A Primer on Canadian Sanctions Legislation – April 2021 | Blake, Cassels & Graydon LLP

Canada, like different main jurisdictions, has a broad vary of financial and monetary sanctions focusing on overseas states and their nationals, in addition to numerous terrorist organizations.

Provided that Canada is in some ways a buying and selling nation, and plenty of Canadian companies have ties elsewhere, sanctions legal guidelines have a big influence not solely on the goal nations but additionally on Canadian companies. Though there’s a substantial amount of harmonization between Canadian sanctions legal guidelines and people of Canada’s worldwide companions (resembling the US and the European Union), there are additionally main variations. Compliance with the advanced internet of sanctions legal guidelines is, due to this fact, an integral side of managing reputational, authorized and regulatory dangers of each enterprise, and have to be addressed within the context of each financial enterprise.

Canadian sanctions legal guidelines apply to all people and companies in Canada and to all Canadian residents and Canadian-incorporated companies working outdoors Canada. They prohibit dealings with designated individuals or inside focused sectors of specified overseas jurisdictions, and impose screening, reporting, and asset-freeze obligations on regulated monetary establishments and different companies. Canadian sanctions legal guidelines embody resolutions handed by the United Nations (UN), in addition to different restrictive measures that Canada, alone or in cooperation with its worldwide companions, has imposed on overseas jurisdictions or teams.

This primer on Canadian sanctions gives an summary of key necessities beneath Canadian sanctions laws as of April, 2021.

ECONOMIC SANCTIONS

There are 5 federal statutes beneath which the Authorities of Canada imposes financial sanctions and commerce restrictions.

1. Felony Code

Half II.1 of the Felony Code prohibits dealing in property of terrorist teams, together with sure entities recognized within the Regulations Establishing a List of Entities. Public Security Canada publishes an inventory of entities designated beneath these laws on its website. The Felony Code imposes particular reporting necessities and asset freeze obligations referring to terrorist property. It additionally units out a number of offences referring to cash laundering and the financing of terrorism.

2. United Nations Act

The Authorities of Canada enacts into Canadian legislation sanctions adopted by the UN Safety Council by laws made beneath the United Nations Act. At the moment, laws beneath the United Nations Act impose sanctions in respect of the next jurisdictions:

Two further laws made beneath the United Nations Act implement the UN suppression of terrorism sanctions and sanctions in opposition to Taliban, ISIL (Da’esh) and Al-Qaida. The Canadian authorities don’t preserve a consolidated listing of all designations beneath the United Nations Act laws. Nevertheless, the UN publishes a consolidated listing of all designations beneath the UN Safety Council resolutions on its website.

The sanctions imposed beneath the United Nations Act laws fluctuate relying on the goal jurisdiction or group and usually embrace arms embargoes, commerce restrictions, and prohibitions in opposition to offering monetary companies or technical help in respect of such coated actions. As well as, the United Nations Act laws prohibit dealings with individuals designated beneath the UN Safety Council resolutions or their property. Whereas the scope of those prohibitions shouldn’t be uniform throughout all laws, they often embody prohibitions in opposition to:

• Dealing in property that’s owned or managed by a chosen individual

• Coming into into or facilitating any monetary transaction associated to such a dealing

• Offering or buying any monetary or different associated service in respect of such property

• Making any property or monetary service accessible to a chosen individual

3. Particular Financial Measures Act

Absent a UN Safety Council decision, the Authorities of Canada has authority beneath the Special Economic Measures Act (SEMA) to impose sanctions on overseas jurisdictions and individuals the place the federal government is of the opinion {that a} grave breach of worldwide peace and safety has occurred that’s prone to lead to a critical worldwide disaster. SEMA additionally authorizes laws to implement a choice of a global group (aside from the UN) of which Canada is a member.

At the moment, there are laws beneath SEMA imposing sanctions in respect of the next jurisdictions:

A broad prohibition in opposition to dealing within the property of sure designated people, teams, and companies which are listed in Schedule 1 to the Particular Financial Measures (Russia) Rules and the Particular Financial Measures (Ukraine) RulesThe SEMA laws usually prohibit dealings within the property, together with monetary belongings, of individuals designated beneath the laws. Additionally they prohibit offering monetary or different companies associated to restricted actions. The laws in respect of Burma, Iran, South Sudan and Zimbabwe additionally impose arms embargoes. The SEMA sanctions in respect of different focused jurisdictions are mentioned in larger element beneath.

