Evidence of meeting #69 for Foreign Affairs and International Development in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was magnitsky.
A recording is available from Parliament.
General Counsel and Senior Vice-President, Legal and Risk, Canadian Bankers Association
Yes. Removing them from SWIFT definitely had a chilling effect, and it did create some challenges in the context of how to deal with certain impacts to Canadians.
I'll turn it over to my colleague Stephen Alsace. He can speak a little bit about what we were talking about in terms of guidance and some uncertainty that happens when you're not able to deal with certain banks, and the impact on Canadians.
G. Stephen Alsace Global Head, Economic Sanctions, Royal Bank of Canada, Canadian Bankers Association
Thank you, Angelina.
Mr. Chair and members, effectively, we're removing some of the largest Russian banks from SWIFT. It has choked off any transactions. Most of the Canadian banks no longer have direct access to Russia in terms of facilitating payments. It's had a good effect in the sense that it has denied some of the largest banks, like VEB, VTB and Sberbank access to western capital, but it has had unintended consequences for ordinary Canadians, and that's part of the reason for a lot of the permit applications to Global Affairs Canada.
Ordinary Canadians are no longer able to easily send money—like remittances for child support, for example—to Russia, or to receive pension payments. Or, in the case of hockey players who are playing in North America, if their employer happens to be owned by a sanctioned entity, their payroll has been cut off. That's one of the results that has occurred.
One other point that I'll also make with respect to Mr. Silver's remarks is that although we are very supportive of the Magnitsky sanctions and we agree that greater coordination is important, most of the large Canadian banks have international operations. For us, for example, we have to comply with sanctions requirements in the United States, in the EU and in the U.K. and other jurisdictions. Although it's not written into our law here in Canada, we also honour other jurisdictions in which we operate.
Liberal
Rachel Bendayan Liberal Outremont, QC
Thank you.
Have you seen rival systems emerging as alternatives to SWIFT?
Global Head, Economic Sanctions, Royal Bank of Canada, Canadian Bankers Association
Yes. In China, there's the CIPS system, and Russia has SPFS. In terms of the rise, we haven't seen significant traffic in that regard, but I think that in terms of alternatives to SWIFT they are on the rise, and there is certainly that risk of capital flight away from that system.
Liberal
Rachel Bendayan Liberal Outremont, QC
Can you perhaps advise the committee of what else we could do to ensure Russia is excluded from the western financial system?
Global Head, Economic Sanctions, Royal Bank of Canada, Canadian Bankers Association
That's a bit challenging. A lot of it is diplomatic, isn't it? I think the focus on those jurisdictions—not necessarily the G20, but.... We know there are jurisdictions that are sanctions evaders, like the UAE. We're seeing potential transactions through India and through China. I think the focus needs to be on some of those other jurisdictions.
Liberal
Rachel Bendayan Liberal Outremont, QC
Mr. Alsace, you previously suggested that there's a bit of a struggle in providing regulatory guidance to financial institutions such as yours. With the proposal for a devoted sanctions bureau—and I hear you, Ms. Mason, on the importance of written guidance—can you be a little more specific as to what exactly you feel you need?
Global Head, Economic Sanctions, Royal Bank of Canada, Canadian Bankers Association
Interpretative guidance would assist. As an example, if you look at the United States and OFAC, they have something like 1,300 FAQs that have been published.
Some of the interpretation around the proposed Bill C-47 is looking at changing beneficial ownership, but rather than using an OFAC 50% plus one rule, they have elected to go even further than the EU and the U.K., so it's really going to make it complicated when you look at the control test they're suggesting. That's an area where we're definitely going to need greater clarification on the amount of due diligence that will be required, because from an operational perspective it will be impossible to stop every single payment and then actually review it and exercise enhanced due diligence against it.
Liberal
Liberal
The Chair Liberal Ali Ehsassi
We next go to Mr. Garon.
Mr. Garon, you have the floor for five minutes.
Bloc
Jean-Denis Garon Bloc Mirabel, QC
Thank you very much, Mr. Chair.
I'll put my questions to Mr. Silver.
