Over the next few decades, around $30 trillion in wealth is 
1. Growth of the FinTech sector
Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Fintech Opinions
Top Security Investments For Your Recently Funded Startup
Guest Post | Jul 1, 2022
Photo by: SOCIAL.CUT on Unsplash
3 out of 5 startups have fallen victim to a security breach in the last two years. If you have just received funding for your startup, you need to invest in security technologies to ensure your sensitive data and assets remain secure.
Which security technologies should a startup business invest in?
Keep reading as we go through the best security investments for your startup to secure your assets and help you improve productivity, and streamline your monthly overheads.
Top Security Investments For Your Startup
Let’s look at some of the best security investments for your startup. These technologies can help you to protect your data and ensure there are no setbacks for your newly founded business. Consider which tools would be most valuable in your security strategy.
Occupancy Management
Occupancy management software is an investment that can help you manage your business's health and safety and your space more effectively.
Occupancy management software integrates with your access control system to provide accurate data logs of the occupancy levels in your building. Since the pandemic began, overcrowding has become an occupational safety hazard. To maintain social distancing measures in your workplace, you should consider implementing occupancy management software.
Occupancy management software can help you understand your office space and may offer an opportunity to downsize your office space. Suppose you switched to a remote or hybrid work model. In that case, your occupancy management software will help you determine how many users are in your office at once and whether your company could potentially downsize to streamline monthly overheads and allocate more money toward the growth of your business.
Touchless & Keyless Access Control
Touchless access control is the foundation of any modern and sophisticated security. With touchless entry, you can reduce the number of touchpoints your employees must touch when entering the building and put health and safety first.
Keyless access control secures your building without inconveniencing your employees. The door locks operate using mobile access credentials. Opting for mobile-first access control can avoid extra expenses caused by keycard or fob replacement.
Users who wish to enter the building do not have to withdraw their mobile devices from their pockets. Instead, they can simply wave their hand in front of the access control reader. The wave of their hand will trigger remote communication with their mobile device that will open the door.
You can operate touchless access control remotely and view security data using a mobile application or cloud-based control center. This convenient security technology supports hybrid work models, where managers and system administrators will be off-site.
Modern, cloud-based access control systems have open API integrations, which can help you to build a fully-integrated security system that performs HR and administrative functions. Since access control is a cloud-based solution, it is best to invest in cybersecurity training and software to avoid falling victim to the rising rate of cyberattacks.
Smart Desk Management
Smart desk management software is a necessity for any hybrid startup. If your employees come into the office to access resources and collaborate on projects, they will need desk space. However, if your office is busy that day, they could drive to work only to find that all the desks are occupied.
Smart desk management software offers a solution to this problem. With this software, your employees can reserve desk space for when they need to use office resources. Employees will be able to view a digital floorplan of your office, with a clear picture of the desks that are reserved and the available desks. Your employees will also be able to see which employees book each desk so they can sit with their friends or in teams.
Visitor Management
Visitor management software integrates with access control to provide more accurate visitor logs. In the event of a security breach, you need to have detailed records of who is in your building to aid in an investigation.
Visitor management software implements digital surveys that your visitors, contractors, and interviewees must fill out before entering the building. Once they have filled in the form, they can enter the building using a temporary digital access key stored on their mobile device. The system will log them out with an accurate timestamp and revoke their access credentials when they leave.
Automated Wellness Verification
Automated wellness verification operates similarly to visitor management software. Your employees must fill out digital forms based on their symptoms to enter the building. This software helps you screen for coronavirus and prevent the spread of the virus in your office, which could lead to staffing difficulties.
Security Integration
When establishing security integrations in a cloud-based system, you must ensure that the information and remote operation capabilities are only accessible to authorized parties. If a third party intercepts this information, it could lead to a costly security breach for your business.So, ensure that you enlist the services of a commercial security system integrator with experience in the industry. Your integrator will be able to advise you on and install the best cybersecurity software and physical security tools to keep your business secure.
