Duhaime's Financial Crime & Anti-Money Laundering Law in Canada

Who is Meng Wanzhou?

Meng Wanzhou is the daughter of the founder of Huawei Technologies Co., one of the largest technology companies in the world based in China. Huawei is one of the largest companies in the world in artificial intelligence (“AI“). Wanzhou leads its AI development and she is the most powerful woman in the world in AI, bar none. She is also the most powerful woman in the world in tech. That’s because Huawei is the major 5G player in the world at the moment, even though Huawei has been effectively shut out of the US market over security concerns that the government of China would have a back door to access user data. On the AML side, she is a significant politically exposed person. She is believed to own expensive real estate in Vancouver, and may therefore be a permanent resident of Canada.

Where was she arrested? 

She was arrested at the Vancouver International Airport entering Canada.

Who arrested her? 

She was arrested by Canada, specifically Canadian law enforcement officials who acted on instructions from their Canadian superiors. Likely, officers from the FBI or other US law enforcement were on hand because this is their file.

Why was she arrested? 

She was arrested allegedly pursuant to an indictment obtained by the US Attorney from the Eastern District of New York (“EDNY“). According to US news reports, the indictment alleges that Huawei violated US sanctions laws involving Iran, Syria and Sudan. She is a senior officer of Huawei and was arrested in that capacity.

Was she incarcerated? 

Yes.

Were her cell phones and laptop seized? 

Yes – its standard procedure.

Is she charged with an offence in Canada?

No.

How was her arrest authorized? 

The US government would have to have sought the advance permission and assistance from the Canadian government for her arrest. That is because it occurred on Canadian soil and the use of Canadian law enforcement officials was needed for the arrest. It would also have involved officials from the US consulate office in Vancouver, who has jurisdiction over the file for the EDNY for the Canadian proceedings.

What level of approval was sought from Canadian officials for her arrest?

Its hard to say but one can speculate that a combination of facts suggests the highest levels must have approved the arrest – those facts are that: it involved the arrest of the most powerful woman in AI; it involved the largest technology company in the world; it happened at the time Montreal was hosting a G7 conference on AI; it would make international news for years to come; it would cause Canada to enter a deep freeze with China’s President Xi; it would impair Canada’s prospects for trade with China; and it would leave unanswered questions for China as to how come Canada will not return Chinese foreign nationals in Vancouver wanted for financial crimes in China but it will arrest, at the request of a foreign government, a globally high profile woman for similarly alleged financial crimes. In addition, the Extradition Act requires political approval for extradition arrests (see below).

How did they know she was flying to Canada?

International flight records are shared with law enforcement so they knew immediately when she booked a flight that she was landing in Canada and therefore, the wheels were put in motion for her arrest by the US government and the permission and assistance from Canada was then sought and obtained. They may have worked on it for weeks, or mere days depending upon how much in advance she booked her flight.

Is the arrest a surprise?

In some ways, no it is not unexpected. For two years, Huawei was aware that the US government was investigating it for sanctions avoidance involving Iran, Syria and the Sudan.  In April 2017, the US media reported that Huawei was subpoenaed two years ago from the US Treasury Department allegedly in respect of US sanctions law. Since it was widely reported in the international press, Huawei was aware of its potential exposure. The Company had US counsel in New York and Wanzhou, as the most visible person in the Company, would have been advised by US counsel of the risks of international travel to Canada when a sanctions investigation was in the works.

What are the allegations?

It is not known what the allegations are but they are believed to involve sanctions avoidance involving Iran. What that means is that the EDNY alleges that Huawei violated US sanctions law against Iran by either conducting financial transactions with Iran or Iranian foreign nationals, or supplying prohibited technology to Iran or Iranian foreign nationals. Sanctions avoidance is a financial crime. Wanzhou, as a senior officer of Huawei, would be one of several officers potentially exposed if there were sanctions violations.

What are sanctions? 

You can read more about US sanctions here. Sanctions avoidance involves several crimes, including usually deceptive practices so that correspondent banks in the US are not aware of Iranian transactions and unwittingly process wires, laundering the proceeds of crime from sanctions avoidance and other serious predicate offences.

Does Canada have sanctions? 

Yes, but they are not the same sanctions. Each country has its own sanctions program. Canada has more relaxed sanctions as against Iran, but in practice that does not matter because Canadian banks and financial institutions must make use of what are called correspondent banks, which are a handful of large US banks that provide US banking services to all of the banks in the world, and as a result of correspondent banking law, every Canadian bank is subject to US sanctions law when they process wires, domestic or foreign.