Venezuela

The Venezuela laws prohibit dealing in any property, together with monetary belongings, that’s owned, held or managed by a person designated beneath the laws or an individual appearing on their behalf. The laws additionally prohibit getting into into or facilitating associated transactions or offering monetary or associated companies. At the moment, solely Venezuelan nationals are designated beneath the Canadian laws. The Authorities of Venezuela and state-owned enterprises in Venezuela should not focused by Canadian sanctions, not like the sanctions measures in the US. Nevertheless, most of the designated people are members of the Authorities of Venezuela. For extra details about the Venezuela sanctions, please see our October 2017 Blakes Bulletin: Canadian Economic Sanctions Update: New Sanctions Against Venezuela and Other Developments.

Iran

Till 2016, Canada had in place an all-encompassing set of commerce restrictions in respect of Iran. The Authorities of Canada lifted most (however not all) of those restrictions in February 2016 when the Worldwide Atomic Vitality Company confirmed that Iran happy the commitments it made beneath the Joint Complete Plan of Motion, a program meant to make sure that the Iranian nuclear program shouldn’t be used for the event of nuclear weapons. Latest political developments in respect of Iran haven’t, up to now, resulted in new Canadian sanctions in opposition to Iran. The Canadian sanctions in respect of Iran are set out each within the SEMA and United Nations Act laws. For extra details about the Iran sanctions, please see our February 2016 Blakes Bulletin: First Step to Re-engagement: Canada Rolls Back Iranian Sanctions.

Russia and Ukraine

The Authorities of Canada, together with its worldwide companions, has imposed a variety of sanctions in opposition to Russian companies and people, in addition to individuals with connections to sure pro-Russian teams in Ukraine. These sanctions measures usually fall inside the following six classes:

• A prohibition in opposition to dealing in, or offering financing for, fairness securities or new debt of longer than 30 days’ maturity in relation to designated main Russian monetary establishments or their property

• A prohibition in opposition to dealing in, or offering financing for, new debt of longer than 90 days’ maturity in relation to designated main Russian power corporations or their property

• A prohibition in opposition to exporting, promoting, supplying, or transport sure designated items to Russia or to any individual in Russia to be used in shale oil, deep-water offshore oil, or Arctic oil exploration or manufacturing

• A broad prohibition in opposition to making investments within the Russian-controlled Crimea and offering associated monetary or different companies. For extra info on Canadian sanctions in opposition to Crimea, please see our February 2020 Blakes Bulletin: New Canadian Sanctions against Crimea.

Syria

Important restrictions additionally exist in respect of Syria. The laws prohibit, amongst different measures, the importing or cargo of any items, aside from meals, from Syria. There’s a prohibition on exporting to Syria and to any individual in Syria any items or information to be used in monitoring telecommunications, luxurious items, and chemical substances and merchandise listed within the laws. There are additionally vital restrictions on the availability of economic companies, together with prohibitions in opposition to:

• Dealing in property held by or on behalf of individuals designated beneath the laws

• Offering or buying monetary or associated companies involving the Authorities of Syria or any individual in Syria, topic to sure threshold exceptions

• Offering or buying monetary or associated companies for the aim of facilitating commerce in petroleum or associated merchandise, aside from pure gasoline

• Making investments in Syria and interesting in different prohibited conduct specified within the laws.

There are a number of restricted exceptions to those restrictions accessible beneath the laws.

North Korea

The SEMA laws in respect of North Korea impose sanctions along with these supplied for beneath the United Nations Act. These embrace, amongst different measures, prohibitions in opposition to:

• Offering or buying monetary companies involving the Authorities of North Korea or any individual in North Korea, topic to threshold exceptions

• Making investments in any entity in North Korea

• Exporting, supplying or transport any items to North Korea or any individual in North Korea and dealing in any items destined for North Korea or any individual in North Korea

• Transferring or speaking technical information to North Korea or any individual in North Korea and interesting in different prohibited conduct specified within the laws.

Restricted exceptions to those prohibitions can be found beneath the laws.

The Minister of Finance additionally issued Ministerial directives in respect of North Korea and Iran pursuant to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTF Act). The directives require reporting entities beneath that Act to deal with all transactions to and from North Korea and Iran as excessive danger, whatever the quantity of the transaction. The Iran directive, which applies to Canadian-regulated banks, credit score unions and cash companies companies, requires these entities to take particular measures for transactions originating from or certain for Iran, together with verifying the identification and ascertaining helpful possession of an individual initiating or benefitting from such a transaction and ascertaining the supply of funds and function of the transaction.

