Foreign Affairs Committee on June 6th, 2023

[The Chair, Liberal, Ali Ehsassi]

I call this meeting to order.

Welcome to meeting number 69 of the Standing Committee on Foreign Affairs and International Development.

Today's meeting is taking place in a hybrid format pursuant to the House order of June 23, 2022. Members are attending in person in the room, as well as using the Zoom application.

I'd like to make a few comments for the benefit of the witnesses and members.

Please wait until I recognize you by name before speaking. For those participating by video conference, please click on your microphone icon to activate your mike, and please mute yourselves when you are not speaking.

Interpretation for those on Zoom is at the bottom of your screen. You have a choice of either floor, English or French audio. For those in the room, you can use the earpiece and select the desired channel.

In accordance with our routine motion, I am informing the committee that all witnesses have completed the required connection tests.

Now, pursuant to Standing Order 108(2) of the motion adopted by the committee on Wednesday, September 21, 2022, the committee resumes its study of Canada's sanctions regime.

It is my great pleasure to welcome as witnesses before our committee, first of all, Mr. Brandon Silver, who I suspect is well known to you all, the director of policy and projects at the Raoul Wallenberg Centre for Human Rights. He is joining us by video conference. We also have witnesses from the Canadian Bankers Association. We have Stephen Alsace, global head of economic sanctions at the Royal Bank of Canada, and Ms. Angelina Mason, general counsel and vice-president, legal and risk, from the Canadian Bankers Association.

Each of you will be provided five minutes for your opening remarks, after which we will open the floor to members so they can ask you questions.

We will go with Mr. Silver first.

You have five minutes. Once you're getting very close, I'll put this up. We would be grateful if you could attempt, to the best of your abilities, to conclude your remarks.

Mr. Silver, the floor is yours.

[Brandon Silver, Director of Policy and Projects, Raoul Wallenberg Centre for Human Rights, As an Individual]

Thank you, Chairman Ehsassi.

Honourable members, it's a pleasure and privilege to see so many friends and familiar faces. I bring warm regards from honourable Professor Irwin Cotler, who regrets he couldn't be with you today, but very much endorses the content of our centre's submission.

Thank you for the opportunity to join you today. I am pleased to testify as a lawyer and director of policy and projects at the Raoul Wallenberg Centre for Human Rights.

Our organization is very engaged in the development and implementation of Canada's sanctions regime. We also manage a global coalition of almost 400 civil society organizations that act to call for sanctions and promote human rights.

Canada can be a global leader in safeguarding dignity and democracy by strengthening the use of targeted sanctions. This committee's study presents a most propitious opportunity to chart such a path forward.

It is especially timely, as Putin's illegal and unjustified aggression against Ukraine is giving violent expression to a broader authoritarian assault on the rules-based order and those who seek to defend it.

Targeted sanctions have proven to be a powerful tool in pushing back. The visa bans, asset seizures and business dealing prohibitions that these sanctions entail are isolating the architects of repression, turning them into global pariahs and cutting them off from the financial flows that fund their oppression.

These sanctions are also protecting Canadian sovereignty from the corrosive effects of corrupt foreign capital and from the rights abuses of those who would seek to co-opt and undermine our democracy and financial institutions. It therefore ensures that our markets and our economy are not contributing to these abuses or acts of aggression abroad.

Honourable members, these are all measurable successes. Indeed, Canada's adoption in 2017 of our Magnitsky law was a game-changer. It lowered the implementing threshold for autonomous sanctions from a “grave breach of international peace and security that [has] resulted or is likely to result in a serious international crisis” to now also include gross and systematic human rights violations and acts of corruption.

Accordingly, our centre uses the term “Magnitsky sanctions” to refer to actions taken pursuant to these post-2017 lower thresholds under both the Justice for Victims of Corrupt Foreign Officials Act and SEMA.

With these measurements and new thresholds, out of the over 2,000 targeted sanctions that have been implemented since the adoption of the Magnitsky law in 2017, 482 of these are Magnitsky-style sanctions for human rights abuses and corruption. Out of roughly 35 Magnitsky jurisdictions, this makes Canada a leader in Magnitsky implementation, a close second to the United States and far ahead of every other jurisdiction. That's all the more admirable when you consider that we have a fraction of their resources.

