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Charities must protect themselves from unwitting terrorist links

Charities working abroad must ensure they’re connecting with bona fide organizations that aren't involved in corrupt activities, including terrorism, Toronto charity lawyer Taras Kulish tells AdvocateDaily.com.

It's a message Kulish, a senior associate with Steinberg Title Hope & Israel LLP, will take to Ukraine June 16 when he delivers a lecture on charity law at the Ukrainian Catholic University in Lviv.

The focus of his talk will be that the system of checks and balances baked into Canadian laws is the “platinum standard for charitable organizations.

Corruption is a problem in Ukraine, and we cannot shy away from stating this,” he says. "Canadian lawyers dealing with Ukraine, especially those with Ukranian backgrounds and connections with the country and its people can offer an educational perspective on the legal landscape around many areas of the law, including charities."

Kulish's lecture in Liviv will outline the legislation affecting charities in Canada such as the Income Tax Act and the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA).

“In Canada, we’ve seen a couple of examples where charities were used to fund terrorist activities in other countries,” he says. “So both the authorities and the charities must be vigilant to ensure they're complying with the law and following best practices so they don’t unwittingly contribute to corruption or terrorism.”

Kulish says one such case was the organization known as the Tamil Tigers, which was accused of establishing the Canadian Foundation for Tamil Refugee Rehabilitation and channelling more than $700,000 to non-qualified organizations outside of Canada. It was stripped of its charitable status in 2011.

Under the PCMLTFA, financial institutions are obligated to ensure their clients are legitimate organizations and can justify the funds that flow through their accounts, he says.

"The same goes for charities — you have to know your partners and their affiliates," says Kulish.

He works with the charity Hope Worldwide, which has branches around the world, including Canada. Kulish says the Canadian organization will only work with an affiliate of Hope Worldwide in another country once they've been vetted by the board in Canada to ensure it's a bona fide entity and in good standing with the parent organization. 

It’s not enough to rely on the parent organization’s approval, he says, Canadian charities have to do their own due diligence.

That may involve sending someone to the affiliate's location and having them file a report.  It's also prudent to demand an accounting of any funds transferred to the organization and to send money over the course of a year in tranches dependent on property financial and narrative reporting for prior funds sent.

“You should ask for narratives and an accounting of how the money is spent as the project progresses,” he says. “This may involve hiring an agent in that country to oversee the process." 

Even if the organization has a successful track record, each new project must be approached with checks and balances during the planning phase, constant reporting during implementation, and audits post-completion, Kulish points out.

“It’s important because the money is coming from Canadian taxpayers,” he says. “So it's very much in the public interest to ensure it’s above board."

Finally, Kulish says, it’s good for business.

"Charities that operate transparently and efficiently are more likely to attract donors, increasing their ability to do more good work," he says. "By sticking to our principles and applying Canadian standards, lawyers and charities can effect incremental change in the culture of a country, one organization at a time. This is in line with the advice given by Justice Frank Marrocco when he spoke to the Ukrainian Canadian Bar Association in November 2015 on Canada Ukraine Free Trade about his experiences in Ukraine as part of a Canadian delegation of judges, and suggested that business lawyers can effect change in their Ukrainian colleagues one transaction at a time."

Efforts to bring transparency of law to countries with a history of corruption is a noble struggle, Kulish says, and one which his colleagues at the Ukrainian Canadian Bar Association and other groups have undertaken. 

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