Photo by Tim van der Kuip on Unsplash
Summary
To ensure the success of your startup, you need to put security first. Failing to protect your assets and sensitive data could lead to the failure of your business. So, consider which security technologies would most benefit your business and plan your security strategy with integration in mind.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Personal Finance Leaks That You May Have Not Considered
Jun 27, 2022
Image Source: https://unsplash.com/photos/nApaSgkzaxg
Do you have a solid financial plan in place? If not, you are not alone. Many people don't take the time to plan for their financial future, and this can lead to disaster down the road. In this blog post, we will discuss some personal finance leaks that you may have not considered. By being aware of these leaks, you can take steps to correct them and improve your overall financial situation.
1. Overspending on unnecessary things
To many people, their personal finances are like a black hole. They know they should be saving more and spending less, but somehow their money always seems to disappear. If you feel like you're constantly struggling to make ends meet, it might be time to take a closer look at your spending habits.
See: Is Open Finance worth getting excited about, or is it just spin?
One of the biggest financial leaks is overspending on unnecessary things. That new pair of shoes may be cute, but do you really need them? If you're constantly buying things you don't need, it's time to cut back.
Another way people leak money is by not taking advantage of discounts and coupons. There are so many ways to save money these days, but if you're not taking advantage of them, you're missing out.
2. Not taking advantage of tax breaks and other financial incentives
When it comes to personal finance, many of us focus on earning more money and ways to save. But another important aspect is making sure you're not overpaying in taxes. The Canadian government offers a number of tax breaks and other financial incentives that can help reduce your overall tax bill.
For example, did you know that you can claim a deduction for public transit passes? If you're self-employed, there are a number of deductions you can claim for business expenses. And if you have children, there are several child-related tax credits that can help lower your taxes.
Make sure you're taking advantage of all the tax breaks and incentives you're entitled to. It can make a big difference in your overall financial picture.
3. Underestimating the cost of living expenses
If you’re not careful, your cost of living could easily eat up most – if not all – of your income. Make sure to track your spending and give yourself a buffer for unexpected costs.
One common mistake people make is underestimating their cost of living. This can lead to serious financial problems down the road. Make sure to take a close look at your spending habits and make sure you have a realistic idea of how much it costs to live.
Another thing to keep in mind is that unexpected costs can pop up at any time. For example, if you have a pet, having pet insurance coverage could save you a lot of money in the long run. That way, if your pet gets sick or injured, you’re not stuck with a huge bill.
There are all sorts of financial leaks that can happen if you’re not careful. The key is to be aware of them and take steps to prevent them.
4. Failing to save money for a rainy day
One of the biggest financial leaks is failing to save money for a rainy day. An emergency fund is crucial because it acts as a buffer between you and debt. It can help you avoid going into debt or taking on high-interest loans when unexpected expenses pop up.
Without an emergency fund, even small unexpected costs can quickly derail your finances. So if you don’t have one already, start working on building up your rainy-day fund today.
5. Investing in risky or unstable ventures
You may have heard the saying, "The higher the risk, the higher the reward." While this may be true in some cases, it's definitely not always the case. When it comes to your personal finances, you should be more conservative with your investments and only put your money into ventures that you're reasonably sure will give you a return.
Also, be wary of get-rich-quick schemes. If something sounds too good to be true, it probably is. Be careful not to put all your eggs in one basket and invest in a variety of different ventures to minimize your risk.
Image Source: https://unsplash.com/photos/pypeCEaJeZY
In the end, these are some of the most common financial leaks people have in Canada. While some of them may be obvious, others may surprise you. The key is to be aware of all the ways your money can leak out so you can take steps to plug those holes. Good luck!
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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What’s next for crypto?
Bitvo | Tristram Waye | Jun 23, 2022
Right now, crypto is in transition, and this is the perfect time to be reflecting on what the next big thing might be.
And as traders and players in the space, thinking about what’s ahead is the key to identifying that next big thing.
Which reminded me of Andy Kessler. He was an old Wall Street maven and fund manager. In one of his books, he had a story about meeting a Swiss investor on a plane. That discussion over a five-hour flight led to a series of deep dives into innovation history.
