THE STANDING SENATE COMMITTEE ON FOREIGN AFFAIRS AND INTERNATIONAL TRADE
EVIDENCE
OTTAWA, Wednesday, December 10, 2025
The Standing Senate Committee on Foreign Affairs and International Trade met this day at 4:16 p.m. [ET] to consider the subject matter of those elements contained in Divisions 18 and 27 of Part 5 of Bill C-15, An Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025.
Senator Peter M. Boehm (Chair) in the chair.
[Translation]
The Chair: Good morning. My name is Peter Boehm. I am a senator from Ontario and the chair of the Standing Senate Committee on Foreign Affairs and International Trade.
[English]
I wish to invite committee members participating in today’s meeting to introduce themselves.
Senator Adler: Charles Adler, Manitoba.
[Translation]
Senator Gerba: Amina Gerba from Quebec.
[English]
Senator Ravalia: Welcome. Mohamed Ravalia, Newfoundland and Labrador.
Senator Pupatello: Hello. Sandra Pupatello, Ontario.
Senator Woo: Yuen Pau Woo, British Columbia.
Senator Harder: Peter Harder, Ontario.
Senator Dasko: Donna Dasko, senator from Ontario.
Senator Al Zaibak: Mohammad Al Zaibak, Ontario.
[Translation]
Senator Hébert: Martine Hébert from Quebec.
[English]
The Chair: Welcome, all. I would like to welcome everyone who is watching across the country on ParlVU.
Colleagues, we are meeting to study the subject matter of Bill C-15, An Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025 — in other words, the budget implementation act.
The specific elements referred to this committee by the Senate are Divisions 18 and 27 of Part 5.
What we thought we would do differently is to do both of these at the same time in one meeting like this. We’ll see if that works.
Today, we are pleased to welcome the following government officials:
From the Department of Finance Canada, Erin Hunt, Director General, Financial Crimes and Security Division; Jeremy Weil, Senior Director, International Financial Crimes and Sanctions; and Ben Rankin, Senior Advisor, Financial Crimes and Security Division.
From Global Affairs Canada, Larisa Galadza, Associate Assistant Deputy Minister, International Security and Political Affairs Branch — known to this committee as our former ambassador to Ukraine as well, I should add — Patrick Boulanger, Director, Export Controls Policy Division; Judy Korecky, Deputy Director, Export Controls Policy Division; and Stephen Burridge, Executive Director, Sanctions Policy Division.
The others are sitting behind the principal witnesses but can, of course, step forward if and as they are required.
And from the Financial Transactions and Reports Analysis Centre of Canada, we welcome Michael-John Almon, Assistant Deputy Director, Strategic Policy and Review.
Welcome to you all. Thank you for being with us.
[Translation]
Before we hear your opening statements and proceed to questions and answers, I would ask everyone present to please mute notifications on their devices.
[English]
Also, I would ask you to observe the instructions on the cards in front of you with respect to the use of microphones and the earpiece to avoid any sonic problems for our interpreters and other staff.
We are ready to hear your opening remarks, which will be followed as usual by questions from senators.
Ms. Hunt, the floor is yours, and you will be followed by Ms. Galadza.
Erin Hunt, Director General, Financial Crimes and Security Division, Department of Finance Canada: Thank you, honourable senators. I am pleased to be here today to discuss Division 18 of Part 5 of the budget implementation act, which proposes two sets of amendments to the Special Economic Measures Act, or SEMA.
The first set of amendments would require the Minister of Foreign Affairs to consult the Minister of Finance before sanctioning entities that could have unintended consequences on Canada’s financial system. The second set of amendments would authorize the Minister of Finance to issue a targeted charge on windfall profits financial institutions may earn from holding immobilized assets.
[Translation]
The first proposed amendments are contained in clause 354. The integrated nature of the global financial system means that targeting certain foreign financial institutions with sanctions could lead to unintended consequences for Canada’s own financial system, especially when a foreign financial institution is active in Canada or is large enough that their failure could raise financial stability concerns.
These proposed amendments would require the Minister of Foreign Affairs to consult the Minister of Finance when sanctioning the following entities under SEMA: globally systematically important banks; foreign banks authorized to operate in Canada; foreign payment service providers operating in Canada; foreign central banks; and foreign entities operating a stock exchange and/or clearing and settlement system.
[English]
Regarding the second set of amendments, while sanctions are an important foreign policy tool, their use can lead to market distortions in Canada’s financial sector. Financial institutions do not face competition to retain immobilized assets, which can remain on their balance sheets for extended periods, generating undue profits.
