Not releasing can put them in violation of Canada's Foreign Extraterritorial Measures Act so they are between a rock and a hard place (particularly Foreign Extraterritorial Measures (United States) Order, 1992 https://laws-lois.justice.gc.ca/eng/regulations/SOR-92-584/p...)

No excuse. This is Square Canada. They made a promise to this client and it's not like they stopped taking money on her behalf as soon as they realized there was a problem. Whatever backend problems they have are their own problem and their own liability.

If they aren't able to do that then maybe this company should not be operating in Canada in the first place.

[edit: oops, I meant Square not Stripe!]

Doesn't matter. She is doing business with Square Canada. If it comes to it, Canadian courts will find in her favour and the judgement will be enforced against Square Canada's assets.

So why not continue to refuse to pay the sanction-risked funds and enter into a private settlement for an amount of, say... $14,159.26 for failing to comply with their agreement and Canadian law?