So I grabbed Kessler’s Wall Street Meat off the shelf to refresh my memory.
Whoops. Wrong book.
It’s great, but the one I want is Kessler’s Running Money.
In Running Money, Kessler shows us how he developed an investment thesis while managing a hedge fund. And he tells us in great detail how he figures out what the next big thing might be.
See: Crypto Pragmatist: Checkout these free crypto (trading) tools
He does this by exploring the evolution of other innovation periods and the key insights he gets from them.
And as a bonus, he’s doing this during Web1, so the entire book is like hopping in and out of a time machine.
Running Money
Running Money gives you insight into what it’s like to be a hedge fund manager in the beginning and through the dot.com boom. Published in 2004, this is a great reference to the evolution of the thinking at the time.
Prior to running money, Andy had been on Frank Quattrone’s team. Quattrone was a legendary Wall Street investment banker that started numerous tech teams around the street. His team brought key companies public, including Netscape, Cisco, and Amazon. Kessler’s book Wall Street Meat was about his days as an analyst.
Kessler left this team and went on to start his own fund. Running Money is about his days as a fund manager. If you’ve read Soro’s legendary Alchemy of Finance, this is a similar journal style, only more fun to read.
Read: Alberta, The untold history of innovation from Canada’s badlands – Part 1
In the book, Kessler has a chance meeting with a Swiss investor. They start talking about how Silicon Valley does what it does.
What makes the Valley what it is.
So Kessler embarks on a journey through the evolution of the industrial revolution. Then explores how this applies to technology.
These sections are connected with entertaining interludes about what he was doing as a hedge fund manager.
- Scale through efficiency and innovation
- The Silicon Valley model
- Crypto and the search for efficiency and scale
- Crypto: industrial + tech
- Cross-chain integration is the new fabric
- From blockchain to the future
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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What Millennials Want From Their Wealth Management Firm
Quartz | Tiffany Ap | Jun 16, 2022
Over the next few decades, around $30 trillion in wealth is expected to be passed down from Baby Boomers to millennials.
- A survey from Capgemini Research Institute found that they’re going to be pickier customers for wealth management firms than their parents and grandparents.
- Surveyed nearly 3,000 high net worth individuals (HNWI), defined as people with investable assets of $1 million or more and found that millennials coming into wealth are far more price-sensitive than the previous generation, especially in a bear market.
- A majority of them are switching advisors to find a better fit compared to what may have worked for older investors.
- Millennials prefer a hybrid model for advisory services and information. The pandemic caused HNWIs to reduce dependency on wealth managers and become more actively involved in investing, spurring demand for self-directed tools.
See: 5 Drivers Behind the Sustainable Investing Shift
- The millennial “freemium” mindset” that has developed over the last 10 years is another factor.
- Younger HNWIs are less willing to pay for straightforward access because they expect that for free in exchange for data or deposits.
- About half of millennials surveyed said they had changed their primary wealth management firm in the past year, with high fees and lack of digital expertise among the top reasons.
- Over 70% of high net worth individuals have invested in digital assets, and for those under the age of 40, that number rose to 91%.
In two generations, women will hold 70% of global wealth
Wealth asset management firms should also plan for another big change in the investor pool: the growing importance of women.
- Women will manage two-thirds of household wealth by 2030, and increase their share of global wealth from about half to 70% within two generations, according to the Royal Bank of Canada.
- Much of the fortunes of men who pass away will end up in the control of female spouses who tend to be both younger and live longer, according to an analysis by consulting firm McKinsey
See: July 14 NCFA Event: Annual Fintech & Funding Summer Kickoff and Rooftop Patio Mixer
Capgemini’s Ghanem:
“Women are working more, they are highly educated, more engaged, more visible and vocal, when women were previously behind the scenes. What was there, but not mentioned, is becoming quantified. It’s the positive consequence of many years of pushing women to be at the front.”
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Important Nuances in the Lummis‐Gillibrand Crypto Bill: Not Securities?