This is the case in Belgium, for example, where Euroclear, a major European transaction clearing and settlement provider, now holds €173 billion in immobilized Russian sovereign assets, which generates some €5 billion in annual windfall profits.
To avoid undue profits to Euroclear, and to support Ukraine’s financing needs, the European Union introduced a windfall profit mechanism on certain financial institutions holding Russian sovereign assets, the proceeds of which are sent to support Ukraine. Our European partners have called on others to replicate this mechanism as a sign of solidarity.
The proposed amendments contained in clauses 353 and 355 to 362 would introduce a made-in-Canada version of the windfall profit mechanism, through a targeted charge on the profits financial institutions may earn from holding immobilized assets. The Minister of Finance would be responsible for the administration and enforcement of these new authorities.
Under the proposed approach, the Governor-in-Council would be authorized to make regulations requiring federally regulated financial institutions to provide the Minister of Finance with information on immobilized property in their control, as well as any profits realized from immobilized property. The amendments further empower the Minister of Finance to order financial institutions to pay profits derived from immobilized assets to the Receiver General. The amendments also allow for information sharing among officials to exercise these powers.
[Translation]
Together, these amendments would protect Canada’s financial system from potential unintended consequences stemming from sanctions, as well as demonstrate solidarity with European allies who have implemented a similar windfall profit charge specifically on Russian sovereign assets.
[English]
With that, I will pass the floor back to you, senator.
The Chair: Thank you very much.
Colleagues, I would like to remind you, if you want to ask a question, please indicate so. We don’t have a list with too many so just as a reminder.
Ms. Galadza, you have the floor.
Larisa Galadza, Associate Assistant Deputy Minister, International Security and Political Affairs Branch, Global Affairs Canada: Honourable senators, thank you for the opportunity to appear before you to discuss Division 27 of Part 5 of the budget implementation act, which proposes targeted amendments to the Export and Import Permits Act, or the EIPA. These amendments are designed to strengthen Canada’s ability to safeguard its economic security in a rapidly evolving global environment.
“Economic security” is a broad term. In this context, it includes Canada’s ability to manage foreign threats and shocks while guiding economic activity such as imports and exports to support national security objectives and foster growth.
Stable and predictable international trade is a significant contributor to Canada’s economic security. However, the global trading system is increasingly shaped by strategic competition, supply chain fragility and, in some cases, the deliberate use of economic measures to exert pressure on other states.
[Translation]
Many of our partners and allies, including the United States, the European Union, Japan and Germany, have regulatory tools to address these emerging risks.
The purpose of the proposed amendments is to ensure that Canada is similarly equipped. The amendments proposed in Division 27 relate to the Export Control List and the Import Control List.
[English]
You are likely familiar with these instruments, but permit me to take a brief moment to explain them.
The Export Control List and Import Control List are regulations. If an article is added to the Export Control List, then the exporter must receive a permit from the Minister of Foreign Affairs before exporting that article and must comply with any terms and conditions attached to that permit. If an article is added to the Import Control List, the same requirements apply for importers.
Two legislative changes are proposed in Division 27:
The first is in clause 460, which would allow the Governor-in-Council to add items to the Export Control List, when required to ensure the adequate and secure supply and distribution of essential goods or to respond to harmful actions by a foreign state. Items added could include either physical goods, like nickel or lithium, or intangible technologies, like technical specifications or software.
The second change is in clause 461, which would allow the Governor-in-Council to add items to the Import Control List, if needed, to ensure a secure and reliable supply of economically important goods. For example, import controls under this authority could ensure that Canada does not develop an economic dependence on relatively cheap goods from an unreliable foreign supplier.
Once again, these amendments give Canada an additional tool to protect Canada from economic coercion or critical supply chain failures that could undermine our economic security.
These measures would complement Canada’s existing economic security tools, which include measures in the Customs Tariff and the Special Economic Measures Act.
It is important to emphasize that passing these amendments would not, in and of itself, impose any new export or import controls. Instead, the amendments would give the government the flexibility to add new controls to face economic security threats in the future if and only if they become necessary. Any future decision to add an item to the Export Control List or Import Control List would be made through the normal regulatory process, including rigorous analysis and stakeholder consultation, as required under Canadian law.
These amendments are expected to be used selectively and strategically and, above all, applied only when warranted. But having them available is essential in a global trade landscape where risks can emerge quickly and unpredictably.
