Senator Beyak: Thank you, gentlemen. I wonder if you follow
disclosures in other nations that our allies, to see if we can learn
anything from their models or get new or updated information, or see if
disclosure numbers are increasing. I am thinking specifically of a recent
United Kingdom Telegraph report that I'll read from. It was the U.K.
Charity Commission of 2015-16, noting that there were 630 disclosures, and
that the number was cited as a record figure and concerned allegations made
and concerns about the abuse of charities for terrorist or extremist
purposes, including concerns about charities operating in Syria and other
higher-risk areas in which terrorist groups operate.
Did you follow that report at all?
Mr. MacKillop: A little bit, perhaps not specifically that report,
but we do a significant amount of work with our international partners,
specifically the Five Eyes partners. We have an international supervisory
forum as well where we talk together amongst the Five Eyes in terms of how
we do supervision and examinations for compliance and those types of things.
We work extremely closely with them with respect to the intelligence side as
well. Over and above the Five Eyes, we have a little over 90 memorandums of
understanding with international partners where we can share intelligence
with them and receive intelligence from them. So we do a lot of work
internationally. We try to keep abreast of everything that is going on
internationally that is of concern.
Senator Beyak: Is Syria more important right now? Is Syria a
greater concern, as this report states?
Mr. MacKillop: It is one area of concern, yes.
Senator Smith: Thank you. We dealt with you before in a past life
with the study that we did in banking.
Has your mandate shifted at all in terms of the focus that FINTRAC has,
which was basically on money laundering and crime? Has there been any shift
where someone from the powers that be said to you that they want you to
focus this percentage more on terrorism? Or is it just part of the
day-to-day function where you're picking up information?
Mr. MacKillop: The mandate hasn't shifted. It's always been money
laundering, terrorist financing and threats to the security of Canada. In
terms of workload, money laundering remains a more significant amount of
work, probably 70 to 75 per cent. Generally speaking, I have two teams that
work on money laundering and one team that works on terrorist financing.
They are not all the same size, but it's about that.
Senator Smith: Has there been a major evolution in the development
of your international relationships?
Mr. MacKillop: No, those are a continuous evolution. There is
nothing significant or major that happened yesterday that made us do
something different today.
Senator Smith: What has made you different today from where you
were five years ago in terms of international terrorism financing?
Mr. MacKillop: Again, I would come back to a couple of points. One
is the professionalization of our analysts, and two is the closeness in
terms of sharing priorities with our law enforcement national security
partners and that ability to talk, being with them on the counterterrorism
national security committees, for example, or being with them on the
Canadian Integrated Response to Organized Crime committees. Those types of
things have significantly helped us in terms of establishing the priorities,
both with the police and for ourselves in terms of responding to their
needs. One of the major things is the amount of trust and confidence that
our partners have in financial intelligence, which has led to an increasing
demand for the intelligence that we provide, because of the usefulness of it
for them. So as you develop more trust and more confidence in the product
that you're providing, the demand increases as well
The Chair: I have two questions. The first follows up on Senator
The Financial Action Task Force has identified charities that operate in
areas of the world where terrorist groups are present, such as Syria, which
I'm sure you're familiar with, and Iraq as having a high risk of being
exploited for terrorism financing. I think that's a fact. Can you tell us in
the last three years whether your organization has identified any direct or
indirect transfers of funds from Canada to ISIS affiliates? If so, how much
money was involved?
Mr. MacKillop: I can't really answer that.
The Chair: Why not? Do you know the answer?
Mr. MacKillop: Yes, if there is an investigation ongoing where
there's an ISIS affiliate or any other terrorist association or charity
that's identified, we would provide that information to law enforcement. We
provide the intelligence on the financial flows. Whether or not that ends up
being identified as being criminal or terrorist-related is not our call.
That's up to those that are doing the investigations. So while I may show
money that was funded by an individual and taken out of a bank account in
Syria, I won't know whether or not that money taken out was for a nefarious
reason. I can simply show the flow of funds.
The Chair: If I was the minister of the Crown, and you were
reporting to me, and if I asked for the ballpark volume of money being
transferred indirectly or directly from Canada to terrorist activities in
places such as the Middle East, would you be able to give me a ballpark
figure of the volume of financing so that I, as the minister of the Crown,
would have an idea of the sense of the urgency and importance of the issue?
Would you be able to give me a ballpark number?
Mr. MacKillop: No, sir.
The Chair: You wouldn't give that to a minister of the Crown? So
we really don't know the importance of this issue or the volume of it.
Senator White, do you want to just conclude that?
Senator White: To be fair, there are other agencies that could
give that information, correct? Thank you.
Senator Meredith: I have a quick question on the indicators with
respect to revenues derived from human trafficking and sub-trafficking with
international partners. Do you track that? Do you have data on that, because
we know that is also the way that terrorist groups are tracked? Mr. Beaudry,
we haven't heard from you. Can you comment on that?
Luc Beaudry, Assistant Director, Collaboration, Development and
Research, Financial Transactions and Reports Analysis Centre of Canada:
In relation to human trafficking, we have been working a great deal with our
law enforcement partners in the past few years. We got great collaboration
from the private sector in order to initiate good financial leads that are
used by law enforcement and our national security partners in Canada and
abroad as well. Internationally, we are looking at human trafficking as one
form of terrorist financing.
Senator Meredith: Do you have numbers in terms of dollar figures?
Mr. Beaudry: We don't have the dollar figures yet. We are looking
at it internationally right now.
The Chair: Colleagues, I would like to thank the witnesses for
taking the time to be with us. We will excuse our witnesses.
For our next panel, we have one witness here with us and also a witness
via video conferencing.
Joining us on panel two today are Mr. Christian Leuprecht, Professor,
Department of Political Science and Economics, Royal Military College of
Canada. Welcome back, sir.
Joining us via video conference is Mr. Tom Keatinge, Director, Centre for
Financial Crime and Security Studies, Royal United Services Institute in the
United Kingdom. I don't know what time it is there, but you look very well
Gentlemen, welcome. I understand that you each have an opening statement.
May I ask that Mr. Keatinge begin, followed by Mr. Leuprecht. We have one
hour for this panel.
Tom Keatinge, Director, Centre for Financial Crime and Security
Studies, Royal United Services Institute: Many thanks for having me. I'm
grateful for the opportunity to contribute to your current study.
I've been asked to focus my remarks on matters relating to charities and
terrorist financing, more specifically the potential of charities for
terrorist financing purposes.
The starting point for this debate is that following 9/11 charities
quickly fell under suspicion of being a weakness in the global effort to
disrupt terrorist financing. In the special recommendations that the
Financial Action Task Force produced addressing terrorist financing
following 9/11, the NPO sector was branded particularly vulnerable to abuse
for terrorist financing. We can debate the accuracy of that statement at
that time, and why charities fell under suspicion, but in the intervening
years charities have, on the whole, worked hard to demonstrate that this
blanket belief is misplaced.
Indeed, following several years of effort and engagement, this blanket
suspicion was removed from the FATF recommendations in June of last year.
However, this does not mean that the sector is immune from implication in
terrorist financing schemes. The conflict in Syria has brought this issue
into sharp focus.
I'll make a number of general and specific observations on risks that
First, charities are typically cash-based businesses. Monitoring sources
and uses of funds is therefore challenging.
Second, regulation of charities activities is inconsistent. You have
heard previously from the U.K. Charity Commission about their work. We are
lucky in the U.K. to have such a dedicated unit, but even they are not able
to monitor the end use of funds in destination countries such as Syria.
Third, charities have to operate as highly effectively cross-border
conduits for funding to support their work. This capability clearly presents
an opportunity for those intent on abuse. Indeed, we've seen examples of
such. This is why the banking sector deals with charities with such caution.
Next, there's been a proliferation of charitable activities since the
start of the Syrian conflict. Do all these start-up charities have
sufficient governance procedures in place, or do they see such checks and
balances as an unnecessary overhead cost?
Finally, charities also act as destinations for funding into the U.K. or
Canada. In the U.K., there has been concern expressed in our Parliament
about the funding of extremism. Former Prime Minister David Cameron
commissioned an investigation into the funding of Islamist extremist
activity in the U.K., including any overseas funding sources.
Charities inevitably fall into the scope of such investigations. This
investigation has been completed but has not been published. What I can say
is that in the U.K. we have no cross-border money transfer reporting
requirements, so we do not know what funding is moving into or out of the
country electronically. Financial border security is an important but often
So how can we ensure that the charitable sector does its valuable work at
home and abroad without being, wittingly or unwittingly, abused by terrorist
I'll make five points by way of conclusion.
First, charities need to be constantly reminded of their regulatory and
governance obligations. New charities are springing up all the time.
Operational governance should be an absolute requirement. Charities that
cannot evidence appropriate standards should not be operating in high-risk
geographies. They should partner with more experienced operators or should
not be operating at all.
Second, and connected to this, charities need to professionalize their
operations. It is no surprise to find former accountants and due diligence
professionals working in large charities. All charities need these skills to
meet their obligations to protect the use of donor funds.
Charities need to ensure that financial governance is included in program
planning and execution. Some big charities, certainly from here in the U.K.,
include audit professionals on the ground to monitor aid distribution and
mitigate diversion risks.
