12 Anti-Terror Finance Fixes Target Bank De-risking of Muslim Charities

For banks, payments firms, and compliance teams, this study surfaces an often-hidden operational cost: anti-terrorism financing and sanctions rules are pushing legitimate non-profit clients out of high-risk jurisdictions such as Syria and Yemen. The 12 proposed federal recommendations could reshape customer risk assessment, de-risking policies, and the regulatory expectations facing financial institutions serving charities.

A new study by University of Toronto law and history professor Anver Emon argues that Canada’s anti-terrorism financing controls are producing measurable harm in the charitable sector, specifically pushing Muslim charities to withdraw humanitarian aid from high-need jurisdictions such as Syria and Yemen. The study, released against the backdrop of long-running criticism that Muslim charities have been unfairly singled out in the fight against terrorist financing, makes a dozen recommendations to various federal agencies aimed at allowing legitimate non-profit work to proceed without triggering financial de-risking or regulatory sanction.

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It acknowledges that these mechanisms exist to protect the integrity of the financial system, prevent its misuse by criminal or terrorist organizations, and uphold Canada’s international obligations as a member of the Financial Action Task Force.

The study does not challenge the underlying purpose of Canada’s anti-terrorism financing and sanctions regime. It acknowledges that these mechanisms exist to protect the integrity of the financial system, prevent its misuse by criminal or terrorist organizations, and uphold Canada’s international obligations as a member of the Financial Action Task Force. Instead, Emon’s analysis focuses on the unintended consequences of those controls. The most important are what the study calls “financial derisking,” in which banks and other financial institutions cut off services to clients, and “humanitarian derisking,” in which non-profits scale back or end their humanitarian commitments because they fear running afoul of anti-terrorism measures.

Muslim charities are described as especially vulnerable because they are committed to providing aid in hard-hit regions — including Syria and Yemen — that Canada also deems high-risk for terrorist financing. The result is a paradoxical situation in which legitimate humanitarian organizations withdraw from precisely the places where their assistance is most needed, not because of any proven wrongdoing but because of the compliance exposure their work creates for their banking partners and themselves. This creates a feedback loop: as banks cut services to avoid regulatory risk, charities lose the financial infrastructure needed to operate, which in turn reduces the flow of aid and may push some activity into less transparent channels.

The study arrives after several years of scrutiny over how Canadian authorities treat Muslim-led non-profits. Emon co-authored an influential 2021 report on audits of Muslim charities, and the new research takes a broader look at Canada’s anti-terrorism financing measures and sanctions regime. More recently, a National Security and Intelligence Review Agency report released in October 2025 found “a lack of rigour” in the way the Canada Revenue Agency selects charities for terrorism-financing audits, concluding that the process introduces risks of bias and discrimination. That finding provides independent support for the claim that Muslim charities have faced disproportionate scrutiny, and it elevates the stakes for the 12 recommendations in the new study.