Details of the Communications Security Establishment project, called Levitation, are revealed in a 2012 PowerPoint presentation obtained by former U.S. intelligence contractor Edward Snowden, CBC News says.
CBC analyzed the document with U.S. news website The Intercept, which obtained it from Snowden. It also posted the presentation online, with some of the information blacked out.
The Ottawa-based CSE employs mathematicians, codebreakers, linguists and software experts with the aim of both collecting foreign secrets and shielding Canada's confidences from prying eyes.
The document says that under Levitation, CSE analysts can access information on about 10 to 15 million uploads and downloads of files from free websites each day.
Extremists generally use free file-uploading sites to distribute training materials, while al-Qaida uses them to spread jihadist propaganda, the document says.
It notes CSE finds about 350 "interesting download events" per month, citing one on how to make a gas bomb.
The document also makes a light-hearted reference to filtering out episodes of the television show "Glee" with a schematic of how its supercomputers track down the small number of files of concern.
One privacy advocate expressed alarm at the CBC report.
"CSE is clearly spying on the private online activities of millions of innocent people, including Canadians, despite repeated government assurances to the contrary," said OpenMedia.ca spokesman David Christopher.
"Law-abiding Internet users who use popular file hosting services are now finding themselves under the government's microscope."
CSE stood by its methods, saying they have helped counter terrorism.
"CSE's foreign signals intelligence has played a vital role in uncovering foreign-based extremists' efforts to attract, radicalize, and train individuals to carry out attacks in Canada and abroad," agency spokesman Ryan Foreman said in an emailed statement Wednesday.
It noted that CSE is legally authorized to collect and analyze metadata — data trails about messages and calls, though not the actual content.
Privacy advocates have stressed that metadata is far from innocuous, as it can reveal much about a person's online behaviour.
CSE said it takes strict measures to protect the privacy of Canadians when it comes across their information.
"In collecting and analyzing metadata, CSE does not direct its activities at Canadians or anyone in Canada, and, in accordance with our legislation, has a range of measures in place to protect the privacy of Canadians incidentally encountered in the course of these foreign intelligence operations," the statement said.
The agency said it could not comment further on "operations, methods or capabilities," as that would constitute a breach of the federal secrets law.
"Furthermore, we regret that the publication of techniques and methods, based on stolen documents, renders those techniques and methods less effective when addressing threats to Canada and Canadians."
In the House of Commons, New Democrat MP Elaine Michaud said the number of downloads inspected daily "seems enormous."
"How can the government ensure that it's protecting Canadians' safety while at the same time respecting their right to privacy?"
Associate Defence Minister Julian Fantino responded by saying the watchdog over CSE has found its actions to be lawful.
Still, the NDP and Liberals called for stronger oversight of intelligence activities.
"That's something that the Liberal party's been calling for for a long time," said Liberal Leader Justin Trudeau.
A recent survey done for the federal privacy commissioner's office found that 89 per cent of respondents who had heard something about government surveillance activities agreed that security agencies should have to explain their activities to Canadians.
"Canadians expressed varying levels of comfort with different ways in which government departments and agencies, including intelligence gathering organizations, could collect or share their personal information," says an accompanying analysis released Wednesday.
Canadians were least likely to be comfortable with the government requesting telecommunications companies to provide personal information they hold about people without a warrant. Fifty-seven per cent said they were not comfortable with warrantless information requests.
The December 2014 survey, which polled some 1,519 respondents between Oct. 21 and Nov. 10, is considered accurate to within 2.5 percentage points, 19 times out of 20.
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