A plume of smoke rises after a strike in Tehran on March 2. U.S. and Israel's military assault on Iran will inevitably put increased pressure on allies to help topple its repressive regime, writes Rita Trichur.Mohsen Ganji/The Associated Press
The Iran war risks becoming a new source of tension in the forthcoming trilateral review of USMCA, the free-trade pact between the United States, Mexico and Canada.
As the U.S. and Israel wage a joint military assault on Iran, they will inevitably put increased pressure on allies to help topple its repressive regime – now headed by Ayatollah Mojtaba Khamenei, the son of the former Supreme Leader – including through further economic isolation.
Mission critical for Canada, no matter Prime Minister Mark Carney’s shifting views on the Middle East conflict, is to deter and disrupt terrorist fundraising, sanctions-evasion and the financing of weapons of mass destruction by Iran’s Islamic Revolutionary Guard Corps, or IRGC.
The IRGC’s perpetration of these financial crimes, including on Canadian soil, is certain to arise as part of the United States-Mexico-Canada Agreement renegotiations for two reasons. The first is U.S. President Donald Trump’s focus on combatting narcoterrorism, which he has tied to his trade grievances against Canada and Mexico.
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Second, Tehran is a financial sponsor of Hezbollah and Hamas through a variety of criminal activities, including exploiting blind spots in international trade.
Ottawa’s national risk assessment for money laundering and terrorist financing confirms that Canada, much like the U.S., has observed how Iran bankrolls proxy terrorist groups across the Middle East.
“Notably, funding from Iran is a key source of financing for Hamas and Hezbollah,” states the 2025 report from the Department of Finance.
“Iran is known to use trade-based money laundering techniques, front companies, financial institutions, correspondent banking, and crypto assets to support these terrorist groups.”
Trade-based money laundering, estimated to be worth as much as US$1-trillion a year globally, uses falsified trade transactions to wash illicit proceeds, including those derived from narcotics trafficking.
The trade transactions themselves do not necessarily facilitate the shipment of drugs or other contraband goods across international borders. In fact, “phantom shipments” are a common tactic. These trade transactions serve as a pretext to move money and other forms of value, such as cryptocurrencies, to parties in another country.
Front companies, including anonymous shell corporations, also give cover to criminals who use them to open bank accounts and access the financial system.
The vast majority of shells are incorporated at the provincial level in Canada. Despite urging from Ottawa, not all provinces have agreed to participate in a pan-Canadian corporate registry to unmask the owners of these corporate entities.
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Correspondent banking, also mentioned in the national risk assessment, refers to a service that allows a bank to facilitate transactions, such as wire transfers, on behalf of another lender in a foreign market.
Although financial transactions associated with Iran are subject to a directive from Finance Minister François-Philippe Champagne, and Iran represents less than 1 per cent of the value of all reported international electronic funds transfers each year, criminals take circuitous routes to avoid detection.
In addition to using underground banking services, rogue actors will move money through intermediary jurisdictions, including the United Arab Emirates, to obscure the sender and ultimate recipient of funds, according to the national risk assessment.
Indeed, the report highlights the RCMP’s Project Collecteur, an investigation that exposed a criminal network spanning individuals in the UAE, Iran, Lebanon, China, the U.S., Colombia and Mexico.
Canada has separately established a link between Iran-backed Hezbollah and Mexican drug cartels.
It hasn’t even been two years since Ottawa belatedly designated the IRGC as a terrorist entity.
Although Global Affairs Canada continues to update its list of sanctioned individuals and entities, there is little evidence by way of arrests, criminal charges and convictions that Canada has successfully stopped illicit financial flows related to Iran.
Instead, it appears that Canada is struggling to deport suspected Iranian officials and is prevented by law from identifying them.
That means suspected IRGC operatives have ample opportunity to fundraise for themselves and proxy terrorist groups while hiding in plain sight.
Canada has been slower than the U.S. to crack down on financial crime, including by Iranian officials. The White House is well aware of Ottawa’s shortcomings on this file.
Crucially, the U.S. is no longer treating trade as a discrete issue from defence policy or national security.
The USMCA review was already fraught for Canada because of Mr. Trump’s accusations of fentanyl trafficking. Rightly or wrongly, it stands to reason that he will also use Ottawa’s wishy-washy support for the Iran war and its kid-glove treatment of IRGC operatives as a cudgel.