However, with that being said, Magnitsky decisions are overwhelmingly undertaken unilaterally and without structured co-operation amongst allies, despite the shared interests, values and threats we all may be seeking to address. In a practical way, this can result in asset flight, with a sanctioned individual laundering their ill-gotten gains and conducting their business in another parallel jurisdiction upon being sanctioned in Canada. It also lessens the significant rhetorical and reputational value, as the listing can be presented as a singular aberration amongst more reasonable democracies, rather than an achievement in the pursuit of justice and accountability.

Therefore, the Wallenberg Centre suggests that an international contact group of jurisdictions with the Magnitsky law be established, which would greatly assist with the coordination and multilateralization of sanctions implementation while also creating a forum for the sharing of best practices.

As well, Canada should take a whole-of-government approach to sanctions and create a single focal point to ensure interdepartmental co-operation and co-operation amongst allies internationally. This is well grounded in parallel precedent. If you look at the U.S., with the Treasury Department's Office of Foreign Assets Control, at the U.K., at the State Department's special envoy on sanctions, I think there are a lot of great models that we can be following internationally to ensure that we continue to lead.

We could assume a leadership role and unique convening capacity internationally to make sure that Canada's sanctions policies advance our foreign policy priorities. For example, we can use sanctions to give teeth to our leadership in advancing the Declaration Against Arbitrary Detention in State-to-State Relations, and thereby shift the calculus in hostage-taking.

We can also, at a time when the rules-based international order is under assault and multilateral institutions are being undermined, use our sanctions regime to show our confidence in these institutions and the enforceability of these international norms by using decisions of UN special procedures like the UN Working Group on Arbitrary Detention, or international treaty monitoring mechanisms like the Committee Against Torture, as the basis for the implementation of sanctions.

I will conclude with this, honourable members. An especially important refinement to our sanctions frameworks would enshrine the crucial oversight role of all of you here today. Ultimately, some of the most impactful precedents and policies have been proposed by civil society and pursued by Parliament. Formalizing this relationship would only strengthen it.

Our centre's written evidence to the committee elaborates upon these proposals, in particular the final one drawing upon existing parliamentary precedent and practice like Order Paper questions, tabling public petitions and the like. We'd be pleased to discuss these with you either in the Q and A or in greater depth separately from this committee hearing.

I'd like to conclude by thanking all of you for your important work in guiding Canadian foreign policy, and for the opportunity and privilege to testify before your committee today.

Thank you.

[The Chair, Liberal, Ali Ehsassi]

Thank you very much, Mr. Silver.

As I understand it, we will now go to Ms. Mason. Is that correct?

[Heather McPherson, NDP, Edmonton Strathcona, AB]

Mr. Chair, on a point of order, there will be bells shortly. Would it be possible for us to get unanimous consent to work through that?

[The Chair, Liberal, Ali Ehsassi]

Is that the will of the committee?

[Some hon. members]

Agreed.

[The Chair, Liberal, Ali Ehsassi]

Thank you, Ms. McPherson.

We now go to Ms. Mason.

You have five minutes for your opening remarks.

[Angelina Mason, General Counsel and Senior Vice-President, Legal and Risk, Canadian Bankers Association]

Thank you for inviting the Canadian Bankers Association and the Royal Bank of Canada to appear this morning to participate in the committee's review of Canada's sanctions regime.

My name is Angelina Mason and I am the general counsel and senior vice-president, legal and risk, with the CBA. I am joined today by Stephen Alsace, global head, economic sanctions, with the Royal Bank of Canada.

Recent proposed legislative changes and federal budgetary commitments in the sanctions space highlight the federal government's continued commitment to the laudable policy goals that drive the regime, which are the safeguarding of human rights, combatting significant corruption, and preserving international peace and security.

Banks operating in Canada have invested heavily in their efforts to comply with and thus enable the evolving regime. Our members work extensively with Global Affairs Canada and the RCMP to ensure broad compliance with sanctions requirements. They also have in place systems and procedures for managing sanctions risk, and they conduct active screening against sanctions lists.

The government provides valuable support for this work. We appreciate GAC's consolidated Canadian autonomous sanctions list, the increasing willingness of GAC officials to engage with stakeholders, including our members, on sanctions matters, and their efforts to perform public outreach. Further, the federal government's announced investment of $76 million in GAC's development of a devoted sanctions bureau and additional support for the RCMP is an important initial step towards ensuring the growing regime is properly resourced to function effectively and efficiently.