Cato | Jack Solowey | Jun 10, 2022
On June 7, 2022, senators Cynthia Lummis (R‑WY) and Kirsten Gillibrand (D‑NY) unveiled their highly anticipated crypto bill. The bipartisan Lummis‐Gillibrand Responsible Financial Innovation Act covers some of the most contested issues in crypto regulation, including taxation, stablecoins, digital asset exchanges, interoperability with the banking system, and compliance with anti‐money laundering laws and sanctions.
Notably, the bill seeks to clarify the extent to which digital assets ought to be regulated as securities by the Securities and Exchange Commission (SEC) or commodities by the Commodity Futures Trading Commission (CFTC). Some reactions to the bill have couched the Lummis‐Gillibrand solution as handing the reins to the CFTC.
See: The Lummis-Gillibrand Bill Puts the CFTC in Charge: A Win for the Crypto Industry
However, this characterization glosses over key features of the bill, under which commodities or securities regulations may apply to crypto projects, depending on the circumstances. The question that the Lummis‐Gillibrand bill seeks to answer is less “whether” it is the SEC or the CFTC that has a role to play in crypto regulation so much as “when” each agency does.
Under the bill, while a digital asset itself may be a CFTC‐regulated commodity, where that asset is sold in connection with a type of security known as an “investment contract,” the contract still will be considered an SEC‐regulated security.
The SEC has found investment contracts to exist when, for example, crypto tokens are sold during so‐called initial coin offerings (ICOs), which raise money for early‐stage crypto projects. The Lummis‐Gillibrand bill recognizes that digital assets will continue to be sold like this. Therefore, the bill introduces the concept of an “ancillary asset.”
See: Alleged US$16 million crypto theft case to test ‘Code is law’ defence in Canada
Under this framework, where a crypto token is, for instance, sold alongside an investment‐like opportunity that helps to finance a crypto project, the token itself may be presumed to be a commodity while the contract documenting the investment remains a security. In such cases, the bill would require the token seller to make applicable disclosures to the SEC.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Why is FinTech so hard to regulate? 5 Challenges for Regulators
Cube | Jennifer Clarke | May 11, 2022
1. Growth of the FinTech sector
The FinTech sector is booming. In 2020 there were around 2,500 FinTech companies in the UK and between 2011 to 2016 the number of FinTech companies grew by 21% year on year.
The diversity of the FinTech sector is a success story for UK businesses, but it can be a headache for regulators.
The high street big banks and financial companies of yesteryear have been joined by hundreds of smaller niche FinTech businesses. The Financial Conduct Authority (FCA) is now responsible for overseeing over 59,000 businesses and their sister organisation, the Prudential Regulation Authority (PRA), watches over 49,000 firms. In many ways, their freedom to operate outside of the regulatory framework has allowed innovation to flourish. But this innovation can also pose a challenge for regulators.
2. New Fintech Products
New financial products may fall outside the existing regulatory framework or regulators may need to adapt existing legislation.
See: Regulating financial innovation – going behind the scenes
- 2021, found the use of Buy-Now Pay-Later (BNPL) products nearly quadrupled in 2020 to £2.7 billion. The Government plans to change the law to bring some of the current forms of unregulated buy-now-pay-later products under FCA regulation.
- Cryptocurrency: since January 2020, crypto businesses in the UK have had to comply with the 2017 money laundering regulations but specific crypto legislation is currently thin on the ground and more specific regulation is expected in the near future.
- Open banking: new online banks and existing banks taking their business online has opened up new risks for consumers. Robust processes are needed to prevent money laundering, identity theft, data protection violations, cybercrime and financial terrorism.
- Robo advisors: robo advisors that give guidance to investors are increasingly common. The FCA warns that, “imported robo advice models may not meet UK regulatory requirements such as suitability, pensions switching and anti-money laundering requirements” and may therefore need to be adapted to the local environment.
3. Additional Risks for Consumers
- New financial providers: this makes it harder for consumers to work out which providers are regulated, and which are offering legitimate products and returns.