4. Freezing Belongings of Corrupt Overseas Officers Act

The Freezing Assets of Corrupt Foreign Officials Act (FACFO Act) permits the Authorities of Canada to make orders directing that the property in Canada of a politically uncovered overseas individual (PEFP) be seized, frozen or sequestered when there’s inner political turmoil in a overseas state. The FACFO Act additionally permits the federal government to make orders proscribing the dealings with designated PEFPs. The designations expire in 5 years, except prolonged for an extended interval by the Authorities of Canada. The powers beneath the FACFO Act are along with, and shouldn’t be confused with, the provisions of the PCMLTF Act referring to enhanced due diligence for PEFPs.

At the moment, laws have been launched beneath the FACFO Act in respect of people related to the previous regimes in Ukraine and Tunisia.

5. Justice for Victims of Corrupt Overseas Officers Act (Sergei Magnitsky Regulation)

The Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law) (SML) was launched in October 2017 to authorize the Authorities of Canada to to designate overseas nationals who, within the authorities’s view, are answerable for, or complicit in, gross violations of internationally acknowledged human rights. A designation beneath SML may be made in respect of overseas public officers (or their associates) who, within the authorities’s view, are answerable for, or complicit in, acts of serious corruption. Designations beneath SML are made by the Justice for Victims of Corrupt Foreign Officials Regulations.
At the moment, the designations beneath SML goal nationals of Russia, Venezuela, South Sudan, Myanmar, and Saudi Arabia.

For extra details about SML, please see our November 2017 Blakes Bulletin: New Canadian Sanctions Legislation in Effect: Sergei Magnitsky Law.

Facilitation

Canadian sanctions laws usually makes it an offence to do something that, immediately or not directly, causes, facilitates, promotes, or assists in a prohibited exercise. This might embrace monetary or technical help, advisory companies, or different actions. When a company develops a sanctions compliance framework and controls, care have to be exercised to detect and stop any company actions that interact sanctions legislation prohibitions not directly.

Permits and Licences

Canadian sanctions laws contains mechanisms for the Minister of Overseas Affairs to situation permits or certificates to authorize sure specified actions or transactions which are in any other case prohibited. Permits could also be granted on an distinctive foundation in respect of actions which are prohibited beneath SEMA or SML laws. The United Nations Act laws additionally authorize the Minister of Overseas Affairs to situation a certificates allowing a specified occasion to interact in an exercise that’s in any other case restricted.

As well as, the Minister of Public Security and Emergency Preparedness might situation an authorization beneath the Felony Code allowing an individual to hold out a specified exercise or transaction that will in any other case be opposite to the prohibition in opposition to dealing in or offering companies in respect of property of a terrorist group.

Screening

Canadian sanctions laws imposes a screening obligation on regulated monetary establishments, together with banks, credit score unions, belief and mortgage corporations, insurance coverage corporations, securities sellers, and cash companies companies that open accounts for purchasers. These establishments are required to find out, on a unbroken foundation, whether or not they’re in possession or management of property owned or managed by, or on behalf of, any individual designated beneath any of the 5 Canadian sanctions statutes.

For federally regulated monetary establishments, the Workplace of the Superintendent of Monetary Establishments (OSFI) printed an Instruction Guide that units out OSFI’s expectations with respect to this screening obligation, together with the frequency and scope of the required screening. Particularly, OSFI expects that screening have to be carried out weekly at a minimal, and extra often the place circumstances dictate. Bigger federal monetary establishments are anticipated to display their information day by day. New consumer names have to be checked in opposition to sanctions lists as a part of, or as quickly as fairly potential after, the onboarding course of. OSFI additionally expects that federal monetary establishments topic to the PCMLTF Act will apply the foregoing search measures to recorded helpful house owners of purchasers and different third events. Sanctions screening measures should even be built-in into transaction monitoring processes.

Accessing Sanctions Lists

In recent times, the Authorities of Canada has made progress towards consolidating the lists of sanctioned individuals designated beneath Canadian laws. The Consolidated Canadian Autonomous Sanctions List maintained by World Affairs Canada now comprehensively lists people and entities which are designated beneath SEMA and SML laws. Public Security Canada maintains a list of terrorist persons designated beneath the Felony Code laws (accessible here). The United Nations has a consolidated listing of all designations beneath Safety Council resolutions (accessible here), which ought to presumably seize all designations beneath the United Nations Act. People designated beneath the FACFO Act should not at the moment included beneath any of the above consolidated lists and may be accessed by the laws (accessible here and here). Observe that OSFI now not maintains an inventory of designated individuals.

