On September 6, 2025, the Canadian government took a step that many in the diplomatic and intelligence communities had long awaited: it officially acknowledged, in a new national risk report, that Khalistani extremist groups are operating on Canadian soil and raising funds for their activities. This admission, published in the 2025 Assessment of Money Laundering and Terrorist Financing Risks, marks a significant shift in Ottawa’s approach to a problem that has dogged relations with India for decades.
The report, released by Canada’s Department of Finance, doesn’t mince words. It states that "several terrorist entities listed under the Criminal Code in Canada that fall under the PMVE (politically motivated violent extremism) 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." According to India Today, this is the first time Canadian authorities have so directly and publicly recognized the activities of these groups.
The Khalistani movement, a campaign to establish an independent Sikh state called Khalistan in India’s Punjab region, has long maintained a presence in Canada. The new report highlights that these groups have not only operated within Canada but have also actively encouraged the use of violence "to establish new political systems, or new structures and norms within existing systems." Funding for these activities, the report notes, comes from a variety of sources: cryptocurrencies, crowdfunding, informal value transfer systems, state sponsorship, abuse of non-profit organizations, and criminal activity.
Historically, the fundraising networks for Khalistani groups in Canada were extensive. But as the report details, these networks have since fragmented. "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," the assessment states. The diaspora community, particularly Sikhs in Canada, has been a key source of donations. The report points out that "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."
Notably, the misuse of charitable and non-profit sectors is not unique to Khalistani groups. The report draws parallels to other organizations, stating, "The misuse of the charitable and NPO sectors has been observed as a prominent financing method used by Hamas and Hezbollah." For Khalistani groups, such tactics remain a critical component of their fundraising operations, although the overall sums represent only a fraction of their total budgets.
The scale of illicit proceeds is staggering. According to PTI, the findings in the report estimate that billions of dollars in illicit proceeds flow annually through Canada, with a portion supporting politically motivated violent extremism. The report’s candid tone is a marked departure from previous years. In 2015, under Conservative Prime Minister Stephen Harper, the government labeled these organizations explicitly as "Khalistani Extremist Groups." But by 2023, during Justin Trudeau’s tenure, the terminology softened, and references to "Khalistani" were removed—replaced simply with "extremist groups supporting violent means to establish a state within India." The latest report, under Prime Minister Mark Carney’s administration, returns to the more explicit language of 2015, signaling a renewed willingness to confront the issue directly.
The timing of the report is no accident. It comes just months after a June 2025 annual assessment by Canadian intelligence services named Sikh separatism as the "primary" politically motivated violent extremism threat in Canada since the 1980s. As PTI reported, this threat has grown as Khalistani extremists have sought to use violence to achieve their political aims. Canada’s intelligence community has tracked these developments for years, but public acknowledgement has often lagged behind the classified reality.
The political context surrounding this report is equally important. Diplomatic ties between India and Canada have been strained in recent years, reaching a low point after the assassination of Hardeep Singh Nijjar, an Indian-designated terrorist, outside a gurdwara in Surrey, British Columbia in June 2023. Then-Prime Minister Justin Trudeau publicly accused Indian officials of involvement, prompting India to dismiss the claims as "absurd and motivated." The fallout was immediate: both countries expelled diplomats, and relations froze for nearly ten months.
But in early 2025, the winds began to shift. Trudeau resigned in January, and former central banker Mark Carney took over as Prime Minister in March, leading the Liberal Party to victory in snap polls the following month. Carney’s administration has moved swiftly to mend fences with India. In June 2025, Prime Minister Narendra Modi met Carney at the G7 summit in Alberta, a meeting that paved the way for the restoration of diplomatic ties. By September, both countries had appointed new High Commissioners, ending a protracted diplomatic standoff.
Despite these positive steps, the issue of Khalistani extremism remains a thorn in the side of bilateral relations. India has repeatedly raised concerns about anti-India activities on Canadian soil, often accusing Ottawa of turning a blind eye. According to India Today, "Canada has long ignored India's repeated concerns about Khalistani elements' anti-India activities on Canadian soil, an issue that has soured relations between the two countries." The new report’s frank admission is likely to be welcomed in New Delhi, but as the same publication notes, "decisive action against Khalistani groups in Canada is yet to be seen."
For its part, the Canadian government has stressed that the threat posed by politically motivated violent extremism is not limited to any one group. The report places Khalistani organizations alongside Hamas and Hezbollah, underscoring the diversity—and complexity—of the challenge. "While PMVE may include religious elements, actors are more focused on political self-determination or representation, rather than racial or ethnic supremacy," the report explains. It’s a reminder that the motivations behind these movements are as varied as their methods.
The report also provides a sobering look at the adaptability of extremist financing. Money services businesses, cryptocurrencies, state financing, and the abuse of the banking sector all play a role. As fundraising methods evolve, so too do the strategies of law enforcement and intelligence agencies tasked with countering them. The Canadian government’s willingness to name and confront the problem is a significant step, but as recent history shows, words alone are not enough.
As both Canada and India work to rebuild trust, the world will be watching to see whether this new era of transparency leads to concrete action. For now, the acknowledgment in the 2025 risk assessment represents a turning point—a recognition that the challenges of politically motivated violent extremism cannot be ignored or downplayed if the two democracies are to chart a more stable future together.
