Canada’s Terrorist Financing Laws: From FINTRAC to Cartel Designations

Author(s): Scott Douglas Jacobsen

Publication (Outlet/Website): A Further Inquiry

Publication Date (yyyy/mm/dd): 2025/10/08

Part 4 of 4

Irina Tsukerman is a human rights and national security attorney based in New York and Connecticut. She earned her Bachelor of Arts in National and Intercultural Studies and Middle East Studies from Fordham University in 2006, followed by a Juris Doctor from Fordham University School of Law in 2009. She operates a boutique national security law practice. She serves as President of Scarab Rising, Inc., a media and security strategic advisory firm. Additionally, she is the Editor-in-Chief of The Washington Outsider, which focuses on foreign policy, geopolitics, security, and human rights. She is actively involved in several professional organizations, including the American Bar Association’s Energy, Environment, and Science and Technology Sections, where she serves as Program Vice Chair in the Oil and Gas Committee. She is also a member of the New York City Bar Association. She serves on the Middle East and North Africa Affairs Committee and affiliates with the Foreign and Comparative Law Committee. 

In this 4-part interview with Scott Douglas Jacobsen, Tsukerman on Canada’s ongoing vulnerabilities in counterterrorism and extremist financing. Tsukerman traces the problem back to porous financial oversight, weak cooperation with allies, and the persistence of diaspora networks sustaining separatist and militant causes abroad. From the assassination of Sikh activist Hardeep Singh Nijjar to the activities of Samidoun and Tamil separatist charities, she highlights how groups exploit hawala, cryptocurrency, and fraudulent charities. Tsukerman also assesses landmark Canadian cases, such as R v. Khawaja, and explains why cartels like Sinaloa and MS-13 are now classified as terrorist entities. The discussion underscores Canada’s lagging enforcement and geopolitical consequences.

Interview conducted August 22, 2025.

Scott Douglas Jacobsen: Let us talk about Canada’s legal framework. You mentioned earlier that Canada has been somewhat behind compared to other countries in counterterrorism finance. However, they are not taking any action. 

For example, there is the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), as well as FINTRAC, Canada’s Financial Transactions and Reports Analysis Centre. The PCMLTFA requires financial institutions and other reporting entities to flag suspicious transactions, and FINTRAC gathers and analyzes that data to detect and curb terrorist financing.

So my question is: can these tools realistically be used to identify suspicious transaction patterns—say, specific clusters of behaviour—and then forward them to FINTRAC for analysis?

Tsukerman: Yes, and in fact, that is already part of how the system is supposed to work. The U.S. has taken a similar approach with laws that create categories of transactions banks must review and report. It has been effective in highlighting red flags. However, here is the issue: while Canada has been building out those mechanisms, the U.S. has undermined some of its own by loosening cryptocurrency regulations.

That is a problem because most suspicious financial activity in crypto does not involve terrorists directly, but instead occurs on exchanges. Fraudsters, con artists, and criminals exploit regulatory gaps to facilitate the movement of money. Those exchanges are often where manipulation occurs, and relaxing oversight there removes one of the main pressure points for monitoring illicit flows.

The same applies to more traditional financial crimes. The U.S. has also relaxed specific categories related to insider trading and fraud detection. However, the truth is that these crimes often leave patterns. For example, there is a reason banks automatically flag deposits above $10,000 in cash—it is rare for an ordinary individual to carry that much legitimate cash. Likewise, if someone who deposits typically $500 a month suddenly begins making structured deposits of $9,999 each time, just below the threshold, that is a classic suspicious pattern.

Jacobsen: So it is about more than just the raw numbers?

Tsukerman: Exactly. It is about sudden changes in financial behaviour. If a person with no history of large transactions suddenly starts moving unusual sums, and it does not align with something transparent—like winning the lottery, receiving an inheritance, or a clear raise—that should be flagged.

Banks and financial institutions can also be trained to identify specific types of structuring. For example, if someone has multiple accounts and deposits exactly $4,000 into each one every time, that is not a standard practice. Likewise, if their pattern shifts suddenly and dramatically, it may be a potential sign of money laundering or financing. These are the kinds of anomalies that institutions should be educated to watch for.

Patterns of financial activity can reveal a lot. If you are involved in organized crime—say, illicit drug trafficking, human trafficking, or sex trafficking—you are going to have irregular deposit behaviour. You will likely attempt to set up shell companies, structure deposits in unconventional ways, and otherwise evade official scrutiny. The goal is always to ensure that illicit cash does not directly trace back to you.

