Assessing and reducing terrorist risks to charities
Charities are trusted by the public and have credibility in their communities. They also have a unique ability to reach and help people in high-risk areas and conflict zones where vulnerabilities to terrorist exploitation may exist.
The Canada Revenue Agency (CRA) is responsible for making sure registered charities comply with the requirements of the Income Tax Act and common law, which prohibit providing support for terrorism. As such, the CRA expects that a charity has controls in place to identify and manage risks of terrorist abuse, including risks that may arise through activities a partner or intermediary may conduct on a charity’s behalf. The following information can help your charity set the appropriate controls in place.
Responsibilities of your charity
Like all organizations and individuals in Canada, charities and their officials are responsible for making sure they do not operate in association with individuals or groups that are engaged in or support terrorist activities.
The courts have established that an organization will not be considered charitable at law if its purposes or activities are illegal or contrary to public policy. This includes the support of terrorism, either directly or indirectly. If the CRA identifies possible concerns, it uses a risk-based approach to promote and enforce compliance. For more information, see The CRA’s approach to compliance.
Charities that ignore suspicious behaviour or careless practices risk damaging their reputations. Charity officials should investigate incidents that suggest a charity may have been exploited, and they should take action to address and correct these issues.
What is terrorism?
Terrorism refers to individuals or organizations supporting or engaging in violence to promote political, ideological or religious objectives. It is a serious threat to civil society, the wider international community and the charitable sector.
Assessing the risks to your charity
The risk of terrorist abuse varies from charity to charity and depends on a variety of factors, such as whether a charity:
- operates in an area of conflict where there is an active terrorist threat
- fundraises in an area that may be vulnerable to targeting by terrorists or terrorist sympathizers
- works with people who are targeted by a terrorist movement for support, protection or legitimacy
Using a charity's finances or other assets
Terrorist groups may use a charity’s funds or assets to support their activities. For example:
- A charity transfers funds to an organization that it didn’t know was connected to a terrorist group
- A charity’s vehicle is loaned to an aid organization linked to a terrorist group and is used to transport weapons into an area of conflict
- A charity’s office or premises are rented by a third party with links to terrorism to hold a political rally or to train terrorist recruits
- A charity’s online forums or social media accounts are used to promote or support terrorism. For example, its members or the public post articles in the comment sections that glorify a terrorist group and its cause, and include terrorist recruitment material
- A charity’s medical supplies are sold to a fake foreign relief organization that is controlled by a terrorist group
Using charity officials, staff, or volunteers
Terrorist groups may take advantage of limited screening, training, and controls in charities; a high turnover of volunteers and employees; and a culture of trust. For example:
- A volunteer joins a charity to travel to an area of conflict with the unstated intention of joining a terrorist group
- An official or volunteer posts on the charity’s website terrorist recruitment material or information that promotes violence, hatred and intolerance of others
- An official raises funds without the charity’s knowledge or supervision and uses them to support terrorism
- A volunteer uses a charity’s computers and printers to produce material that glorifies or supports terrorism
- An official independently approves the transfer of funds to an area where there are risks of terrorism or selects intermediaries that may expose the organization to increased risks of terrorist abuse
- An official moves funds through several organizations to hide the goal of financing terrorism
- A speaker is invited to the charity’s event where the speaker expresses extremist views that promote violence
Using an intermediary to divert resources
A charity’s risks and vulnerabilities increase when it works with or through an intermediary to carry on activities. For example:
- A charity provides funding to an intermediary that is found to be associated with a listed terrorist entity
- An intermediary collects funds for a charity and diverts these funds to groups connected to terrorism
- An intermediary diverts humanitarian relief to individuals or groups connected to terrorism
- An intermediary uses fraudulent identification to access a charity’s funds and diverts them to groups connected to terrorism
- An intermediary has limited experience in managing terrorism risks and unknowingly makes a charity’s resources available to terrorist groups
Using a charity's name and reputation
Terrorists may use a charity’s name, reputation and networks to gain access to certain communities or to take part in or support terrorist activities. For example:
- An individual who is not connected to the charity starts a crowd-funding campaign with the charity’s name and diverts the collected funds to support terrorist activities
- An intermediary raises funds to support terrorist activities by using a charity’s logo without permission, suggesting that charity endorses the project
Reducing the risks to your charity
To help your charity identify practices to reduce its risk of abuse, review the Checklist: How to protect your charity.
For more information on the Government of Canada’s efforts to protect charities from terrorism, go to Framework to safeguard the charitable sector.
The CRA’s approach to compliance
As the majority of charities are largely compliant and generally only need guidance, the CRA uses a risk-based approach to promote and enforce compliance within the charitable sector. It has a number of tools at its disposal:
- Education letters and telephone calls to charities
- Audit program
- Other tools
In regards to the audit program, the CRA may select a charity for audit for various reasons. The CRA works closely with charities and accepts additional information throughout the audit process. When the CRA has finished its audit, it will send the charity a letter outlining the results. If the CRA identifies non-compliance under the Income Tax Act, the letter identifies the CRA’s concerns and preliminary views.
An integral part of the audit process is the administrative fairness process that allows the charity, where it disagrees with the CRA’s findings, to make representations on the findings before the CRA comes to a determination on the appropriate compliance outcome. Depending on the information provided by the charity on the findings, the CRA would provide additional education to the charity where appropriate to address more minor or moderate non-compliance. This means the CRA generally gives the charity the chance to take corrective measures through an education letter or a compliance agreement, later following up with the charity to verify if it has implemented the necessary changes. For cases of serious or repeat non-compliance, the CRA may instead look at imposing a sanction or advise that it plans to annul or revoke the charity’s registration.
If a charity believes the CRA has not interpreted the facts or applied the law correctly, it can make use of its recourse rights. If a registered charity disagrees with a sanction or with a proposed revocation, it can file an objection. If a registered charity disagrees with a decision resulting from the objection process, it can appeal to the Federal Court of Appeal or the Tax Court of Canada, depending on the type of appeal.
For more information, go to The audit process for charities.
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