Canadian Charities Prohibited from Supporting Terrorism

Every registered charity in Canada carries a legal obligation that goes beyond doing good work — it must actively avoid any connection to terrorism.

This prohibition applies to all charities without exception, whether Christian, Muslim, Sikh, Hindu, Jewish, or secular. It does not matter whether a charity is large or small, local or international. The rules are the same across the board.

This article explains what the law requires, what has changed in 2025 and 2026, and what charities need to do to stay compliant and protected. For broader guidance on CRA compliance for Canadian charities, the B.I.G. Charity Law Group resource library is a useful starting point. 

The Legal Framework: What Canadian Law Says

Two federal statutes form the backbone of Canada's rules on charities and terrorism. Knowing both is essential for every charity director and officer. 

The key laws are:

• The Income Tax Act (ITA) — governs charitable registration and prohibits charities from supporting terrorism in any form
• The Charities Registration (Security Information) Act — gives the CRA and Public Safety Canada the authority to deny or revoke charitable registration through a joint certificate process signed by the Minister of National Revenue and the Minister of Public Safety

Together, these statutes create a comprehensive legal framework that leaves no room for exceptions. Courts have also established that an organization will not be considered charitable in law if its purposes or activities are illegal or contrary to public policy — and support of terrorism qualifies as both.

The Canada Revenue Agency (CRA) is the federal body responsible for making sure registered charities comply with these requirements. It reviews all applications for charitable registration, monitors registered charities, and conducts compliance activities under both statutes. 

Canada's Designated Terrorist Entity List

Canada maintains an official list of designated terrorist entities — but charities need to understand that this list does not define the limits of the prohibition.

Public Safety Canada maintains the list under the Criminal Code of Canada. It is published in the Canada Gazette and updated regularly. Some entities appear under multiple names or spelling variations, so charities must check all known aliases when screening partners.

The critical point: Supporting any organization involved in terrorism — whether or not it appears on the designated list — is still a violation of Canadian law.

This matters most for charities operating internationally. A charity working in a conflict-affected region may unintentionally direct funds toward groups with terrorist links, even when those groups are not formally listed. The CRA expects every registered charity to have controls in place to catch these risks before they become violations.

The CRA's Review and Analysis Division (RAD)

The CRA has a specialized unit — the Review and Analysis Division, known as RAD — that handles terrorism financing risk assessments within the charitable sector. Understanding how RAD operates is important for any charity, particularly those with international programs.

RAD was established in 2003 as Canada's counter-terrorism efforts expanded after the September 11 attacks. It receives leads from intelligence and law enforcement partners, media sources, public tips, and internal CRA referrals. Based on those leads, RAD decides whether to open a formal audit of a charity.

In October 2025, Canada's National Security and Intelligence Review Agency (NSIRA) released a major report on RAD's operations. The findings were significant.

Key findings from the October 2025 NSIRA report:

• RAD audited a number of charities that did not present credible risks of terrorist abuse
• Between 2009 and 2022, 67% of audited charities were discernibly Islamic and 19% were Sikh
• Islamic charities represent less than 1% of all registered charities in Canada
• RAD lacked an evidence-based method for validating the risk indicators it used to justify audits
• Documentation of audit selection decisions was inconsistent and insufficient
• NSIRA concluded these deficiencies raised serious concerns about the potential for bias, and that RAD's decisions may have infringed Charter rights

The CRA accepted the majority of NSIRA's recommendations. Beginning in the 2025-26 fiscal year, the CRA implemented a formal tracking mechanism to document audit referrals and selection criteria. The CRA has publicly committed to transparency and fairness in its charities audit program and has stated it does not select charities based on religious affiliation.

What this means for charities: Proactively documenting risk management controls is now more important than ever. A well-documented compliance record is the strongest protection a charity has if RAD opens an audit. Charities that need help assessing their current compliance posture can speak with a charity lawyer at B.I.G. Charity Law Group. 

