The Ecosystem Behind De-Risking in Canada

Why Muslim-led and humanitarian charities are being shut out of the financial system — and who’s responsible.

The Big Picture: A Web of Policies, Not a Single Order

De-risking isn’t caused by a single law or agency. It’s the result of a complex ecosystem where banks, regulators, intelligence agencies, and government departments interact — often with good intentions, but dangerous consequences. Muslim-led and humanitarian charities are disproportionately caught in this web. Here’s how the system works, who the key players are, and why change is urgently needed.

The Ecosystem Behind De-Risking in Canada

Government Players

Department of Finance Canada
  • Writes Canada’s anti-money laundering law: the PCMLTFA.
  • Promotes a “risk-based approach,” but its focus on terrorism financing has made banks overly cautious.
  • Its own risk assessments label Muslim-led and humanitarian charities as high risk — setting the tone for the entire system.
  • In 2023, it acknowledged de-risking as a concern and launched consultations.
Finance Canada’s Advisory Committee on AML/ATF (ACMLTF)
  • Brings banks, regulators, and law enforcement together to shape AML/ATF policies.
  • Civil society has no seat — affected charities are excluded from the table.
  • Without diverse voices, risk policies lean toward caution, not inclusion.
House of Commons Finance Committee (FINA)
  • Oversees AML/ATF legislation and banking access.
  • Raised alarms as early as 2015 about overreach and biased data collection.
  • Can’t force change, but its public findings and recommendations shape national debates.
Office of the Superintendent of Financial Institutions (OSFI)
  • Regulates Canada’s banks and how they manage risk.
  • Tells banks to assess risk — but doesn’t stop them from overcorrecting by exiting entire sectors.
  • Its high compliance expectations create pressure to drop high-risk clients, even without wrongdoing.
RCMP & CSIS
  • Feed banks intelligence alerts and risk indicators — even without charges or listings.
  • Banks react swiftly to this “pre-criminal” information.
  • Case example: IRFAN-Canada was de-banked years before being officially listed as a terrorist entity.
FINTRAC – Financial Intelligence Unit
  • Collects and analyzes reports from banks.
  • Its strict rules and penalties create a “zero-tolerance” culture.
  • Warns against blanket de-risking — but banks often overreact out of fear.
  • Banks interpret ethnicity, religion, or geography as proxies for risk, contributing to profiling.
Canada Revenue Agency (CRA) – Charities Directorate & RAD
  • Audits charities for possible terror financing.
  • 85% of charities audited and revoked under RAD were Muslim-led and humanitarian charities.
  • CRA’s red flags ripple across agencies and banks, even when no wrongdoing is found.
  • Risk information spreads — but exoneration rarely does.
Department of Justice Canada
  • Crafts legal interpretations of anti-terror laws.
  • Broad definitions (e.g. pre-C-41 law) created legal risks for legitimate aid.
  • Has the power to clarify that discriminatory de-risking violates Charter rights.
Financial Consumer Agency of Canada (FCAC)
  • Protects individual consumers — not organizations.
  • Can’t force a bank to explain or reverse account closures.
  • Doesn’t collect public data on who’s being de-banked — major accountability gap.
Innovation, Science & Economic Development Canada (ISED)
  • Oversees nonprofit transparency and corporate registries.
  • Better data sharing from ISED could reduce banks’ uncertainty about charities.
  • Supports fintechs — but banks still hold the final power to cut ties.
Global Affairs Canada (GAC)
  • Administers sanctions and humanitarian exemptions.
  • Can issue permits under Bill C-41 for charities operating in conflict zones.
  • Tries to keep aid channels open — but banks often ignore or sidestep its exemptions.

Banking Sector’s Role

Canadian Bankers Association (CBA)
  • Represents Canada’s major banks.
  • Advocates for risk-sharing and clearer regulations — but doesn’t oppose de-risking.
  • Defends banks’ discretion to exit clients based on internal policies.
Ombudsman for Banking Services and Investments (OBSI)
  • Handles banking disputes — but can’t reverse account closures.
  • Offers little recourse for de-risking victims beyond delay or notice extensions.
  • Recommends affected individuals pursue human rights complaints.
AML/CFT Departments in Banks
  • These internal teams manage risk based on compliance, not inclusion.
  • Incentivized to avoid risk at all costs — even if that means dropping legitimate clients.
  • Often staffed by ex-law enforcement or security professionals who act conservatively.
  • Use secretive algorithms, internal scoring, and third-party data (e.g. World-Check) to flag clients.

A System That Protects Itself — But at What Cost?

De-risking is not accidental — it’s the outcome of a system optimized for risk avoidance, not fairness. Muslim-led and humanitarian charities — particularly those doing humanitarian work in conflict zones — bear the brunt of this design.

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