A recent disclosure by the Canadian government has brought into focus the scale of terror financing networks operating within the country. The Department of Finance Canada released a comprehensive document titled “The 2025 Assessment of Money Laundering and Terrorist Financing Risks in Canada”, which it describes as a detailed assessment of the “most pressing” threats related to both money laundering and terrorist financing.

This report does not merely address broad risks—it specifically identifies Khalistani terrorist organisations as active beneficiaries of funding streams that originate inside Canada itself.

Khalistani groups named alongside Hamas and Hezbollah

The report does not treat the Khalistani threat in isolation. It places organisations such as Babbar Khalsa International and the International Sikh Youth Federation under the larger umbrella of “Politically Motivated Violent Extremism” (PMVE). This category also includes globally notorious Islamist organisations like Hamas and Hezbollah. According to the government’s own explanation, PMVE is defined as ideologies that seek to “establish new political systems or new structures and norms within existing systems by use of violence.”

The report further explains how law enforcement and intelligence services in Canada have traced funding links back to the country: “Several terrorist entities listed under the Criminal Code in Canada that fall under the PMVE category, such as Hamas, Hezbollah, and the Khalistani violent extremist groups Babbar Khalsa International and the International Sikh Youth Federation, have been observed by law enforcement and intelligence agencies to receive financial support originating from Canada,” the document stated.

The assessment also clarifies that these violent groups may sometimes invoke religion to gain sympathy, but the real motive is political. “While PMVE may incorporate religious elements, actors are more focused on achieving political self-determination or representation, rather than promoting racial or ethnic supremacy,” it added.

Khalistani groups pushing for a separate state through violence

The Canadian government report also lays bare the intentions behind these organisations. It clearly points out that Khalistani networks in Canada endorse “violent means to establish an independent state within Punjab, India.” Importantly, the assessment reveals that their sources of funding are not limited to Canadian soil. Instead, contributions come from a range of countries, giving these groups a wider reach.

The report reflects on how the structure of these groups has changed over time: “These groups previously had an extensive fundraising network in Canada but now appear to consist of smaller pockets of individuals with allegiance to the cause but seemingly no particular affiliation to a specific group.” This indicates a shift from large-scale operations to smaller, scattered cells of supporters who continue to uphold the separatist cause.

Shared fundraising strategies: Khalistani, Hamas, and Hezbollah

The findings also shed light on the financial strategies that enable such groups to survive. The report reveals that Khalistani outfits raise money under the pretense of non-profit or charitable activities. It adds that Hamas and Hezbollah also employ the same model of deception. The tactics often involve using non-profit organisations (NPOs) and charitable fronts to collect donations, which are then redirected to sustain extremist operations.

Canadian authorities note that diaspora communities remain an important target for these groups. “Khalistani violent extremist groups have also been known to use networks to solicit donations from diaspora communities to raise and move funds, including through NPOs,” the assessment highlights. Yet, despite this active solicitation, the report makes it clear that the revenue generated through these so-called charitable activities forms only a small fraction of the overall operational budget of these terrorist entities.

Political backdrop: From Trudeau to Carney

The inclusion of Khalistani groups in such a high-level official assessment is not just about national security—it also carries diplomatic implications. Many analysts view this as a signal that Canada may now be attempting to repair its strained relations with India, which had deteriorated under former Prime Minister Justin Trudeau, often accused of being openly sympathetic to Khalistani elements.

The current Prime Minister, Mark Carney, though belonging to the same Liberal Party of Canada, has inherited this complicated legacy. Historically, the Liberal Party has maintained steady political support from the Sikh community in Canada, and some of its members, including Trudeau himself, have either tacitly or openly expressed solidarity with individuals aligned with the Khalistani ideology.

India–Canada Ties Strained Under Trudeau’s Tenure

Although Canada has long served as a safe space for Khalistani extremist organisations, the situation escalated sharply under the leadership of former Prime Minister Justin Trudeau. His open and baseless support for Khalistani groups led to a level of hostility between India and Canada not witnessed before.