- Quick decisions: consumers may make quicker financial decisions online as products can be bought more quickly with no face-to-face contact. This means that potentially vulnerable customers may take on financial risks they don’t understand or make quick decisions without taking time to consider their suitability.
- Increased complexity: the array of available choices can cause consumers to sign up to multiple financial products and to lose sight of their overall financial position.
See: Penrose Report: Power to the People: Stronger Consumer Choice and Competition
- Tech risks: there are more security risks as sensitive data is held by even more businesses. Data and passwords can be stored on mobile phones or laptops and customers may be tempted to duplicate passwords, leaving them open to identity or other financial fraud.
- Accessibility and exclusion: some consumers without access to new technologies may not be able to access new financial products. Others might be access new technologies but may not have the funds or income to support their spending choices.
- Social media: research shows that new investors with under 3 years’ experience are more than twice as likely to rely on YouTube or other social media for researching new investments.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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NCFA Response to FINTRAC’s ‘Knee Jerk’ Regulations Requiring Donation Crowdfunding Platforms to Register and Comply with AML/ATF Legislation
About NCFA Canada | June 10, 2022
“In summary, the regulations are ineffective, burdensome, anti-competitive, and damaging to both the domestic donation crowdfunding sector and the Canadian nonprofit/charitable sector. The goal of protecting Canadians from money laundering and terrorism is laudable, but these regulations should be scrapped, and new regulations drafted in full consultation with stakeholders.” – Daryl Hatton, Founder/CEO, FundRazr
Note to reader: thanks to the following National Crowdfunding & Fintech Association of Canada (NCFA) members and advisors who contributed in the preparation of this post: Robin Ford (Principal, Robin Ford Consulting), Daryl Hatton (Founder/CEO, FundRazr), David Durand (Founder and Managing Partner, Durand Lawyers), Craig Asano (Founder/CEO, NCFA), Richard Remillard (Principal, RCG Group), and Charlene Cieslik (Chief Compliance Officer, Localcoin)
Background - Emergency Economic Measures Order
On February 14, 2022, the federal government took the unprecedented step of invoking the Emergencies Act to end disruptions, blockades, and an occupation in the city of Ottawa. This included an extension of AML/ATF (anti-money laundering and anti-terrorist financing) obligations to donation crowdfunding platforms and certain payment service providers, without notice, but on a temporary basis.
When the Emergency Economic Measures Order and related Emergency Measures Regulations were revoked on February 23, 2022, the government announced its intention to quickly make permanent the donation crowdfunding AML/ATF requirements.
New regulatory amendments now apply to impose AML/ATF registration, reporting, and other requirements on donation crowdfunding platform services carried on in Canada and on some related payment service providers. Regulated equity/investment and loan crowdfunding was already caught. See: https://www.gazette.gc.ca/rp-pr/p2/2022/2022-04-27/html/sor-dors76-eng.html.
(We do not deal here with the removal of exemptions for payment processing of credit, debit, and prepaid products under the definition of “electronic funds transfer”.)
Read: ‘Immediate emergency situation is over’: PM Trudeau revokes Emergencies Act
While amendments could in theory create an additional cost-effective layer of protection for donation crowdfunding, the government has not provided an analysis of the risks (or data) sufficient to justify the changes, or the extent of the changes. So far as we can tell (given the absence of data and analysis), the government, in an unseemly rush, has seriously over-reacted.
We raise here some significant issues with the amendments and the process of their enactment.
Improper consultation
The federal government did not properly consult on the amendments to the Regulations.
The amendments were made on April 5 and came into effect immediately, but were not published in the Gazette until April 27. The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) published this notice to reporting entities on April 27 – https://fintrac-canafe.canada.ca/notices-avis/2022-04-27-eng.
Unlike previous amendments, notice did not appear on the government’s “Consulting with Canadians” web page.
The Government justified the failure to consult as follows:
“In order to swiftly address the serious and immediate risk to the security of Canadians and the Canadian economy posed by crowdfunding platforms and certain payment service providers due to their vulnerability to being exploited for money laundering and terrorist financing purposes, the Regulations were exempt from the requirement to prepublish.”
