Since late January 2022, protesters have been occupying the city of Ottawa in an extended demonstration against vaccine mandates. The protest was initially billed as a ‘freedom’ convoy aiming to get the federal government to remove mandatory vaccination requirements for truck drivers. However, it quickly became evident that the protest organisers and many of their supporters were also ideologically-motivated extremists and that the protest was about much more than mandates and included anti-vaccine elements, QAnon conspiracy theory adherents, white supremacists, and more.
In February, the protest in downtown Ottawa expanded to include blockades at several Canada – US border crossings. One such blockade at the Coutts border crossing also led to arrests and charges, including allegations of a conspiracy to commit murder.
In response to these events, on Monday, 14 February, 2022, the Government of Canada announced plans to use the Emergencies Act to implement financial measures (and other measures) against the protesters in Ottawa and at blockades across the country. The purpose of these measures is to limit the ability of protesters to re-supply and sustain their occupation, encourage them to leave Ottawa, and restrict the financial resources they have at their disposal.
These financial resources are extensive. Various fundraisers for the convoy, and particularly crowdfunding campaigns, have raised upwards of US$10 million. While most of these funds have not been disbursed to the protesters, the spectre of this level of funding (some of which has come from outside Canada) for an illegal occupation of Ottawa raised serious concerns.
As a result, the government announced a series of financial measures to stifle these sources of funds. One of these measures includes the expansion of Canada’s existing anti-money laundering and counter-terrorist financing act and associated regulations, (the Proceeds of Crime (Money Laundering) and Terrorist Financing Act), to regulate crowdfunding companies. While other measures are intended to expire after thirty days, the government has signalled its intention to make the crowdfunding provisions permanent. Under existing law, crowdfunding platforms like GoFundMe and GiveSendGo are not regulated: instead, their payment processors (like Stripe, PayPal, and WePay) are regulated entities required to report mandatory transactions to FINTRAC, Canada’s financial intelligence unit.
The conversation around the possible regulation of crowdfunding platforms is not a new one; however, as a FINTRAC deputy director noted during this testimony at a parliamentary committee, the existing regulations as applied to payment processors (and excluding crowdfunding) do not leave a significant gap in the regime. There is little to be gained from regulating crowdfunding platforms in addition to payment processors – at most, this addition to the regime will allow crowdfunding platforms to identify their own suspicious transactions and report them to FINTRAC, already a mandatory requirement for payment processors. If these regulations are not adequately de-conflicted, they could result in a duplication reporting of transactions by both the crowdfunding companies and the payment processors, and increase FINTRAC’s compliance monitoring responsibilities.
One area of the emergency measures regulations that is new and does address a gap in Canada’s anti-money laundering and counter-terrorist financing regime is the inclusion of cryptocurrency crowdfunding platforms. This measure appears to have been added to directly target a crowdfunding campaign hosted on Tallycoin. Tallycoin is a crowdfunding website set up to handle Bitcoin transactions. It allows donors to send donations directly to a beneficiary’s wallet, and does not involve a payment processor, meaning that these transactions have few touchpoints with regulated entities in Canada. The convoy crowdfunding campaign hosted on Tallycoin received over US$1 million in donations, at least some of which was likely disbursed to the protesters. Under the new regulations, cryptocurrency crowdfunding platforms like Tallycoin would be required to register with FINTRAC, submit mandatory reports, and generally comply with the PCMLTFA.
While the inclusion of cryptocurrency-based crowdfunding platforms under Canada’s anti-money laundering / counter-terrorist financing laws does address a gap in the regime, the risk posed by these entities is relatively small. In fact, there is little evidence of the involvement of crowdfunding platforms in general (let alone those soliciting donations through cryptocurrencies) in illicit financial activities; their greatest financial risk is the creation of fraudulent campaigns, not money laundering, terrorist financing, sanctions evasion, or other illicit financial activities.
Ultimately, the inclusion of crowdfunding platforms in Canada’s anti-money laundering / counter-terrorist financing regime creates some duplication of reporting and increases the compliance monitoring responsibilities of the FINTRAC. Certainly, the duplication of reporting can be managed through deconfliction in regulations, and compliance burdens can be eased by a greater investment in FINTRAC’s compliance activities when permanent legislation is tabled. However, a piecemeal approach to amending FINTRAC’s legislation and reporting entities during emergencies overshadows a far greater problem in Canada: a lack of investment in resources to investigate and prosecute financial crimes of all types, including those being enabled by new financial technologies.