The breaking point came in June 2023, when Trudeau, without providing evidence, accused India of involvement in the killing of Khalistani terrorist Hardeep Singh Nijjar on Canadian soil. This accusation caused a major diplomatic storm. By October 2024, India responded by recalling its High Commissioner Sanjay Verma from Ottawa after the Trudeau government declared him a “person of interest” in the Nijjar murder case—again, without substantiating proof. The situation worsened when Trudeau’s administration expelled six Indian diplomats from Canada. New Delhi retaliated by asking six senior Canadian diplomats to leave India in the same month.

The back-and-forth expulsions plunged ties into their worst crisis in decades. Bilateral trade negotiations were frozen, and both sides began re-evaluating key partnerships, casting a shadow over economic and political cooperation.

Khalistani Groups Empowered Under Trudeau’s Liberal–NDP Alliance

During this period, Khalistani extremist outfits not only survived but thrived. Trudeau’s Liberal Party was propped up in Parliament by the New Democratic Party (NDP), led by Jagmeet Singh, a leader often criticised for his pro-Khalistani leanings.

Under this alliance, the threat posed by Khalistani radicals became more visible on Canadian streets. In November 2024, tensions erupted outside the Hindu Sabha Temple in Brampton, where Khalistani activists gathered and raised anti-India slogans to mark the anniversary of the 1984 anti-Sikh riots in Punjab, which had followed the assassination of then-Prime Minister Indira Gandhi. When Hindu devotees pushed back against these actions, the situation turned violent, and Hindus were attacked by Khalistani mobs.

The incident was not isolated. The Hindu community across Canada increasingly reported facing threats and intimidation, particularly from groups led by figures such as Gurpatwant Singh Pannun, founder of Sikhs for Justice (SFJ). Despite these warnings, successive Canadian governments, including Trudeau’s, continued to turn a blind eye. Officials often used freedom of speech as a justification for inaction, allowing Khalistani propaganda to flourish unchecked.

India repeatedly voiced its frustration, warning that Canada’s permissive stance endangered India’s national security. Meanwhile, Canada’s immigration policy review—introduced to reduce the intake of new migrants—added another layer of complexity, as India remains one of the largest contributors of immigrants to Canada.

Amid this tense backdrop, there was finally a sign of diplomatic thaw. For the first time after taking office in March 2025, Canadian Prime Minister Mark Carney met Indian Prime Minister Narendra Modi on the sidelines of the G7 Summit in Kananaskis, Alberta, June 2025. The two leaders discussed ways to repair the fractured relationship, agreeing to send back their respective High Commissioners and explore opportunities for renewed cooperation.

A Glimmer of Hope for Restoring India–Canada Relations

By August 2025, a significant symbolic step was taken. Both nations appointed new High Commissioners as a gesture of reconciliation. India chose Dinesh K. Patnaik, a seasoned 1990-batch IFS officer and then Ambassador to Spain, to represent New Delhi in Ottawa. On the other side, veteran diplomat Christopher Cooter was named as Canada’s envoy to India. These appointments were publicly welcomed as a step toward normalization of ties.

However, optimism was quickly tempered by troubling developments. Just a few months after the Modi–Carney meeting, the Khalistani outfit Sikhs for Justice (SFJ), working alongside the Guru Nanak Sikh Gurdwara in Surrey, made headlines by inaugurating a so-called “Embassy of Khalistan”. The post carried signage for the fictional “Republic of Khalistan” and was set up within the gurdwara premises in August 2025.

The controversy deepened when reports surfaced that the building housing this so-called embassy had benefited from Canadian taxpayer money. Specifically, the British Columbia government had allocated $150,000 for the installation of an elevator in the very same structure. This revelation fueled concerns that taxpayer-funded infrastructure was indirectly enabling extremist symbolism.

The incident immediately reignited debates about Canada’s leniency toward Khalistani elements. Critics argued that despite diplomatic outreach, the government’s soft approach toward extremists continued to embolden separatist forces, complicating efforts to truly stabilize ties with India.