Mr. Silver, you talked about Magnitsky-style sanctions and how they have made a difference. You pointed out—I think it was in the case of Canada—that 482 such sanctions had apparently been imposed. I was under the impression that Canada had not imposed such sanctions since 2018, when it used them against 17 Saudi nationals because of the torture and execution of journalist Jamal Khashoggi.
Are there reasons why the imposing of these kinds of sanctions has been slowed down, and how do you explain that?
Director of Policy and Projects, Raoul Wallenberg Centre for Human Rights, As an Individual
Thank you for the question, Mr. Garon. That is an important point.
The data that our centre has submitted to the committee is the result of the amendments made to the Special Economic Measures Act in the context of human rights and the fight against corruption.
The Magnitsky Act has been used a little over 60 times. However, the amendments to the Special Economic Measures Act that the Magnitsky Act led to have made our sanctions regime much clearer and more definitive in the fight against human rights violations and corruption.
The numbers that we submitted, the 482, are those that would have been possible only post 2017. Before then, the threshold for sanctions was a grave breach of international peace and security that has resulted in or is likely to result in an international crisis. That threshold change has allowed for a much more expansive use of sanctions that we think are rather timely given the global resurgence of authoritarianism, of neo-liberal populism and of acts of aggression. The fact that those laws were changed accordingly is incredibly important.
The disuse of the Magnitsky law as it is, as opposed to the lower thresholds under the Special Economic Measures Act, is an interesting question that we explore in greater depth in our written submissions to the committee. It's our assertion that this is an issue of rhetoric rather than substance. The laws are largely parallel. There are some minor distinctions between them—you know, the allowance for a sanctioning of entities under SEMA, but only of individuals under the Magnitsky act—but by and large, we actually call for, because of this, a shift in the use of language in order to allow for better coordination among our allies and to make use of the important resonance that the word “Magnitsky” has, such that we call both SEMA and Magnitsky law implementation for human rights and anti-corruption “Magnitsky laws”.
Bloc
Jean-Denis Garon Bloc Mirabel, QC
Mr. Silver, if I may interrupt, I don't have a lot of time.
You talked about multilateralism. As we know, capital is very mobile. You also talked about the flight of capital and said that this could happen when a territory unilaterally imposes sanctions.
Do you have any idea of the extent of the capital flights that result from sanctions imposed in this way?
Can you give us some concrete examples of the ineffectiveness of unilateral sanctions, particularly by Canada?
Director of Policy and Projects, Raoul Wallenberg Centre for Human Rights, As an Individual
The extent of the flights is difficult to determine, but we can rely on the circumstances. As I mentioned to your colleague, most Canadian sanctions are unilateral. It is important to set standards and let those who do not respect human rights know that Canada will not let them continue to do so. The country has to stand up, even if its allies do not.
We are not opposed to the use of unilateral sanctions because they are important measures. Sometimes we are leaders in this regard. I will give a good example—the case of Vladimir Kara-Murza. He appeared before the committee on a number of occasions, and his testimony was essential to the passage of the Magnitsky Act. In fact, the reason is currently in prison in Moscow, for 25 years, is because he testified before a House of Commons committee.
Canada is the first country to sanction corrupt judges and prosecutors, as well as those who give false evidence, and to send a message that we are acting in solidarity with human rights defenders around the world. Because of this unilateral sanction—
Liberal
The Chair Liberal Ali Ehsassi
Mr. Silver, I'm afraid your time is over. I'm sorry about that. You're 40 seconds over. We will have to go to the next member.
Ms. McPherson, you have five minutes.
NDP
Heather McPherson NDP Edmonton Strathcona, AB
Thank you, Mr. Chair.
Thank you very much to all our witnesses for being here today and for sharing their expertise with us. I think it's clear from all the questions we've heard so far that everybody is interested in ensuring that Canada's sanctions regime is as strong and effective and coordinated as it can be.
Certainly, Ms. Mason, I heard what you were saying about the challenges with reporting and permitting.
