The Air India public inquiry will broaden its scope Thursday, turning its attention to whether some charities are raising money for terrorist organizations right under Canada's nose.

The inquiry, headed by Former Supreme Court justice John Major, will examine whether terrorist organizations banned in Canada, such as the Sikh group responsible for bombing Air India Flight 182, killing all 329 people aboard in 1985, are collecting cash from institutions fronting as temples, mosques and charities.

The federal agency that monitors money transfers and terrorist financing, the Financial Transactions and Reports Analysis Centre of Canada (also known as FINTRAC), flagged $140 million worth of suspected terrorist-linked transactions in 2006.

Intelligence groups have suspected that some charities with special tax status are funneling money for any of the 40 extremist groups that Public Safety Canada has banned, such as Hezbollah and the Tamil Tigers.

Vancouver Liberal MP Ujjal Dosanjh said it's about time the government started taking the problem more seriously.

"We need to be tougher in our approach because that's part of the prevention of terrorism, not just in Canada, but terrorism abroad and in other parts of the world," Dosanjh said.

Dosanjh, an outspoken opponent of political violence, was hospitalized in the mid-1980s after being beaten by a Sikh extremist wielding an iron bar.

Canada not immune to global problem

He said he welcomes the new phase of the Air India inquiry because Canada is not immune to the problem of local terrorist funding.

"Those who were openly spreading terror have gone underground, but the problem still exists on a smaller scale," he said.

There has never been a successful prosecution of a terrorist fundraiser in Canada. However, there have been three different prosecutions of Canadians in the U.S. this year.

Earlier this month, a judge in New York sentenced former Toronto immigration consultant Khalid Awan to 14 years in prison. Awan, a Muslim of Pakistani descent, admitted to wiring hundreds of thousands of dollars to the Khalistan Commando Force, a Sikh separatist group waging a bombing campaign in India.

In another case last year, three Ontario men and two Quebecers were charged in Michigan for allegedly raising millions of dollars for Hezbollah.