Funding flows internationally to and from charities should be subject to
reporting, as I believe is already the case in Canada. This may seem
nannyish, but evidence suggests that many countries have little insight into
the funds flowing into or out of their territory. But, we must remember,
regulations should ensure funds are not driven into informal and opaque
channels where they cannot be monitored. The epidemic of de-risking by the
banking sector has led to charities either being unable to distribute their
legitimate funds or moving funds through informal and high-risk channels.
Ultimately, nations such as Canada and the U.K. rely to a substantial
extent on charities to assist them in distributing aid funding from our
national prosperity to fragile and broken states around the world. This work
supports our domestic and international security and should be promoted but
must operate to a standard that minimizes the opportunity for aid and funds
to be diverted or charities to be abused for uncharitable use.
I look forward to your questions.
The Chair: Thank you, sir. We'll ask Mr. Leuprecht to say a few
Christian Leuprecht, Professor, Department of Political Science and
Economics, Royal Military College of Canada, as an individual: Good
afternoon, ladies and gentlemen. Thank you for the invitation.
As you know, we've recently completed a project specifically on Canada
and organizations' activities within Canada that we were able to track all
based on open sources. You can find that on the TSAS website, and I gather
some members of the committee have read that paper.
We also have an ongoing project that is looking to map all the known
transnational terrorism financing cases to establish the patterns behind
these cases and the preliminary number of cases, and the data points that we
have on each of these cases suggests that there are some distinct patterns
that beg some really interesting questions, both internationally and within
This is a project I'm doing with Art Cockfield from the law school at
Queen's. Professor Cockfield has found in our work that by and large the
legislative framework we have is not all that bad. The interesting research
question is if the Financial Action Task Force tells us that our legislative
framework is half decent, why is it that this problem seems to persist.
Let's ask how important the problem is just in the last year.
There's FATF, the Financial Action Task Force. There's the updated
strategy on terrorist financing. There are recent statements by G20 leaders
and finance ministers in support of the FATF efforts on TF. There is the
urging of FATF member states to do more. There's the 2016 G7 action plan on
terrorist financing to counter ISIL finance group and the action plan by the
finance group. There are recent EU efforts.
There is no lack of evidence to suggest that this is a growing problem
and an important problem by all accounts, and yet it seems empirically we
have a really hard time doing something about this. As you have mentioned,
we have relatively few prosecutions. The question is: Is the indication that
we have so few prosecutions that, first, we don't have a problem; second,
that we're doing such a fantastic job at stamping out the problem; or third,
that we're not doing a particularly good job? This is the question of the
zeros and the ones. How do you measure the zeros when we don't have a lot of
these events out in the open or have a whole lot of prosecutions?
To put this into some context, this is a highly diverse, variegated
problem. We have the listed entities, such as Hamas and Hezbollah, and the
external security organization by Hezbollah that runs the global financing
operations. I have written about this. I have mapped these networks. They
tend to be decentralized; they have demonstrated links to Canada. There is a
recent article I published on this in Terrorism and Political Violence,
which is the top journal in the field in the world.
Then there's the transnational terrorist organizations, such as IS and al
Qaeda, that have increased and become self- financing. IS at its height is
at about $80 million a month, much of it from illicit oil exports.
Then there are the local and more domestic and regional organizations,
such as the Tamil Tigers. They are organizations. We have very good evidence
from Australia on how this works. One was siphoning off donations in
temples, part of those donations. The other was through phone card calling
schemes where Tiger-friendly organizations controlled those phone cards, and
it was expected that if you were part of the diaspora you would use a
certain phone company.
The challenge is these are legal activities, yet some of the funds are
used for illegal purposes, so that explains part of why the prosecution is
so difficult. There is local fundraising by organizations such as al
Shabaab, and then we have the lone wolves and foreign terrorist fighters
that really need relatively little money for their efforts.
What are some of the challenges here? One is the problem of attribution.
One of my retired colleagues says that even terrorists need to go to the
dentist. So when you send money abroad, even if you send it to a certain
listed organization, they might use it for development purposes. The
organizations are quite astute at trying to mask the purpose of the funding,
and so generally the attribution both individually and to organizations can
There's the purveyor problem in Northwest Africa. Bruno Charbonneau
teaches at Laurentian and UQAM and has written about this, that here
organizations are basically providing services that otherwise states would
provide. Much of what al Qaeda actually moves and smuggles in Northwest
Africa are basic things like food stuffs and basic things you would buy at
the hardware store because there is no state to provide these things, but
some of the stuff they do and smuggle are clearly illicit and clearly not in
Then you also have the problem of convictions in the sense that it's
difficult to obtain convictions. I think prosecutors are reticent to
prosecute because we don't have a lot of precedent, so that makes the
prosecutions a bit of a gamble as to whether they'll be successful, and
often it's an effort that law enforcement will lay all the charges they
possibly can and then plead away certain types of charges. Terrorism
financing is often one of those charges that goes by the wayside, but I
remind you that Momin Khawaja, the first individual charged under Canada's
terrorism law, was also charged with a financing charge
The broader question that raises is how can an organization such as
FINTRAC, our Financial Intelligence Unit, be a better enabler overall in
this process? I have a few recommendations to think about here. One is that
the legislation, while it might provide broadly the tool kit for
organizations to work, really the terrorism financing legislation in Canada
and elsewhere was crafted on to money laundering legislation, and these are
two opposite problems in most cases. Money laundering involves illicit funds
being laundered to make them legal; terrorism financing usually are funds
that are in one way or another legal and being used for illicit purposes. To
use the same instrument to achieve two opposite objectives for prosecution
has not turned out to be the most efficient sort of thing. There's a whole
question around if we need to have completely autonomous, isolated terrorism
financing legislation. I think we need more research to have more of this
out in the open.
You could tell from my predecessor that there is always a reticence with
people within the bureaucracy to talk about some of these things, and we
actually know more from open sources than we would admit.
We need to abandon the 10K limit. The $10,000 limit never made any sense.
It doesn't make any sense from the side of false positives. It doesn't make
any sense from the banking sector because the banking sector will tell you
it just imposes additional regulations and costs for them to siphon out all
the transactions under and over. Let's just have them report all the
transactions, because then we have full domain awareness with which we can
We need a financial transaction exchange. The precedent here is what
we're doing on the cyber side where we have the CCTX, the Canadian Cyber
Threat Exchange, which is a world precedent. The public sector and the
private sector come together with their financial intelligence units to
exchange data on cybersecurity threats and intelligence, and I think we need
to do this. This is one of the ways we can enable FINTRAC, by bringing more
people around the table and finding an effective mechanism for financial
institutions and the intelligence agencies and law enforcement to come
together and exchange some of the operational strategic intelligence, and I
think we could be a world leader here. Just as we have taken a stand on the
cyber side, we could do this on the finance side
We need more reporting on inflows of financing. We're always talking
about outflows, but in Canada we have a challenge of certain countries that
we might not consider the friendliest funding of what are ostensibly welfare
projects within Canada, which in itself is an interesting debate to have
because it somehow suggests that the Canadian state is not adequately taking
care of some groups so why are we funding welfare projects by these
countries within Canada. This is all dubious to me to begin with, but we
need to ask harder questions about the money that is coming into the country
and for what purposes it is being spent in this country.
What looks like charitable and altruistic purposes are meant to advance
the interests of some countries that we would consider perhaps hostile
The way to perhaps wrap up my introductory remarks is you just had a
discussion about human trafficking. We've seen dozens of people come across
the Canadian border in recent days, and I would urge the committee to ask
some hard questions about how these folks are getting to the border. The
patterns we're seeing are exactly the patterns we saw in Europe with some of
the migratory patterns there. It suggests that these individuals are not on
their own. Some are finding their way up to the border and walking across.
They are getting help and paying people to get up here.
Canada has an obligation to ask some hard questions about who is making
money on this, both in the United States and internationally, and what
obligations we have, not to just accept people as refugees but also to
ensure that human traffickers and smuggling rings are not exploiting the
vulnerability of these individuals to bring them here to Canada.
The Chair: Thank you, sir, you've raised some very interesting
Senator Jaffer:: Thank you very much to both of you for the things
that you have said. There are so many questions, but I'll start, first of
all, with you, Mr. Keatinge.
You have written extensively on the sources of financing of ISIS and how
the terrorist financing landscape has changed in recent times. One of the
articles was entitled Financial Intelligence and the Evolving Threat from
Daesh. I will not repeat what you have written, but because we have
people who watch this, I want to provide background.
The article talks about ISIS losing the territory it used to gain funds,
and many supporters are returning to the countries in which it was active.
You identify this as a new potential threat for terrorist financing. It was
very interesting what you said at the end, that we mustn't confuse those who
are doing good charitable development work with a few who may not be doing
such good work.
What are you currently seeing? Is terrorist financing coming through
Mr. Keatinge: Thank you for the question. Very briefly, the point
of that article is we got obsessed on the terrorist financing risk as it
relates to money moving from countries like the U.K. into the conflict area
of Syria and Iraq, particularly as that relates to foreign fighters
travelling from our countries to those destinations. My point there was that
people are starting to come home, and as was mentioned by the previous
speaker, it's very difficult to identify flows of funding to cut off. So
what we must also be thinking about, not exclusively, is how can we use
financial flows, financial intelligence? How can we use that to identify who
these individuals are?
