Canada is one of the first countries in the world to require online crowdfunding platforms to report to their anti-money laundering and anti-terrorist financing regulator, government officials told a special committee examining the truck convoy protest and the steps taken the government did to end it.
Treasury officials said new regulations came into effect last week, adding crowdfunding platforms and some payment processing firms to the list of companies required to report large or suspicious transactions to the Financial Transactions and Reports Analysis Centre, Canada’s Financial Intelligence Unit , Report to.
FINTRAC deputy director of intelligence Barry MacKillop said the regulations fill a loophole that could be exploited.
“Certainly, I think it would at least act as a deterrent to anyone who wants to use a crowdfunding platform to promote nefarious activity,” MacKillop told lawmakers and senators on the committee set up to investigate the government’s use of the emergency law .
Millions raised on GoFundMe, GiveSendGo
Julian Brazeau, director-general of the Treasury Department’s financial crime and security division, said Canada is the first country, to his knowledge, to require crowdfunding platforms to report transactions to a body like FINTRAC.
The move means some large donations over $10,000 to Canadian fundraisers hosted by online crowdfunding companies like GoFundMe or GiveSendGo or that the platform deems suspicious could now be reported to FINTRAC and then potentially reported to the police.
GoFundMe, which hosted the first multimillion-dollar crowdfunding campaign for the Ottawa truck convoy protest, said it believes “responsibility is at the core of social fundraising” and will comply with the new regulations.
“GoFundMe will continue to work together and work together as new regulations are introduced,” said spokeswoman Meghan Weltman.
GiveSendGo – which raised millions for the convoy protest after GoFundMe shut down the fundraiser over concerns it might be violating its terms of service – has not yet responded to questions from CBC News.
The power of crowdfunding companies to raise money 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 – successfully raised millions of dollars from donors in Canada and abroad had collected.
The government initially required crowdfunding platforms to report to FINTRAC under the Emergency Economic Measures Order, which it passed when it invoked the Emergency Law to resolve the truck convoy protest. This requirement ended with the lifting of the declaration of state of emergency. However, the government telegraphed plans to require crowdfunding platforms to report FINTRAC in their budget, then published new regulations in The Canada Gazette on April 27.
In the statement accompanying the regulations, the government said the international Financial Action Task Force had identified crowdfunding platforms “as an emerging risk area for terrorist financing”.
The fact that crowdfunding platforms are not required to report certain transactions to FINTRAC poses “a serious and immediate risk to the security of Canadians and the Canadian economy,” she wrote.
“This risk became clear in early 2022 when illegal blockades took place across Canada, funded in part by crowdfunding platforms and payment processors. The persistence of these gaps poses a risk to the integrity and stability of the financial sector and the broader economy, as well as a reputational risk for Canada.”
The regulations will introduce a number of new requirements for crowdfunding platforms.
“Obligations include registration with FINTRAC, reporting requirements (including suspicious transactions and transactions of great value), record keeping, customer due diligence and the development of a compliance program,” the government wrote.
The regulations cover transactions involving both traditional and virtual money, such as cryptocurrencies, and “apply to both domestic and foreign companies when directing their services to Canadians.”
The government said about 1,000 crowdfunding platforms and additional payment processors are now required to report to FINTRAC. It estimates that it will cost the platforms $18 million to $20 million overall in management and compliance costs over the next 10 years.
Much of the committee’s hearing Tuesday night focused on the provisions of the emergency law that resulted in 280 bank accounts or other financial accounts being frozen for several days. Congressmen and senators bombarded Treasury and FINTRAC officials with questions about why and how they were being conducted. Conservative MP Glen Motz said the move had shaken many Canadians’ confidence in the government and Canadian banks.
Deputy Deputy Minister Isabelle Jacques said the measure was taken to prevent money from flowing into the protest and to dissuade protesters from staying on Parliament Hill. After they left the protest, their accounts were unblocked, with all accounts unblocked by February 24. Jacques pointed out that it is up to the financial institutions to decide which accounts should be frozen based on the information provided by the RCMP.