Assessment of Money Laundering and Terrorist Financing Risks in Canada

"The Port of Montreal is a known link where luxury vehicles are shipped to Lebanon, financially supporting Hezbollah."

"While the volume of terrorist financing in Canada is assessed to be low, the consequences of enabling deadly and destructive terrorist attacks in Canada and abroad are grave."

"The misuse of the charitable and NPO sectors has been observed as a prominent financing method used by Hamas and Hezbollah."

"Hezbollah remains a highly active global player in the cocaine, heroin, fentanyl, and captagon trades with trafficking networks spanning Latin America, Canada, and the United States."

Department of Finance report 

"Organizations like Samidoun masquerade as charitable actors that claim to provide humanitarian support to those in need, yet in reality divert funds for much-needed assistance to support terrorist groups."

Treasury spokesman Bradley T. Smith 

Hezbollah fighters    Photo by AP Photo/Hussein Malla

 

Canada remains a hub for terrorist financing, enabling extremist groups to capitalize on everything from charitable fraud to rising rates of drug trafficking as well as auto theft, according to a newly-released 125 page report from the Department of Finance. Hezbollah, the Lebanese terrorist group is recognized as a leading recipient of funding originating from Canada, the black market vehicle trade in particular. 

 

Compared to the problem of conventional money laundering, the amount of terrorist financing originating in Canada is deemed relatively low, but the authors of the report note that the damage that can be done by "a lone terrorist actor or terrorist group" represents a threat of potential negative consequences proportionately higher. 

 

Canadian money ends up with the Palestinian terror group Hamas, not only Hezbollah, in addition to extremist Sikh groups named as Babbar Khalsa International and the International Sikh Youth Federation;   all organizations that "have been observed by law enforcement and intelligence agencies to receive financial support originating from Canada", the report notes. 

 

The funding is derived from various sources; from "crowdfunding" to crypto currencies to "abuse of non-profit organizations".  Toronto resident Khalilullh Yousuf was given a 12-year sentence four months ago for organizing GoFundMe campaigns to, on the surface, raise money for humanitarian purposes for Gaza, while actually funnelling it to Islamic State affiliates. 

 

Canada listed Samidoun, the Vancouver-based anti-Israel group last October as a terror entity, as did the United States. Long active in promoting terrorist ideology in Canada and abroad, Samidoun's status was that of a fundraiser for terror groups, specifically the Popular Front for the Liberation of Palestine, cited as the primary focus to list it as a terror group. Despite which its status has not changed, it remains listed as a charitable group, and it is free to continue its illegal activities due to the fact that the Liberal government has done nothing to disrupt its activities as the illegal entity it is. 

 

Samidoun Website

 

The Department of Justice cited Canada's lucrative illicit drug trade as one where terrorist groups were the likely beneficiaries. Hezbollah's use of the Port of Montreal to ship out luxury cars represents only one of several criminal organizations that use the same tactics. When rates of auto theft were at all-time highs in 2022, industry representatives stated that it was well-known that stolen cars were headed to Montreal on their way to leaving Canada. "The question is, how serious, or how bad does this situation have to become before the authorities really do something about it?" said a frustrated David Adams, president and CEO of Global Automakers of Canada.

 

CSIS (Canadian Security Intelligence Service) estimates Canadian money laundering networks move between $45 to $113 billion annually in total, of which money laundering for terrorism is but a relatively small part. The real alarm raised by the report notes that hostile state actors manage similar money laundering networks to finance interference plots within Canada itself.

 

The Port of Montreal's location makes it a hub for the illegal export of stolen vehicles to Africa and the Middle East. (Charles Contant/CBC)

  

"Foreign states seeking to interfere in Canada often rely on networks of proxies within Canada to carry out their activities."

"Foreign states seeking to funnel money into foreign interference activities can take advantage of existing networks, often criminal in nature, to co-mingle and launder funds from different sources."

Department of Finance report  

Deputy Commissioner Marty Kearns, Investigations and Organized Crime at the Ontario Provincial Police, left, talks with Deputy Chief Benoit Dube of the Surete du Quebec beside two recovered stolen vehicles during a news conference in Montreal. (Graham Hughes/The Canadian Press)

 

Where Does Hamas Get Its $2 Billion Annual Operating Budget?

"A good life is a sign of success and power."

"[And it isn't just the Hamas leadership abroad] I have been once or twice to the Kerem Shalom crossing [with Gaza]. You would not believe the number of Jacuzzis going into the Strip."

Israeli Brig.Gen. Yosef Kuperwasser

 

"Hamas's leadership both inside and outside Gaza steals money from Gazans, who live in bad conditions, to build military infrastructure and for private purposes, including to maintain their expensive lifestyles."

IDF Maj.Gen. Yaakov Amidror

 

"It was the Israeli government's policy to allow Qatar to send funds to the Gaza Strip."

