The "backdoor" loophole: How foreign money still influences Canadian politics

Added: 2026-05-14

[00:00:00]Thank you to all our witnesses. I have questions for everyone, but I'd like to start with you, Mr. Burton.

[00:00:07]You spoke about the ability for foreign agents to use proxies to fund candidates supported by foreign actors. You talked about how often people would receive money that corresponds to the amount that comes out of their pocket because some of the amount of course is refunded by the public purse. So someone donates $400, gets $300 back as a tax credit. The foreign agent pays that person $100. So logically, are we saying here that the state is actually funding foreign interference with tax credits?

[00:00:49]>> Well, yes. I mean, that's uh that's how this uh this scam worked. And uh presumably the refunds were made through these police stations, these um you know um covert off-site um um uh institutions serving the the Chinese government's interest. I don't think that the people who received the money back, you know, went to the Chinese embassy and got it from there. So, it is it is indicative of problems in our enforcement of Canadian law and and everybody who was involved in this scheme clearly knew that it was illegal. I mean, there's no ambiguity about it. Um, you were being given an under the under the table refund for for your donation. So, um I mean, I'm just beside myself. I the but the issue for me really is uh will it stop? are do are we actually going to prevent this behavior from persisting in the next election in in certain writings that the Chinese state has identified as amendable to um their their um subversion and um the question of uh what are the rewards for this? Um I think some of it are rewards which the people who are colluding with agents of the Chinese state are receiving back in China. So how you know how do we trace that kind of um that kind of scheme which is transnational and covert and corrupt.

[00:02:22]Thank you. Special question specific question of tax because whether one agrees or not with the idea of tax credits one when donations are made to political parties under the current system the government when it provides a tax credit to proxies it's paying from its from its own funds uh to fund foreign interference on itself. So whether one agrees with the principle or not, if you remove the tax credit, that could have an impact on foreign interference. I see Madame Turnbull would like to jump in here.

[00:02:57]>> So to the question to the part that that you raised about like what what might our opinions be about like I think it's important for there to be public funding for political parties. I think that uh I I would be in favor of reinstating the per vote subsidy. I was sad to see that go. I think it's important for parties to be able to have some base of funding to be able to compete keep the lights on and the strugg I think there have been a lot of negative implications frankly to the struggle to to try to uh recruit donations.

[00:03:30]You can donate up to 1,700ish, but most people don't donate anywhere near that.

[00:03:34]And you end up having to compete for these tiny organizations or sorry, these tiny bits of money. And I think it that's a lot of what actually leads to some of the toxic rhetoric that we see in politics a lot of the time, but that's that's a whole other thing. I think it's it's completely in the public interest for there to be public funds directed at political parties, 100%. But I completely agree with with my colleague. Um, if that money is then being used to turn around to go back to to give a tax credit for for money that should never have been given in the first place, well then yes, then it's part of the problem.

[00:04:10]Madame Lawler, >> Madame Lawler, on the matter of data protection, parties often use third parties who provide computer services to manage data for door-to-door canvasing for example.

[00:04:28]Do you have any recommend recommendations in about how these companies who provide these third-party computer services should guarantee the cyber security of data? Do you think we could go further in terms of uh controlling all of this?

[00:04:49]>> Thank you so much for the question. I you are absolutely correct in identifying thirdparty data brokers as an important source of information for political parties and other organizations ones that are are currently not adequately captured under the legislative framework. Uh these are uh these are commercial bodies that are selling or transferring information to and from political parties uh and are are absolutely sites of potential data breaches uh because they sort of operate on the the fringes of political parties or or sort of in uh consultation with political parties um but aren't uh restricted in the same way that political parties are. are and it's really up to political parties at this juncture to regulate their own behaviors through their own internal policies. it does represent a site for potential misuse of voter data and I think that we can see in the Alberta example there are also other examples across jurisdictions uh where we have have seen violations of people's individual privacy rights uh because of these uh breaches that can occur at that juncture that these bodies are um as commercial bodies are also playing a really important role in our democratic exercise but aren't caught by the legislation.

[00:06:07]Thank you so much. Um Mr. Jackson, 5 minutes, please.

[00:06:11]>> Thank you, Chair. Um thank you to the witnesses. Nice to see you both again.

