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The property at 26 Suncrest drive, is in Mahmoud Reza Khavari's name. In Toronto September 30, 2011.

J.P. MOCZULSKI/The Globe and Mail

A financier who fled from Iran to Canada during an embezzlement scandal is the subject of a citizenship-fraud investigation, but is not considered a criminal or an active security threat, top Canadian security officials say.

The case of Mahmoud Reza Khavari was discussed in Canada's Parliament for the first time on Monday as federal officials were grilled on whether they adequately screen for problematic individuals before people are allowed into Canada.

Until September, Mr. Khavari headed Bank Melli, a major Iranian lender that has been blacklisted internationally for alleged ties to Tehran's nuclear programs. "There's something here that has to be looked at," Conservative senator Daniel Lang said as he pressed for answers on how the banker found a haven in Canada.

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The question arose during scheduled Senate committee testimony on the measures Canada is taking to prevent Iran from developing nuclear weapons.

"We do investigate threats to the security of Canada, we do investigate individuals who are in Canada regardless of their citizenship, and we do provide advice to immigration officials where there is a security concern," replied Jeff Yaworski, an executive with the Canadian Security Intelligence Service. But he added that "in the case of this particular individual, there was nothing that I'm aware of that came to the surface."

Mr. Khavari, who sources say has been a dual Iranian-Canadian citizen since 2005, left Iran in September as prosecutors there announced they wanted to question him in connection with a $2.6-billion embezzlement scandal that has led to the arrest of several bankers. Tehran also wants an international warrant for Mr. Khavari's arrest.

The security officials testified that Canada has no extradition treaty with Iran. But Mr. Khavari could be stripped of his Canadian citizenship under immigration laws if officials discover he misrepresented himself to gain status.

RCMP assistant commissioner Mike Cabana, told the Senate committee that "there is a process in place … our agencies are supporting CIC [Citizenship and Immigration Canada]in their decision-making process."

The banker's continuing freedom and apparent wealth – he and his family own several Toronto properties – have angered Iranian diaspora groups. It's unclear how he could become a Canadian citizen while working in Iran as an elite banker.

Sources say Mr. Khavari is indicative of a much larger wave of people who have slipped into Canada. The Globe and Mail reported Monday that one of several brothers whose family business is at the heart of the Iranian embezzlement scandal moved to Montreal this past summer.

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John Davies, who is Public Safety Canada's national-security policy director, told the committee that the bureaucracy is considering tweaking immigration laws. "There is quite an active look," he testified, adding that the bureaucracy is studying dormant security certificate laws, which allow officials to kick out potentially dangerous foreigners under relatively low legal thresholds.



With a report from Bill Curry in Ottawa

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