But we have to remember — and we see this in the U.K. certainly all the
time — that there are flows of money going to places like Turkey, Jordan and
Lebanon, which are charity-related and are funding refugee camps on the
border in Turkey with Syria, for example. That money is too often stopped by
banks and others because there is a concern that it might be going to fund
It's important that as we try to tighten the terrorist financing net, we
don't shoot ourselves in the foot by actually stopping funds that are meant
to be going to support these individuals who are refugees. Of course, if we
don't support them, what happens? Who steps into that vacuum, as was
mentioned by the previous speaker, organizations such as ISIS that provide
welfare and so on? It's very complicated, but we need to think about it in a
smart way, and generally I think we think about it in too blunt a way.
Senator Jaffer: Thank you. Mr. Leuprecht, you have raised so many
questions. One of the things you said, if I understood you correctly, is
that in many places the state is not existent, so the terrorist organization
or the organization on the ground will be providing services such as
education and hospitals, plus doing other things. Sometimes it's difficult
to tell what it is, whether it's terrorist funding or doing development. Can
you expand on that idea?
Mr. Leuprecht: I think what we need to encourage organizations to
do is to transform their efforts into genuine political efforts. This is
sort of the Northern Ireland challenge, the Sinn Fein and the IRA.
There are things we can do on the policy side to make sure we incent
behaviour that divorces violent criminal extremist behaviour from political
behaviour. We need to be particularly proactive — and I think Canada has
done a reasonably good job at that — in areas of the world where we're
seeing a lot of fragility and potential challenges. I would particularly
highlight northwest Africa in that particular context because, as Professor
Keatinge pointed out, once we have the forest fire, then it becomes a very
tactical concern, and I think we need to make sure we forestall this type of
behaviour to begin with.
Senator Jaffer: I am really concerned when you talk about human
smuggling. I've been involved with issues of human trafficking for a very
long time. In terms of terrorist financing and human smuggling, they're
both, as far as I'm concerned, bad activities, but the human smuggling that
may be happening in Manitoba may have nothing to do with charities; it's
somebody trying to get wealthy on people's backs. For me, it is a very
difficult road to go down, to mix human smuggling with terrorist financing.
Mr. Leuprecht: I would say one of the things that we've been
observing is what is often called the nexus between terrorism and organized
crime. I'm being apprehensive about this nexus because, like a lot of things
in this field, there is a lot of proposition and relatively little evidence.
What we do know about the nexus is that increasingly we are seeing
terrorist organizations adopt organized crime methods, and we've seen
organized criminal organizations, especially, for instance, in Mexico,
adopting terrorist methods. So there is common learning. I wouldn't say
convergence, but there is a learning mechanism at work here.
Senator White: Thank you both for being here. Sir, thanks for
being here again. I know you've been here before.
In relation to Canada, our legislation that put FINTRAC in place in the
first place is not new. I think when we hear people talk about "this should
be $10,000,'' the fear we have, of course, if it was wide open, is how would
we manage that?
Would you recommend we actually have a look at the way in which FINTRAC
operates to allow for the technology that's out there today to do the
tracking rather than when it was developed in the first place? Is that how
you would see this taking place? We couldn't triplicate the size of FINTRAC
to be able to manage the data. I don't think that's necessary anyway, do
Mr. Leuprecht: No. On the data analytics side, this is purely a
methods problem; it's not a staff resourcing problem. By having full domain
awareness, as you know from your previous job, it will actually give you a
better appreciation of what's happening than if you only see part of the
Senator White: Thank you for that, because that's exactly my
point. Realistically we're sitting in the Stone Age trying to demand
something of people who are in a technical age. The number of people that
we're tracking, the number of organizations we're tracking and the amount of
money, we could actually get all of the information and share it more easily
if we had access to more information, not less. It wouldn't become more
convoluted; it would actually become clearer for us.
Mr. Leuprecht: There are institutional and cultural obstacles to
this. I find in this town there are some people who are apprehensive about
data because they don't understand it. We also have a challenge in this
country with data analytics; we don't have a proper training program for
security applications in terms of data analytics or even advanced social
network analysis. Most of what you get from the intel and law enforcement
agencies are i2 charts.
There's a lot more we can do with the resources that we have if we have
better competencies within those resources, which is not to say we don't
have good competencies, but I think we could be doing better with the
people, competencies and mandates we have.
Senator White: We just heard from witnesses who talked about not
listing criminal organizations in this country. If we look at Australia,
they have had great success, for example, in outlaw motorcycle gangs,
listing them and keeping them from owning property. Many will say we drove
them underground. They're underground already; that's why they continue to
Don't you think it's time for us, as we walk through this, to go beyond
just the listing of some individuals who belong to criminal organizations
through FINTRAC but actually identifying those organizations that have been
proven in court as criminal organizations, listing them so their assets are
more difficult to hang onto as well?
Mr. Leuprecht: I certainly think that the current mechanism of
when three people get together and this becomes an organized criminal
activity is highly misleading in terms of the data that we then end up
publishing. I think one of the greatest assets available to police is asset
forfeiture. But one of the challenges we have, of course, is you can count
the number of accountants in the RCMP on one hand, so you actually need the
competencies within the organizations. If minimum qualifications at entry
are the way we're going to recruit and promote people, those are the
outcomes we're going to get.
Senator Meredith: Thank you both for being here this afternoon.
For the purpose of the study, it's on charities and the protection of
charities within Canada. We're talking internationally as well.
Professor Keatinge, which country offers us the best example of those
looking to ensure that charities are protected in the context of terrorism
financing? That's my first question. I have a quick follow up as well.
Mr. Keatinge: Of course, I would say the United Kingdom. But as I
say, I know you heard from Michelle Russell previously.
I think the key thing we have in the U.K. is that it's obviously an organ
of government, but it's a relatively independent organ of government. And it
is focused on safeguarding the charity sector. It's not focused on tax or
any of the issues that one associates with charities. It's focused on
safeguarding the charity sector and safeguarding donor funds. That has led
to excellent engagement between the enormous sector of charities we have in
the U.K. and the authorities, and an attempt to try to make sure the
charities understand their responsibilities, the risks that they run, and
how they are going to address those risks.
I certainly recommend the Charity Commission as a model to look at. I
think it could do with much more funding. It's an important body,
particularly in the context of what we're talking about now. As a concept, I
would strongly recommend that as a best practice case study
Mr. Leuprecht: I would simply encourage the committee that we can
look beyond the Five Eyes community. There are good things within the Five
Eyes community, but there are also other countries having a good effect, in
I would urge you to look at the operational side. Having a good
legislative framework, if we don't have the capacities to apply and enforce
that legislation, is only going to get us so far. These are very complex,
difficult negotiation investigations. There is some restructuring within the
RCMP currently to do better, but I think overall, we must rethink the
capacities we need to do this and how we can get better outcomes from what
we already have in place.
Senator Meredith: Both of you spoke of diversion with respect to
assets that are going to proper charities, or help in terms of humanitarian
crises. One of the things was diversion risk of food, water, medicine, with
respect to supporting individuals. Is there a mechanism to prevent that from
happening? Is it obviously a criminal element such as ISIS looking to
reinvent themselves? Is there a way for to us prevent this diversion risk
that both of you talk about from happening? Professor Keatinge, would you
comment on that?
Mr. Keatinge: The large charities, as I mentioned in my opening
remarks, which have the appropriate governance in place, focus very closely
on ensuring to the best of their ability that diversion risk is minimized.
Most of them have a diversion risk manager who is out there on the ground
making sure that, as best as possible, stuff goes to where it needs to go
I think stuff is less of a concern than money is. The diversion of cash
is clearly a much bigger concern. They're making sure that charities are
fully aware of who their partners are on the ground. Some charities find it
difficult, uncomfortable, to vet partners on the ground, but knowing who
your partners are on the ground, who they are connected with is extremely
important. So I think what you tend to find is that charities would rather
move stuff into areas of conflict, rather than cash, because if the stuff
goes, that's bad. But it is certainly not as bad as if cash gets diverted.
Charities that have the right governance in place put a huge emphasis and
cost into making sure that diversion is minimized as much as possible.
Mr. Leuprecht: The patterns, as the professor pointed out, of the
large charitable organizations versus some of the other activities, are
different patterns of the mechanisms used to transfer, the types of goods,
and the way money and the amounts of money are transferred, how many
intermediaries are involved. The moment you get more intermediaries, it
raises questions of whether we are trying mask some money along the way.
From some of the patterns alone, we can establish some of the risks, the
degree of risk at which transfers are being diverted. FATF has encouraged
better risk management practices, which suggests that not only is Canada
struggling, but much of the Western world is struggling with what these
risk-based models need to look like.
Senator Tkachuk: Maybe both of you can comment on this. When you
mentioned that the $10,000 ceiling was going to be irrelevant and that we
should watch it all, my view is that — I don't know if my view is correct or
not — we have been through this before. FINTRAC has been around a long time.
We had one criminal charge, I think, that has been prosecuted and won in all
this time. Wouldn't it be true that by watching everyone, we're really not
Mr. Leuprecht: Yes, you're absolutely right. The prosecution side,
as we mentioned, poses a challenge but that doesn't mean, as Luc Beaudry and
Barry MacKillop pointed out, there aren't some good successes in Canada at
intercepting and disrupting activity without necessarily ending up with
convictions at the end.
Senator Tkachuk: I kind of agree with that, yes.