Provided that there isn’t a totally consolidated listing of Canadian designated individuals, monetary establishments should both consolidate all Canadian designated names in-house or depend on a third-party business screening service supplier to adjust to their ongoing screening obligation. The place such service suppliers are used, it’s the duty of the monetary establishment to make sure that the screening is carried out in opposition to all Canadian sanctions lists and is up to date in a well timed method when designations are made.

The designations beneath Canadian sanctions laws usually take impact earlier than the implementing laws are formally printed within the Canada Gazette. Monetary establishments ought to guarantee that there’s an efficient course of in place in order that new designations are added to their lists earlier than the formal publication of the laws, resembling by monitoring for information alerts by World Affairs Canada.

Reporting

There are a selection of reporting necessities beneath the Canadian sanctions laws:

• First, any property of a chosen or associated individual, recognized because of screening or in any other case, have to be frozen and reported immediately to the Canadian law-enforcement authorities. These obligations should not restricted to regulated monetary establishments and apply to all individuals in Canada and all Canadians outdoors Canada.

• Second, regulated monetary establishments are additionally required to reveal, each month, to their principal federal or provincial regulator, whether or not they’re in possession or management of property of an individual designated beneath the Felony Code laws or the SML laws. The variety of individuals or contracts concerned and the full worth of the property have to be reported month-to-month; if no such property is detected, a 0 report have to be despatched to the principal regulator. For federally regulated monetary establishments, these stories have to be filed with OSFI based on OSFI’s directions for utilizing OSFI Form 525 or OSFI Form 590. The Canadian Securities Directors have additionally issued guidance for securities sellers who should make these stories to a provincial securities fee as their principal regulator. The Funding Trade Regulatory Group of Canada (IIROC) has additionally printed instructions for its seller member companies. For extra info on the month-to-month reporting obligation for Canadian-regulated monetary establishments, please see our Could 2019 Blakes Bulletin: Changes to Monthly Sanctions Reporting Requirement.

• Third, establishments topic to the PCMLTF Act should additionally report matches with the Criminal Code list and designations beneath the United Nations Act suppression of terrorism regulations to the Monetary Transactions and Reviews Evaluation Centre of Canada (FINTRAC) persistently with FINTRAC’s guidance on submitting terrorist property stories.

Canadian sanctions laws usually gives immunity from civil proceedings for any good-faith disclosure made beneath the laws. The particular immunity provisions beneath every related regulation have to be consulted to make this willpower.

Penalties and Contravention

It’s a prison offence in Canada to willingly contravene the Canadian sanctions laws. Contraventions are punishable by vital fines, imprisonment, or each. Furthermore, a violation of the sanctions laws, and even an allegation of a violation, might considerably hurt the status on any group, notably a monetary establishment.

BLOCKING AND ANTI-BOYCOTT LEGISLATION

Overseas Extraterritorial Measures Act

The Authorities of Canada has authority beneath the Foreign Extraterritorial Measures Act (FEMA) to make orders defending Canadian pursuits in opposition to the extraterritorial utility of overseas legal guidelines in Canada. There are at the moment two blocking orders issued beneath FEMA.

• First, the Foreign Extraterritorial Measures (United States) Order, 1992 (1992 Order) blocks the extraterritorial utility in Canada of the U.S. embargo in opposition to Cuba. The 1992 Order prohibits a Canadian company, together with its administrators, officers, and staff, in respect of any commerce between Canada and Cuba, from complying with an extraterritorial measure of the US. The 1992 Order additionally prohibits complying with any path or communication referring to such a measure that the Canadian company has obtained from an individual who is able to affect the insurance policies of the Canadian company. There may be additionally an obligation to inform the Lawyer Common of Canada of any such communications. For details about the influence of the modifications to the United States-Cuba relations for Canadian companies, see our February 2016 Blakes Bulletin: What the United States’ Weakened Embargo Against Cuba Means for Canadian Business.

• Second, the Certain Foreign Extraterritorial Measures (United States) Order, 2014, prohibits any individual in Canada from complying with U.S. “Purchase America” necessities in relation to the redevelopment of premises in northern British Columbia that had been leased by the State of Alaska.