Given their role within the global financial system, our members have observed several ways in which Canada's sanctions regime should continue to evolve. Primarily, as the regime continues to evolve and become more complex—including with the recent proposal of deemed control provisions that contain highly subjective elements in Bill C-47—there is a need for written, publicly available guidance.

This need is well understood. It was highlighted by this committee's 2017 report, as well as in the Senate Standing Committee on Foreign Affairs and International Trade's recently published report detailing its review of the regime. It is also common practice for sanctions authorities in other jurisdictions, such as the United Kingdom and the United States, and in other regulatory contexts within Canada.

To address this need and align with international and domestic best practices, we encourage GAC to develop this written guidance in consultation with stakeholders. Guidance will provide clarity and transparency for stakeholders—especially those that lack or cannot afford access to expensive resources to support their activities—thus mitigating the operation and regulatory risks that may flow from regulatory opacity when doing business globally. It will also help to ensure that the Sergei Magnitsky Law and SEMA are implemented as intended and that their desired policy goals are efficient and effective.

Along with written guidance—as endorsed by the Senate committee report—the government should also work to educate the Canadian public on the nature, rationale and impact of Canada's sanctions laws. In the current context, private sector entities, such as our members, are often required to address the questions and concerns of their clients. To ensure that the public receives accurate, up-to-date information that is consistent, we suggest that the federal government would be best placed to answer these questions, as our members and other stakeholders are still trying to understand the impact of the law on their own businesses.

There is also currently an opportunity to improve the efficiency and effectiveness of sanctions reporting. More specifically, our members currently provide sanctions reports to various government agencies. The government's recent proposed amendments in Bill C-47 to create additional reporting requirements to FINTRAC open the door for meaningful engagement between the regulator and industry to refine reporting requirements and ensure they meet the policy intent of the legislative amendments.

Operationally, the permit system also requires the federal government's attention. We understand that in other jurisdictions there are streamlined mechanisms for seeking permits or certificates to authorize certain specified activities or transactions that are otherwise prohibited. For example, the United States has provisions for general licences that authorize particular types of transactions for a class of persons, without the need to apply for a specific licence. This general approach has not been used in Canada, although it is possible under the law.

Given the lack of guidance and clarity in the law, we understand that GAC has been flooded by permit applications. It appears this increased volume has created a backlog of applications, leaving Canadians waiting with unclear timelines for formal responses. These permits are not always sought by large corporations. Often, it is everyday Canadians seeking these permits, such as retail banking clients attempting to remit funds to family members in jurisdictions impacted by sanctions.

We suggest that GAC align with the approach taken in foreign jurisdictions. Further, we also recommend that GAC hire additional resources to focus specifically on licence applications and, ideally, set out a mandate to complete all licence requests within a reasonable period.

Finally, as the Senate report recommends, sufficient investment in GAC’s sanctions bureau and other federal departments involved in the regime is needed. We appreciate and support the government’s previous budgetary commitments to GAC and understand the government is considering providing additional government agencies with a role in the sanctions space.

Given the complexity of the regime, it is critical that any government department or agency involved in the regime, including GAC, be properly resourced and that staff receive extensive training on and have sufficient knowledge of this highly technical area of the law.

This approach will help ensure oversight is tailored to and reflects the uniqueness of the regime and that it is not conflated with that of other legislative areas, such as Canada’s anti-money laundering—

[The Chair, Liberal, Ali Ehsassi]

Ms. Mason, could I ask you to conclude your remarks? You're a minute and a half over.

[Angelina Mason]

I apologize.

Thank you. We look forward to your questions.

[The Chair, Liberal, Ali Ehsassi]

Thank you.

You'll have an opportunity to mention all of the things you wanted to during questions by the members.

[Angelina Mason]

You caught me in my last sentence.

[The Chair, Liberal, Ali Ehsassi]

Absolutely.

We now open it to questions from the members.

The first member up is Mr. Hoback.

You have five minutes.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair, and thank you, witnesses.

Ms. Mason, I'm going to go to you first.

You talked about written guidance. Could you maybe expand on it a bit?

Right now, when you're dealing with, let's say, a Canadian business that is looking at doing business in another country, what is there for you to provide for guidance? Because there's no guidance in place, is it possible that they get different advice from one institution versus another?

Just give me some—

[Angelina Mason]

Sure.

Compared to other jurisdictions, the guidance is very detailed. It goes into specific fact scenarios. It definitely has a lot more structure. Therefore, people can interpret the particular sanction differently.

