Canadians are getting a reality check about our country’s struggle to enforce sanctions against Russia within our own borders.
This information, of course, isn’t coming from Ottawa. Transparency isn’t the Canadian way. As usual, we are learning about our domestic failings from the U.S. government rather than our own.
The Financial Crimes Enforcement Network, or FinCEN, an arm of the U.S. Department of the Treasury, recently published a report that provided disclosures about suspected Russian sanctions evasion by companies including those based in Canada.
Buried in the bowels of its financial trend analysis is the revelation that Canada is a top 10 country when it comes to Russia-related export control evasion.
That means a notable number of Canadian companies are still buying and then exporting prohibited U.S. goods to entities in Russia in breach of U.S. sanctions. It is yet another example of how Ottawa’s lax approach to sanctions enforcement is emboldening Russia as it wages war in Ukraine.
Specifically, Canada ranks eighth with a total of 30 suspected infractions by companies and entities that use Canadian addresses, according to FinCEN’s analysis.
The top seven jurisdictions named in the report are the United States (976), Russia (322), China (130), Hong Kong (126), Turkey (49), United Arab Emirates (43) and Britain (33). Singapore (30) and Cyprus (17) are in 9th and 10th place, respectively.
“In some cases, the U.S.-based companies directly transacted with entities in Russia, and in other cases, the U.S.-based companies transacted with entities based in other countries that were potentially acting as intermediaries on behalf of Russian end-users,” states the report.
“These financial relationships were usually established before the Russian invasion of Ukraine, but some continued after, potentially violating U.S. export controls.”
Of chief concern, according to FinCEN, is that prohibited goods, such as electronics, are eventually being used to support Russia’s military operations in Ukraine.
FinCEN’s analysis is based on data from Bank Secrecy Act reports filed between June 28, 2022, and July 12, 2023, that involve nearly US$1-billion in suspicious activity. The vast majority of those reports were submitted by financial institutions as a result of their customer due diligence.
Although FinCEN provides limited details about suspected sanction evasion by Canadian companies, its disclosures are still a darn sight better than anything provided by Ottawa. Perhaps that’s because FinCEN is required by law to publish trend information.
Thanks to that mandatory reporting, Canadians are getting a glimpse of weaknesses in our sanctions regime and some sense of how we stack up to other countries. Still, the true scope of the problem remains unclear.
If our federal agencies have comparable statistics about companies caught violating Russian-related export sanctions, they’re not sharing them.
The RCMP, which is responsible for collecting data on assets owned by individuals sanctioned under the Special Economic Measures Act, didn’t immediately provide comment. Neither did Global Affairs Canada, which is primarily responsible for overseeing sanctions programs.
Canada Border Services Agency, which assists U.S. authorities with nabbing sanctions violators, said Thursday that it required more time, possibly until early next week, to provide responses to queries from The Globe and Mail.
Really?
Russia’s invasion of Ukraine began almost 19 months ago. Our federal officials should have answers at the ready about what Canada is doing to crack down on companies that evade export controls including those imposed by our closest ally and largest trading partner.
For its part, the Financial Transactions and Reports Analysis Centre of Canada (FinTRAC), did provide a response. It noted, in part, that it has produced two special bulletins to raise awareness among businesses about Russia-linked money laundering related to sanctions evasion.
Additionally, FinTRAC is responsible for ensuring that businesses required to comply with federal anti-money laundering legislation have policies and procedures in place to mitigate sanctions risks and report suspicious transactions.
“The transaction reporting that FINTRAC has received has been critical to its work with its closest allies, including Australia, the United Kingdom and the United States, as part of the Russia-Related Sanctions and Illicit Finance Financial Intelligence Units Working Group,” its statement said.
God bless FinTRAC for trying.
But when it comes right down to it, FinTRAC has been set up to fail because of its narrow mandate. It’s an open secret that it can only tackle suspected sanctions evasion if it converges with potential money laundering.
“This limits the ability of FINTRAC to identify sanctions evasion trends, typologies and indicators that could be valuable to the financial sector and law enforcement,” the Department of Finance conceded in a consultation document earlier this year.
The Trudeau government should use its fall economic statement to outline detailed plans to combat sanctions evasion. Moreover, it should require federal agencies and the RCMP to publish regular enforcement statistics so there is a measure of accountability.
Canadians shouldn’t have to rely on mandatory reporting by FinCEN and other U.S. enforcement agencies to learn bits and pieces of what’s happening in our own country.
Give us results, not talking points. After all, what’s the point of announcing successive Russian sanctions if those measures cannot be enforced?
Rita Trichur