The government provided no data to support the conclusion of “serious and immediate risk”. To put this another way, the justification in “support” appears to be entirely theoretical (aka ‘trust us’ - see below).
No transition provisions
Donation platforms were given no time to register with FINTRAC and ensure their compliance programs, policies and procedures were updated to comply. So, they were immediately in a position of non-compliance. FINTRAC says it will “focus its compliance activities on registration requirements and educating impacted sectors”. In our view, this is not a proper way to “work around” immediate coming into force.
Who is caught?
The government claims that the new AML/ATF requirements will catch approximately 1,000 additional businesses in the donation crowdfunding and payment service provider sectors. Since we are aware of only a very small number of Canadian-based donation platforms, we assume that most of these are based elsewhere, but doing business in Canada (e.g, GoFundMe). The government has provided no data in support of its claim.
Risk?
While recommendations of the Financial Action Task Force (FATF) do indeed address money laundering and terrorist financing risks that may arise from the development of new products and new business practices, as the government notes, FATF guidance is also very clear that governments should take a risk-based approach in their implementation. The government’s Regulatory Impact Analysis shows no risk analysis beyond high level assertions. To the extent there is data in support, we have not seen it, so cannot comment on it.
Benefit?
The Regulatory Impact Analysis states: “Actions to counter money laundering and terrorist financing have long been recognized as powerful means to combat crime and protect the safety and security of Canadians.” What actions? Where is the data to support this statement? All data of which we are aware in fact shows that the global AML/ATF system at best does not work well and is very costly for businesses and consumers. For a recent critique see: https://www.lawgazette.co.uk/commentary-and-opinion/aml-laws-have-failed-it-is-time-to-start-again/5112496.article. We agree that we need to start again.
The government concludes that the amendments “will help prevent the financing of illegal activities through these types of financial services”, but again provides no evidence in support. They partly side-step this problem by saying: “there are substantial qualitative benefits associated with the proposed amendments that cannot be monetized due to the lack of available or reliable data to accurately measure the reputational, economic, and national security benefits that would result from the implementation of the regulatory changes”. This is simply not good enough.
Cost (including excessive burden)
There is widespread agreement that the regulatory burden and related costs imposed by AML/ATF requirements in Canada are significant: building, instituting and overseeing a compliance program subject to biennial audits and FINTRAC examinations; ongoing regulatory requirements including client identification, transaction reporting, and record keeping procedures, and more. To get a feel for the burden, see this IIROC guidance (which applies to authorized broker/dealers) - https://www.iiroc.ca/news-and-publications/notices-and-guidance/anti-money-laundering-compliance-guidance-0
In addition, donation platforms and related payment service providers must report or verify transaction amounts of $1,000 or more. This is a significant ‘raise’ over the usual amount applicable to other reporting entities of $10,000. The cost burden of reporting transactions of $1,000 or more (plus related additional costs for each donation) will severely reduce net donations. Have the costs of this additional level of compliance and the impact on the charitable sector been properly researched and taken into account?
See: Crowdfunding platforms now required to report transactions to FINTRAC, after truck convoy protests
Finally, since (so far as we are aware) the government already gets much of the required data as the money moves through the banks and other payment service providers (already regulated), we are not told why the additional requirements are needed at all.
Nor must it be forgotten that many organizations, including registered charities who receive donations for charitable purposes (via donation crowdfunding or not) are subject to enhanced scrutiny by the fiscal authorities. See: Canada Revenue Agency Act (eg, https://www.canada.ca/en/revenue-agency/services/charities-giving/charities/checklists-charities/checklist-charities-on-avoiding-terrorist-abuse.html), the Income Tax Act, and the Charities Registration (Security Information) Act. And see: https://umanitoba.ca/centres/mipr/media/Following_the_Money_Trail_-_Kari.pdf.
The government estimates that it will cost donation platforms a total of $18-$20 million over the next 10 years in administrative and compliance costs. But there is no data provided to support this estimate. To this will be added the cost-recovery scheme for FINTRAC’s compliance activities once the scheme is implemented (about which we also know very little so far).