"The thinking was that it would buy quiet. [For Qatar], maintaining ... long-standing ties to terror organizations is part of the country's grand strategy."

"Giving terror groups a safe haven is a form of security for Qatar. It insulate the royal family. In the past, terror groups targeted ruling families in the Gulf countries, but never in Qatar."

"It is very unlikely that Turkey would ever expel Hamas. U.S. pressure might even be counterproductive in this scenario."

Brandon Friedman, senior research fellow, Moshe Dayan Center for Middle Eastern and African studies, Tel Aviv University

Gaza's Hamas prime minister, Ismail Haniya, center left, walks alongside Qatari Emir Sheikh Hamad bin Khalifa al-Thani at a welcome ceremony at the Rafah border crossing with Egypt in 2012.  Mohammed Abed / Pool / AFP via Getty Images

 

The top leaders of Hamas; Ismail Haniyeh, Moussa Abu Marzouk and Khaled Mashaal are not going begging for charity, even as hunted, outlawed terrorist leaders, who find haven with sympathetic Qatar and Turkey. Their personal net worth has been estimated at $11 billion. Which does not come as a great surprise to anyone interested in video snippets and photographs that find their way through social media advertising their penchant for living the good life.

 

 Just as Yasser Arafat siphoned off international funding for Palestinian refugees. And the corruption that reigns within the Palestinian Authority with Mahmoud Abbas and other West Bank leaders known to have amassed their own private fortunes. So where does all that lifestyle funding come from? The focus on Hamas alone sees it being recognized as the second richest terror group in the world, with a $2 billion annual budget.

 

Funded itself by the international community, the Palestinian Authority transfers an estimated 33 percent of its total annual budget to Hamas meant in theory to pay salaries of Fatah officials along with goods and services for Gaza residents; staples such as water, electricity and medical treatment. Although

Hamas and Fatah are virulently hostile rivals to one another, by transferring funding  to Hamas the PA extracts a level of influence in Gaza. 

Hundreds of millions are raised by Hamas from taxes it imposes on goods arriving through Egypt's Rafah crossing and Israel's Kerem Shalom crossing, along with tariffs on contraband entering Gaza through its vast network of smuggling tunnels; goods from kitchen appliances to luxury vehicles. The Islamic Republic of Iran is good for an estimated $250 million yearly. Tehran also generously supplies Hamas with weapons and training, and its financial contributions to Hamas coffers is increasing.

 

Members of Hamas security march in a military parade at a graduation ceremony in Gaza City last year.  Majdi Fathi / NurPhoto via Getty Images

 

There are endless sources of ongoing funding for the terrorist group, including hundreds of millions from aid groups alongside its own web of 'charitable' organizations. UN agencies spent close to $4.5 billion in Gaza from  2014 to 2020, over 80 percent of which gets channelled through UNRWA for Palestinian refugees, comprising 3/4 of the population of Gaza. Germany has banned charities with Hamas links, such as the Samidoun Palestinian Prisoner Solidarity Network, which is active in less alert countries such as Canada, collecting funds in support of Hamas.

It was revealed through an investigation by Focus on Western Islamism which exposes Islamist extremism and finances, that over $260 million was raised for Hamas by charities in the United States that are aligned with the terrorist group. Qatar has transferred tens of millions in cash monthly to Hamas, reaching close to $400 million annually. Members of al-Qaeda, Islamic State and the Taliban have been hosted by Qatar, along with Hamas executives. Qatar's state-run Al Jazeera network spreads Hamas propaganda.

President Recep Tayyip Erdogan of Turkey defends Hamas as a legitimate fighting force against Israeli 'oppression' and 'genocide': "Hamas is not a terrorist organization, it is a liberation group, 'mujahedeen' waging a battle to protect its lands and people". Erdogan has provided Hamas leaders with Turkish passports. In early 2023 Israel seized 16 tons of explosive materials originating from Turkey bound for Gaza.

 

Members of the Hamas-led government executive security forces take part in an armed exercise inside their base.  Abid Katib / Getty Images

 

 

In the weeks since the attack, the issue of what domestic and international anti-money laundering (AML), fraud and sanctions teams are doing – and doing differently – to identify terror-tinged or laundered funds tied to Hamas has also been on the minds of top U.S. Treasury agencies and lawmakers.

In rapid succession, over three days – October 18th through Oct. 20th – the U.S. Treasury’s Office of Foreign Assets Control (OFAC) and Financial Crimes Enforcement Network (FinCEN):

• OFAC acts: Issued a bevy of sanctions against key Hamas terrorist group members, operatives, and financial facilitators located in Gaza and elsewhere, including Sudan, Turkey, Algeria, and Qatar, according to congressional witnesses.
• Virtual value villain: The action “specifically targeted those managing assets within a secret Hamas investment portfolio, a Qatar-based financial facilitator with close ties to the Iranian regime, a key Hamas commander, and a Gaza-based virtual currency exchange and its operator.”
• FinCEN alert: Issued an alert covering refreshed red flag indicators tied to Hamas money movements and terror finance more broadly.
• FinCEN targets crypto mixers: FinCEN also proposed a new regulation to prevent crypto mixers from helping terror groups and their financiers.