The US wants Wanzhou extradited – how does Canada’s extradition process work?

The Extradition Act authorizes the extradition of foreign nationals and Canadians from Canada.  In order to successfully extradite a person from Canada, several conditions must be met as follows:

• the requesting country must have an extradition agreement with Canada;
• the request must be for prosecuting or sentencing the person;
• the alleged offence must carry a term of imprisonment of at least two years in the requesting country; and
• the alleged conduct must be an offence in Canada (referred to as “dual criminality”) punishable in Canada by a term of imprisonment of at least two years.

The first step in extradition is the receipt of a request by the US. (completed)

Upon receipt of the request, the Minister of Justice issues an authority to proceed to the Attorney General for the committal of the person if the Minister is satisfied that extradition is permitted under the Extradition Act. (completed)

The Attorney General then arranges for the arrest of the person if the person is not already in custody.  (completed)

Once a person is arrested (completed), an extradition hearing is held to determine whether the person can be extradited.

There may be a bail hearing first to determine the flight risks of permitting the person to be released from prison. (in progress today).

At the extradition hearing, the judge must be satisfied that there is sufficient evidence to establish a prima facie case that an extraditable crime has been committed.  Subsequent to an extradition hearing, the person is either discharged, or committed to the Minister for physical removal.

As you can see from the above, the arrest of Wanzhou had to be authorized by two Canadian political ministries pursuant to the Extradition Act before she ever boarded an airplane and left China. Politically speaking, that will cause a deep freeze between Canada and China because that decision is a political one under the Extradition Act and Canada could have elected to decline to arrest Meng Wenzhou for political, judicial or other reasons.

What will be determinative at the extradition hearing?

The issue of dual criminality may be the determinative issue, as will financial crime. Wanzhou will likely argue that Huawei did not engage in financial transactions involving Iran and ergo did not commit sanctions avoidance and launder the proceeds of that crime through the international banking system. She may also argue in the alternative, that if the US can prove that financial transactions with Iran occurred in violation of US sanctions, the alleged criminal conduct is not an offence in Canada and will focus on Iranian sanctions law in Canada, assuming that the allegations involve Iranian sanctions. Whether the hearing involves money laundering allegations remains to be seen. Sanctions avoidance is a money laundering offence, and it is often pleaded because extradition is facilitated for financial crimes. On the other hand, Canadian courts and lawyers are not used to money laundering cases, or sanctions law, and it means that the outcome Wanzhou’s extradition case, either way, is hard to predict and will likely result in a significant settlement with the EDNY.

What sort of evidence does the US have?

Long before Wanzhou was arrested, the FBI and likely DHS would have obtained substantial financial records of wires from banks, as well as email records to build a case. They would have prepared affidavits of that evidence for an indictment.

Why is there a publication ban in Canada? 

It is not known why there is a publication ban on the litigation in British Columbia. There are no obvious legal reasons why a publication ban would have been granted and it is not constitutional – no one is at risk of harm in this case and in any event, the public interest in an open Court proceeding and the public’s right to know, outweigh any potential harm that could arise.

Will it cost Canada with China? 

Canadian government officials know that Wanzhou is the leading woman in AI in the world, and is important to China. Arresting her is like arresting Mark Zuckerberg – Canadian officials would have weighed the advantages and disadvantages of arresting her and decided that there were more advantages to Canada with arresting her. No question, it will seriously harm Canada’s relationship with China but Canada must have determined it was worth it for reasons that no doubt make sense to experienced people in politics.

Why is Wanzhou so important in the world?

Wanzhou is important because Huawei is the global leader in 5G technology, which we need if AI, big data and machine learning are to progress. While Huawei is the world’s no. 2 smartphone marker, it is the leader in telecommunications equipment, such as the hardware goes into cellular towers, Internet networks and infrastructure that enables modern communication. For self-driving cars and the Internet of Things to progress to power our cars, our appliances, our pace makers, our hospitals, our airplanes, our farm equipment, our crops and everything else, we need 5G.  We also need it to collect big data for machine learning. In essence, Huawei controls the data and information that runs through the 5G networks and whoever control the data, can access it, use it or manipulate it, which is the concern of US intelligence officials. Most importantly, whoever controls the data and the networks, essentially controls the world. And that person, until this week, was going to be the heir to the Huawei dynasty – Meng Wanzhou.