Justin Trudeau is warning about foreign money distorting Canadian politics. So why does the law allow it?

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This article was published 22/02/2022 (1039 days ago), so information in it may no longer be current.

In announcing the end of the Emergencies Act on Wednesday, Prime Minister Justin Trudeau said the country needed to reflect on the role of foreign money and foreign influence.

After leaked data from the GiveSendGo account of the so-called Freedom Convoy suggested more than half its donors came from outside Canada, MPs of all political stripes agreed foreign money should play no role in shoring up anti-government protests.

So why did the law allow for it?

Canada’s election law bans political parties and candidates from accepting donations from non-citizens or permanent residents. But there are large gaps when it comes to cryptocurrency, third-party funding, and the pre-leadership race period — areas where if someone wanted to cheat, they’d probably get away with it.

Cryptocurrency is so popular that Interim Conservative Leader Candice Bergen has named Ontario MP Ben Lobb as her special adviser on blockchain technologies and crypto assets. Alberta MP Michelle Rempel Garner recently tabled a private member’s bill encouraging the growth of the sector, and Pierre Poilievre, the only declared Conservative leadership contestant, has argued cryptocurrencies allow Canadians to protect their wealth from government-fuelled inflation.

This month, convoy supporters donated at least half a million dollars worth of bitcoin.

Yet, the Canada Elections Act makes no mention of cryptocurrency. It’s not because parties and candidates haven’t asked; in 2019, Elections Canada offered advice on how it thinks the law applies.

Under the current regime, an anonymous bitcoin owner can donate thousands of dollars in $20 increments by creating a new address for each transaction. The small donations go unreported and could be unknown to the political candidate or party receiving them. This $20 rule was adopted for events such as passing the hat at a church basement spaghetti dinner, but in the bitcoin world it allows donors to give large amounts while concealing their identities.

For contributions of more than $20, Elections Canada recommends political entities set up a two-step process to identify donors and record transaction information from the blockchain, so that contributions can be audited. None have. If any political entities are using cryptocurrency, they haven’t told Elections Canada.

To the best of the agency’s knowledge, spokesman Matthew McKenna said, “cryptocurrency transactions have not been reported in any returns from political entities.” The Commissioner of Canada Elections, the investigative arm, also confirmed it’s never looked at the use of cryptocurrency.

There are some tough rules. Any amount over $20 that is anonymously donated has to be cashed out and paid to the government. But lots of what Elections Canada offers are suggestions. For example, candidates, nomination contestants and leadership contestants “should not buy property or services directly with cryptocurrencies.” The word “should” is used, McKenna said, because the law is silent on the question. But getting donations in cryptocurrency and paying for things through cryptocurrency could easily escape the watchful eye of our election bodies.

Marc Mayrand, the former chief electoral officer who is now enjoying his retirement in Florida, suggested cryptocurrencies should be banned in the financing of political parties.

“I’m not sure why we simply don’t prohibit the use of those instruments,” he told me, “especially if they are seen as obscuring the source of funds.”

One gap that’s been exploited but not fixed involves third-party financing. Back in 2019, the Manning Centre, the organization founded by former Reform party leader Preston Manning, gave $312,450 to the anti-Liberal group Canada Strong and Proud and its provincial wings. Manning refused to disclose his donor list, leading Jean-Pierre Kingsley, who ran Elections Canada from 1990 to 2007, to say that ran counter to the spirit of the law.

Third-party groups are banned from using foreign funds for election advertising or partisan activity, and must report donations greater than $200. Had the Manning Centre paid for advertising itself, it would have had to report its donors and couldn’t have used foreign money. But funding a third-party group — even being the sole provider to that group — is allowed.

Another gap is the unregulated period before a leadership contest. Right now, for example, the Conservative party has yet to declare the rules of its leadership race. Once the contest starts, participants can accept money only from Canadians and permanent residents, and must report all their expenses. But until then, Poilievre, who declared he was running on Feb. 5, and former Quebec premier Jean Charest, who is exploring his candidacy, can play around the bonds of the law. It would be easier for Charest to argue his funding and expenses are exploratory, but as Mayrand says, it’s “a grey area.”

“It probably relies more on good faith and goodwill than anything else,” he said.

Here lies the problem. There are other possible scenarios — for instance, an individual, operating independently, could solicit funds abroad, set up a phone bank and sign up party members who are favourable to a particular candidate. With time, I’m sure I could discover more loopholes. Understandably, Elections Canada did not want to point them out to me.

If we’re serious about stamping out foreign funding, there are lots of places to look. The MPs’ conflict of interest code doesn’t even prevent a foreigner from donating to one’s exploration of a leadership campaign.

What’s more concerning than these loopholes, of course, is the increase of foreign interference operations. They are, as Macdonald-Laurier Institute fellow Marcus Kolga told the House of Commons’ national defence committee last week, a “persistent and growing” threat. We do not want, as Kolga described, Russian state media polarizing our society by promoting narratives that take advantage of public fear and anger over the COVID-19 pandemic. Nor do we want a Fox News contributor lying about a woman being trampled to death by Canadian police. But some things are easier to regulate than others.

We could at least start with the election law.

Althia Raj is an Ottawa-based national politics columnist for the Star. Follow her on Twitter: @althiaraj