Investigators have tracked millions of dollars associated with an elaborate tax fraud in Russia to bank accounts in Canada, bolstering their call for Ottawa to adopt legislation to freeze the assets of corrupt foreign officials.
Anglo-American financier Bill Browder and a team of investigators and lawyers compiled the data on the transfers of the funds, which indicate a clear Canadian connection to a $230-million (U.S.) swindle in 2007 by Russian officials who used his Russian-based hedge fund, Hermitage Capital Management.
Sergei Magnitsky, a legal adviser for Hermitage, was allegedly tortured and died in a Russian prison in 2009 after exposing the fraud to Russian authorities. Since then, Mr. Browder has helped international authorities track and freeze $43-million (U.S.) in assets related to the fraud, and persuaded governments to take action against Russian officials he says are engaged in the fraud and the cover-up of Mr. Magnitsky’s death.
In 2012, the United States adopted the Magnitsky Act, which freezes assets and bans visas for Russians who violate human rights.
While Canadian political parties are in favour of a Canadian version of the law, the current government has refused, despite strong support inside the Liberal caucus.
In a telephone interview from his London offices, Mr. Browder said his investigation proves the need to toughen legislation in Canada to deal with human-rights abusers.
Hermitage investigators found total transfers of $220,000 (U.S.) from two firms that received the proceeds of the fraud to four companies and individuals in Canada, and $1.5-million (U.S.) in wires to Canadian accounts from companies that were part of an alleged money-laundering network set up by the fraudsters. The investigation also identified $12.6-million (U.S.) in transfers from Canadian accounts to accounts linked to the network.
Hermitage started tracking the financial transfers out of Russia with the help of two whistle-blowers, and collaborated with governments around the world to map a web of firms and money flow.
“What we have here is a very direct and very clear documentation of how this affects Canada,” Mr. Browder said. “It’s not like Canada is sitting off in a different world where this dirty money doesn’t touch it, so it’s important for the politicians to realize that Canada is being abused by criminals and human-rights violators as much as many countries in Europe and elsewhere.”
Foreign Affairs Minister Stéphane Dion says Canada’s current laws are sufficient and that harming relations with Moscow would be pointless.
Earlier this year, Conservative Senator Raynell Andreychuk tabled the Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law) in the Senate with support from colleagues such as independent Liberal Senator Percy Downe.
The House foreign-affairs committee is reviewing the Freezing Assets of Corrupt Foreign Officials Act and the Special Economic Measures Act, which allows Canada to impose sanctions on foreign governments for grave breaches of international peace. Liberal MP Robert Nault, who chairs the committee, has said he favours updating the current legislation with broad powers to go after anyone accused of human-rights abuses, rather than just Russians.
Former interim Liberal leader Bob Rae said the new findings make this an issue of “real-world” politics.
“Our government, like other governments, needs the ability to deal with acts of corruption, the amassing of huge wealth as a result and the use of Canada as a money-laundering haven, because other countries are putting up walls and barriers,” Mr. Rae said in an interview.
Former Liberal cabinet minister Irwin Cotler said the adoption of broad, Magnitsky-type legislation is essential in the fight against human-rights abuses.
“We owe it to Sergei Magnitsky and those associated with him, the human-rights defenders, to hold Russia accountable and at the very least to prevent them from laundering their proceeds abroad or from entering Canada with impunity,” Mr. Cotler said in an interview.
Hermitage’s lawyers had the results of their investigation into Canadian transfers delivered by hand to the RCMP last week, as well as to the Ontario Provincial Police, the Sûreté du Québec, the Canada Revenue Agency and other government agencies and departments.
“On behalf of Hermitage, we respectfully request that you initiate an investigation and gather available evidence without delay to prevent the dissipation and loss of the illicit funds and, if appropriate, freeze such funds or other assets and hold the persons and entities who were involved in, benefited from and facilitated the money-laundering activities in Canada accountable for their unlawful conduct,” said the document, which was also provided to The Globe and Mail.
Hermitage acknowledged it has only a “preliminary” overview of the financial transfers to Canada. The firm has obtained the names of the recipients of the funds, but has not uncovered any explanation for the individual transactions.
“What we would hope for is for Canadian authorities to use their powers to subpoena banks and companies, to raid institutions if necessary, to build up a much clearer picture of where this money was coming from, who benefited from it, what other money came into those accounts, and I suspect a much bigger money-laundering crime will be identified than just this one,” Mr. Browder said.