[Translation]
Honourable senators, thank you for your attention. My colleagues and I would be pleased to answer any questions you may have.
The Chair: Honourable senators, I wish to remind you that you have three minutes each for the first round. This includes questions and answers. Therefore, to senators and witnesses, please be concise. We can always go to a second round if we have time.
[English]
Senator Dasko: Thank you, witnesses. As we all know, in February 2022, Russia invaded Ukraine and the equivalent of C$425 billion of Russian state assets were frozen by Canada’s EU and G7 partners, the majority of which are managed by Euroclear, as you mentioned, a security deposit based in Belgium. Euroclear has indicated that these assets include at least C$22 billion as of March of this year.
Since Euroclear bank cannot hold Canadian dollars itself, Euroclear’s Canadian dollars are believed to be held in Canadian dollars in correspondent accounts with Canadian financial institutions.
Would these amendments — and I was very excited when I saw them because I assume they must — permit the government to require information about Russian state assets held in Canadian dollars, which are under the jurisdiction of Euroclear but held in Canadian financial institutions? Would the government be able to require this information, given that arrangement?
Ms. Hunt: Thank you for the question. It is a little complicated, obviously, when we are talking about international assets, how institutions in Canada hold assets and how they are held in other international financial institutions. The proposed amendments to SEMA don’t specifically target or relate directly to the Euroclear assets. They are focused on the assets held in Canada. But they will allow the Minister of Finance to seek information about the assets held by Canadian federally regulated financial institutions to allow us to have a better understanding of what those assets are.
To this point, C$185 million of assets has been reported to the RCMP, and that is the number that we understand is being held and frozen or immobilized in Canada at this time.
Senator Dasko: But Euroclear has said that 7% of the Russian state assets that they hold are in Canadian dollars. I am assuming those dollars are held in Canadian banks because Euroclear cannot hold them in Canadian dollars. Can I deduce from what you said that the government is able to seek this information?
Ms. Hunt: Can I turn it over to Jeremy to provide a little more context?
Jeremy Weil, Senior Director, International Financial Crimes and Sanctions, Department of Finance Canada: As Ms. Hunt said, the official number that has been disclosed to the RCMP is the best number we have, officially, to work with. Those are all assets combined, not state assets only. I think, as Ms. Hunt explained, these provisions are important because they will allow the Minister of Finance to issue regulations querying, from the federally regulated financial sector, exactly what we are talking about to parse through some of these numbers and some of the opacity that you correctly pointed out, senator. What Euroclear does or doesn’t hold and where it holds those assets is not something we can disclose because these are commercial confidences of Euroclear Bank. As you mentioned, in their public disclosures, they have outlined that approximately 8% of the frozen sovereign assets are denominated in Canadian dollars. But that does not necessarily mean that the assets are held in Canada. The sanctioned assets, for the purposes of compliance with the European sanctions, are being immobilized in euros in Belgium.
The Chair: Thank you. We are well over time.
[Translation]
Senator Hébert: Ms. Galadza, my question is for you, given that you addressed amendments to the Export and Import Permits Act. I’m still having trouble understanding why this provision was introduced and why economic security is being specifically targeted. The examples you gave affect things other than economic security. I’d like you to explain that to me in a little more detail.
Ms. Galadza: Thank you for the question.
[English]
First, I would point out that today is not the first time the desire to make these amendments has been made public. It was announced in the 2024 Fall Economic Statement. This is something we have understood for a while would be a useful tool to have. This is a tool that many of our allies have.
Why with respect to economic security? We can already control the import and export of goods for national security purposes. We are now in a world where economic tools are being used to coerce us in a way that affects our national security.
And just to make it clearer in the law that economic coercion can be answered with import and export controls, this amendment will create the provision to list items that are of economic security concern or importance to Canada. So it just makes it clearer that where we are responding to economic coercion or where our economic interests are involved, we can control the item or technology.
[Translation]
If I may, I’m going to give the floor to Patrick so that he can say a little more about this.
Patrick Boulanger, Director, Export Controls Policy Division, Global Affairs Canada: Certainly. Thank you for your question.
In the Export and Import Permits Act, you will see that a certain number of passages in section 3 list seven criteria under which certain items could be added to the Export Control List. The legislative proposal you’re currently studying seeks to add an eighth criterion that would be related to economic security when circumstances could justify the use of such means. It’s not a matter of reacting to an immediate situation, but of adding tools to the tool box.