Mr. Silver, you talked about that single focal point. I think that's an excellent suggestion. Could you talk about that single focal point? I know you're talking about it in terms of determining who is sanctioned, but in terms of the enforcement of sanctions and in terms of measuring the effectiveness of our sanctions regime, would that also be useful in that manner?
Director of Policy and Projects, Raoul Wallenberg Centre for Human Rights, As an Individual
That's exactly what we envision, Ms. McPherson, and we elaborated upon it somewhat in our written submission.
If you look at parallel jurisdictions, you see that there is a department with an interdepartmental responsibility for coordination, such as OFAC in the U.S., or the U.K.'s newly established office. There's an opportunity for Canada to do the same.
The budget implementation act announced the allocation of $75 million...the creation of a financial crime task force. There's an opportunity there, perhaps, for this task force to have an interdepartmental coordination opportunity, but also one internationally. When our allies are talking to us on sanctions matters, it seems to largely be ad hoc and subject specific, rather than comprehensive and multilateral.
Having a focal point can assist with that broader coordination and with coordination internally among the myriad and often regrettably disparate and siloed government departments, whether it be FINTRAC, RCMP, CSIS, the Department of Justice, GAC and the like. Having that main focal point both within Canada domestically and for our allies internationally can help streamline things and address some of the issues.
Fellow witnesses from the Canadian Bankers Association have addressed them, and in particular, because of the diffuse nature of engagements, the gathering of data has fallen to civil society. I mentioned at the outset of my remarks that we co-chair a group of about 400 major international NGOs working on sanctions, and the data and metrics I shared with you earlier were largely compiled by civil society, because we've had to fill the void that should largely be filled by government. The government should be tracking these numbers and using them as a means of refining their actions.
If I could, I'll use the remainder of my answer time, Ms. McPherson, on Vladimir Kara-Murza's case, because you've been a leader on this case in an all-party way. I know that Mr. Garon and his colleague Alexis Brunelle-Duceppe joined in calling for freedom for Vladimir Kara-Murza. I was referencing in my response earlier that that's a good example of where we sometimes can't coordinate with allies, but we lead. Canada sanctioned all those involved in this case, and then advocated for our allies to do the same. It was one of those rare instances where both the U.S. Department of Treasury and the U.K. sanctioned the Kara-Murza case, and both of them in their public statements said they were following Canada's lead.
That's one of those times where unilateral action helped, combined with multilateral advocacy. Canada took the lead, and all of our allies followed.
NDP
Heather McPherson NDP Edmonton Strathcona, AB
It was, of course, my deep honour to be on that working group and to continue to push for honorary citizenship for Vladimir Kara-Murza.
I get your point, though, when you speak about the fact that there is this ad hoc thing. We heard that from the CBSA. We heard that from the RCMP in the last meeting, that there is no coordinated effort, and it makes it very difficult. In fact, I've asked Order Paper questions that I've not received adequate responses on, because I don't think the mechanisms are in place.
Perhaps for my last minute I'll ask Ms. Mason to just talk a little more about the fact that Global Affairs is overwhelmed. There is a backlog and confusion.
Could you speak about how you would see that being fixed? How could that be alleviated?
General Counsel and Senior Vice-President, Legal and Risk, Canadian Bankers Association
It's resourcing. We see there are very promising signs in the devotion of such a large budget that, through resourcing, you will have the expertise to be able to provide the guidance, deal with permits.
We also agree with our fellow witness, Mr. Silver, on ensuring there's coordination among all the different stakeholders within the government. There are various different aspects to the sanctions, and it's important to make sure there's one stop where we have a full understanding, and data and support.
NDP
Heather McPherson NDP Edmonton Strathcona, AB
I will say that it's complicated for parliamentarians. It's complicated for banking. It's obviously very complicated for Canadians to understand this as well. Thank you very much for that clarity.
Conservative
Garnett Genuis Conservative Sherwood Park—Fort Saskatchewan, AB
Chair, I just have a quick point of order.
The convention is that we leave 10 minutes after a vote before we resume.
Given that we're all clearly voting by app anyway, I wonder if there would be unanimous consent to resume the committee meeting immediately following the vote.