Canada has become one of the first countries in the world to require online crowdfunding platforms to report to its anti-money laundering and terrorist financing watchdog, government officials have said. to a special committee examining the truck convoy protest and the government’s actions to end it.
Finance Ministry officials said new regulations came into force last week, adding crowdfunding platforms and certain payment processors to the list of companies required to report large or suspicious transactions to the Center for Analysis of Financial Transactions and Reports, Canada’s Financial Intelligence Unit.
Barry MacKillop, deputy director of intelligence for FINTRAC, said the regulations fill a gap that could be exploited.
“Certainly, I believe subjecting them to the Proceeds of Crime, Money Laundering and Terrorist Financing Act would at least serve as a deterrent to anyone who might want to use a crowdfunding platform to advance nefarious activities. “, said MacKillop. MPs and senators on the committee set up to examine the government’s use of the Emergency Act.
Millions raised on GoFundMe, GiveSendGo
Julian Brazeau, director general of the Financial Crimes and Security Division of the Department of Finance, said that to his knowledge, Canada is the first country to require crowdfunding platforms to report transactions to an agency. like FINTRAC.
The power of crowdfunding companies to raise funds was in the spotlight earlier this year after organizers of the truck convoy protest – which paralyzed downtown Ottawa for three weeks and blocked various border crossings – have succeeded in raising millions of dollars from donors in Canada and abroad, first on GoFundMe and then on GiveSendGo.
The government first required crowdfunding platforms to report to FINTRAC under the Emergency Economic Measures Order it passed when it invoked the Emergencies Act to resolve the demonstration of the convoy of trucks. When the declaration of emergency was revoked, this requirement ended. However, the government telegraphed its intention to require crowdfunding platforms to report to FINTRAC in its budget last month, then published new regulations on April 27 in the Canada Gazette.
In the explanation that accompanies the regulations, the government said the International Financial Action Task Force has identified crowdfunding platforms “as a new area of risk for terrorist financing”.
The fact that crowdfunding platforms are not required to report certain transactions to FINTRAC presents “a serious and immediate risk to the safety of Canadians and to the Canadian economy,” he writes.
“This risk was highlighted in early 2022, when illegal lockdowns took place across Canada and were funded, in part, by crowdfunding platforms and payment service providers. Allowing these discrepancies to persist represents a risk to the integrity and stability of the financial sector and the economy in general, as well as a risk to Canada’s reputation. »
The regulation will introduce a number of new requirements for crowdfunding platforms.
“Obligations include registration with FINTRAC, reporting requirements (including suspicious transactions and high value transactions), record keeping, customer due diligence and development of a compliance program,” the government wrote.
The regulations include both traditional and virtual currency transactions like cryptocurrencies and “apply to domestic entities, as well as foreign entities when directing their services to Canadians.”
The government said around 1,000 additional crowdfunding platforms and payment processors will now have to report to FINTRAC. He estimates that this will cost the platforms a total of $18-20 million over the next 10 years in administrative and compliance costs.
Much of Tuesday night’s committee hearing focused on provisions of the emergency law that resulted in the freezing of 280 bank or other financial accounts for several days. Members of Parliament and Senators bombarded officials from the Department of Finance and FINTRAC with questions, wanting to know why this was done and how it was done. Conservative MP Glen Motz said the decision has shaken the confidence of many Canadians in the government and Canadian banks.
Assistant Deputy Minister Isabelle Jacques said the measure was passed to stop money flowing to the protest and deter protesters from staying on Parliament Hill. Once they left the protest, their accounts were unfrozen, and all accounts were unfrozen on February 24. Jacques pointed out that it is up to financial institutions to decide which accounts should be frozen, based on information provided by the RCMP.