[English]
Senator Al Zaibak: My question is directed to Ms. Hunt or former Ambassador Galadza. Has Canada frozen funds or sanctioned assets from the former Syrian al-Assad regime? If so, how much, and how will the government use these assets or funds to give back to and rebuild Syria now that there is a new transitional government?
Ms. Galadza: I don’t have that information at hand, but we can return the answer in writing if that is okay with you.
Senator Al Zaibak: So you cannot confirm whether there have been assets frozen or you just don’t know how much?
Ms. Galadza: I will leave all of those answers to a written answer, if you will allow me, just to ensure they are 100% accurate.
Senator Al Zaibak: I appreciate that. If I may follow up?
The Chair: Senator, I think the provision here is more meant for the Russian federation. Please go ahead.
Senator Al Zaibak: Has this been done before with other countries?
Ms. Hunt: Sorry, senator, would you mind repeating the question so I understand exactly what you are asking?
Senator Al Zaibak: How will the government use these assets or funds to give back to and rebuild the country concerned?
Ms. Hunt: Thank you for the question and the clarification. The way the legislation sets it out is the minister is able to impose a charge on the profits that are being generated by the immobilized assets. Those profits would return to the Consolidated Revenue Fund, and the government could rely on fiscal room to support or aid a country or advance other related priorities.
Senator Al Zaibak: Thank you.
Senator Ravalia: If I could direct my question to Ms. Galadza — could you outline what possible acts, policies or practices of a foreign country or association of countries that might be detrimental to Canada’s economic security interests are envisioned by the proposed amendments to the Export and Import Permits Act?
Ms. Galadza: Thank you for the question. It is not an easy one to answer, and I’ll tell you why: When items are added to the import list or export list, we know there could be many ramifications. We also know that with anything on the Export Control List or Import Control List, that control can cut two ways. We would only add something to the list if, after thorough analysis, we understand that the net benefit would be to the economic and national security of Canada. That calculation changes. It has to be evaluated in a certain situation. What is at risk, and how much of it? What is the affected sector? Are there other places that we can sell a good or procure a good? There are other considerations like these, regarding what the impact would be on other Canadian industries.
There is an extensive review that takes place, including a public consultation to ensure we have all the information we need about that situation to make the determination that putting the item on the control list is of net benefit to Canada.
Senator Ravalia: From a historical perspective, can you give me examples where something tangible has happened and has actually been effected?
Ms. Galadza: The provision that is being put in place is for future purposes. It is there in case we need it. The thinking is it’s better to have it and use it, if necessary, than need it and not have it.
Senator Ravalia: Thank you.
Senator Woo: My question is on the export and import permits. You have described the need for this change in defensive terms, to respond to economic coercion from another country, for example, but it seems to me that we are also putting in place this amendment so that we can use it as an offensive tool.
In other words, it sounds to me as if we want to include economic coercion on our part as a way in which we can extract benefits of some sort from another country. I’m thinking about how China is weaponizing rare earth exports and the United States is weaponizing semiconductor exports.
Would it be correct to say that we are giving ourselves the ability to do what the Americans and the Chinese are doing to each other insofar as rare earth materials and semiconductors are concerned?
Ms. Galadza: Thank you for the question. Our prosperity relies on a system of rules and institutions that provide predictability and stability for the international trade investment system. That is what we believe is best for Canada and for the world: an open, fair and inclusive rules-based system.
We’re seeing that some other countries fall outside of that. These provisions are intended to be used as a response to economic coercion or to —
Senator Woo: They are to be used only as a response, not as an offensive tool. Is that the answer?
Ms. Galadza: That is the intention.
Senator Woo: Are there WTO, multilateral, plurilateral or bilateral trade agreements that might make it more difficult for us to follow through on some of these export controls? For example, if we wanted to stop the export of a sensitive product to a big country with which we have a long-standing free trade agreement, would there be a problem in doing so?
Mr. Boulanger: I’m not a trade policy expert, but there could be trade risks involved if we were to get into that situation.
Senator Woo: It is a crucial question, though.
Mr. Boulanger: Yes. We could get back to you in writing.
Senator Woo: I think that is very important. If a trade agreement takes away our ability to use the tool that we may well approve before long, then it is essentially nullified.
Ms. Galadza: I mentioned earlier that the regulatory process for putting an item on the Export Control List or the Import Control List involves public consultations. It would also involve consultations if we do have a trade agreement in place that touches that kind of trade and says that there are consultations or certain processes that need to be followed. If there is a trade agreement in place that specifies additional measures that would need to be taken in the course of regulatory change, that would need to be adhered to.
