Foreign interference regulation in Canada

As our world becomes increasingly globalized, digitalized, and technologically advanced, new avenues are emerging for foreign actors to covertly insert themselves into Canada’s political and economic ecosystem. Canada, and other like-minded countries, are responding by taking measures to bolster their defenses against the threat posed to their sovereignty and prosperity from foreign interference.

This article defines foreign interference and illustrates the threat it represents to Canada’s national security. We also briefly examine Canada’s current approach and proposed initiatives to safeguard against it.

What is foreign interference?

The federal government’s consultation paper, Enhancing Foreign Influence Transparency: Exploring Measures to Strengthen Canada’s Approach, defines “foreign interference” as “[a]ctivities perpetrated by a foreign state, or proxy, that are harmful to Canada’s interests and are clandestine or deceptive, or involve a threat to any person. This can include, for example, harassment and intimidation of Canadian communities to instill fear, silence dissent, and pressure political opponents.” A subset of foreign interference, “malign foreign influence,” refers to covert or non-transparent undertakings carried out “by, at the direction of, on behalf of, or with the substantial support of a foreign principal with the objective of exerting influence and affecting outcomes.” Foreign interference differs from legitimate and transparent advocacy efforts by a foreign country to advance its national interests.

Below, we outline some of the many forms of foreign interference.

• Online campaigns, including through social media, to influence elections, public opinion, political reputations and policy developments.
• Malicious cyber activity that introduces malware to collect information in support of foreign objectives.
• Interfering in academia and research through activities such as influencing agendas, exerting economic pressure, and directing investments.
• Appropriating domestic intellectual property to support another country’s military or economic objectives.
• Inserting foreign actors into Canada’s supply chains and critical infrastructure.
• A “foreign principal” (such as a foreign government, organization, entity or individual), directing a “foreign agent” (i.e., someone located in the target country) to undertake interference activities. Foreign agents can be recruited in a variety of ways, including blackmail, threats, manipulation, or through building relationships with influential people in or out of the government. People recruited to act (knowingly or unknowingly) as foreign agents can include:
  • political staff or volunteers;
  • employees of a Canadian company monitoring or collecting information on behalf of a foreign state without disclosing the relationship;
  • public officials (elected or unelected);
  • shareholders gaining economic power though investments; and
  • individuals who make donations to political parties or candidates.

Certain segments of the Canadian population are particularly vulnerable to foreign interference. For example, people from diaspora communities who have close ties with family in their country of origin might be leveraged into cooperation by threats to that family by the country of origin’s government or its proxies. Moreover, people working in Canada’s democratic institutions, academia, media, and critical infrastructure sectors are targets of particular interest because they are uniquely positioned to advance the aims of malign foreign actors.
 

Foreign interference in Canada

Foreign interference has taken on greater prominence in Canada in the last few years. For example, the 2021 Public Report published by the Canadian Security Intelligence Service (CSIS) noted that foreign interference is one of Canada’s key national security threats.

Canadian legislative efforts to combat foreign interference

Following several years of consultations focused on the threat of foreign interference in Canada, in May 2024, the federal government introduced comprehensive legislation focused on protecting Canada’s democratic processes. Bill C-70, An Act respecting countering foreign interference, proposes to update existing laws and create new legislation to better equip the federal government to protect Canadians against the threat of foreign interference. The Bill proposes to:

• Amend the Security Information Act to create new offences for certain acts related to foreign interference, such as influencing election outcomes. These amendments also propose to address the sharing of military technology and knowledge, and define individuals who will be permanently bound to secrecy.
• Modernize the Canadian Security Intelligence Service Act to allow for CSIS to share information with municipal, provincial and Indigenous levels of government, and Indigenous communities. It also expands CSIS’s powers to seek warrants to access data containing personal information.
• Establish a standardized framework within the Canada Evidence Act for handling sensitive information in federal proceedings which take place in Ottawa-Gatineau.
• Expand the concept of “sabotage” under the Criminal Code to:
  • create a new sabotage offence focused on conduct targeting “essential infrastructure”, defined as a public or private facility or system that provides or distributes services that are essential to the health, safety, security and economic well-being of Canadians;
  • create a new sabotage offence of making, possessing, selling or distributing a device intended to be used or knowing it will be used to endanger the safety, security or defence of Canada, cause serious risk to the health or safety of the public, or endanger the safety or security of foreign military forces that are present in Canada; and
  • clarify that the offense of “sabotaging” is meant to capture prohibited acts where the individual had the intent to endanger the safety, security or defence of Canada rather than acts whose purpose was prejudicial to the safety, security or defence of Canada. Legitimate advocacy or protest where there is no intent to cause harm is not captured by these new offences.
• Introduce a new Foreign Influence Transparency and Accountability Act which proposes to create a foreign influence registry, overseen by an independent Foreign Influence Transparency Commissioner, which will require individuals or entities that enter into arrangements with a foreign principal or undertake activities to influence Canada’s government or political process to publicly register. This act broadly defines “foreign principal” to include foreign entities (including economic entities), foreign powers or foreign states, which will capture a wide range of businesses such as financial institutions, energy companies, and sovereign wealth funds, among others. The compliance burden on such entities may be significant as a result.

Several of these proposed legislative changes, particularly the new Foreign Influence Transparency and Accountability Act, will impact foreign companies operating in Canada as well as any Canadian companies and organizations either working with foreign principals or working in the “essential infrastructure” sector.

In addition to the new measures found under Bill C-70, other existing Canadian legislative or regulatory frameworks aimed at fighting political interference include the following:

• The Lobbying Act promotes transparency by requiring individuals who lobby federal public office holders to register with the Office of the Commissioner of Lobbying and to disclose certain information, including the identity of their client. Theoretically, foreign organizations, including foreign governments, are also subject to transparency requirements—but in reality, few foreign governments are legally required to register due to broad exemptions.
• The Canada Elections Act prohibits foreign involvement in electoral activities.
• The Conflicts of Interest Act prevents conflicts between private interests and the duties of appointed government officials.

However, recognizing that the current legislative framework is insufficient to address the growing threat of foreign interference in Canada, the federal government has undertaken a number of policy initiatives to further combat foreign interference.

In 2023, the Bank Act and other similar legislative frameworks governing federal financial institutions were amended to require such institutions to establish and adhere to policies and procedures to protect themselves against threats to integrity or security, including foreign interference. Concurrently, the mandate the Office of the Superintendent of Financial Institutions was expanded to ensure that federal financial institutions comply with this new requirement. These amendments also granted the Minister of Finance the power to direct the Superintendent of Financial Institutions to take control of a federally regulated financial institution for any national security reason.

Although the Initial Report of the Public Inquiry into Foreign Interference in Federal Electoral Processes and Democratic Institutions released on May 3 found that the acts of foreign interference that occurred during the last two federal general elections did not undermine the integrity of our electoral system, the Commissioner did note that such acts did leave a “stain on our electoral process”. The Commission continues with its review and is likely to generate additional policy recommendations to further prevent political interference in the electoral process.

In subsequent editions of this series, we will more closely examine the outcomes of the above-noted consultations and proposed legislative amendments.

What’s next

Countering foreign interference is complex. It will require, among other things, more education for the Canadian public and political actors, and further resources for law enforcement and intelligence agencies. It also demands a coordinated response between the private and public sectors in Canada and internationally.

We will likely see enhanced due diligence obligations for organizations, expanded powers for regulators to combat national security and foreign interference issues, and enhanced registration and reporting requirements for foreign parties.
 

Learn more about recent legislative and regulatory efforts to combat foreign interference within the Canadian financial sector.