Open this photo in gallery Huawei chief financial officer Meng Wanzhou, who is out on bail and remains under partial house arrest after she was detained last year at the behest of American authorities, leaves B.C. Supreme Court during a lunch break from a hearing, in Vancouver, on Thursday October 3, 2019. DARRYL DYCK/The Canadian Press

The Department of Justice says the allegations against Huawei executive Meng Wanzhou would be a crime in Canada and she should be extradited to the United States on fraud charges.

The department says in documents filed in British Columbia Supreme Court that the allegations meet the crucial extradition test of “double criminality,” meaning if they had occurred in Canada they would be criminal under Canadian law.

The U.S. alleges Ms. Meng lied about Huawei’s relationship with its Iran-based affiliate Skycom to one of its bankers, HSBC, putting the financial institution at risk of violating U.S. sanctions against the country.

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“Simply put, there is evidence she deceived HSBC in order to induce it to continue to provide banking services to Huawei,” the Justice Department says in the court documents released Friday.

The Huawei chief financial officer denies the allegations and is free on bail, living in one of her two multimillion-dollar homes in Vancouver, ahead of a hearing set to begin Jan. 20 that will focus on the double-criminality test.

Her legal team has argued the alleged misrepresentations do not amount to fraud. It says the case is really about the U.S. trying to enforce its sanctions against Iran even though Canada does not have the same sanctions.

However, lawyers for the Department of Justice say in the court documents that Ms. Meng’s alleged conduct put HSBC at risk of economic loss and is sufficient to make a case of fraud in Canada.

“To establish HSBC’s deprivation, there is no need to consider American sanctions law,” they say.

The documents say Huawei controlled the operations of its affiliate Skycom in Iran from at least 2007 to 2014. Skycom employees used Huawei e-mail addresses and access badges and the company’s bank accounts were controlled by Huawei, the documents say.

At the same time, they say HSBC was Huawei’s most important international bank. HSBC and its U.S. subsidiary cleared more than US$100-million worth of transactions related to Skycom through the U.S. between 2010 and 2014, the Justice Department alleges.

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It alleges that Ms. Meng met with a senior HSBC executive in 2013 and assured them in a PowerPoint presentation that Huawei no longer held a shareholding interest in Skycom and she had resigned from Skycom’s board. She also told them Huawei subsidiaries in Iran would not have business transactions with HSBC, the court documents say.

HSBC has a long-standing policy prohibiting relationships with Iran-based clients and processing Iran-related transactions through the U.S. to avoid exposure to American civil and criminal liability, the documents say.

“Had HSBC known of Huawei’s activities that breached American sanctions against Iran, HSBC would have re-evaluated its relationship with Huawei,” they say.

The bank risked fines and penalties for violating Iranian sanctions law by doing business with Skycom, both as a result of violating a previous deferred prosecution agreement and attracting additional penalties, the documents add.

The Department of Justice also says there is precedent for the court to consider a foreign legal context in a limited way in an extradition proceeding. Doing so would only reinforce the conclusion that the allegations meet the double-criminality test, it says.

“Consideration of American sanctions law only serves to assist this court to better understand why HSBC’s economic interests were at risk.”

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Ms. Meng’s arrest at Vancouver’s airport on Dec. 1, 2018, has fractured Canada-China relations. Beijing detained two Canadians, Michael Kovrig and Michael Spavor, in a move widely seen as retaliation and restricted some imports including canola.

The double-criminality hearing starting Jan. 20 is scheduled for five days.

If the judge rules the test has not been met, Ms. Meng will be free to leave Canada, although she’ll still have to avoid the U.S. if she wants to evade the charges. If the judge finds there is double criminality, the hearing will proceed to a second phase.

The second phase, scheduled for June, will consider defence allegations that the Canada Border Services Agency, the RCMP and Federal Bureau of Investigation conspired to conduct a “covert criminal investigation” at the airport.