[Translation]
Senator Gerba: Welcome to our witnesses. In a Radio-Canada article today, we learned that Russian imports increased by 29% in one year. The president of the Ukrainian Canadian Congress has expressed concern about this.
You may not be able to explain the reason for this increase, but would the amendments we’re discussing today, particularly those to the Export and Import Permits Act, be able to correct or better control this situation? My question is for Ms. Galadza.
[English]
Ms. Galadza: The amendments being made to the Export and Import Permits Act are about ensuring the protection of our economic security. If there are goods being imported in a way that threatens our economic security, these amendments and the rest of the EIPA allow us to specify the imports from or exports to a specific country. We can make it country-specific.
Senator Gerba: Is it now possible to control and to make it not happen?
Ms. Galadza: It depends on the item. The items being imported or exported would have to appear on the control lists we currently have. Those control lists list technologies, dual-use item and weapons systems or components of weapons that we have said as a country we are going to export with great care, and only after a lot of analysis of whether they are going to be used in accordance with international law and with all of our treaties.
Those items have to be specified. It is about national security and our agreements such as the Arms Trade Treaty. The amendments being made will allow us to add items to those control lists that impact our economic security.
An assessment would have to be made. What is being imported? What kind of an impact might that have on our economic security, and should that be added to a control list so that we can take the appropriate measures?
Senator Gerba: Thank you.
The Chair: We’re coming to the end of round one. I will use my prerogative as chair to ask a question.
We are concentrating on SEMA because that is what is in the proportioned legislation, but, of course, we also have the Justice for Victims of Corrupt Foreign Officials Act, otherwise known as the Sergei Magnitsky Law, which the government has not used that much.
I am wondering two things: first, whether it would make sense to make some amendments to the Sergei Magnitsky Law; and second, whether you have a number on the value of assets that may have been immobilized under that law.
Ms. Galadza: I will turn around and see if one of my experts has the answer to that question.
Stephen Burridge, Executive Director, Sanctions Policy Division, Global Affairs Canada: All frozen assets are disclosed to the RCMP, so under SEMA, it is a requirement that any assets that have been frozen that belong to a listed person must be disclosed to the RCMP. In some regulations, it is required to disclose it to the Commissioner of the RCMP or to the Director of CSIS.
As it stands right now — and this may get to the earlier question about Syria as well — to date, there are only frozen assets that have been disclosed to the RCMP under the Special Economic Measures Act, or SEMA, regulations. Those SEMA regulations include Russia, Belarus, Iran and Haiti. To the earlier question, there are no disclosures that have been made on frozen assets related to Syria. Under the Justice for Victims of Corrupt Foreign Officials Act, or JVCFO, there have been no frozen asset disclosures to the RCMP either.
Senator Harder: I have three quick questions. Two of them are to Ms. Hunt with respect to Division 18. First, I want assurances that the need for the Minister of Foreign Affairs to consult with the Minister of Finance is not going to delay the process. The second, with regard to our windfall profits replication, the Canadian version of what the Europeans have suggested — which is fine — are we doing that to be good like-mindeds? Do you actually anticipate that there will be assets available for distribution through the Consolidated Revenue Fund and utilized for appropriate recompense, if I can put it that way?
With respect to Division 27, I welcome the comments you made about a public consultation. Could you speak to whether there’s any public oversight after its conclusion? In other words, what kind of reporting or ongoing mechanism of oversight is anticipated to avoid the kind of problems that Senator Woo was speaking about?
Ms. Hunt: Thank you, senator. I will start with your first question about whether we see this potentially causing a delay in the practice. I can assure you that the answer is no. This ensures that we include in the legislation what is already practised informally. We think it will be helpful, given that this is increasingly used as a foreign policy tool, to ensure that is more formalized throughout the process and to ensure that those considerations are a formal part of the process.
Your second question regarded whether Canada is proposing the windfall profit charge to be with like-minded countries. Obviously, we want to show solidarity. Canada has been a real leader in looking for innovative solutions. The proposal in front of you, while it will be able to be applied in the context of Russian sanctions, is a broader approach that can be used because our sanctions are being used more as a foreign policy tool to ensure that there is a level playing field among all our financial institutions and no one institution has unduly profited.
In fact, we are taking a broader approach than what our European counterparts have done to ensure that it will apply in the future as well. It is not Russia specific —
Senator Harder: Do you anticipate any funds being available?