Mr. Leuprecht: No, I would say to the contrary, you want to work
with the full amount of intelligence and evidence available to you precisely
so that you can have a better sense of divergent types of patterns and
behaviours associated with certain types of activity, which we currently do
not have. I would say that we would be better off with a fuller spectrum
than we currently have. And the banks would be grateful because you would
reduce their compliance costs in the process.
Mr. Keatinge: If I may, there are two ends of the spectrum that I
look at. One is Australia, where all cross-border transactions into and out
of the country are required to be reported. The other end of the spectrum is
my own country, the U.K., where there is no visibility at all. When you talk
to law enforcement and others in those two countries, it's very clear to me
who has the better picture of financial activity.
Let's remember, network analysis has been mentioned by the other witness.
Network analysis is incredibly powerful if you can use financial information
to map who is connected to whom. But if you impose an artificial cut-off,
you are going to limit the picture that you can get. That's why there is so
much focus around the world now on public-private partnership, on banks and
government working together to try and create more detailed, accurate,
complete pictures of financial information, so that we can tackle
criminality and the financing of terrorism.
Senator Tkachuk: A lot of the latest terrorist attempts were
domestic in nature. In other words, the people were living in the country,
or in the case of the EU, in France and in Belgium, where they have free
movement back and forth. You are raising the money domestically. You're not
shipping it out to anybody. You are raising the money domestically; it
doesn't take a lot. You buy a bunch of machine guns. You go into a concert
and you kill everybody. It seems to me that's what they are doing now.
Mr. Keatinge: I'm not suggesting that if you introduced zero
threshold cross-border reporting, suddenly you would solve everything. But
you would create a better picture of part of the challenge.
Let's remember, certainly in Europe, in recent years, the challenge has
been money going from our countries to Syria and Iraq, so that's been
something which has challenged the authorities. Now, you're quite right. We
now face this domestic issue of lone wolves, small cells. Let's be dynamic.
What should we be thinking about now vis-à-vis the threat?
Part of the problem we face is that the terrorist finance landscape was
set after 9/11 on the basis of a threat, al Qaeda. We now face a spectrum of
threat from lone actors through to proto-states like Al-Shabaab and Islamic
State. We haven't been sufficiently dynamic to adjust our approach to map
that changing threat. No one solution is going to work for the full threat
spectrum, so we need to keep scanning that threat spectrum and determining
what is the right approach for the threats that we face right now.
Senator Tkachuk: Hamas and Hezbollah are known to have fundraising
networks in Canada, I believe. Has the amount of money raised by these
groups increased in recent years? Are they using charities as a vehicle to
Mr. Leuprecht: Arguably, Hezbollah is probably the quintessential
global terrorist organization, if you look at the networks and how far these
networks span. Much of what they do relies on fairly sophisticated trade
mechanisms, value-added mechanisms and some value-added tax fraud. This goes
beyond somebody knocking on doors and trying to collect money.
But I think the key here is that we need to make sure — what I have
demonstrated in my own work is that, again, over the weekend, we got a bunch
of talk about the Canada-U.S. border and what goes across that border. We
can demonstrate empirically that the real challenge is not what happens
across the U.S.-Canada border. The real challenge is what happens in North
America and the way in which what happens in North America makes the rest of
the world less safe by virtue of the things that people procure here and by
virtue of the funds that, in one way or another, are acquired here and sent
to the rest of the world in support of nefarious purposes, or purposes that
are clearly and statedly not in the interests of either Canada or its
The financing effort and making sure that we curtail that to the best our
ability is important. We live in a diverse country, and when you live in a
diverse country, you're bound to find some people who will have, either for
profit motives or for ideological motives, sympathies with some
organizations that we would prefer them not to support that we have listed
and said, "We need to make sure that we communicate to all Canadians what
sort of behaviour is and is not acceptable in this regard.''
The Chair: Do you have any response to that?
Mr. Keatinge: I don't think I can comment on specifics to do with
Canada in that case, no.
Senator Tkachuk: In your own country?
Mr. Keatinge: Again, this goes to part of my comment about how we
have sort of failed to adapt in my own country. There is tremendous
experience in this country in the financing operations of the IRA. People
forget about the IRA. But we certainly learned an awful lot about how
terrorist groups finance themselves through our experience with the IRA.
Again, it has been touched on in other comments.
There is this nexus between business and criminality that allows funds to
be raised for terrorist purposes. Clearly, the IRA is a case that we should
not lose sight of because its ability to raise money from business was
impressive, and its ability to use organized crime was impressive. It's not
all about donors and charities, which is what one would tend to imagine from
reading the press.
Senator McPhedran: This is really just a point of clarification
directed to Mr. Keatinge. At point four of your presentation, you make the
statement: "There has been a proliferation of charitable activities since
the start of the Syrian conflict.''
I just wanted to be clear in my understanding. Do you have any evidence
to suggest that such proliferation is connected to misuse of the charitable
funds involved for terrorism?
Mr. Keatinge: My point there is that, certainly in the U.K., the
number of charities that have been set up to support efforts to bring
humanitarian aid to Syria has grown enormously. Very early on in the
conflict — I forget the precise date — the number of charities that were
targeting their work on Syria had doubled, of course, because of the
conflict going on there.
My point is that a lot of these charities are set up with very good
intentions but with not necessarily the right governance in place to operate
and to deal with an environment that is as complex and which involves so
many different forms of non-state-armed groups as is the case in Syria. I'm
certainly not saying that the proliferation of charities was in order to
move funds to terrorists. My point was that these charities were set up very
quickly, with good intentions, but I don't think in all cases they had the
governance in place to manage the funds they were moving.
Senator McPhedran: Therefore, were those funds prone to misuse?
I'm trying to understand the logic. Your point about governance and where
you were taking it is that, therefore, they are, at minimum, vulnerable to
their funds being diverted and misused for terrorist purposes.
Mr. Keatinge: Correct. I have sat with charities, listening to
them talk about what they do. It's clear to me that there are some that get
their responsibilities and invest in those responsibilities, and there are
others that think it's an unnecessary overhead cost and that the delivery of
aid is the most important thing that they should be doing, come what may.
Senator McPhedran: This is still part of my point. I'm just trying
to understand, pulling together a number of the points in your report to us.
You also recommended to us the Charity Commission as a model. Were you
making a connection at all between the function of the Charity Commission as
you see it and the kind of oversight you see greater need for from this
example in point four
Mr. Keatinge: One of the things the Charity Commission has done is
it's spent a lot of time on road trips around the U.K., going to communities
where charitable giving is particularly high as it relates to the conflicts
in Syria, and tried to instill in people the importance of understanding
what is happening to their money. If you think about it, zakat is one
of the principles of Islam. The giving of money is extremely important;
indeed, it's an obligation. The question is: Are you thinking about what is
happening to that money, or are you giving that money and so, in a way,
you've carried out your obligation?
It's about encouraging people to think about who they give their money
to, which channels they use to distribute their money and to talk to local
people running charities to make sure they are aware of their obligation.
The Charity Commission has done a huge amount of outreach around the U.K.
I think part of that is because of all these new charities that have
started. They know they need to get out there and make sure people
understand their obligations.
Mr. Leuprecht: Senator, this is a really important question to
ask. If we apply some foresight on the Middle East, it's expected that the
Middle East will become a less stable rather than more stable region. We
will likely see more conflict. The test case of what's happened with Syria
is a bit of a canary in the coal mine. So we need to make sure that
Canadians can reach out but not end up financing things that we prefer them
not to finance.
To that effect, we talk about charities but, really, this is a very
diverse sector. It's like talking about the private sector, where you have
very large corporations and also very small mom-and-pop operations. It
suggests that we need a much more risk-based model when it comes to the
charity sector, because the very large organizations have huge operational
and reputational risks at stake. If something goes wrong, they have the
capacity. At the same time, they spend a lot more money on administration
than some of the smaller groups that are much leaner, much more efficient
and can in many ways get money to places much more quickly but where there
is a much greater risk, if the proper governance structures aren't in place.
So one thing the Government of Canada can do is to make sure when we have
smaller charities that we can help them effectively put these governance
structures in place and that we have proper oversight and review mechanisms
in place to ensure that charities are conducting themselves in accordance
with the law and with their intended purpose and not even unintentionally
having any of their funds leaking to purposes we don't want them leaked to.
Senator Jaffer: I have a question for you, Mr. Keatinge. We know
that ISIS is losing territory, and that before, ISIS was financing a lot of
its work through the land it owned and the resources it owned. Now, as it is
losing territory, it is going to have to start looking at other ways of
raising money. You have done a lot of work on ISIS. Can you tell us where
you think they will be going?
Mr. Keatinge: The first thing to say is that any organization cuts
its operational cloth to meet its financial ability. So obviously, ISIS has
attempted to operate a welfare state. It has attempted to operate security.
It's obviously operated a fighting force. As they lose their territory, as
they are restricted, then we can expect their operating model to change. My
point is that the operating model will require less money.
There are some issues that we should be concerned with. I know
kidnap-for-ransom is very relevant in Canada. As the areas that ISIS control
are restricted, we see reporters reporting from Mosul, for example. The
question we need to ask ourselves is, are we going to see a return of
kidnap-for-ransom as an ISIS funding tool, which I think has been less the
case in the last couple of years?
Kidnap-for-ransom will be a big concern in Syria and Iraq over the next
year, as we have westerners going in, aid, journalists, et cetera, in a way
they haven't been doing previously.
