Crowdfunding platforms now required to report transactions to FINTRAC, after truck convoy protests

May 4, 2022 FinTech and Alternative Finance, Fintech Services, Fundraising, Investing, Trading, Legal Issues, Regulation, Consultation, Stories No comments

CBC | Elizabeth Thompson | May 4, 2022

Government says [donation and reward-based] crowdfunding platforms are an emerging risk for terrorist financing

The power of crowdfunding companies to raise money was in the spotlight earlier this year after organizers of the truck convoy protest — which paralyzed downtown Ottawa for three weeks and blocked various border crossings — successfully raised millions of dollars from donors both from Canada and abroad.

The government first required crowdfunding platforms to report to FINTRAC as part of the Emergency Economic Measures Order it adopted when it invoked the Emergencies Act to resolve the truck convoy protest. When the declaration of an emergency was revoked, that requirement ended. However, the government [confirmed] plans to require crowdfunding platforms to report to FINTRAC in its budget last month, then published new regulations April 27 in The Canada Gazette.

See: Canadian cryptocurrency exchanges ordered to cease dealings with convoy-linked accounts

In the explanation that accompanies the regulations, the government said the international Financial Action Task Force has identified crowdfunding platforms "as an emerging area of risk for terrorist financing."

"This risk was highlighted in early 2022, when illegal blockades took place across Canada that were financed, in part, through crowdfunding platforms and payment service providers. Allowing these gaps to continue represents a risk to the integrity and stability of the financial sector and the broader economy, as well as a reputational risk for Canada."

Canada has become one of the first countries in the world to require [donation and reward-based] crowdfunding platforms to report to its anti-money laundering and terrorist financing watchdog FINTRAC, government officials told a special committee examining the truck convoy protest and the steps the government took to end it.

Foreign Crowdfunding platforms GoFundMe, GiveSendGo to comply with new regulations

The move means that some large donations over $10,000 to Canadian fundraising campaigns hosted by [foreign] crowdfunding companies like GoFundMe or GiveSendGo, or which the platform thinks may be suspicious, could now be reported to FINTRAC and then potentially be flagged to police.

See:

Emergencies Act Post-Mortem: Crypto execs in Ottawa discuss Digital Assets

Freedom Convoy Continues, Fundraiser Raises $542K in Bitcoin

The government said approximately 1,000 crowdfunding platforms and additional payment processors will now have to report to FINTRAC. It estimates it will cost the platforms a total of $18-$20 million over the next 10 years in administrative and compliance costs.

"Obligations include registration with FINTRAC, reporting requirements (including suspicious transactions and large value transactions), record keeping, customer due diligence and developing a compliance program," the government wrote.

The regulations include transactions in both traditional and virtual money like cryptocurrencies and "apply to domestic entities, as well as foreign entities when they direct their services to Canadians."

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