Ms. Hunt: We know that $185 million is frozen in Canada. With the tools that will be given to the Minister of Finance, we will be able to gather more information about what types of funds they are and where they are held within our financial institutions, at which time the minister will be able to issue an order should there be funds for which this tool could be applied.
Senator Harder: Thank you.
Ms. Galadza: Annually, the Minister of Foreign Affairs tables a report to Parliament on the administration of the Export and Import Permits Act. There will be details in there about how that is taking place, but I would also expect that at the front end, it would be very clear why an item is being added and obvious that it was in response to something and not for proactive, coercive and weaponization purposes we see other countries doing.
The Chair: Thank you. Our second round starts with Senator Dasko.
Senator Dasko: I wish to close the loop on what was said earlier. We are talking about Russian state assets in Canadian dollars that Euroclear has said they have or are responsible for.
Following the trail, it is believed by many people that these funds are in Canadian financial institutions because of the connection between them and Euroclear. If they were in Canadian financial institutions, should I assume — you can say yes or no — that this would assist us in learning the amounts? That would be my first question.
My other question is this: Do you assume that this money is in Canadian financial institutions, given the relationship?
Ms. Hunt: Thank you, Senator Dasko, for the question. I know that this is a little bit of a difficult one for us to explain clearly.
Senator Dasko: It is okay. You can explain it.
Ms. Hunt: Euroclear has frozen the assets in Europe. It is holding the assets in any denomination in equivalent amounts in Europe. If there are specific assets that need to be sanctioned in Canada according to the SEMA, they should be immobilized and frozen in Canada, regardless of which bank it has a relationship to because Canada needs to know who the ultimate beneficiaries of those assets are.
This tool will allow us to get more information about the specific assets that are immobilized in Canada pursuant to our requirements, but they need to know who the beneficial owners are. We will also be able to gather more information about the types of assets that are being held. For example, is it an investment account? Is it a checking account? Are there investments in mutual funds? Knowing this will help us to better understand whether a profit is being made unduly on holding those assets, and that is what this charge will focus on.
Senator Dasko: Right, okay. So when you say “held in Canada,” you mean Canadian financial institutions?
Ms. Hunt: Correct.
Senator Dasko: Yes. This should be seen by people like me who are looking to find the Russian assets and who say that we should be happy with this.
Ms. Hunt: If the institutions are holding assets that belong to a Russian-sanctioned entity, those assets —
Senator Dasko: State assets.
Ms. Hunt: Yes. Russian state entities are sanctioned under Canada’s SEMA act.
Senator Dasko: They are, yes.
Ms. Hunt: Those assets should be immobilized in Canada pursuant to the SEMA requirements and disclosed to the RCMP, and then the Minister of Finance can gather more information about them to see whether the institution may be profiting unduly from holding those assets immobilized on its balance sheet.
Senator Dasko: Thank you.
Senator Woo: This is a technical question on the windfall tax on immobilized assets. Is there an analogue in criminal law where proceeds of crime, for example, are immobilized? Is there also that provision where the state can impose a windfall tax on the bank that is holding the criminally gained assets of a racketeer? Do you know that?
Ms. Hunt: I do not know the answer to that question, senator. I can take it back, and we can respond if there is something under the Criminal Code with respect to that.
Senator Woo: Yes. Really the question is this: If there isn’t, why are we doing it in this case? Presumably because the numbers are very large, I guess, and also because there is a kind of international relations and solidarity element to it. I would be curious if we didn’t have a similar provision because the proceeds of crime can be very large as well, possibly larger than the $100 million or so that we think is being held from sanctioned Russian entities in Canada.
Mr. Weil: One element that could be helpful to draw that distinction is that the immobilized property from a sanctions perspective can be immobilized for a long time, effectively in stasis.
Senator Woo: Yes.
Mr. Weil: That is my immediate reaction if you were to compare and contrast the two. A criminal matter would be more dynamic and tactile. The situation here could be dormant assets on the balance sheet of an institution that are yielding passive income, if you will, as opposed to the bank account of a criminal, that happens to be held in an institution when there was a process against that criminal at some point in time.
Senator Woo: Just to follow up, sometimes regimes change. The national assets of a regime can go from one we did not like to one we are more favourable toward. I’m thinking of Syria, for example. Does that change the calculation in any way where we have imposed an excess tax because we didn’t like the regime when they held the assets, and it has changed because a better government has come in? How does that factor into the law?
