The Wrong Way to Truck Along

Restrictive measures imposed to combat the coronavirus pandemic are slowly being lifted in countries across Europe and North America. But when Canadian lorry drivers were told that they would need to be vaccinated to cross the US–Canada border without having to quarantine, this sparked an anti-mandate protest the likes of which the country had not seen throughout the pandemic. Perhaps this is what caught authorities off-guard: while much of the world was looking forward to ditching vaccine passports and taking holidays abroad, anti-vaccine sentiment and pent-up frustration with restrictions on personal freedoms have erupted in epic proportions in the great white north.

Supporters (including plenty of sympathetic, wealthy Americans) flocked to crowdfunding platforms like GoFundMe and GiveSendGo to donate to protest organisers, raising millions of dollars to pay for fuel, warm meals and even mobile saunas for the demonstrators’ staging area. But with pressure mounting – not least from disgruntled Ottawa residents living with incessant horn blaring –GoFundMe eventually opted to withhold funds and refund donations made to campaigns like ‘Freedom Convoy 2022’, citing violations of its terms of service that prohibit the promotion of violence. Sightings of Nazi flags being flown by some demonstrators likely contributed to the decision to stop facilitating a movement with tinges of violent extremism. Elsewhere in Canada, weapons were seized from solidarity protestors linked to the far right, who are thought to have conspired to murder Royal Canadian Mounted Police (RCMP) officers.

Eager to move along the convoy of trucks and encamped protestors choking the streets of Ottawa, on 10 February the provincial government of Ontario secured a court order prohibiting anyone from using or dealing with donations made to two of the protest’s largest crowdfunding campaigns. But after a further surge in protest activity, the federal government decided to go nuclear.

On 14 February, Finance Minister Chrystia Freeland (also Prime Minister Justin Trudeau’s deputy) announced that emergency legislation would be enacted to, among other things, ‘broaden the scope of Canada’s anti-money laundering and terrorist financing [AML/CTF] rules’, primarily to keep funds raised on crowdfunding platforms away from protestors supporting the illegal blockades. Provisions were also made for financial institutions to freeze personal or corporate accounts suspected of financing the occupation, without a court order. Institutions doing so in good faith would be protected from civil liability. The measures, by virtue of being implemented using emergency legislation, should be lifted within 30 days, but there is reason to expect that obligations for crowdfunding platforms to register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC – the country’s financial intelligence unit) will remain. Since the measures’ introduction, several high-profile leaders have been arrested, but the incident highlights several worrying trends in how AML/CTF tools have been rolled out to deal with circumstances that have little to do with preventing money laundering or terrorist financing.

Setting Policy in a Crisis

Starting with the least egregious development, the decision to bring crowdfunding platforms under the purview of AML/CTF regulations in a crisis situation is unfortunate. To be sure, there is precedent for doing this, albeit gradually: the EU Regulation on European Crowdfunding Service Providers sets standards for minimum levels of due diligence for project owners and places the sector among the other obliged entities. Currently only applicable to investment- and lending-based crowdfunding, there is a proposal for the regulation to be extended to donation-based platforms as well. Research on the financial crime risks of crowdfunding platforms is still modest, and variance in risk across platform types must be appreciated. Appropriately, the EU’s framework for regulating the sector was not constructed overnight. The somewhat hasty approach taken by Canada is perhaps unappreciative of some of those nuances, including the fact that the payment service providers that facilitate transactions on behalf of crowdfunding platforms are obliged entities already. As noted by RUSI Associate Fellow Jessica Davis, this decision risks overburdening FINTRAC with duplicitous reporting, spreading compliance resources even more thinly and requiring subsequent deconfliction of regulations. The speed at which the protest movement raised substantial sums using online crowdfunding has indeed thrown light on a need to monitor this space more closely, but doing so in such a slapdash fashion is not called for.

Deploy the Bankers

Canada’s emergency measures served to effectively conscript financial institutions and place them on the front line of a war over public order, requiring banks, payments firms and crowdfunding platforms to determine and cease dealing with anyone associated with the ‘illegal blockades’ and to disclose transactions or assets held to the RCMP or Canadian Security Intelligence Service. According to the finance minister, the RCMP provided banks with names of individuals and entities to screen against their customer lists when implementing these freezing orders, but other reports indicate that financial institutions were broadly left to their own devices in interpreting the new expectations placed on them.

A lack of public sector guidance on what financial behaviours or activities banks should be looking for in determining financial crime (particularly terrorism financing) is one of the chief shortcomings of the suspicious transaction reporting (STR) regime, whereby banks feed financial intelligence to law enforcement. The very same applies here – given bank compliance staff’s likely dismay at being asked to pull indicators of ‘illegal blockade finance’ out of thin air – although with far greater consequences attached. The STR system still allows banks to complete transactions they may find suspicious. Canada’s emergency order, on the other hand, expects banks to freeze whole accounts on the same grounds of reasonable suspicion, and they are incentivised to do so by being protected from civil liability should they freeze an account in error. The true scale of accounts wrongly frozen as a result of the order may be small, we will have to wait to see. Nonetheless, there’s a reason why the Financial Action Task Force (FATF – the global AML/CTF watchdog) standards uphold reporting suspicious activity, not freezing accounts due to wariness.

Authoritarian Abuses

Put simply, the AML/CTF tools laid out by the FATF standards were not designed to respond to law-and-order crises like that seen on the streets of Ottawa. Canada’s decision to use them in this case, aside from proving the point of government overreach in the eyes of some demonstrators, sets a dangerous precedent when it comes to deploying AML/CTF rules beyond their intended remit.

By not giving an existing court order on crowdfunded donations enough time to take effect, Canadian policymakers have demonstrated how tempting it is to reach for AML/CTF tools when dealing with a crisis that would appear to be spiralling out of control. Coming from a developed economy with a relatively strong human rights record and membership in FATF (and not one of its less powerful regional bodies), this signals to other jurisdictions that anti-financial crime standards may be used in similar ways, possibly to quell protests and other expressions of discontent that would be deemed entirely legitimate by most democratic standards. This was certainly the case in Nigeria in October 2020, where popular protests against police brutality were stymied when the Central Bank of Nigeria ordered private banks to freeze the accounts of protest organisers without warning. Unlike in Canada, this was done without emergency legislation being enacted, but such details are often overlooked when autocrats seek to utilise international standards against money laundering and terrorist financing to mute popular expressions of discontent and encumber the work of political opponents.

Was It Worth It?

It is unclear whether these emergency financial measures will be what eventually returns normality to Ottawa; at the time of writing, widescale arrests seemed to be the police’s main tactic. Yet the decision to call on the private sector to move along protestors smells of desperation. Instead of blocking access to bank accounts, perhaps financial intelligence gleaned from transactions made by key organisers could have informed the law enforcement response. At the very least, the court order on using crowdfunded donations probably should have been given space to take effect and be enforced.

On imposing the emergency economic measures, Finance Minister Freeland said, ‘it gives me no pleasure to impose any of these measures. In fact we do so with great sorrow but do not doubt our determination to act, to defend our democracy, to defend our economy, and to restore peace’. All laudable aims, surely, but in doing so Canada has also inadvertently credited the authoritarian playbook on abusing AML/CTF to erode democracy.

The views expressed in this Commentary are the author’s, and do not represent those of RUSI or any other institution.

Have an idea for a Commentary you’d like to write for us? Send a short pitch to commentaries@rusi.org and we’ll get back to you if it fits into our research interests. Full guidelines for contributors can be found here.