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Vincent Clifford: Terrorist financing laws can affect us all

(2013-08-29)

OTTAWA — One of the main objectives for most criminal organizations is the accumulation of wealth. Such is the case with drug cartels, international fraud rings and foreign corruption schemes. Terrorist groups, however, sit in stark contrast to conventional criminal organizations — they are not motivated by financial gain. Their mission, in most cases, is to advance an extremist ideological agenda by committing sudden and deadly acts of violence that are meant to strike terror in the hearts and minds of innocent people.

This Right to Know column continues the four-part series on anti-terrorism and national security law, and examines measures designed to incapacitate terrorist financing. Although Canada’s terrorist financing laws are relatively unknown to the general public, they have in fact altered the way in which many businesses and financial institutions operate.

After 9/11, there was a renewed and intensified interest in the underpinnings of terrorist financing. Several governments around the world, including our own, signalled that part of the war on terror would be waged on a “financial front.” Large-scale acts of terrorism require extensive monetary backing and a financial framework within which to transfer funds earmarked for such activities. Consequently, one of the purposes of Canada’s terrorist financing law is to track and monitor the transfer of suspicious funds within Canada and abroad.

Keeping track of suspicious financial transactions is clearly an effective and worthwhile terrorist financing counter-measure. However, it might surprise most Canadians to learn that one way in which our government identifies suspicious financial transactions is by requiring private sector entities to report to a national intelligence agency. Accountants, banks, credit unions, trust companies, moneylenders, financial co-operatives, currency service companies, security dealers, real estate brokers, life insurance companies and casinos are all required to report large and/or suspicious financial transactions to a national financial intelligence agency known as FINTRAC (the Financial Transactions and Reports Analysis Centre of Canada).

FINTRAC operates under the ambit of federal terrorist financing and money laundering laws. Its mandate includes collecting and analysing financial data, and the production of financial intelligence. Private sector business entities that must report to FINTRAC are identified in federal regulations, and are known as “reporting entities.” They are required to report financial transactions that involve sums greater than $10,000, or where there are reasonable grounds to “suspect” that a transaction is related to a terrorist offence.

In addition to reporting to FINTRAC, businesses are required to comply with client identification and record-keeping obligations, and must also undertake internal risk assessments to determine whether they are vulnerable to terrorist financing activity. Indeed, the “Know Your Client” form that financial institutions complete is designed to ensure that they are in compliance with the law.

Failure to report to FINTRAC when required is an offence — compliance and due diligence are paramount. The regime threatens stiff penalties for corporations and individuals who fail to report. Regulatory penalties can be up to $500,000. In the most serious of cases, criminal charges can be laid and offenders can also face imprisonment. This presents a significant issue for directors and officers of financial institutions and businesses.

On an annual basis, FINTRAC receives approximately 25 million transaction reports from more than 100,000 sources. Where there are reasonable grounds to suspect that financial intelligence would be relevant to investigating a terrorist financing offence, the information can be passed to other investigative agencies at the federal, provincial or municipal level. These agencies include various police services, CSIS, the Canada Revenue Agency and the Canada Border Services Agency. The sharing of information is secret, and it is done without the knowledge or consent of the clients using the businesses who report to FINTRAC.

Proponents of the mandatory reporting regime say that it plays a critical role in ensuring the high quality and timeliness of data that FINTRAC receives, thereby facilitating the effective investigation and prosecution of terrorist financing offences.

Critics of the mandatory reporting requirement maintain that it creates the potential for intrusion on ordinary citizens’ privacy rights. The requirement to make a judgment about what constitutes a “suspicious” transaction could result in over-reporting in order to reduce risk of non-compliance. In addition, the regime has been criticized on the basis that it allows access to personal information for investigative purposes without a warrant or court order.

Such divergent views underscore one of the most pressing civil liberty issues in the fight against terrorism — to what degree should personal information be shared? We, as a nation, must continuously assess the extent to which privacy rights should give way to national security concerns. Canadians can, however, be confident that when called upon to do so, our courts have demonstrated that they are capable of striking a balance between the right to privacy, and the need for security.

 

W. Vincent Clifford is certified by the Law Society of Upper Canada as a Specialist in Criminal Law. He is the managing partner of the law firm of Edelson Clifford D’Angelo, LLP. He can be reached at vincent@ edelsonlaw.ca and you can follow him on Twitter at twitter.com/WVClifford.


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