Ms. Hunt: Senator, that’s an excellent question. I think the way the charge is created allows for dynamism in those circumstances. It reflects the current reality based on Canada’s existing sanctions regime. So the charge would not continue if Canada makes changes to its sanctions regime.
Senator Woo: Sure.
Ms. Hunt: And the funds are directed to the Consolidated Revenue Fund, which means the government is able to leverage those funds and direct them to priorities that it feels are important. For example, in the case of the Russian regulations, the government has committed to using the funds to support Ukraine. In another instance, they may choose to do something different with that to support other victims in a circumstance. So it does allow flexibility. There is not one specific destination for the funds other than back to the central Consolidated Revenue Fund to allow the government to support priorities.
Senator Woo: Thank you.
[Translation]
Senator Gerba: Can you further explain why the government chose not to specify the purposes for which profits from capital assets under the Special Economic Measures Act can be used?
Ms. Hunt: Thank you for your question. We want to make sure that the government and the Minister of Finance have the flexibility to target the most important priority work in one case or another. The mechanism has to do with any sanctions that Canada might consider. There might be other circumstances that would be considered in other conflicts or other countries where the Government of Canada would choose to do something different. It is to ensure that the government has that flexibility.
Senator Gerba: Do we have any idea what we’re expecting in terms of an amount?
[English]
Ms. Hunt: The revenues that Canada expects through this mechanism are modest. That is an excellent question. Because of the number of revenues that Canada has in total in the country and the location and types of assets we might have, I think we expect the revenues to be modest. But this is one circumstance, and there are future possibilities where revenues may be larger than those that are currently likely under this mechanism with respect to the sanctions that we have in place.
Senator Gerba: Thank you.
Senator Pupatello: Just a quick question on the same matter. Is there an amount, a limit for the banks — like with their anti-money laundering activities — where a $10,000 level triggers other scrutiny? Is there a limit in this instance? Would we worry that $9,999 many times over would evade any scrutiny? That is one question. Is it a transaction that triggers this? If money is currently sitting here and has been sitting here for 10 years with no activity — you mentioned this passive income ability — we are not going to get at that because there is no active transaction that is current.
Ms. Hunt: Senator, that is an excellent question. There are a couple of different ways to look at sanction assets in Canada. The first is that the obligation under SEMA requires that all assets of a sanctioned person, be that a physical person or entity, be immobilized in Canada. At the same time, whether they are being moved or not and they have to stop and halt or freeze any transactions that may be linked to a person, under the Anti-Money Laundering and Anti-Terrorist Financing Regime, we have clarified to ensure that our reporting entities are able to support the detection of sanctions evasion. So that is where sanctioned individuals are trying to leverage typologies that are typically used for the laundering of funds to try to evade sanctions in Canada. They are also required to report to FINTRAC any suspicious transactions that they feel are attempts to avoid Canada’s sanctions. In both instances, there is no threshold. They have to report or immobilize all assets related to that.
Senator Pupatello: So it is not just one way. It is not just money coming in but also money going out, correct?
Ms. Hunt: Correct.
Senator Pupatello: Going out anywhere or —
Ms. Hunt: Going out anywhere because it requires an understanding of who will benefit and who is going to receive the funds. It is not a country-specific understanding. It is a person-specific understanding.
Senator Pupatello: For example, individuals who have not made it on to this list yet to be sanctioned could be sending sanctioned individuals money from Canada, is that correct?
Ms. Hunt: If they are, those funds should be frozen pursuant to the SEMA and should be reported to FINTRAC because they may be seeking to evade Canada’s sanction requirements.
Senator Pupatello: To clarify, Canadians who are currently not on a sanctioned list or individuals with money or assets in Canada cannot transfer any level out.
Ms. Hunt: No.
Senator Pupatello: Okay.
Ms. Hunt: You cannot deal with sanctioned persons.
Mr. Weil: It is a blanket dealings ban.
Senator Pupatello: Thank you.
The Chair: Thank you, Senator Pupatello, sponsor of the bill in the Senate.
I would like to ask a question of Mr. Almon. I don’t want you to feel you have been overlooked in any way. It is also very rare that your organization comes to a meeting such as this one.
My question is very simple. How does FINTRAC fall into all of this? As the conditions internationally change, are you in contact much — to the extent that you can tell us — with similar organizations among our partner countries? Specifically, obviously, we are talking about Ukraine here.
Michael-John Almon, Assistant Deputy Director, Strategic Policy and Review, Financial Transactions and Reports Analysis Centre of Canada: Thank you. In 2024, as Ms. Hunt was explaining, sanctions evasion was added to our mandate as both Canada’s anti-money laundering and anti-terrorist financing supervisor as well as Canada’s financial intelligence unit.
