Hong Kong Shell Companies Used to Funnel Canadian Tech to Russian Military: Report
Udumbara
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Millions of dollars’ worth of Canadian technology has been funnelled through a network of Hong Kong–based shell companies to Russia’s military, evading sanctions, according to a new report by two human rights organizations.
“Canadian technology has repeatedly surfaced in Russian weapons recovered on the Ukrainian battlefield, with supply chains running through Hong Kong,” reads the report. “Our analysis found that these battlefield components were part of much larger flows of Canadian goods to Russia.”
It notes there is “little evidence” Canadian firms whose technology has been used to fuel Russia’s war have acted knowingly in the transshipment scheme.
The Ukrainian government has previously urged Hong Kong to take measures to prevent Russia from using the region to circumvent Western sanctions. Meanwhile, the Hong Kong government has said it does not implement unilateral sanctions imposed by other countries, but does enforce sanctions imposed by the United Nations Security Council, pursuant to the instructions of China’s foreign ministry.
In recent years, Hong Kong has come under the increasing control of the Chinese Communist Party, despite originally being supposed to have autonomy after its handover from the UK in 1997.
The Oct. 28 report says that, based on Russian customs records, it identified 153 shipments of technology originating in Canada and routed through Hong Kong, valued at US$2.55 million.
It says the issue stems from Canada’s sanctions and enforcement efforts failing to keep pace with the threat posed by shipments reaching Russia via Hong Kong.
The document argues that compared to its G7 allies, Canada hasn’t put as much focus on targeting third-country procurement schemes in evasion hubs like Hong Kong, with Ottawa yet to sanction Hong Kong traders and Russian-linked intermediaries already targeted by the United States and the European Union.
It also says Canada’s sanctions designation process makes rapid response “difficult,” requiring multiple approval stages that may give operators enough time to shift to a new shell company and resume business. In addition, exporters face “little pressure” to track what their goods are used for once they leave Canada, while Canadian border officials have “little authority” to follow goods beyond the border.
The report provides a number of recommendations for Ottawa to ensure Canadian goods are not aiding Russia’s war.
Among them is designating Hong Kong as a “high-risk jurisdiction” under existing legal authorities, requiring increased due diligence and transaction reporting by financial institutions, and making efforts to hold Canadian manufacturers involved in sanctions evasion accountable.
“As global dynamics shift, it’s time for Canada to step up and take a leading role,” said Samuel Bickett, the report’s author.
