OTTAWA — Canada’s efforts to prevent terrorist financing may be creating unintended barriers for Muslim charities trying to deliver humanitarian assistance in some of the world’s most vulnerable regions, according to a new University of Toronto study.
The study, led by University of Toronto law and history professor Anver Emon, warns that stringent anti-terrorism financing rules, sanctions and banking practices are causing some Canadian Muslim charities to reduce or completely withdraw humanitarian operations from countries such as Syria and Yemen. Organizations fear that working in jurisdictions considered high-risk could result in frozen funds, terminated banking relationships or other serious consequences.
Emon’s study makes 12 recommendations to federal agencies aimed at helping charities and non-profit organizations provide humanitarian and development assistance abroad while remaining compliant with Canadian laws and international obligations.
The treatment of Muslim charities has faced increasing scrutiny in recent years, with critics arguing that some organizations have been disproportionately affected by measures intended to combat terrorist financing. A National Security and Intelligence Review Agency report released last October found a “lack of rigour” in the Canada Revenue Agency’s process for selecting charities for terrorism-related audits and warned of risks of bias and discrimination.
Emon, who co-authored a widely discussed 2021 report examining audits of Muslim charities, expands the focus in his latest research to Canada’s broader anti-terrorism financing framework and sanctions regime.
The study acknowledges that these measures serve important purposes, including protecting the integrity of Canada’s financial system, preventing funds from reaching criminal or terrorist organizations and meeting Canada’s international obligations under global standards established by the Financial Action Task Force. However, it argues that the system can also produce significant unintended consequences.
Muslim charities can be particularly affected because many provide humanitarian assistance in conflict zones and regions that Canadian authorities and financial institutions consider to carry a higher risk of terrorist financing.
One major concern identified in the study is “financial derisking,” in which banks or financial service providers terminate or restrict services for organizations they consider potentially risky. A related problem, described as “humanitarian derisking,” occurs when charities reduce or abandon humanitarian activities because they fear violating anti-terrorism laws, sanctions or financial compliance requirements.
According to the study, financial institutions generally have considerable discretion under their service agreements to terminate relationships with clients, sometimes with limited notice and without providing a detailed explanation. For registered charities, losing banking or payment-processing services can make it extremely difficult, if not impossible, to continue normal operations or deliver assistance overseas.
The challenges became particularly evident after the Taliban returned to power in Afghanistan in 2021. Canadian charities operating there faced concerns that humanitarian funds that indirectly or incidentally benefited the Taliban could potentially be interpreted as providing support to a listed terrorist organization.
Canada amended the Criminal Code in 2023 to permit the delivery of basic humanitarian assistance when reasonable efforts are taken to minimize benefits to terrorist organizations. Development programs involving longer-term objectives are covered by a separate authorization system administered by Public Safety Canada.
The study says charities operating in high-risk jurisdictions can rely on the Criminal Code’s humanitarian exception in certain circumstances, but uncertainty remains about exactly what activities qualify as humanitarian assistance and when an organization must instead seek authorization from Public Safety Canada.
According to the study, this uncertainty can leave non-profit leaders concerned about potential criminal liability. Some organizations consequently conduct their own conservative risk assessments and decide to limit or discontinue work in areas where humanitarian and development assistance is urgently needed.
Two Canadian Muslim charities described their experiences to The Canadian Press but requested anonymity because of concerns that public attention could discourage potential donors.
One charity said it had been using a donation-processing platform commonly used by non-profit organizations when its service was suddenly terminated. According to the charity, the platform attributed the decision to its banking arrangements but did not provide a written explanation or an opportunity for the organization to challenge the decision. The resulting financial difficulties forced the charity to discontinue operations in three countries.
Another charity launched a fundraising campaign to support humanitarian projects in Syria after Canada amended its sanctions regime to facilitate humanitarian assistance. Several months later, its financial service provider froze money connected with the Syria campaign.
The charity said the provider initially appeared to be unaware of an exemption under Canada’s Special Economic Measures Act sanctions framework that permitted the humanitarian activity. Even after the exemption was brought to the provider’s attention, the funds remained inaccessible during an extended internal review.
Because the charity had already made commitments to humanitarian projects in Syria, the inability to access the money forced some programs to be slowed, delayed or stopped.
Emon conducted the research under the auspices of Canada’s Office of the Special Representative on Combating Islamophobia, where he served as a special adviser. He emphasized that the findings and recommendations do not represent the federal government’s official position.
Among its recommendations, the study calls on the Canada Revenue Agency’s charities directorate, working with Public Safety Canada, to issue clearer guidance explaining the scope and limitations of the Criminal Code’s humanitarian exception and authorization regime.
It also recommends that the CRA and Public Safety jointly hold semi-annual information sessions for charities and non-profit organizations to explain compliance requirements, discuss best practices and provide guidance to organizations applying for authorization to operate in affected regions.
The study further proposes that the CRA and Global Affairs Canada organize regular sessions to help non-profit organizations understand and comply with Canada’s sanctions regime.
The Canada Revenue Agency declined to comment specifically on the study, saying it does not discuss third-party reports.
Public Safety Canada acknowledged the recommendations and said it works with the CRA and other federal partners to assist organizations seeking information about the humanitarian exception and authorization process.
The department said that since 2024, federal agencies have conducted regular outreach and interactive information sessions with charities, non-governmental organizations and other stakeholders. These sessions are intended to provide guidance, explain developments, answer questions and gather feedback about how the authorization regime is working.
The Department of Finance said it is reviewing the study’s recommendations and that the federal government continues to engage with stakeholders to ensure Canada’s anti-terrorism financing measures remain effective and proportionate while responding to emerging challenges.
The department also pointed to a commitment in the 2024 fall economic statement to consult non-profit organizations about illicit-financing risks, evolving international standards and the practical challenges organizations face.
The study ultimately argues that protecting Canada’s financial system and preventing terrorist financing remain essential objectives, but that greater clarity, communication and coordination are needed to ensure legitimate charities can continue delivering humanitarian assistance without unnecessarily losing access to banking services or withdrawing from communities in urgent need.