At that time, it increased the level of obligation and responsibility among the reporting entities that are under our supervision. That includes the financially regulated financial institutions but also money services businesses, real estate brokers and a variety of other sectors of the economy.
Just to build on the question from Senator Pupatello, they now have obligations to submit suspicious transaction reporting where they have reasonable grounds to suspect that the transaction or attempted transaction may be related to sanctions evasions. It is even lower on that level of suspicion associated with it.
They have reporting obligations more broadly but also record keeping and know-your-client obligations that now tie into that, just as they do with money laundering and anti-terrorist financing obligations.
To the second part of your question, yes, as we have increased our space related to sanction evasion, we have also increased our relationships and understanding, particularly with other like-minded allies in terms of the types of typologies and indicators associated with these financial activities. You will have seen that from public-facing publications from us on our strategic intelligence related to both sanctions evasion and proliferation financing.
The Chair: Thank you very much.
[Translation]
Senator Gerba: Are there any exceptions for members of the diaspora who want to send money to the country?
[English]
Ms. Galadza: Senator, there is a way in which individuals can receive an exemption or a permit to send money. I think you are talking maybe about remittances or something like this. Maybe I’ll ask Mr. Burridge to again explain what that process is.
Senator Gerba: Thank you.
Mr. Burridge: Thank you for the question. So anybody in Canada can apply to the Minister of Foreign Affairs to undertake an activity that would otherwise be prohibited by Canada’s sanctions, be it under the Special Economic Measures Act, the Justice for Victims of Corrupt Foreign Officials Act, or even under the UN Act as well. It is a slightly different process with the UN Act because they would need to seek a permit through the UN Security Council as well and the committee there.
So that application can be made to the Minister of Foreign Affairs. It is at her discretion whether that is granted. Various factors will be taken into consideration, including humanitarian factors and national security — things like that. So permits are not guaranteed. They are exceptional in nature, and it is a process that is confidential, but anyone is open to make an application for a permit.
Senator Adler: To anyone on the panel willing to respond, have we ever sanctioned or have we ever considered sanctioning an ally? I’ll give you an example: the United States.
The Chair: Feel free, any of you wonderful public servants and witnesses, to respond.
Mr. Burridge: Thank you for the question — I think.
I think that when it comes to any sanctions designation, there is a rigorous due diligence process that we undertake, thinking about each situation very uniquely. As you will be aware, no doubt, under the Special Economic Measures Act and under the Justice for Victims of Corrupt Foreign Officials Act, there are very specific triggers and thresholds that would justify listing someone or listing an entity. Under the Special Economic Measures Act, that includes things like human rights violations, significant corruption and situations that constitute a grave breach of international peace and security, as well as when a multilateral organization to which Canada belongs calls on its members to impose economic measures. And then, under the Justice for Victims of Corrupt Foreign Officials Act, those same two — human rights-related and corruption-related triggers.
So I think we would look at those triggers. We would look at a situation. We would look at broader implications: What are allies doing? How could this impact Canadians? How could this impact our national security? How could this impact Canada economically?
There are a number of factors. I cannot say with any certainty on what musings there have been about certain countries or certain individuals in countries. Certainly, when regulations are made, as you know, they become public. And so I am sure that there are a lot of situations that we think about using sanctions in, but it is not always the right tool. We have always thought of sanctions as being a tool of last resort and one that complements other efforts — foreign policy efforts, advocacy and different capacity-building projects and things like that. We do need to put that lens on whether or not sanctions are an appropriate tool in the toolbox at any given time.
Senator Adler: I appreciate the triggers and lens tutorial, Mr. Burridge. So the answer to the question “Have we ever considered sanctioning the United States?” is that you don’t know?
Mr. Burridge: I don’t know that answer, no.
Senator Adler: Thank you.
The Chair: Thank you very much, and thank you, Senator Adler, for bringing this meeting to a crescendo at the end.
On behalf of the committee, I would like to thank our witnesses, all fine public servants, for the job you do. So thank you to Larisa Galadza, Patrick Boulanger, Judy Korecky, Stephen Burridge, Michael-John Almon, as well as, of course, Erin Hunt, Jeremy Weil and Ben Rankin from Finance Canada.
Colleagues, we will reconvene tomorrow morning at 10:30, in this room, for an in camera discussion on the future business of the committee.
(The committee adjourned.)