Skip to content
SECD - Standing Committee

National Security, Defence and Veterans Affairs

 

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.

[English]

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 Columbia. Welcome.

Senator Kenny: Colin Kenny, Ontario.

[Translation]

Senator Saint-Germain: Senator Raymonde Saint-Germain from Quebec.

[English]

Senator Boniface: Gwen Boniface, Ontario.

Senator White: Vern White, Ontario.

[Translation]

Senator Smith: Senator Larry Smith from Montreal.

[English]

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.

[Translation]

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.

[English]

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' terrorism investigations.

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 anti-terrorism efforts.

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

[Translation]

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. Chair.

[English]

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 through this.

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 terrorism financing.

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 that.

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 service businesses.

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 before?

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 security agencies.

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.

[Translation]

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 transactions.

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.

[English]

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 tax receipts?

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 investigation.

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 prosecution.

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 their fundraising?

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 prosecution afterwards.

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 out.

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 component.

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 and reporting?

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 protect us.

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 report those?

Mr. MacKillop:Correct.

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 charities.

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 Beyak's question.

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 rested.

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 exist.

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 overlooked issue.

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 financing?

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 words.

[Translation]

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.

[English]

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 Canada.

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 be difficult.

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 our interests.

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 work.

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 countries.

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 points.

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 charities?

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 terrorism.

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 you?

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 picture.

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 be active.

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 particular Germany.

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 to.

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 watching anyone?

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 raise money?

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 allies.

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 report something.

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 suspicion.

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 civil war.

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 written statement.

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 same time.

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 financing sources

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 State.

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, a.k.a. charities.

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 into Canada.

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 happen.

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 outcomes.

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 the UN.

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 that issue.

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 outlaw that.

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 some balance.

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 extent.

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 terrorist organizations.

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 was.

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 some fruit?

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 United States.

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 happen.

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 now.

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 problem set.

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 can.

(The committee continued in camera.)

Back to top