Crowdfunding companies will have to report transactions

Finance Ministry officials explained that new regulations came into effect last week that add crowdfunding platforms and certain payment processing companies to the list of companies required to report large or suspicious transactions to the Center for Finance. Financial Transactions and Reports Analysis of Canada (FINTRAC), Canada’s financial intelligence unit.

Barry MacKillopDeputy Director of Intelligence at the FINTRACFinancial Transactions and Reports Analysis Center of Canadapointed out that these new regulations fill gaps that can be exploited.

I believe subjecting these companies to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act will at least serve as a deterrent to anyone who might want to use a crowdfunding platform for wrongful activities.said Mr. MacKillop Members of Parliament and Senators on the committee set up to examine the government’s use of the Emergencies Act.

Millions raised on GoFundMe and GiveSendGo

Julian Brazeau, director general of the Financial Crimes and Security Division at the Department of Finance, said that to his knowledge, Canada is the first country to require crowdfunding platforms to report transactions to a organization like FINTRACFinancial Transactions and Reports Analysis Center of Canada.

The fundraising ability of crowdfunding companies was proven earlier this year when organizers of the truckers’ protest – which paralyzed downtown Ottawa for three weeks and blocked various border crossings – managed to raise millions of dollars from donors in Canada and abroad, first on GoFundMethen on GiveSendGo.

The government first required crowdfunding platforms to report to the FINTRACFinancial Transactions and Reports Analysis Center of Canada under the Emergency Economic Measures Order passed when he invoked the Emergencies Act to control the protest. When the declaration of emergency was revoked, this requirement ended. However, the government has indicated its intention to require crowdfunding platforms to report to the FINTRACFinancial Transactions and Reports Analysis Center of Canada in its budget last month and then published new regulations on April 27 in the Canada Gazette.

In the explanation that accompanies this new regulation, the federal government explains that the International Financial Action Task Force (FATF) has identified crowdfunding platforms as a new risk area for terrorist financing.

The fact that crowdfunding platforms are not required to report certain transactions to the FINTRACFinancial Transactions and Reports Analysis Center of Canada present a serious and immediate risk to the safety of Canadians and to the Canadian economy wrote the government.

This risk was highlighted in early 2022, when illegal lockdowns took place across Canada and were funded, in part, by crowdfunding platforms and payment service providers. Allowing these shortcomings to persist represents a risk to the integrity and stability of the financial sector and the economy in general, as well as a risk to Canada’s reputation.

New regulations

The new regulations introduce a number of requirements for crowdfunding platforms.

Obligations include registration with the FINTRACFinancial Transactions and Reports Analysis Center of Canadareporting requirements (including suspicious transactions and high value transactions), record keeping, customer due diligence and development of a compliance programthe government said.

Both traditional and virtual currency transactions, such as cryptocurrencies, are affected by these new rules which apply to domestic entities, as well as foreign entities when directing their services to Canadians.

The government estimates that around 1,000 additional crowdfunding platforms and payment processors will now have to report to the FINTRACFinancial Transactions and Reports Analysis Center of Canada. He estimates that this will cost these platforms a total of $18-20 million over the next 10 years in administrative and compliance costs.

Much of Tuesday night’s committee hearing focused on provisions of the Emergencies Act that resulted in 280 bank or other financial accounts being frozen for several days.

Deputies and senators bombarded officials of the Ministry of Finance and FINTRACFinancial Transactions and Reports Analysis Center of Canada, to find out why it was done and how it was done. The Conservative MP Glen Motz felt that this decision had shaken the confidence of many Canadians in the government and Canadian banks.

Assistant Deputy Minister Isabelle Jacques said the measure was passed to stop money flowing to the protest and to deter protesters from staying on Parliament Hill.

Once the persons concerned left the premises, their accounts were again accessible, and all accounts were unfrozen on February 24. Mrs Jacques stressed that it was up to the financial institutions to decide which accounts should be frozen, based on the information provided by the RCMPRoyal Canadian Mounted Police.

With information fromElizabeth Thompsonof The Canadian News