Guidance is the best way to ensure that there's clarity and consistency in approach.

[Randy Hoback, Conservative, Prince Albert, SK]

Wouldn't that be for the courts to define, or is that something that should be right in the legislation?

[Angelina Mason]

Guidance is actually very common, not only within the sanctions area but in other regulatory areas within Canada, whether it's OSFI or the consumer protection framework. It's very common for regulators to add guidance to what's in a particular statue or regulation, because, necessarily, there will be fact scenarios that you can't contemplate within the four corners of a piece of legislation.

[Randy Hoback, Conservative, Prince Albert, SK]

What are the consequences for you, then, if you make a mistake because you haven't been provided that guidance?

[Angelina Mason]

Well, that's why we're wanting to ensure that guidance is provided. What happens is that you end up not being able to proceed, in an abundance of caution, because there isn't clarity on exceptions.

We have assisted our clients in seeking permits, but it's two sides of the same coin. If the guidance is better, there's less need for permits. Otherwise, people are having to apply for permits to understand whether or not their transactions are permissible.

[Randy Hoback, Conservative, Prince Albert, SK]

Okay, thank you.

Mr. Silver, I want to say that we really appreciate your work, your organization's work and Mr. Cotler's work on this file.

You talked a little about an “asset flight”. I'm curious as to whether you have some examples of what that looks like. You then talked a bit about a “single focal point” to prevent some of this, so maybe just give a bit more texture or content, if you don't mind.

[Brandon Silver]

Thank you, Mr. Hoback, for your kind words and important questions.

If we look at Magnitsky multilateralization, it's the idea that with imposing sanctions, the asset freezes and visa bans should ideally be coordinated among multiple jurisdictions with parallel laws. If we sanction an individual in Canada and we are the only country to do so, they can easily make use of parallel banking systems—the very same amenities and rights that they seek to deny their compatriots at home—and enjoy those rights abroad.

The statistics in Canada are that 79% of our sanctions are unilateral. That means that most of the sanctions we're implementing are undertaking important components of naming and shaming and protecting our domestic financial systems and democracy from being co-opted or abused by foreign nationals or entities engaging in maligned behaviour, but doing so is less effective because they can go to the U.K., the U.S., the EU or any of the other 30-odd Magnitsky jurisdictions.

With respect to the 21% of Canadian sanctions that are multilateralized—i.e. involving not just us—we usually do those with only one partner, so they're not very broad or multilateral. When we say that we're not engaging unilaterally, we're really usually doing so only bilaterally, so Canada will make an announcement with the U.K. or with the U.S. or with the EU. Of that 21% of multilateralized sanctions, 14% are bilateral, meaning that only a couple per cent of Canada's sanctions are truly global in reach and scale.

That is in a bit of a nexus with our recommendation to create this diplomatic coordination group. If Canada is engaging in a concerted and coordinated effort to share intelligence, to share Magnitsky implementation and diplomatic action with like-minded states, we can really tighten the screws and increase the pressure on rights abusers both reputationally and rhetorically—because it would be multiple democracies sanctioning them—but also substantively in terms of depriving them of the ability to access the vacations or the universities that their families often seek to use, as well as the banking sector, markets and economies in Canada, the U.S. and the U.K. If we're acting concertedly, we can be far more impactful.

[Randy Hoback, Conservative, Prince Albert, SK]

I assume I'm out of time.

[Brandon Silver]

I'm sorry. If there's some time, would you mind repeating your second question?

[The Chair, Liberal, Ali Ehsassi]

Mr. Hoback is out of time.

We'll now go to Ms. Bendayan.

You have five minutes.

[Rachel Bendayan, Liberal, Outremont, QC]

Thank you very much, Mr. Chair.

I thank the witnesses for joining us today.

Canada and its allies have imposed unprecedented sanctions on Russia, affecting almost every aspect of its economy. Our objective is very clear: to limit Russia's access to funding.

There is one sanction that I find very interesting: The main Russian banks have been removed from the international financial transfer network, SWIFT. I would like to hear the witnesses' comments, especially those from the Canadian Bankers Association, on this point in particular.

Ms. Mason, perhaps I'll begin with you on the SWIFT sanctions that Canada imposed with our allies. Mr. Silver just noted the importance of working with multiple allies. In the case of SWIFT, we worked with a number of important allies in order to get that done. I wonder if you could speak a bit from your perspective as to the effectiveness of those SWIFT sanctions.