2025–2026 Legislative and Policy Updates

Several important changes to Canada's anti-terrorism financing framework took effect or were proposed in 2025 and 2026. Charities should be aware of all of them.

Cash Donation Prohibition

Budget 2025 introduced a prohibition on accepting cash donations of $10,000 or more in a single transaction or prescribed series of related transactions. This measure amends the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and is part of Canada's broader effort to close gaps in its anti-terrorism financing regime. 

Charities that currently accept large cash donations should review their policies and consult a charity lawyer about compliance.

FATF Mutual Evaluation

Canada is undergoing its 5th mutual evaluation by the Financial Action Task Force (FATF) during the 2025-2026 fiscal year. This international review assesses Canada's compliance with FATF's Recommendation 8, which specifically addresses the risk of terrorist financing through the non-profit sector.

The outcome of this evaluation will influence how Canada's regulatory framework for charities evolves in the years ahead.

2025 National Risk Assessment

The Department of Finance released its 2025 Assessment of Money Laundering and Terrorist Financing Risks in Canada. This document includes updated findings on how the charitable sector is assessed for terrorism financing vulnerability and directly informs how the CRA prioritizes its compliance activities.

Charitable Sector Modernization (April 2026)

In April 2026, the Minister of Finance and National Revenue presented the Canada Strong for All – Spring Economic Update 2026. It announced the government's intention to modernize the framework for the charitable sector in 2026-2027, including improvements to digital compliance tools and service delivery. These changes are expected to affect how charities interact with the CRA going forward.

FATF Recommendation 8 and Canada's International Obligations

Canada is a member of the Financial Action Task Force, the intergovernmental body that sets global standards for combatting money laundering and terrorist financing. FATF's Recommendation 8 is the international standard that governs how countries protect the non-profit sector from being used to finance terrorism.

Canada is currently being evaluated against this standard through its 5th FATF mutual evaluation in 2025-2026. The results of that evaluation will shape future regulatory expectations for Canadian charities.

What Recommendation 8 requires in practice:

• Countries must identify which non-profit organizations are at risk of terrorist financing abuse
• Oversight measures must be proportionate to actual risk — not applied broadly to all charities
• Measures must not unduly restrict or discourage legitimate charitable activity
• Charities demonstrating strong governance and compliance controls are considered lower-risk

Charities that follow CRA guidelines are already aligned with these requirements. FATF's updated Best Practices specifically warn against disproportionate oversight — a standard directly relevant to the NSIRA findings on RAD's conduct.

Charities Operating Internationally: Direction and Control vs. the Grantee Model

Canadian charities working outside Canada face additional compliance complexity, especially in conflict-affected regions. The June 2022 amendments to the Income Tax Act created two distinct pathways for international fund transfers.

Pathway 1: Direction and Control

This is the traditional approach, in place for approximately three decades. Under direction and control, a charity maintains full oversight of how its funds are used abroad. The charity directs the activities, selects the staff or volunteers, and controls the outcomes. This remains the most clearly defined and widely used approach.

Pathway 2: The Grantee Model

Under the June 2022 amendments, charities can make grants to eligible foreign organizations — but only with rigorous due diligence and ongoing oversight of how those funds are used. The CRA has published draft guidance on these grant-to-grantee requirements. Charities must also account for new rules on implicit and explicit gifts introduced in the same amendments.

Both pathways carry terrorism financing risk in high-risk regions. Intermediaries who divert funds toward terrorist activity can expose a charity to serious consequences — even when the charity had no knowledge of the diversion. This is why documented due diligence matters at every step of an international program.

Consequences of Non-Compliance

The penalties for a Canadian charity found to be supporting terrorism go beyond losing charitable status. Directors and officers should understand the full range of consequences.

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A revoked charity may continue operating as an unregistered non-profit, but it loses tax benefits and, in practice, most donor confidence. Revocation should be understood as a serious and lasting consequence.