Senator Jaffer: You said that they will be doing different things.
From that, I am jumping, and maybe I'm incorrect, is they may not be
providing the social services and just focusing on fighting and survival. Is
that what you were saying?
Mr. Keatinge: That's what I mean. They go from a protest state to
being an insurgency, focusing on car bombs in Baghdad, promoting attacks on
the streets of Europe and Canada, as opposed to controlling territory and
managing territory like a quasi-government.
Senator White: Mr. Keatinge, you talked about the education that
is happening in the U.K. in relation to charities and where money is going.
Are you seeing an increased reporting from individuals or other groups that
may not have reported in the past about concerns?
Mr. Keatinge: I caught the end of the previous session where one
of you was quoting from an interview from the Telegraph with William
Shawcross, the chairman of the Charity Commission. There has clearly been an
increase in concerns raised by the public and others as it relates to
charities' operations. Yes, there has been an increase. The data that
William Shawcross produced in that interview confirms this
Senator White: Are you seeing increased reporting in relation to
terrorism financing or organized crime financing or just charities overall?
Mr. Keatinge: Certainly charities overall. The Charity Commission
has, in the last year or so, become much more open in reporting on
investigations that it's undertaking. Michelle Russell and her colleague
talked about a case from last year, which was linked to terrorist financing.
There was a case earlier this year where an aid convoy was used to transfer
funds to a terrorist group. It's an increase overall, and there are
increasing number of examples we are being made aware of where there are
terrorist financing-related issues.
The Chair: I would like to pursue some of the earlier questioning,
and I don't think we got a response. One of the things we're trying to find
out around this table is how big an issue is this question of foreign
financing. What is the volume of money? What are the numbers of people
involved? If Canadians were aware of what is going on, they would be much
more alert and looking for possible incidents which would cause one to
Mr. Leuprecht, you said you thought Canada was doing a pretty good job,
but we don't really know how big a problem this is. My question to you and
Mr. Keatinge is the same: If we don't know how big an issue this is, and the
volume of the dollars we're talking about to give a context of the terrorism
financing and the actual financing, what it entails, how could we say
somebody is doing a good or bad job?
Mr. Leuprecht: I would turn the question around. I would say we
should stop talking about terrorist financing and start talking about
terrorist resourcing. There are many different ways by which organizations
procure various resources that may not be financial resources, and we go
through this in our paper. We need to understand the resourcing model rather
than financing. If we simply focus on money, we're missing the bulk of ways
in which organizations are active in this field.
It would be a worthwhile effort, based on some of the intelligence, to
try to get an estimate on this. Professor Keatinge may want to correct me on
this, but I have been working on some folks in Turkey who are trying to get
a sense of how much money organized crime made from human trafficking to
Europe. It's estimated at about $10 billion U.S. last year alone. The
numbers here are pretty staggering.
We want to turn around how we think about this problem, and we want to
think about this from a law enforcement issue, more as an asset forfeiture
problem, and to some extent as a proceeds of crime problem. Because in our
Criminal Code, it's a reverse burden of proof, if I understand this
correctly. I'm not a lawyer. It is an element within our Criminal Code.
You have to demonstrate how you obtained the money you are spending. By
using that provision, we could make more inroads in this country. Rather
than looking at the purpose, we would be looking at flows and finances that
seem suspicious to us and where we can articulate reasonable grounds for a
The Chair: I will turn this around on you, and we'll talk about
financial resources. With that definition, what are we talking? Are we
talking $10 billion or $5 billion? What are Canadians looking at? If you
don't know, shouldn't the authorities at least be informing the general
public on an ongoing basis what is happening in the country?
Mr. Leuprecht: That would require the government to provide a
remit as to how it would like this estimate calculated and what we are or
are not to include in that.
The Chair: Do you think Canadians have the right to know?
Mr. Leuprecht: I'll give you an example. The article about
Hezbollah, where, among other things, they run a porn site and engage in
credit card fraud, but about 90 per cent of the profit generated went to the
individuals that were running that racquet, rather than being transferred
back to Hezbollah. How do you count that? Do you count the 10 per cent that
went back to Hezbollah or everything they generated? There are challenges on
the method here.
Mr. Keatinge: In the U.K. we have had cases recently where it has
turned out that several thousand pounds have been transferred to designated
individuals via charities. It's important to say that most often the
charities are unaware of the fact that they are being abused. That brings me
back to my main point, which is why are they unaware? Because they don't
have the governance in place that they should have in place. We need to be
focusing on strength of governance to avoid them being abused for terrorist
finance purposes. Second, we have this campaign every year at the time of
Eid in the U.K. where the message is that there needs to be responsible
giving by the Muslim community to make sure they know where their donations
are going. Don't give them to any charity. Give them to a charity that you
know is doing good work and has the right governance in place.
The Chair: Thank you very much.
Colleagues, joining us on panel three is Dr. Matthew Levitt,
Fromer-Wexner Fellow and Director, Stein Program on Counterterrorism and
Intelligence, The Washington Institute for Near East Policy, Washington,
D.C. From 2005 to 2007, Dr. Levitt was Assistant Secretary for Intelligence
and Analysis at the U.S. Department of the Treasury. Prior to that, he
worked with the FBI. He has written a number of books on terrorism
financing, with the primary, but not exclusive, focus on financing
activities of Hezbollah and Hamas.
Welcome, Mr. Levitt. I understand you had to make some adjustments to be
able to join us today, and we appreciate the efforts you've made. I
understand you have an opening statement, so I would invite you to begin.
Matthew Levitt, Director, Stein Program on Counterterrorism and
Intelligence, The Washington Institute, as an individual: Thank you so
much. It's an honour to be able to testify before the Senate and before your
committee. Thank you for having me. I will be brief in my opening statement;
I appreciate your flexibility given the last-minute change in time. I'll get
you the full statement that I've written for you in the next day or so.
I think it's important to take a look now at the state of terrorist abuse
of charity in what I would describe as the age of ISIL and the Syrian war.
Not because all of it is tied, necessarily, to the so-called Islamic State
or to the context of the war in Syria, but because these two events have
largely changed the environment in which we find ourselves
I would put it to you this way: When I was a counterterrorism analyst at
the FBI during 9/11, and in the years that followed when I was in and out of
government, we recognized that abuse of charity had been a major source of
financing for terrorism, for al-Qaeda in particular.
Disrupting terrorists' ability to abuse charitable giving as a means of
raising, transferring and laundering funds — and it's an important way to do
each of those three things and could function for any one of them but often
does all three — that this became a major focus of counter-terrorism
authorities around the world.
Charities operating as fronts for terrorist groups were designated by
national authorities and by international organizations like the United
Nations. The charitable sector was encouraged to put in place more
sophisticated due diligence procedures to protect the industry from abuse
and governments engaged in outreach information campaigns to provide
public-private information sharing. For a while, I think it's fair to say it
seemed like the abuse of charity was a thing of the past, at least as a
preferred illicit finance typology. Then came the war in Syria and a series
of other conflicts across the Middle East and North Africa. I think in
particular of Libya and of Yemen. This has put the reality of terrorist
abuse of charity on the front burner of counter-terrorism policy.
For example, there have been quite a few cases in the United Kingdom.
There was a case this past December; the conviction of two British men on
charges of funneling cash to extremists in Syria. They joined a 100-vehicle
British aid convoy which was just a cover to supply one of their nephews
with 3,000 pounds sterling. He was tied in that particular case to the al
Qaeda element in Syria that used to call itself Jabhat al-Nursa Fateh
al-Sham. There are many cases like that.
As conflicts rage across the Middle East and North Africa, charities
remain crucial for alleviating the accompanying humanitarian crises such
wars bring in their wake. In February, Amnesty International found that 13.5
million people were in urgent need of humanitarian assistance in Syria
alone, and that number is only expected to rise. A UN official warned in
December of a looming famine in Yemen, where nearly 19 million people
already need some form of humanitarian aid.
So it shouldn't be a surprise that the UN Security Council passed a
resolution in 2014 urging all member states to contribute or increase their
support to meet the spiraling need of the people affected by the Syrian
The resolution sought to get help for UN agencies but donors and aid
agencies of any type have to be careful. There are some who will callously
take advantage of such tragedies, whether natural or manmade, to divert,
embezzle or launder funds for terrorists or for other purposes. In some
cases these are false fronts. For example, a report by Australia and several
other southeast Asian countries noted that Australia experienced suspicious
pop-up NPOs, or non-profit organizations, which appeared to dissolve after
raising funds for supposed humanitarian efforts in Syria and Iraq. There is
the case of the charity, purported to help Syrian orphans, that was
operating in Lebanon, Turkey and Bangladesh. Lebanese authorities first
launched an investigation there in May 2015, arrested certain individuals on
charges of fundraising for jihadists and recruiting for the Islamic state.
Another case in Australia led authorities to raid a daycare centre
business. An investigation was started on the suspicion that $27 million of
child care rebates claimed from the Australian government may have been sent
offshore to fund the Islamic State and other terrorist groups.
