Two human rights organizations released a report on Tuesday revealing that the Russian military is using Hong Kong shell companies to evade sanctions and acquire significant amounts of critical Canadian technology, estimated to be worth millions of dollars.
The Committee for Freedom in Hong Kong Foundation (CFHK Foundation) and the Raoul Wallenberg Centre for Human Rights jointly published an investigation report titled “Backdoor to the Battlefield: How Hong Kong Funnels Canadian Technology into Russia’s War Machine.” The report analyzed battlefield intelligence data, public records in Hong Kong, and three years of data from Russian customs.
According to the report’s author, Samuel Bickett, “With the changing global landscape, Canada should step up and take a leadership role.”
The statement highlights that Hong Kong has become the world’s largest hub for the transfer of Western advanced technology, with these technologies being transported to Moscow and other hostile governments. Some Canadian technologies have made their way into Russia’s military operations in Ukraine through Hong Kong’s supply chains controlled by Beijing.
The report reveals that Russian weapons seized on the battleground in Ukraine have been found to contain Canadian technology multiple times, indicating that these components flow into Russia through Hong Kong’s supply chain. These components are just a small part of the vast amounts of goods flowing from Canada to Russia.
Russian customs records show that a total of 153 batches of technology goods originating from Canada and transiting through Hong Kong were valued at $2.55 million.
A report published by the CFHK Foundation in July 2024 revealed that during the global sanctions against Russia, Hong Kong played a role in evading sanctions. Since Russia’s invasion of Ukraine, companies headquartered in Hong Kong have shipped “billions of dollars’ worth of sanctioned technology” to Russia.
However, there is currently “almost no evidence” showing that Canadian companies intentionally participated or were aware of technology being rerouted to Russia to support warfare actions.
The report points out that the root of the problem lies in Canada’s slow response to sanctions and enforcement actions, as they have failed to keep pace with the situation and effectively prevent the flow of technical products through Hong Kong to Russia.
It is noted in the document that compared to their G7 allies, Canada lacks sufficient focus on addressing intermediaries like Hong Kong that facilitate sanctions evasion. Ottawa has not imposed sanctions on Hong Kong businessmen and intermediaries related to Russia, despite them being on the sanctions lists of the US and the EU.
The report also highlights that Canada’s sanction procedures are complex and slow to take action, requiring multiple approval stages, which may give businesses enough time to shift to new shell companies and resume operations.
Additionally, exporters have almost no “pressure” to track the use of goods once they leave Canada, and Canadian border officials have very limited authority to monitor cross-border goods.
In August 2024, Canada mandated that banks report suspected sanctions evasion activities to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). Ottawa also announced its first arrests earlier this year under sanctions against Russia.
The Ukrainian government has urged Hong Kong to take measures to prevent Russia from exploiting the region to evade sanctions. However, the Hong Kong government stated that it will only follow instructions from the Chinese Ministry of Foreign Affairs and implement sanctions passed by the UN Security Council, not unilateral sanctions imposed by other countries.
The report indicates that Hong Kong’s refusal to implement global sanctions against Russia is equivalent to “green-lighting illegal operators to set up local bases.”
The report offers several recommendations aimed at ensuring that Canadian goods are not used to support warfare activities. These recommendations include categorizing Hong Kong as a “high-risk jurisdiction” under existing Canadian laws and regulations (i.e., blacklisting), requiring financial institutions to strengthen the review of funds or transactions related to Hong Kong, and holding Canadian manufacturers responsible for sanctions evasion involvement.
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Article originally published in the English edition of The Epoch Times.