OTTAWA — A report by an expert in extremist financing and money laundering says the Canada Revenue Agency’s approach to policing terrorist abuse “proved seriously deficient” in the case of a long-running audit of the Muslim Association of Canada.

The report by University of Manitoba professor Michelle Gallant is the latest study to recommend the revenue agency make changes to ensure its audits of charitable organizations are free of bias and discrimination.

It calls on the agency to become more familiar with cultures and religions, including Islam, to better publicize how it conducts such audits, and to consider regularly releasing lists of groups and individuals with whom charities should avoid engaging.

The Muslim Association, which waged a court fight to try to halt the revenue agency’s audit, asked Gallant to carry out the review. Gallant said she was not paid to do the work and that she had no prior ties to the charity or the revenue agency.

The association, known as MAC, promotes community service, education and youth empowerment and says more than 150,000 Canadians use its mosques, schools and community centres each year.

MAC has long contended that an audit of its activities by the revenue agency’s Review and Analysis Division was fundamentally tainted by systemic bias and Islamophobia.

During court proceedings over the agency’s audit, federal lawyers said preliminary audit findings identified “several serious issues” concerning the association’s non-compliance with its charitable registration obligations.

These allegedly included involvement in foreign political activities, buying considerable real estate, providing support to an organization listed as a terrorist entity and issuing improper donation receipts.

Gallant’s report says scrutiny for support of extremism places charities “in the unenviable position of making decisions about what actors, or actions, the administrator of charities law might think are linked to terrorism.”

“Despite the distinctive ambitions of the administrative agency — the effort to police terrorist abuse — in the case of the MAC audit that effort proved seriously deficient.”

Gallant said the agency drew heavily on MAC’s links and ties with others in its analysis.

“Considerable dispute exists over the implications and effectiveness of such ‘links,’ or associational, methods,” she wrote. “It risks capturing innocent activity through associational connections, risks ‘over-inclusion’ and can fail to accurately discern between suspicious activity and authentic legitimate activity.”

Leaders of Muslim charities, volunteers and employees exist within their religious communities, the report adds. “Any anointing of the notion that associations — connections — indicates terrorist abuse risks overidentification and the attraction of ‘guilt’ by association,” it says.

The revenue agency could play a bigger role in educating charities about the possible risks of involvement with certain groups or people, Gallant said in an interview.

“I think that if the charities directorate was a little more forthcoming in educating, specifically — don’t interact, don’t be doing things here, we’re suspicious about these things — then charities can make a choice, right?” she said.

Revenue agency spokesperson Nina Ioussoupova declined to discuss Gallant’s recommendations, saying the charities directorate “does not comment on third-party reports.”

A National Security and Intelligence Review Agency report released in October found “a lack of rigour” in the way the agency selects charities for audits over terrorism concerns, saying the process introduces risks of bias and discrimination.

In response to the spy watchdog’s report, the revenue agency said it tries to ensure that registered charities are treated fairly and without bias. The agency also accepted most of the watchdog’s recommendations and said it had already taken steps to strengthen its processes and oversight.

The office of the federal taxpayers’ ombudsperson recently said the revenue agency was “taking significant steps” toward raising awareness among employees of “unconscious bias” that can perpetuate discriminatory behaviour.

MAC had asked the Ontario Superior Court to stop the revenue agency’s audit on the grounds it violated Charter of Rights guarantees of equality and freedom of religion, expression and association.

A judge ruled in 2023 it was too early to intervene in the federal examination — a decision that was upheld on appeal.

MAC says its charitable status was neither suspended nor revoked due to the revenue agency audit.

The association says it entered into a compliance agreement about “technical governance issues,” which resulted in small financial penalties that are currently under appeal.

Ioussoupova would not comment on the audit, saying the revenue agency’s actions can be made public only when an audit results in charitable registration being revoked, annulled, or suspended, or when a charity is penalized.

Ioussoupova confirmed that MAC remains a registered charity.

Sharaf Sharafeldin, MAC’s president for strategy, said Gallant’s review “brings meaningful closure to Canadians, particularly the Canadian Muslim community.”

“We look forward to the audit being formally closed soon and remain committed to serving our communities and providing strong and principled leadership for Canadian Muslims.”

This report by The Canadian Press was first published April 1, 2026.

Jim Bronskill, The Canadian Press