[00:06:15]Um Dr. Turbo, I'm going to uh direct most of my questions to you. Um you've testified here at this committee in previous parliaments on this this topic, and I've gone back um because when the minister and his team were here, I'm trying to get to the bottom of a scenario that as a new member of parliament, I find a bit odd that it exists. And I would argue that most Canadians probably have no idea that foreign money really ends up in third party hands that then they can use for elections purposes. I I I don't know that that's really all that widely understood in the Canadian general public. Um and so under the provisions of the act, there's still the 10% loophole that they're that they're arguing is necessary. And you had um said, and this is a quote from uh when you were being asked questions by Mr. Richards, I'd be happy if for political contributions that are kept in a separate bank account like the bill is advocating those limits applied all the time. I fear that's not going to survive a court challenge. I I'm curious if you could just outline your thoughts on that a little bit in more detail.

[00:07:16]>> So I think that was probably in 2018.

[00:07:20]>> I believe so. And so not knowing exactly what was in my head at the time but trying to what will I say to that now?

[00:07:29]>> Also what the minister and his team Rick said that that that this you know having uh third parties be allowed to use zero contributions would not survive a court challenge. And I'm trying to understand why it would be a charter infringement for third parties to not be allowed to use foreign money in Canadian election activities.

[00:07:50]I just don't understand.

[00:07:52]>> I don't know why it would either. And I wonder if it has to do with what the third party would have to prove like in terms of if you've got the money that's part of your own funds, it's there for a period of time. Um, how like at a certain point are if this foreign money got it got into your own funds account, it's there for a while.

[00:08:11]What if at some point if there's a 10% threshold, it did get used for something is and that that is in the space of regulated activity, would a would a third party really be held to account for that after a certain period? Would they be able to be like could it be proven that that's exactly what they intended to do? I mean, personally, and now I'm gonna have to go look this up, too, because I'm not 100% sure why, but I but I wonder if it has to do with just that being able to be fully accountable for that a especially after enough time has gone by.

[00:08:43]>> And so, my additional concern then here is that, you know, we we're talking about the pre year prior to a pre-writt period, right, is what they're going to hold accountable the the financing from foreign contributions for. But, you know, foreign actors are going to read this bill when it becomes law. They're going to understand when Canadians now we're in a majority. It's a set election date. I mean, there's obviously some flexibility in that, but they're going to have a general sense of what year the election's going to be in. And so, if if if it's not contributions, but um say a foreign actor um contracts services with a third party for a million dollars in the year prior to the year prior, and then that would be considered revenue rather than a contribution because they've purchased a service. But then that money could still theoretically be used three years down the road by the third party to work on campaigning >> as long%.

[00:09:34]>> Right.

[00:09:34]>> Yeah. Yes.

[00:09:36]>> Right. And their revenue has now increased and so that 10% becomes higher >> because the revenue of the organization is now higher based on the contracting of those services.

[00:09:46]>> Yes.

[00:09:47]>> So is there a way to deal with that?

[00:09:50]>> Because I think that's a backdoor loophole too that should be addressed.

[00:09:53]Right. These third parties I'm sorry the the foreign actors are smart. they're going to catch on to this provision very quickly.

[00:10:00]>> Of course, like they're smart. This is their business. They want to do this like 100%. This isn't hard. This is not a hard code to crack, obviously. And I mean, the only way I think that you're going to be able to make sure that none of that foreign none of those foreign funds gets into uh the election orbit at all is to absolutely enforce a separation of accounting where all of that is going into this fund over here.

[00:10:25]all you know and and is no not allowed to cross-pollinate with any money that can legitimately used for for regulated expenses. Now groups are going to be affected differently by this obviously right for a lot of for a lot of groups that act as third parties in elections. They have whole other lives with whole other services they provide. They might have entirely legitimate reasons why they would be receiving funds from outside Canada to do whatever their their operations are whatever. Whereas there's some third parties that probably have no interaction at all in their operations with a foreign entity. So they would get no foreign money um for for legitimate reasons. And so putting the onus on the third parties to say you have to keep your money separate and this is important enough like it's a loophole >> 100%.

[00:11:13]>> Thank you. Sorry. Oh, that's okay.

[00:11:15]Chair.

[00:11:16]>> Thank you, Mr. Burton. I'd like to hear you uh following Madame Turnbull's remarks uh about the idea of res reinstating per vote subsidy uh with perhaps ceilings and getting rid of tax credits without necessarily taking a position on the on the philosophical side of things. Could that have a positive impact on foreign interference, for example, if we at least gave further thought to these matters?

