In response to a request from Ukraine, the Canadian government has imposed economic sanctions in the form of asset freezes against former President Viktor Yanukovych and 17 others, including the former Prime Minister and other ministers and advisors and their associates and family members. Although just released today, the Freezing Assets of Corrupt Foreign Officials (Ukraine) Regulations took effect on March 5, 2014. These measures impose significant obligations on Canadians regarding their cross-border dealings.
A copy of these regulations and the list can be found here.
Prohibited Activity
Canadian companies are now prohibited from engaging in business with these listed politically exposed foreign persons. More specifically, there are prohibitions against dealing directly or indirectly in any property wherever located of the listed persons and against entering into or facilitating any financial transaction related to such dealings. Providing financial services or other related services in respect of a listed person's property is also prohibited.
Reporting Obligations
The Freezing Assets of Corrupt Foreign Officials Act (FACFOA) also requires that reports be made without delay to the Commissioner of the Royal Canadian Mounted Police of the existence of property in your possession that you have reason to believe is property of a listed person and of information about any actual or proposed transaction regarding such property. Further, federally and provincially regulated financial institutions and financial services companies are required to determine on a continuing basis whether they are in possession or control of listed persons' property. For federally regulated financial institutions, the Office of the Superintendent of Financial Institutions has noted that it expects customer records to be searched at least on a weekly basis and more often if necessary.
Impact on Companies Doing Business Abroad
All Canadian companies, not just those in the financial services sector, that are engaged in international activities should be screening transactions for involvement of any of these listed persons or any of the over 2,000 companies, associations and individuals that are "blacklisted" under Canada's economic sanctions legislation. Screening for such designated persons is a critical component of the due diligence expected of Canadian companies to ensure compliance with these measures as set out under the FACFOA, the Special Economic Measures Act, the United Nations Act, and the Criminal Code.
Potential For Economic Sanctions Against Russia
Companies doing business with or having operations in Russia, Ukraine or the surrounding area should also be monitoring developments closely and considering mitigation strategies to address the risk of sanctions against Russia. Even prior to the Russian invasion of Ukraine, Canada was one of the first countries to threaten economic sanctions against Russia for interference in Ukraine. In this regard, asset freezes and possibly much broader trade and investment sanctions are currently being considered by the Canadian government in conjunction with its allies, the United States and the European Union.
Canada's Increasingly Aggressive Use of Economic Sanctions Measures
All indications are that Canada will continue to implement an aggressive economic sanctions and anti-terrorism regime, not simply based on multilateral initiatives through the United Nations Security Council, but also through unilateral measures where Canada is of the view that UN measures are insufficient or non-existent. This continues to be the case for Canada's measures controlling dealings with a number of countries, including Iran, Syria, Belarus, Burma (Myanmar), Zimbabwe and North Korea. Russia may soon be added to that list.
Canadian companies and financial institutions should be carefully reviewing their compliance policies and screening lists in light of these latest developments. Because of the substantial financial and reputational impact that contraventions in this area can have, it is important that any company doing business internationally, whether in the goods, services or technology sector, ensure appropriate compliance and due diligence measures are in place. These include: maintaining compliance manuals; appointing responsible compliance officers; screening customers, end-users and suppliers; providing training programs; conducting internal audits; establishing disclosure procedures; and reviewing contracts and other legal documentation on a regular basis.
At the present time, Canada imposes trade controls of varying degrees on activities involving the following countries (and in many cases, listed entities and individuals associated with them): Belarus, Burma (Myanmar), Côte d'Ivoire, the Democratic Republic of the Congo, Cuba, Egypt, Eritrea, Guinea, Iran, Iraq, Lebanon, Liberia, Libya, North Korea, Pakistan, Somalia, Sudan, Syria, Tunisia, Ukraine and Zimbabwe. Any involvement of these countries or any listed person in proposed transactions or other activities should raise a red flag for further investigation to ensure compliance with economic sanctions and export and technology transfer controls.
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