There appears to be an element of wishful thinking in the assumptions and estimates said to underlie the so-called cost benefit analysis. Given the very high (relative) burden for smaller firms, it is unacceptable that the data and risk analyses are not provided in detail so that they can be contested.
These changes also appear to be profoundly anti-competitive; if regulation is not proportionate and risk-based, smaller Canadian-based platforms may fail, leaving only larger foreign platforms in the Canadian market.
The only concession to smaller donation platforms (eg, the Canadian platforms) is FINTRAC’s promise that its “risk-based approach” will allow entities to comply with the Act in a manner that accounts for their size, activities, and transaction volumes. We will be watching.
But how bad is it really?
Daryl Hatton, Founder and CEO of FundRazr, Canada’s largest donation crowdfunding platform, speaks out (https://fundrazr.com/)
“The new requirements will impose a very costly burden on community service crowdfunding platforms while providing no real added benefits. These costs will impede the successful delivery of fundraising services that help the Canadian nonprofit/charitable sector fund social services programs.”
These services are a significant component of the Canadian economy: 8.5% of Canadian GDP ($169B) in 2017 according to Stats Canada.
A single $1,000 transaction representing a donation to a Canadian charity will generate between $0 and $50 of revenue for the crowdfunding platform. The costs of processing this transaction and reporting it to FINTRAC will exceed the revenue generated. This is obviously not sustainable and will significantly reduce the ability of crowdfunding platforms to process larger gifts. This will reduce revenue for the Canadian nonprofit sector at a time when it is struggling. CanadaHelps Giving Report 2022 already projects a decline of 12% in total giving from 2019 to 2021 due to pandemic impacts and inflation. Transactional information from the first quarter 2022 indicates the decline will likely be bigger. The AML/ATF regulations will exacerbate the decline.
Most and perhaps all Canadian donation crowdfunding platforms process transactions via payment processors and Canadian banks which are already required to obtain identity information and keep records for all recipients of donated funds.
Donors are now required to provide validated proof of their personal information beyond the usual name, address, and credit card information. This will cause many donors to abandon the transaction, further damaging fundraising activities. They will do this because the added identity burden is intrusive and is not placed on them for e-commerce transactions or for donations made directly to charities on their websites. As some smaller charities use crowdfunding platforms to process contributions on their websites, this further distorts the market both between crowdfunding platforms versus other payment processing mechanisms and between large and small charities. The playing field is no longer level.
More: NCFA Advocacy
Existing regulations require reporting of individual transactions of $10,000 or more. The regulations lower the threshold to $1,000 without providing any evidence that even a $10,000 level is an effective deterrent to money laundering. Bad actors wishing to circumvent these rules will simply break their transactions into multiple pieces all less than the specified threshold. As these are electronic transactions, the costs to the bad actors of doing this splitting are minimal.
In summary, the regulations are ineffective, burdensome, anti-competitive, and damaging to both the domestic donation crowdfunding sector and the Canadian nonprofit/charitable sector. The goal of protecting Canadians from money laundering and terrorism is laudable, but these regulations should be scrapped, and new regulations drafted in full consultation with stakeholders.
Effectiveness of FINTRAC and conclusion
But all this raises another issue. How rigorously will FINTRAC review applications for registration? Will it do a quick once over and tick the box for registration, with a “risk-based” review of compliance by apparently smaller or less “risky” platforms to come perhaps years later? Will a platform be able to register and proclaim registration as a money services business as a badge of honesty and legitimacy, then take donations for 6 months and disappear?
And how effective is FINTRAC generally? We have no idea really, although we are aware of recent efforts to boost its capacity. And what about the balance between individuals’ privacy rights and the government’s ability to gather evidence to enforce laws?
This is knee-jerk regulation of the highest order. While everyone supports measures to mitigate money laundering and terrorist financing risks, this is not the right approach. There is a better way forward which the NCFA would be happy to discuss with relevant federal officials.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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