Measures by the federal government to prevent terrorist groups from receiving funding from Canada are hampering the international aid efforts of Muslim charities.
That is the finding of a new report titled Humanitarianism and the Exclusion of Muslim Charities from the Financial Sector, which was co-produced by the University of Toronto and Institute of Islamic Studies.
Canada’s anti-money laundering and anti-terror financing laws exist to protect the integrity of the financial system, prevent misuse by criminals or terrorist organizations, and uphold Canada’s international obligations, the report notes.
But Ottawa’s measures and tools also lead to unintended consequences, the report says. And Muslim aid groups are being especially affected because they operate in countries Canada deems high-risk for terrorist financing, such as Yemen and Syria.
“Canadian government hearings and independent research have shown that Muslim-led charities are disproportionately subjected to onerous audits by the Canada Revenue Agency, often extending beyond standard compliance with the Income Tax Act,” the report says.
For aid groups, the consequences of this enhanced scrutiny can include “financial derisking” — a process where banks and other financial institutions cut off services to clients.
“In practice, this can mean they terminate a client’s account with limited notice and without disclosing the reason,” the report says. “Clients must withdraw their funds within a set time frame, after which the institution ceases to provide services.”
Once “derisked,” aid groups can lose access to essential financial services and cannot fulfil their operational requirements.
To avoid this outcome, aid groups may proactively practice what is called “humanitarian derisking” — scaling back or ending programs for fear of running afoul of anti-terrorism measures.
‘More difficult’
One aid group that is following this discussion closely is Islamic Relief Canada, a registered Canadian charity.
“The current risk environment affects how international humanitarian organizations, including Islamic Relief Canada, plan and deliver their work,” said Houda Kerkadi, who does media relations for the organization.
Kerkadi cited other challenges created by de-risking, including duplicative due diligence, delays, increased administrative costs and fewer financial channels.
“Even when we ultimately find a way to deliver assistance, the system can still make legitimate humanitarian work slower, more costly and more difficult,” she said.
It can also “deter organizations from operating where the need is greatest. We have certainly seen that scenario broadly play out in the sector,” she added.
Like many aid groups, Islamic Relief Canada often works in the most difficult environments in the world, she noted.
“Conflict, displacement, natural disasters and political instability inevitably create operational challenges, but they also make rigorous oversight even more important,” she said. Islamic Relief Canada maintains the strictest financial and other controls to ensure humanitarian assistance reaches its intended beneficiaries, she says.
The challenge is “ensuring that regulatory and financial systems are both rigorous and workable so that legitimate humanitarian organizations can continue reaching people who urgently need assistance,” she said.
‘Reinforce concerns’
Darron Seller-Peritz, a policy analyst and program officer at Cooperation Canada, says his organization stands with aid groups like Islamic Relief Canada that are dealing with extra scrutiny.
“These organizations are an important part of Canada’s charitable and international cooperation sectors and they must be able to carry out their legitimate work without facing disproportionate barriers,” said Seller-Peritz, whose organization is a national network of international aid groups.
The report “reinforce[s] concerns that Muslim-led and humanitarian organizations have raised for some time,” he added.
Counter-terrorism financing and regulatory measures “should be implemented in a manner that is proportionate, transparent, risk-based and designed to safeguard legitimate charitable and humanitarian activities,” he said.
Cooperation Canada welcomes opportunities to discuss emerging risks and potential policy and operational solutions is an important step in the right direction, he added.
In a statement, Global Affairs said it recognizes the important role that charities and non-profit organizations play in delivering humanitarian assistance to vulnerable populations around the world.
“Canada is committed to maintaining a strong framework to combat terrorist financing and protect the integrity of Canada’s financial system, while supporting the ability of humanitarian organizations to carry out their vital work,” the statement said.