There have been joint investigations by the United States and Saudi
Arabia of a variety of entities — charities that are focused on financing
for the al Qaeda and the Taliban. I will provide details of those in my
I think it's important to realize this is an issue in an age of
tremendous sectarian division and radical ideological underpinnings for
terrorism across the spectrum whether for far right groups, or radical
Islamist groups and everything in-between. We need to recognize that
charitable support is sometimes underpinning the hard line ideologies that
can foment terrorism. Consider the German intelligence report leaked in
December worrying about the hard line Salafist ideology being imported from
charities in gulf states like Saudi Arabia, Kuwait and Qatar that, according
to the reports, were closely connected with the government offices in those
home countries. One of the most significant groups cited was the Kuwaiti
Revival of Islamic Heritage Society, RIHS, which has already been
blacklisted by the U.S. and I believe the UN as well for bankrolling al
Qaeda. Similar cases can be found in India, in Kosovo and around the world
Finally, I think it's important to recognize that while the vast majority
of our attention in this regard is paid to Sunni extremism when we're taking
about the Islamist spectrum, Iran fomenting its radical Shia variation has
used abuse of charities as well. In July last year, authorities in Kosovo
arrested an Iranian cleric, charging him with financing terrorism and money
laundering through a charity that was "exploiting the revolution.''
More recently, a charity tied to Lebanese Hezbollah, the Islamic
Resistance Support Organization, IRSO, which had been previously designated
by the U.S. Treasury Department in August 2016 was tied earlier this year to
a public Hezbollah campaign explicitly calling for donations not to
Hezbollah's political or social welfare organizations but to its militant
operations with a campaign it called "equip a mujahedeen.'' The organization
produced a campaign video complete with gaudy background music, militants
putting on uniforms and holding weapons, Quranic sayings flashing across the
screen with the words "You contribute. You resist. Financial jihad is your
duty,'' and then providing a donation hotline number that goes to this
charity tied to Hezbollah
So I think we need to think long and hard about the risks and the
liabilities involved with charitable giving. Charities provide an absolutely
critical service. Charities are good, and the vast majority of them are
completely compliant with the kind of due diligence responsibilities we need
to have in place. We need more charity in an age of civil wars and the types
of horrible things we're seeing around the world.
However, as a 2015 report noted, we are in an age in which we're seeing
emerging terrorism financing risks from things like bogus non-profit
organizations using viral social media campaigns to fundraise for
extremists. It can be very hard to prove terrorist abuse of charities in
court — which I imagine we will talk about in a moment — but that doesn't
dissuade us from pursuing these cases as actively as we can.
It means that court proceedings, actual criminal charges, may not always
be the best, the easiest or the most effective way to target these
charities. There may be other regulatory methods or other tools that we want
to use, but we need to target this abuse of the charitable sector.
Finally, we need to recognize that this is something we need to do not
only from a national security perspective, but also from a sincere desire to
help the charitable sector protect itself. When charities are demonstrated
to be at risk, even good charities may find it difficult to be able to
secure banking services. We've seen this many times, where banks or other
financial institutions are wary of clearing funds for charities that so far
as we know are perfectly legitimate and may be operating in conflict zones
because that tends to be where the need is greatest. We've seen this in
Somalia, for example. That's a big problem. We want charities to be able to
function where their services are so desperately needed.
The upshot of many of the requirements that we put on the charitable
sector can be delays and reductions in aid to populations that sorely need
it, and that's a problem. We need to find ways to balance between our
national security prerogative and the equal need to get aid to people who
are desperate for it in as timely a fashion and as affordable a fashion so
that as much of a donated dollar goes to aid as possible. Neither of these
are going to be able to be done at 100 per cent. We're going to have to find
ways to make them work together.
Charities have an absolutely critical role in providing aid and
alleviating suffering worldwide. The vast majority of them are perfectly
legitimate. But as the incidents that I have laid out and more that I will
discuss in my written testimony show, governments, charities and donors all
have to be vigilant. The question is: How do we do that? As we move forward,
how do we further empower our law enforcement agencies on their own and in
cooperation with regulators, FINTRAC, FinCEN here in the United States, and
others, to be able to put together the kind of cases necessary to do that.
With that opening statement, again, it's my honour to be able to testify
before you today, and I look forward to engaging in conversation with you.
Senator Jaffer: Dr. Levitt, thank you for making yourself
available to us. In everything that I have read — and I've not read
everything you have written, but the things that I have read — you have
talked about terrorist financing ever evolving. It's changing, and you have
to adapt to new forms. Those who want to be the bad actors will find a place
in the caravan to go in as help, but the message you gave us today was that
it's still important to have those charities help out, especially in
countries where there is a lot of conflict.
One of the things that worries me about the study that we are doing is
that we are focusing excessively on charities, and we will be entirely
missing the point that terrorist groups move on to new tactics. As they find
one door closed, they move on to new tactics, and that's what I think you
have also said.
Can you talk about the flexibility and not just focusing on charities?
There are other terrorist financing methods as well.
Mr. Levitt: Thank you for your question, senator. Of course,
again, it's my pleasure to be here. Thank you for having me.
It's absolutely true, and I have written extensively on terrorist
evolution and adaptation. I would argue this is exactly what we're seeing.
Whereas, at one point, the abuse of charity was something that was number
one or number two on the list of things that were of greatest concern
regarding terrorist financing. That dropped precipitously over many years of
hard work, and what we are seeing is terrorists evolving and adapting by
returning to the abuse of charity yet again.
There are variations. It is no longer today usually these massive
charities, though we have many cases of those still. There's a lot of
activity on the Internet. There's a lot of activity on social media, but the
fact that we are seeing a return to the abuse of charity, I would argue, is
one form of terrorist evolution and adaptation in this space. It's
incredibly important to underscore, as I think you were getting at, that
there is no one way to raise funds, and we have to walk and chew gum at the
I applaud the committee for taking a look at charities because I don't
think most have caught up to the fact that this is now again something that
bad actors are using as a way to move, transfer and launder funds. It is
something that a committee like this should be looking at. I don't mean to
suggest, however, that it is the only one, and I'm quite certain that a
committee like this will be looking at other means as well.
I've never seen any one terrorist organization that finances itself based
on just one model. I think that, increasingly, we're seeing a flattening of
the illicit finance space where it's not so much, "What does this
organization do or that one do,'' with some exceptions where something like
the Islamic State finds itself operating on ground that happens to be rich
in natural resources, for example. But their supporters around the world,
whether it's Islamic State or al Qaeda, whether we are talking far right
extremists or others, tend to use those tools that are available to them in
their local area, tend to use those things that they are most familiar with.
Why does one person use social media and one person carry cash on his or
her person? Probably because that's what they're familiar with, that's what
they know. Absolutely, I think we are in violent agreement. There are many
ways to raise funds for illicit purposes, terrorist or otherwise, but I
would not lose sight of this one. I think it's very important because we
have an opportunity here to get ahead of the curve before terrorist abuse of
charity becomes bigger than it is. Because it is now something that needs to
be back on our agenda. Maybe not like it was on 9/11, but it is something
about which I think many people are surprised that it has become as big of a
deal as it has over the past few years, given the success we had against it
in the years after 9/11.
Senator Jaffer: Dr. Levitt, you have written extensively about the
sources of funding that ISIS — I believe our biggest terrorist threat — uses
in getting funding. For example, instead of using charities, you have said
that ISIS steals livestock, sells foreign-fighter passports, taxes, et
cetera, including $40 million in a single month from oil sales.
Even when it comes to domestic funding of ISIS, it seems that charities
are simply not the biggest problem, and you have cited the Financial Action
Task Force report that identifies robbery and drug trafficking and ransom as
well as various social service payments and unpaid loans as the major
Can you comment on how it might be wise for a study on terrorist
financing to take on some comprehensive approach rather than focusing on
individual sources? For example, yes, it's important to focus on charities,
but that's not the only terrorist financing. There are others as well. So
can you give us some idea of how we go about doing that?
Mr. Levitt: Thank you for your question. The first thing I would
say is that the work of mine that you're citing is now a little bit old. The
Islamic State has a unique terror financing model because it created a
so-called "state,'' and controlled territory that happened to be resource
rich and so was able to make money from oil, from livestock, from stolen
passports and all of those other things. But now we are seeing tremendous
coalition success in targeting the so- called Islamic State on the ground in
Syria and Iraq, and, as that happens, those types of financing models are
fading away. We are seeing the Islamic State now under severe financial
stress, especially when you add to it things like the fact that, since last
January, the coalition targeting was expanded to enable it to hit oil
tankers, to be able to hit cash depots, literally blowing up millions upon
millions of dollars.
What that has done is make financing from individual supporters in
different places all that much more important. So I think that only
underscores the importance, at this particular time, of looking at something
like charity as a potential sector that could be abused and, indeed, is
being abused by groups like the Islamic State but not limited to the Islamic
Having said that, I think your question was asked and answered already.
I'll say it again: Certainly, there is more than one means of financing
terrorism, but, as we sit here in different parts of North America, I think
it's especially important for us to look at what types of criminal and
terrorist activity are providing logistical and financial support for
terrorist groups from within our borders. Within our borders in particular
we're not seeing that livestock issue. We're not seeing oil and gas. One
thing we do still see, from time to time, is abuse of charity. One thing our
European colleagues see is abuse of charity. One thing the Financial Action
Task Force sees, in its more recent reports than the one I cited in the
study of mine that you pointed to, is abuse of non-profit organizations,
We're not in disagreement at all. There are many ways to finance
charities. We all, myself included, look at many of them. I think it is
appropriate, however, to have discussions on maybe one at a time, and you
can have other meetings that talk about things across a holistic spectrum.
Both of those are appropriate uses of our time and effort, I would argue.
