Russian living in B.C. claims Scotiabank wrongfully withholding funds over sanctions

The Bank of Nova Scotia, or Scotiabank, signage is pictured in the financial district in Toronto, Friday, Sept. 8, 2023. THE CANADIAN PRESS/Andrew Lahodynskyj

A Russian woman who has been living and working in Canada for the last eight years says her money is locked in limbo due to sanctions against Russia's largest bank, so she's taking Scotiabank and the Canadian government to court.

Daria Zubashchenko's legal action indicates it's not just oligarchs who are caught up in Canada's financial sanctions, which were imposed in response to Russia's invasion of Ukraine.

Her lawyer said others have come to him for similar reasons — but the amounts involved were too small to even justify going to court.

Zubashchenko filed two applications in Federal Court last month, one against the Bank of Nova Scotia, the other naming Global Affairs Canada and the Attorney General as respondents.

She says she's a Russian citizen who has been living in Canada since 2016, holding a work permit and filing taxes each year.

She graduated from Simon Fraser University with a psychology degree in 2021, and that year, court documents say, she and her mother sold two properties in Russia.

Zubashchenko's share was nearly $324,000, and in February 2022, the documents say she tried to wire about US$90,000 to her account at the Bank of Nova Scotia from her account at Russia's Sberbank, which was sanctioned by Canada.

The funds, she claims, never made it into her Canadian account, and she learned in May 2022 after inquiring with Sberbank that the wire transfer had been blocked under Canada's Special Economic Measures (Russia) Regulations.

About a month later, Zubashchenko's court application says Scotiabank told her the funds were "being held and disclosed to the Royal Canadian Mounted Police" under the sanctions regulations, and it told her she could apply for a permit to release the money from Global Affairs Canada.

The court documents say her lawyer sent a letter telling Scotiabank that the sanctions don't apply to her, but its "escalated customer concerns office" allegedly refused to release the funds without a permit from Global Affairs.

Seva Batkin with Vancouver's Fraser Litigation Group said he couldn't comment on his client's situation, but others who have contacted him about money being held-up due to sanctions are "all in essentially the same boat."

Batkin said he'd had two other people come to him with similar issues, but the relatively small amounts meant the matters had not made it to court.

An appeal to Scotiabank's customer complaints appeals office was also unsuccessful, and Zubashchenko's application alleges the bank again refused to release the funds in October this year claiming it was "required by the Canadian government to freeze and withhold any payment involving Sberbank."

"We sympathize with your client’s situation, however Scotiabank is obligated to freeze this payment because of the sanctions on the bank the payment was initiated from," the bank's decision said. "At this time, there is nothing further Scotiabank can do with respect to releasing the funds as the Bank is following its legal obligations."

The applications say the bank said it was "unable to assist" with the permit process through Global Affairs, and though the agency has acknowledged her permit applications made in June 2022 and June 2024, it has allegedly "failed or refused to adjudicate" them.

Zubashchenko's applications say she isn't subject to the sanctions and the funds did not benefit Sberbank in any way.

The regulations impose duties on banks to "determine" if funds are owned or controlled by sanctioned people or entities, and to disclose information about any transactions involving them to the RCMP, the applications say.

"Contrary to the position taken by (Scotiabank), these provisions do not impose a duty on banks to withhold funds," Zubashchenko claims.

In an emailed statement, Scotiabank said it “complies with all applicable sanctions in the jurisdictions in which it operates. Given this matter is before the courts, we cannot comment further.”

Global Affairs Canada said in an emailed statement that the minister of foreign affairs can grant permits to allow "specific transactions or activities, otherwise prohibited by Canadian sanctions, to take place."

The permits are only granted "in exceptional circumstances and are assessed on a case-by-case basis," and they're designed to "mitigate against possible unintended consequences of Canadian sanctions."

It said it can't release information about permit applications to "respect privacy and commercial confidentiality."

This report by The Canadian Press was first published Dec. 12, 2024.