The NPRM goes beyond one designated group and seeks to highlight the “risks posed by the extensive use of CVC mixing services by a variety of illicit actors throughout the world.”

If enacted, the new rule would “increase transparency around CVC mixing to combat its use by malicious actors including Hamas, Palestinian Islamic Jihad, and the Democratic People’s Republic of Korea (DPRK),” according to FinCEN. 

Association of Certified Financial Crime Specialists

 

Canada's Earned Place on the Global Corruption Index

"The problem of money-laundering in Canada and other corruption scandals have been headline news in recent years, ragging down the perception of Canada as a clean country. this year's disappointing results show the need to take concrete action to restore Canada's reputation."

"There's no there-there issue that made us drop, this is more about the ripple effect of what's happened over the last couple of years and not seeing a counterbalance in enforcement, new rules or the results of those new rules."

"Canada-wide, we need to see action on anti-money laundering. It's a national issue. And we need to see the federal government taking foreign bribery seriously too." 

James Cohen, executive director, Transparency International (TI) Canada

Canadian Prime Minister Justin Trudeau said he "made a mistake" by joining in talks for giving a government contract to a charity that paid his family. Reuters

Canada scored 74, putting it in 13th place on the Corruption Perception Index (CPI) in 2021. A drop of two points in comparison to the year before, placing Canada in a tie with Iceland, Ireland, Estonia and Austria. Other countries above Canada on the listing include Denmark, Germany, Singapore and Hong Kong. France scores at 71 and the United States 67; Canada's 74 score emphasizes a downward trend -- having dropped 10 points since 2012.

Transparency International points out that Canada's ranking represents the most significant drop in score of all 180 countries in the past five years. "I think Canadians are frustrated, and rightfully so. What the public needs to do is keep up the pressure to make sure that changes come through. We can't just rest on our image of Canada the good any more, we need to see action."

Remember the SNC-Lavalin scandal? Prime Minister Justin Trudeau and then attorney-general Jody Wilson-Raybould (at right) clashed over appropriate government action

 

No one single incident or scandal stands out to have caused Canada's latest ranking fall. Mr. Cohen's theory is that the country is embroiled in the shock waves caused by fairly recent events that drew worldwide attention and those relate to the Prime Minister of Canada, Justin Trudeau, playing fast-and-loose with scruples and ethics to suit his own personal and political agenda.

Unlike any prime minister before him, Trudeau since becoming head of government in 2015, has three times been the subject of separate Ethics Commissioner investigations, two finding that he had broken ethics laws. There was the controversial Christmas vacation the Trudeau family enjoyed on billionaire philanthropist and leader of the Ismaili movement, Aga Khan's private island, in 2017.

The Prime Minister again broke ethics laws in 2019 when the Ethics Commissioner found he had improperly applied pressure on then-justice minister Jody Wilson-Raybould to broker a remediation agreement with Quebec engineering giant SNC-Lavalin. "We see in reports that the CPI is compiled from, that this is obviously still on the mind of international observers", remarked Mr. Cohen.

The WE Charity scandal rocked the Liberal government in 2020 and eventually led to Finance Minister Bill Morneau's resignation and a subsequent Ethics Commissioner ruling of his having breached the law. "It's not just the scandals, but it's also the lack of things that have been done. We've seen remediation agreements come into effect, but we have yet to see a remediation agreement sealed, or finished", observed Mr. Cohen.

"Trudeau managed to dodge Conflict of Interest Act findings against him in the WE Charity scandal, despite appearances; Trudeau was a regular at the Keilburgers’ mass pep rallies, and Trudeau’s wife, brother and mother were paid hundreds of thousands of WE Charity dollars in celebrity-endorsement fees."

"But then-finance minister Bill Morneau was not so lucky. Morneau was found to have contravened conflict-of-interest laws by accepting free trips for himself and his wife and daughter to exotic WE Charity locales in Kenya and Ecuador."

Terry Glavin, The Ottawa Citizen

Money laundering is a recurring issue in Canada, a situation which has garnered headlines across the country, in particular in British Columbia. Anywhere between $46 billion and $130 billion is estimated laundered through Canada annually, known as "snow-washing".  There is hope on the horizon with recent initiatives taken by the federal and provincial governments toward increased transparency and to fight corruption. Unfortunately results have not yet been recognized.

A significant initiative, if it is seen through to fruition, undertaken by the federal government and a few provinces is a pledge to install a new beneficial ownership registry, to reveal the identity of owners of shell corporations, often used in money laundering schemes within Canada. "For Canada to go back up, we need to start seeing the results of the good intentions", stated Mr. Cohen.