Criminals think about details that ordinary people do not. For example, normal people do not worry about where their cash came from—they spend it. However, a career criminal does. If the cash was tied to a crime scene, already marked or traced, they do not want to be caught with it. That creates paranoia: the feeling that “everyone is staring at you.” So criminals want to launder the money quickly—get it out of direct circulation, disguise its origins, and “clear it” before authorities notice.

That is why you see criminals engaging in unusual patterns of movement, including multiple accounts, structured transactions, outsourcing funds through intermediaries, and layering transactions through companies. While regular people or businesses might have more than one bank account, criminals and terrorist financiers are far more sophisticated in how they manipulate them. That sophistication itself can be a red flag.

Jacobsen: Let us look at two more Canadian examples of flagged organizations—first, the Canadian Arab Federation. In 2009, the federal government cut its taxpayer funding after evidence emerged that it displayed Hamas flags and had links to extremist groups. In 2014, the Federal Court of Canada upheld that decision, affirming the government’s policy that taxpayer money should not go to organizations supporting terrorism.

Second, more recently—in February 2025—the Canadian government listed seven Latin American criminal organizations, including the Sinaloa Cartel and MS-13, as terrorist entities. Mainstream outlets, such as the Associated Press, reported this. The designations freeze assets in Canada and criminalize financial or material engagement with these groups.

What is your take on these two cases?

Tsukerman: In the first case, the Canadian Arab Federation, the principle is straightforward: if an organization is openly aligning itself with groups like Hamas, it should not receive taxpayer funding. That is not just a legal decision—it is a matter of common sense.

The second case is particularly significant because it reflects a trend. By designating major cartels and transnational gangs like MS-13 as terrorist entities, Canada is aligning its policy more closely with the United States and other allies. It means their assets can be frozen, their financial networks can be disrupted, and cooperation with law enforcement across borders becomes easier.

Jacobsen: You mentioned charities connected with extremist and terrorist organizations. Following reports from several U.S. NGOs that flagged their financial activity, the U.S. government terminated all funding and cooperation with them. Why was the U.S. funding those charities in the first place? Was it through State Department grants or some other program?

Tsukerman: Likely through State Department or related federal grants. The details would vary by case, and you would have to review each organization individually to know the exact form of support. What is clear, though, is that after reports linked them to illicit financial activity, U.S. funding was cut off entirely.

As for the second issue—the designation of cartels—Canada is clearly following the U.S. lead. One of the earliest actions of the Trump administration was to begin categorizing certain cartels as terrorist organizations. There are a few reasons for this.

First, their methods are effectively terrorist in nature. They do not just operate like traditional mafia-style rackets; they terrorize entire populations. They cut off heads, display them publicly, abduct family members, and torture—not for information or ransom, but as a means of intimidation, eliminating rivals, or enforcing loyalty. This goes far beyond ordinary organized crime.

Second, many cartels literally do business with recognized terrorist organizations. Money is fungible, and flows back and forth between them. For example, some cartels in Latin America have been linked to Hezbollah operations in the region. Hezbollah itself has been documented in Mexico, the U.S., and, to a limited degree, in Canada. These links make cartels and terrorist groups financial and operational partners, even if their agendas differ.

Jacobsen: So, in some cases, they function as proxies?

Tsukerman: Cartels are increasingly used as proxies for other actors—including states—for objectives like arms trafficking, contract killings, or intelligence gathering. The most sophisticated cartels infiltrate government agencies, intimidate officials, and terrorize civilians. Their tactics and partnerships make them indistinguishable from terrorist organizations.

That is why they are being treated in this manner. Moreover, there is a political dimension too. Labelling a group “terrorist” brings heightened attention, stricter sentencing guidelines, and greater legal authority. It also generates popular support for government action. The designation itself is powerful—it dramatically shifts both the legal and political landscape.

Categorizing cartels as terrorist organizations rather than simply as organized crime conspiracies signals seriousness. It tells both the public and international partners that the government views these groups as a genuine national security threat—not just as criminal syndicates. That is an unstated but important reason why the designations have shifted in recent years.

Jacobsen: There is also much international material that could connect here, but that is a separate discussion.

Tsukerman: For instance, Canada has its own legislative framework under the United Nations Act—not to be confused with the United Nations Association of Canada. The Act enables Canada to implement UN Security Council sanctions domestically. That ties into terrorism designations, but it is a separate thread from what we have been covering today.

Jacobsen: Understood. That is a good place to wrap up for today. Thank you, as always.

Tsukerman: My pleasure. Looking forward to continuing.

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