[00:11:47]Um I think you know that similar to what uh um um Miss Briier was saying that the Chinese and the Russians have enormous resources that they're dedicating to this kind of work. I mean the United Front Work Department of the Chinese Communist Party is a couple of times the the entire Chinese foreign ministry. So they're dedicating a terrific amount of um effort to this. So I feel that they will always find some way to to um do an end run around us or find some kind of loophole that will allow them to exert influence where they feel it it should be exerted. So you know certainly this particular scheme about uh getting lots and lots of people to to donate and then get the refund is one but other methods of of um of funding also can arise. I I I just think that that they will do more and more and and as I said in my opening statement, they are expanding their resources to their Canadian operations significantly and AI and and other computer um enhanced methods um allow them to do it much better and this includes the problem of disinformation, a very serious problem of of disinformation uh particularly within the community that read um their get their information in the Chinese language.

[00:13:17]>> Madam Turnable, you talked about better regulating uh nomination races other than just through monetary punishments. What would your other recommendations be?

[00:13:29]>> Okay. Well, I think I think it's important, for example, to take some of the the pieces around like for like undue influence by foreign entities, things like that, and apply it specifically to leadership and nomination contests. Um, we know what happens. We know that foreign actors see these these contests as part of the electoral process and also a space that might be easier to penetrate than elections at the ballot box where people are showing up and casting their ballots in person. Like we we don't really hear, you know, that those that those are the issues are in a ballot box intimidation in Canada. That's not that's that's not what we hear about. We hear about other issues that are taking um that are making it possible for foreign intu influence to potentially happen. So I think there are to be able to to give a legal basis to the it's it's not like political parties are saying yeah we'd love to have someone come and influence you know it's not like it's not at that parties have rules about who can participate in these you have to be a member of the party obviously and you you all know this better than me but giving elections Canada the ability to go after someone who who has violated this law that's important like to make >> I'll have to cut you off be my uh apologies. Um I will go to Mr. Cooper and Madame Brriier uh next. I will warn you in advance. I will cut you off at 5 minutes.

[00:14:55]>> Okay. Thank you uh very much. Uh, Professor Turnbull, we heard uh from the chief electoral officer in the previous hour who acknowledged that there are no real safeguards to prevent foreign actors from exploiting the exception with respect to third party uh financing where third parties could use their own funds uh in terms of purchasing goods or services or direct or funneling money uh into those entities that could then be used for uh regulated activities by third parties. Um it's a loophole. You called it a loophole. I agree. It's certainly a loophole. Uh you in answer to Mr. Jackson said uh that a solution would be some sort of separation of funds or separate accounting. Could you elaborate on what fix could be made to close that loophole uh as best as possible?

[00:15:57]>> The only thing I can think of is for third parties, you're registered as the third party. You've you know, you you have to make representation to Elections Canada already. You're part of the system uh as as acknowledged as a third party. You have requirements under that.

[00:16:11]Um, if you kept foreign funds completely separate, uh, whether however they're they're coming for whatever reason they're coming, right? If if it's foreign service, if it's is whatever it is, if you keep the foreign funds separate from from domestic funds, then when you get to the point of spending for regulated activities, you know that the money is only coming from money that you receive domestically and you're subject to audit. So, you know, and and if if the punishment's bad enough, it would discourage from from doing it.

[00:16:43]>> Well, why not simply require third parties to set up a separate bank account uh to uh and use funds from that bank account uh from donations from individual Canadians for regulated activities? Why not simply do that? I mean this bill largely does that but uh it g provides while it it seeks to do that uh it there's this big big loophole that makes it very very easy to get around.

[00:17:14]>> I agree with you.

[00:17:16]>> I don't I in my view I don't think that that would create an ownorous uh responsibility on the part of third parties even small ones.

[00:17:25]>> Thank you for that. Um Mr. Burton what what are your thoughts on this? Um I I'm with you on this. I I think it's a a issue which should be addressed by amendments made by this committee.

[00:17:38]>> You think this is the type of loophole that uh United Front Work Department uh and the PRC would exploit?

[00:17:46]>> Definitely. I mean they you know they look for any loophole and opportunity to exploit our freedom our our our free and open system uh to to further Chinese interests in Canada. And um you know they they have they have such a big operation and so much coordination and so much capacity that there's no loophole that that they're not going to be going through frankly based on my 50 years of experience dealing with that regime.

[00:18:17]Okay.