Canadian Anti-Discrimination Legal guidelines

The Canadian provinces of Ontario and Manitoba have every enacted a Discriminatory Enterprise Practices Act, which prohibits individuals in every of these provinces from partaking in sure discriminatory practices. This laws was launched within the Eighties in response to the Arab League boycott of Israel. The laws prohibits an individual from refusing to interact in a enterprise exercise with one other individual on account of nationality or the geographic location of the counterparty, amongst different grounds. There may be additionally a prohibition in opposition to getting into into any contract that features a requirement that one of many events to the contract will refuse to interact in enterprise with every other individual on the premise of such attributes. The laws gives for necessary reporting necessities when an individual receives a request to take part in prohibited actions.

EXPORT AND IMPORT CONTROLS

Export and Import Permits Act

The Export and Import Permits Act imposes export and import commerce controls on particular items or items from sure jurisdictions. These controls have an effect on a variety of cross-border shipments and transactions. The controls are applied primarily by the next three lists:

The ACL is an inventory of nations to which the federal government has deemed it obligatory to regulate the export of any items. At the moment, North Korea is the one jurisdiction listed within the ACL, and a allow is required to export items to that nation.

The ECL and ICL are lists of products that the federal government has deemed obligatory to regulate for sure enumerated functions. For instance, Canada carefully controls the export of army items and expertise to nations that pose a risk to Canada and its allies, are concerned in, or beneath imminent risk of hostilities, or are topic to UN Safety Council sanctions. The ECL additionally controls the export of any U.S. origin items whether or not or not the products are in any other case managed by the ECL. A allow — whether or not a particular or basic allow — is required to export or import items recognized on the ECL or ICL.

The Export and Import Permits Act additionally makes it an offence to assist or abet an individual in partaking in an exercise that contravenes the laws. Subsequently, monetary establishments engaged in worldwide commerce financing, in addition to different companies, ought to take measures to make sure that by offering companies to an importer or exporter, they don’t not directly contravene Canada’s export and import management laws.

Prohibiting Cluster Munitions Act

The Prohibiting Cluster Munitions Act (PCMA) implements Canada’s commitments beneath the Conference on Cluster Munitions, a global treaty addressing the humanitarian penalties of sure explosive munitions. The PCMA makes it an offence to own, transfer, import or export cluster munitions, explosive submunitions and explosive bomblets, or help one other individual in finishing up any of those acts. Companies ought to be certain that they don’t not directly contravene the PCMA by offering companies to an importer or exporter.

World Affairs Advisory Relating to Xinjiang, China

World Affairs Canada has issued an advisory on doing enterprise with entities lively overseas or with ties to Xinjiang, China (Advisory). The Advisory doesn’t impose authorized necessities however units clear compliance expectations for Canadian companies with respect to pressured labour and human rights involving Xinjiang, together with adoption of voluntary finest practices.

The Authorities of Canada expects Canadian companies with hyperlinks to Xinjiang to look at their provide chains to make sure their actions don’t help repression of ethnic minorities in Xinjiang and throughout China, together with surveillance equipment in Xinjiang, detention or internment services, or pressured labour. Equally, the Advisory encourages corporations to carefully study end-users of their services to make sure that they don’t seem to be getting used to help these actions. Canadian companies that function in or have end-users in sure high-technology fields, resembling these associated to cameras, sensors and biometric gadgets, are anticipated to train the best stage of due diligence and warning when doing enterprise in China as these merchandise could also be used to arbitrarily monitor Uyghurs and others in Xinjiang.

Given the broad scope of this Advisory and its emphasis on analyzing provide chains and end-users of companies, Canadian monetary establishments, institutional buyers, and different buyers ought to contemplate making use of due diligence measures to make sure that companies receiving financing or capital from them don’t interact in, or direct the funds obtained to help, the sorts of actions described within the Advisory.

The Advisory additionally cautions corporations to take steps to make sure their provide chains don’t violate the prohibition within the Customs Tariffs Act in opposition to importing from any nation items produced, in complete or partially, by pressured labour. As well as. Underneath the Export and Import Permits Act, managed items and expertise can’t be exported from Canada the place there’s a substantial danger they could possibly be used to commit or facilitate critical violations of human rights. The advisory states that each one export allow functions for managed items and applied sciences will likely be reviewed for danger that the gadgets could possibly be used to commit or facilitate such violations.