Budget will compel crowdfunding platforms to report suspicious transactions

Popular online crowdfunding platforms and their payment processors will soon have to report suspicious transactions

Popular online crowdfunding platforms and their payment processors will soon have to report suspicious transactions to Canada’s money laundering and terrorist financing watchdog.

The policy change, outlined in Thursday’s budget, comes in the wake of the anti-vaccine mandate convoy protest that paralyzed downtown Ottawa for three weeks and blocked several border crossings.

Crowdfunding campaigns raised millions of dollars for the protest from donors located in Canada, the United States and around the world.

A campaign on GoFundMe raised $10.1 million for the protest before the company — worried that it might violate GoFundMe’s terms and conditions — shut it down. A second Freedom Convoy 2022 campaign hosted by GiveSendGo raised $9.7 million US while the Adopt a Trucker campaign, which is still live on GiveSendGo, has raised $591,440 US.

A separate online crowdfunding cryptocurrency campaign raised more than $1 million for the protest — much of it from anonymous donors.

Most Canadian financial institutions are required by law to report certain transactions to the Financial Transactions and Reports Analysis Centre (FINTRAC), which looks for financial transactions that could be related to money laundering or terrorist financing. But the emergence of online crowdfunding sites since the most recent revision of the FINTRAC law has resulted in them not being covered.

The crowdfunding campaigns for the convoy protest attracted attention because of the speed at which money was raised and the size of some of the six-figure donations from companies and individuals. It also highlighted the fact that crowdfunding platforms were generally unregulated in Canada, and the rules that did exist were largely set by the crowdfunding companies themselves.

Expanding the reach of regulations

In her budget tabled Thursday, Finance Minister Chrystia Freeland said the government will introduce new regulations to expand the existing rules which oblige companies to report things like suspicious transactions or financial transfers of $10,000 or more.

“The federal government is working to bring into force new regulations that extend AML/ATF obligations to payment service providers and crowdfunding platforms,” the government wrote. “This will ensure that these businesses are required to monitor and report all instances of suspicious activity that may involve attempted money laundering or terrorist financing.”

In separate testimony before the House of Commons Finance committee in recent weeks, officials from FINTRAC and the RCMP said they didn’t see any signs of terrorist financing during the truck convoy protest.

A protester argues with police officers on the 17th day of the convoy protest in Ottawa on Feb. 13, 2022. (Justin Tang/The Canadian Press)

When the federal government invoked the Emergencies Act to deal with the protest, it required crowdfunding services to register with FINTRAC. That requirement ended when the Emergencies Act was revoked.

By proceeding through regulation, the government can make the requirement permanent without having to get approval from Parliament.

To allow FINTRAC to add crowdfunding platforms and payment processors to its workload, the budget plans to provide it with an extra $89.9 million over five years and $8.8 million ongoing — a 24 per cent increase in funding and a 13 per cent increase in staffing.

“This increased capacity will enable FINTRAC to implement new anti-money laundering and anti-terrorist financing requirements for crowdfunding platforms and payment service providers; support the supervision of federally regulated financial institutions; continue to build expertise related to virtual currency, modernize its compliance functions; and update its financial management, human resources, intelligence and disaster recovery systems,” the government wrote.

Government planning a crypto review

The government also plans to strengthen the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, along with sections of the Criminal Code and other legislation, and will conduct a review of the anti-money laundering and terrorism financing regime to address identified gaps.

In the budget, the government says it also plans to launch a legislative review of digital currencies and to help manage the risks of digitization.

“In the last several months, for example, there have been a number of high-profile examples — both around the world and here in Canada — where digital assets and cryptocurrencies have been used to avoid global sanctions and fund illegal activities,” the government wrote.

An advertisement for the Bitcoin cryptocurrency is displayed on a street in Hong Kong on Feb. 17, 2022. (Kin Cheung/AP Photo)

Crowdfunding platforms and payment processors involved in the convoy protest fundraisers have not yet responded to requests from CBC News for comment. In testimony before House of Commons committees, they indicated they would be open to reporting to FINTRAC.

Kim Wilford, general counsel for GoFundMe, said the company is willing to work with the government.

“To the extent it is determined that we should be regulated by FINTRAC, we will gladly assist and cooperate,” Wilford told the public safety committee on March 3.

Katherine Carroll is global head of policy for Stripe, which processes payments for a number of crowdfunding platforms. She said it pre-registered with FINTRAC when the Emergencies Act was adopted.

“We have been in active communication with FINTRAC and stand ready to co-operate and comply with any permanent regulatory changes that are adopted, whether through new legislation or in connection with implementation of the Retail Payments Activities Act,” she told the public safety committee.

Jacob Wells is co-founder of GiveSendGo, which has hosted fundraisers in the past for members of the Proud Boys — which has been designated a terrorist group in Canada. He told the public safety committee that his company would comply with a requirement to report to FINTRAC.

“We’re going to do everything that we’re required to do by law in order to keep our platform viable and to continue the service that we have for Canadians and other people around the world,” said Wells.

Elizabeth Thompson can be reached at [email protected]

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