We recently commemorated the fifth anniversary of the terrorist attacks on New York City, Pennsylvania and Washington, which served to justify the introduction of increasingly strict anti-terrorism legislative measures around the world. But the threat of further attacks has not dissipated and the political will to eradicate terrorist organizations and their supporters remains strong. Charitable organizations remain a significant focus of the war on terror, and have repeatedly, but arguably unjustifiably, been dubbed the “crucial weak point” in the war. 

Charities, both in Canada and worldwide, are among the silent victims of global anti-terrorism initiatives, and now face the uncertainty of indiscriminate prosecution of overbroad legislation, a literally impossible task of ensuring strict compliance with the legislation, uncertainty as to whether they will be able to continue their programs because of a chill on giving, and restrictions in their operations because of compliance initiatives.

In many instances, the enforcement of the law per se may not be the key issue. The concern may not be what the authorities will do in enforcing anti-terrorism legislation, but rather that they may enforce such legislation. As a result, part of the impact of Canada’s anti-terrorism legislation may have as much to do with coping with a fear of the law as it will with coping with the law itself. This “shadow of the law” effect creates a chill on charitable activities in Canada, as charities hesitate to undertake programs that might expose them to violation of anti-terrorism legislation, and with it the possible loss of their charitable status. 

The three central anti-terrorism legislative initiatives since the fall of 2001 are Bill C-36, An Act to amend the Criminal Code, the Official Secrets Act, the Canada Evidence Act, the Proceeds of Crime (Money Laundering) Act and other Acts, and to Enact Measures Respecting the Registration of Charities, In Order to Combat Terrorism (Anti-Terrorism Act); Bill C-35, An Act to Amend the Foreign Missions and International Organizations Act (Foreign Missions Act); and Bill C-7, An Act to amend certain Acts of Canada, and to Enact Measures for Implementing the Biological and Toxin Weapons Convention, In Order to Enhance Public Safety (Public Safety Act). Although other statutes deal with issues related to terrorism, for the purposes of this article, the above three pieces of legislation are collectively referred to as Canada’s anti-terrorism legislation.

The changes brought about by the Anti-Terrorism Act are without precedent in Canadian legal history and demonstrate a disturbing disregard for the principle of due process and natural justice. The amendments implemented by the Anti-Terrorism Act arguably amount to the creation of a “Super Criminal Code” within Canada’s existing Criminal Code. From a practical standpoint, charities could very well become unwittingly involved in violating the Criminal Code by “facilitating” a “terrorist activity” without actually intending to support any terrorist activity whatsoever, directly or indirectly, and without knowing or even imagining the ramifications of their actions. 

A charity that violates Criminal Code terrorism provisions could face consequences on many fronts. Not only might it be subject to the relevant penalties under the Criminal Code and inclusion as a “listed entity”, but it could also be subject to possible loss of charitable status under the Charities Registration (Security Information) Act, as well as the freezing, seizure, restraint, and forfeiture of its charitable property.

The Proceeds of Crime (Money Laundering) Act was originally enacted in 1991 and was amended and renamed by the Anti-Terrorism Act. Under the new provisions of the Act, charities may be subject to the prescribed record keeping and reporting duties outlined in the Act and its regulations. These duties have been referred to as a new compliance regime for financial entities, the definition of which may well include charities. However, even if charities do not fall within the definition of a reporting entity, they could still be reported upon by other reporting entities, such as a bank, an accountant or life insurance company, without the charity’s knowledge.

The expansion of the federal government’s power to share and collect information with respect to terrorist financing compliance issues under the Act may have an indirect but significant impact on charities. The information collected and shared with various government and law enforcement agencies could lead to any of the consequences affecting a charity including investigation, criminal charges, listing, deregistration, as well as the freezing and seizing of assets. 

Part 6 of the Anti-Terrorism Act enacts the new Charities Registration (Security Information) Act. This Act enables the government to revoke the charitable status of an existing charity or deny a new charitable status application if it is determined that the charity has supported or will support terrorist activity. Such deregistration is initiated by the issuance of a "security certificate" against the charity or applicant for charitable status and could have consequences beyond simple deregistration for the charitable organization.

The security certificate and deregistration process raises several concerns from the point of view of basic principles of natural justice and due process. These factors are of even greater concern in light of the serious consequences of the issuance of the security certificate. Deregistration not only entails a charity’s losing its ability to enjoy the tax benefits of charitable status, but there is also a possibility that the issuance of a security certificate might expose the charity or its directors to investigation and prosecution under the enhanced “Super Criminal Code” provisions. 

More importantly, there is the strong possibility that issuance of a security certificate could lead to the freezing or seizure of the charity’s assets. This could entail the bankruptcy, insolvency, or winding up of the charity and, in turn, expose the charity’s directors to civil liability at common law for breach of their fiduciary duties for not adequately protecting the assets of the charity.

Although due diligence is not a defence for violations of the anti-terrorism laws in Canada and abroad, or against revocation of charitable or tax-exempt status under tax laws, effective due diligence is, at the very least, necessary in order to show a desire to comply. Apart from compliance with anti-terrorism laws, maintaining due diligence is also mandatory in accordance with the common law fiduciary duties of directors to protect charitable property. 

While due diligence is not a defence against anti-terrorism charges, the anti-terrorism laws do not abrogate directors’ fiduciary duties to the charity and its donors. As such, it can provide powerful protection for directors against complaints at common law. 

One of the greatest benefits from exercising due diligence may be in its preventative effect; helping to avoid the occurrence of the kind of event or association that might lead a charity to be implicated under the anti-terrorism laws. Through exercising due diligence the charity can identify potentially problematic individuals or organizations before it is too late.

The collective insecurity flowing from September 11, 2001, and other terrorist acts has resulted in the introduction of extraordinary laws aimed to curb the threat of further terrorist attacks and the ability of such terrorist organizations to mobilize. 

Canada’s response to the threat of international terrorism is reflected in the broad powers contained in a series of legislative measures, including the Anti-Terrorism Act’s amendments to Canada’s anti-money laundering laws and the creation of the Charities Registration (Security Information) Act. The creation of a “Super Criminal Code” could implicate many traditional charitable activities as being “terrorist activities”or “facilitating” those who may have participated in or supported a “terrorist activity”.

At the very least, charities are now faced with a new compliance regime in financial transactions, record-keeping and various reporting obligations, with a “one size fits all” approach to due diligence that is likely to impact negatively the ability of organizations to carry out their objects effectively. And yet, failure to comply with any aspect of the new anti-terrorism legislation could result in the loss of charitable status or the possible issuance of a security certificate, a process devoid of normal legal safeguards and avenues to provide an informed defence. 

Unless the public, the charitable sector and governments recognize the serious and prejudicial impact of anti-terrorism legislation and enforcement on charities and those that depend on their operations, charities will continue to be among the silent victims of these ongoing initiatives worldwide.