Senator Meredith: Thank you so much for your presentation. One of
the critical things we are looking at is, obviously, as my colleague Senator
Jaffer said, that you talk about charities and the good work that they're
doing and that they're compliant.
We heard from FINTRAC with respect to transactions. Over 23 million
transactions come through every year in terms of the in and outflow of cash
Having worked with our anti-terrorism unit in Canada, what
recommendations can you give us or observations that you've made with
respect to how we can improve and ensure that these transactions that are
coming in don't go toward financing any sort of terrorist group or
individual? Then I have a second question as well.
Mr. Levitt: Thank you so much for our question. The simple answer
is: With difficulty. It's very difficult, often, without some type of
intelligence, which doesn't necessarily have to mean classified
intelligence. There could be information and intelligence that comes from
the private sector, from banks reporting to FINTRAC or what have you. It can
be very difficult when you have an established charity to demonstrate that
what they are saying publicly on their website or maybe at conferences and
whatnot is, in whole or in part — and it can be obviously either — not
entirely true, that some money is also going to terrorism.
As I mentioned in my opening statement, and has been my experience —
first when I started in counterterrorism in the United States in the FBI,
and later as Deputy Chief of Intelligence for the U.S. Treasury — and as
someone who served as an expert witness in many cases involving the abuse of
charity, I can tell you these can be very difficult cases to prosecute, so
we need to look at doing these in multiple ways.
I happen to be quite impressed with a lot of the work that FINTRAC does.
I think it's very important to be able to continue to build public-private
relationships, not only with banks but also with the charitable sector.
First of all, so that the charitable sector has a better understanding of
what is going on. What are you looking for? What are your concerns? So that
the good actors, the vast majority of actors in the charitable sector — who
are not good actors but great actors; they are trying to make the world a
better place — can do what they want to do. It's in their interest. They
don't want to get caught up in this. These are people who are trying to feed
hungry people. They have no interest in supporting terrorists.
We also have to recognize that there are things we will have to work
through. Many of the charities we will be concerned with will be operating
in places that are dangerous, such as conflict zones. Some of those areas,
if you want to be able to deliver food to the people who actually need it,
you will have to have some type of engagement with bad actors. You will have
to pay a bribe somewhere. There are things that in the real world have to
How do we navigate that? I don't have an easy answer to that. I just know
it's not going to be black or white, 100 per cent either way.
The national security side of government has a legitimate and really
important stake in making sure we do all we can to prevent money from going
to terrorists. I would argue that it is no less — or, an equally important
national prerogative to support charitable giving and to provide the
financial and material support to people who desperately need it, for all
the right reasons, and to prevent the kind of massive refugee migration
flows that we have seen, for example, overwhelming Europe. We need to be
able to balance these things.
I will say that in the West in general — in the United States, Canada,
Australia and Western Europe in particular — time and again, in my
conversations with law enforcement, two issues for them in this space are
resources and prioritization.
In many places in Europe, for example, the prioritization of a law
enforcement officer's caseload is made by prosecutors. I remember a
conversation in one European country about the tremendous lack of progress
they had made over many years with a charity that was raising a tremendous
amount of money for terrorism. Everybody knew it; they knew it; over a beer,
they were quite open about it. But this simply wasn't the priority of the
prosecutors. There are limited resources, both financial and personnel, and
it's difficult to do all these things at the same time.
In an era when we're worried about the Islamic State, and then the rise
again of al Qaeda, really serious worries, homegrown violent extremists,
inspired extremists and returning foreign fighters, these are big issues. I
can understand why, for law enforcement and security, their primary
occupation is making sure they are on top of the people not who want to
raise money but who might, God forbid, want to carry out an attack.
I do think we need to find a way to balance those out. Where do we see
the prioritization of this in the counter-terror finance space? The
counter-terror finance space has to be multidisciplinary and across
departments and agencies. The counter-terror finance space is not FINTRAC
space and that's it, or a U.K. charity commission or tax collectors or
whatnot. It is definitely a law enforcement space, and we need to recognize
that law enforcement is going to have competing priorities, whether it's
local, RCMP, FBI or what have you. That's a conversation we need to have. We
need to recognize — as lawmakers, as recovering government bureaucrats and
academics, in my own case — that it's not enough for us to write papers or
to hold hearings if we don't then come up with ways of recommending for them
to better balance their resources. Ultimately, I don't think anybody would
disagree that we should do more, but with the current resources and threats,
you can only do so much.
Senator Meredith: You're a very good-looking recovering academic.
Mr. Levitt: My job here is done.
Senator Meredith: Thank you for your insight on this. Obviously,
the subject matter is near and dear to this committee with respect to the
One of the things you cited in your presentation was the fact that the UN
has a list of sanctioned entities. In Canada, we don't have clear-cut
legislation around these entities. Is that something you would recommend or
suggest to Canada that we pursue in terms of identifying and naming these
entities to ensure that the general public and the interest of the general
public is protected?
Mr. Levitt: I do think there is utility in having a national
listing process, for a variety of reasons. In the United States we have it.
In order for us to be compliant with a UN designation that is proposed by
another country, we need to go through our own listing process.
I remember early on, 2006 or so, at the beginning of the Iran sanctions
era, a small number of Iran sanctions were passed at the UN, pushed forward
by European partners, that the United States was out of compliance with
because we couldn't come up with the evidence on our own. So it's not
perfect and it can present problems, but there are several advantages to it.
Canada got sued by the last person in Canada who was on the UN list. It
was a Sudanese-Canadian case. I know it well because I was slated to be the
Government of Canada's expert witness. In the end, the case was settled.
That is one set of issues that not having your own list presents. De facto,
you need to automatically designate entities that come up at the UN and that
can present problems on legal challenge.
I would argue that maybe the other reason is that the UN list, A, is by
definition incomplete; and, B, can sometimes result in
lowest-common-denominator listing. There may be times when the Government of
Canada, for its own equities and interests, determines that an entity needs
to be listed, and other countries may disagree for policy reasons or
disagree over how they define the information. The Government of Canada may
have its own interests in being able to take an action, and that's something
that is very important.
The second is that, by definition, these lists are incomplete. Very few
people pay attention to this, but the UN list is, by definition, limited to
entities tied to al Qaeda, the Taliban and, now that it has been expanded,
the Islamic State as well. The UN can only designate Indonesian Jemaah
Islamiah, for example, by virtue of tying Jemaah Islamiah to al Qaeda. But
in the event that the Government of Canada wants to list an entity tied to
the Tamil Tigers, which has had a history in Canada, or Hamas, Hezbollah, a
Jewish extremist group, or Colombian FARC — any group that is not expressly
tied to al Qaeda, the Taliban, and Islamic State — it is not designatable at
One of the things we need to pay very close attention to in the coming
years, for example, is the rise now of not just a question of Lebanese
Hezbollah, but the many more very radical and militant Shia militias
primarily, but not only, out of Iraq. They have ties to individuals in North
America, for example, and those, without a list of your own, if you're just
going by the UN list, are non-designatable.
Senator Beyak: Thank you very much, Dr. Levitt, for coming and
sharing with us your vast expertise. It's very much appreciated.
Canada allows religious charities to deal in cash, to accept cash
donations. Some of our witnesses in the past have been very concerned that
there is no way to track cash, that it's easily mishandled and misused. I
wonder if you have any suggestions for our committee's report to address
Mr. Levitt: That's a great question. Let's bring this down to a
granular level. If you are in your church or mosque or synagogue, any
religious house of worship I have ever been into, even if it's only petty
cash, collects cash. I don't think we will want to be in a position to
I do think we have to have very strict regulations in place about how
that money is accounted for and recognizing it will never be perfect. This,
to me, is among those spaces that maybe we just need to recognize. We need
On the one hand, there is petty cash and people donate a few dollars here
and there. This is not what we're really worried about. What we're worried
about is that at the end of a month or two or three months there is a decent
pot of cash and maybe some of those funds can be siphoned off over time.
That will be very difficult to stop, whatever we do.
We do need to have very clear regulatory reporting requirements in place
so that charitable institutions, religious or otherwise, can explain to
authorities how much money came in over a period of time, how much money
came in, in cash or cheque or in-kind gifts, and we can track that to some
When it comes to cash, the more granular the better. So if we can ask for
at least a record to be kept, and how much money came in a week and then a
month, you can get a sense of things. It might be more difficult to cook
those books. At the end of the day, especially with cash, if you want to
cook books, you'll cook the books.
Sometimes law enforcement's greatest leads are places where there are
suspicious activities and completely clean books. I remember the case, in a
completely different context, of Banco Delta Asia in North Korea, which was
as dirty and as crooked as it can get, but the first time that the books
were offered they were so clean as to be disgusting. That was ultimately
proven to be the case, but it was just one more thing that led law
enforcement to say, "Hmm, maybe there is greater scrutiny needed here.
Senator Tkachuk: Thank you very much for that presentation. We
have heard a lot in the past and also today on stopping terrorism financing.
Our government, and I imagine your government does as well, watches for cash
transactions. Also, in the British government, the earlier witness had said
that they worked with charities to make sure that they are not being used by
Are there any other measures that law enforcement and Parliament can do
to prevent terrorism financing? Do governments conduct operational or
compliance audits of charities that do international work?
Mr. Levitt: Thank you for your question. I think this is something
that needs to be considered. There are a lot of different ways to define
what an operational audit might look like in that space.