One additional complexity: the confidentiality provisions of the Income Tax Act restrict the CRA from publicly disclosing information about charities under terrorism-related investigation. This means the public — and sometimes even parliamentarians — may not learn about a charity's compliance issues until months or years after the fact.

How Charities Can Protect Themselves

The best protection against terrorism financing risk is a strong compliance program built before a problem arises. The CRA publishes a Checklist for Charities on Preventing Terrorist Exploitation, and all registered charities are advised to review it.

Practical steps every charity should take:

• Screen all partners and intermediaries — verify identity, mandate, and track record before transferring any funds, especially internationally
• Document all due diligence — written records of every screening decision create a clear audit trail if RAD makes inquiries
• Train board members and staff — everyone involved in financial decisions should know the red flags of terrorist financing abuse
• Review international programs regularly — charities active in high-risk jurisdictions should conduct written reviews of their activities and partners on a regular schedule
• Consult a charity lawyer before entering foreign funding arrangements — both the direction and control rules and the June 2022 grantee amendments carry legal complexity
• Subscribe to the CRA's Electronic Mailing List (EML) — the CRA sent 40 EMLs during the 2024-2025 fiscal year covering regulatory obligations, and staying current with CRA guidance is itself a compliance best practice
• Report concerns immediately — if a charity suspects exploitation by a partner or intermediary, officials must investigate and take corrective action without delay

Common red flags to watch for:

• Unusual or urgent fund transfer requests without clear explanation
• Opaque intermediary structures that make it difficult to track where money goes
• Partners operating in regions with active listed terrorist organizations
• Requests to move funds through multiple organizations before reaching the stated recipient
• Speakers or volunteers expressing extremist views that promote violence

Non-Charitable Non-Profits: A Compliance Gap

Non-charitable non-profit organizations in Canada are largely outside the CRA's terrorism financing oversight framework. The Charities Directorate's authority under the Income Tax Act and the Charities Registration (Security Information) Act applies specifically to registered charities.

This gap has been formally flagged in Canada's national risk assessments and raised in the context of the 2025-2026 FATF mutual evaluation. Non-profits should not assume that the absence of CRA oversight means the absence of legal risk — criminal law obligations under the Criminal Code of Canada apply to all organizations and individuals in the country.

Frequently Asked Questions

Does the terrorism prohibition apply to all Canadian charities regardless of religion?

Yes. The prohibition applies to every registered charity in Canada without exception. The CRA enforces the same rules for all charities, regardless of religious or secular affiliation.

Does a charity have to support a designated terrorist organization to be in violation?

No. Supporting any organization involved in terrorism — whether or not it is on Canada's official designated entity list — violates Canadian law.

What is RAD and when does it audit a charity?

RAD is the CRA unit responsible for terrorism financing risk assessment in the charitable sector. It opens audits based on leads from intelligence partners, media, public tips, or internal CRA referrals. The 2025 NSIRA report found that RAD's processes for selecting charities for audit lacked sufficient rigour and needed significant reform.

Can a charity lose its registration for unknowingly funding terrorism?

Yes. The CRA expects charities to have adequate risk controls in place. A charity that failed to conduct proper due diligence may face compliance consequences even if it was unaware that funds were diverted to terrorist purposes.

What is the new cash donation rule for charities?

Budget 2025 introduced a prohibition on accepting cash donations of $10,000 or more in a single transaction or prescribed series of related transactions, amending the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

What is FATF Recommendation 8?

It is the international standard that governs how countries protect the non-profit sector from terrorist financing abuse. Canada is being evaluated against this standard during its 5th FATF mutual evaluation in 2025-2026. Charities following CRA guidelines are generally considered aligned with its requirements.

Where can a charity find Canada's list of designated terrorist entities?

The list is maintained by Public Safety Canada and published in the Canada Gazette and annual Statutes of Canada. Check all known aliases, as some entities appear under multiple names or spelling variations.

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