We need to recognize that our ability to actually audit is obviously most
available to us at home. Let's say we have a charity based in Canada that's
operating in different places and different conflict zones. It can be very
difficult to audit in those conflict zones, and sometimes when it's done,
it's not done very well.
The U.K. Charity Commission, which does wonderful work, is a case in
point. U.K. Charity Commission has not run one or two but three different
investigations into Interpal — not to be confused with the international
police agency — which has been widely tied to Hamas. It's a U.S.-designated
Hamas charity outlawed in Israel and elsewhere.
At one point, the U.K. Charity Commission said it sent people out as best
it could — but really we're not investigators — to look at who Interpal was
partnering with and saw no problems.
The BBC then ran a documentary, sending journalists to some of those same
partner agencies on the ground that Interpal was saying it was partnering
with, and found Hamas posters everywhere. They talked to people, and they
said, "Oh, yes, absolutely, we're Hamas.''
So it can be very difficult. It can also be beyond the remit of some of
these organizations to do those types of investigations abroad.
This does open up a conversation that I think is really important to have
between different overall approaches to this issue. I think that you could
make a case that at the two ends of a spectrum lie the U.S. approach and the
British approach. It's not so much opposite ends of the spectrum as it once
Here is what I mean: In the United States, what we tend to see is if
authorities find a charity that is involved in terrorism, they act on it.
There tends to be, and certainly historically there was, much more of a
hammer approach and not being as willing to look and see if there is a part
that can be carved out. Is the whole tree bad or just some branches or just
In the U.K., you have the opposite. The U.K. Charity Commission took a
kind of scalpel approach that their first, second and third options were to
assume it wasn't a charity that was set up by terrorists or was a front in
whole, but it was in part, and to carve out entities here and there.
In both cases, you could cite examples that worked and those that were
failures. I think it's fair to say that both sides have moved a little, but
there is still a spectrum of activity.
I think what we need is to be able to find ways to build connective
tissue, inter-agency connective tissue between our intelligence, our law
enforcement, our regulatory authorities, our tax people, to be able to have
these discussions, and each of whom is looking at things from different
ways, to be able to have these discussions about what we — kind of a capital
"W'' — collectively know. Then we can decide if something needs to be done
with a foreign partner and theoretically sending people abroad to look for
themselves. But it does get very difficult when charities are operating
internationally and can often be operating very cleanly at home in the
United States, or in your case Canada, and that the illicit activity happens
on the ground or abroad.
Senator Tkachuk: One more question. It bedevils me a little bit
because charities operate at the pleasure of the government. If the
government says, "We're going to pull your tab and you can't get receipts
anymore,'' that kills the charity.
It seems to me that you can do an audit of the person's books, and you
can do an audit there. Revenue Canada does those. That can be fully
compliant, but that doesn't mean that in the field they are not doing some
bad things out there.
So if there is some operational evidence that there are suspicious things
going on, Revenue Canada can simply say, "We're going to do an audit
operationally and we're suspending you for six months, and we'll see what
happens.'' There is really not much they can do about it.
That's why I don't understand why we can't seem to log on to what is
going on with charities, because we hear a lot of talk, but there are no
convictions and nothing happening.
Mr. Levitt: I would caution against judging by convictions. There
are many tools in our tool kit. There are certainly cases where there should
be prosecutions and indictments, and at least in some cases, one would
assume, convictions. I think a very strong case can be made across the
board, not just in Canada, that these are few and far between and that
that's not always indicative of insufficient evidence. I think sometimes it
is indicative of some of the other things we have discussed, in terms of
resources and prioritization of the threat.
There are other ways to measure how well we're doing on this whole issue.
The same way, by the way, we shouldn't measure by how many designations we
have had, how many FINTRAC referrals we have had. Each of these is
interesting, but, in isolation, none of them is particularly telling.
I think it's also important to recognize that it can be politically
sensitive to target charities, especially if charities are tied to
particular ethnic or religious groups. So you want to make sure that there
is enough there.
It's my understanding — and I can't speak to Canada, I can only speak to
the United States — as former FBI, if you look at the Holy Land Foundation
case here in the United States, it was the largest Muslim charity in the
country at the time, and it turned out to be a front for Hamas. It took two
trials. The first ended in a hung jury, but ultimately there were
convictions on all counts of charity abuse for terrorist support in the
That didn't start with a prosecution. That was an intelligence
investigation for quite a few years, very operational, looking at books and
other things. So I can only assume that counterparts in Canada engaged in
similar activities where they deem it necessary.
The Chair: Senator Meredith, be very brief.
Senator Meredith: Thank you so much. We heard from two professors
prior to you, and they talked about, especially Professor Keatinge,
diversion and assets where alleged charity sends monies, goods and products
for humanitarian purposes overseas and those are then diverted for illicit
activities. Can you elaborate for me in terms of what Canada can do in terms
of our charities? You talk about compliance and governance and so forth. Is
there anything else that we can do differently or we need to enhance? To
Senator Tkachuk's line of questioning with respect to these charities in
terms of prosecution or having their charity status revoked because they are
failing to comply, can you elaborate further on that?
Mr. Levitt: First of all, I was very pleased to see that my friend
and colleague Tom Keatinge testified today, too. You are in good hands. I
can't speak to the hands you are in now, but earlier you were in good hands.
He raises an important point in terms of diversion. Sometimes diversion
happens and it's not part of what is happening in the home charity, say in
the United States or Canada, where an entity is raising funds. They are
trying to do the right thing, and then it gets diverted farther down the
line either by someone farther down the line who is a bad actor or because,
as I said, funds are needed to get food to this village. The only way to get
to this village is to go through lines controlled by a militant group. They
will only let me through with a bribe. There are a variety of ways it can
What we need to be most concerned with are ones where the charity
operating in the home country, say Canada, is knowingly operating in such a
way that diversion is happening. It knows about it. Perhaps it's
purposefully doing it that way, in the worst case scenario, or it's
tolerating it and not reporting it.
There is no mechanism right now for them to report, "Hey, there is a
starving village. We have to give 2 per cent to this terrorist group to get
through. Can we do that?'' Maybe there needs to be, but there isn't right
We, however, have had so many cases where the people were knowingly
operating on the ground with people they knew to be militants. The
worst-case scenario, charities that were established to be fronts in the
first place, that was what they were set up to do. Charities that are
claiming to be non-profit, non-governmental organizations and I'm sure are
giving some funds, maybe most funds, to people who need it, maybe people who
support their cause, maybe not. But in the real world, charity does go, even
when it's also going to terrorism, and that can make it complicated.
It can also, by the way, make it complicated for us to get cooperation
from local partners on the ground. The local government may decide that it's
in their priority interest to see it gets to that starving village. They may
not see this militant group as being quite as bad or maybe they are
intimidated by this militant group, so that can also complicate our
investigative abilities on the ground.
We need to figure out where our home court advantage is — in the United
States, in Canada, et cetera — what regulatory requirements can we put on
parties that won't be so overbearing that will cause them to delay by days
or weeks; that won't be so expensive, in terms of compliance, that will
divert a ton of money that should be going to charity to their compliance
efforts, but is still reasonable due diligence on their part too so that
they can say, "Look, we have done everything that is reasonable within our
ability to determine that the guy that we're partnering with in Somalia, in
Iraq, in the Gaza Strip, in Colombia, wherever it is, is a good actor.'' I'm
not convinced that we're doing all that yet.
Several years ago I testified on this issue before the U.S. Congress. I
think I was brought in as kind of the hardheaded security guy, and most of
the panel was people from the charitable sector. I think they were surprised
at how much agreement we had, but I don't think that they were quite
willing, as I was, to say, "Look, national security can't ask for 100 per
cent. We have to give up some.'' I don't think they were quite as willing to
say, "Okay, we can't get stuff where it needs to go as fast as possible, as
cheaply as possible, even though we want to do that for good reasons,
because we have to be able to accommodate national security.''
Since that testimony, things have progressed. I think that's in part why
we have seen so much success in denying illicit actors the ability to
leverage charity and abuse charity as much as they once did. My concern is
that we're seeing things all over the world in all kinds of cases — big
charities, two guys starting up a charity that exists on their website, and
everything in between — and this is our opportunity to get ahead of this
I don't work for Canada Revenue, but bring them in. What types of things
would be useful to you to know to be able to make that determination, as
your colleague asked a moment ago, as to whether or not we need to do some
type of operational forensic investigation? At what point do we need to see
if the RCMP has information? Maybe we're looking at the charity itself and
maybe they are looking at some of the individuals who may be affiliated with
the charity. A holistic, whole-of-government approach is really necessary.
It's the only way to work in this space because, as I said earlier,
ultimately we will know there is illicit activity going on if we get that
information. We can't expect that their books will look bad or that their
website looks bad. To the contrary, their websites, their books and their
public statements more often than not will be squeaky clean.
Again that tiny subset, I can't state enough — I keep talking about
charities and abuse — the vast majority of charities are our best allies and
our best friends and are doing God's work.
The Chair: Dr. Levitt, thank you very much for taking the time out
of your schedule to appear before us. The clock has moved on. I would like
to excuse you so you can go about your day. Thank you very much.
I would suspend, colleagues, to go in camera. There are a couple of
issues I would like to bring forward, and I'll try to keep it as brief as I
(The committee continued in camera.)