Canada: Implications Of Expanded Canadian Sanctions Against Syria

Effective March 5, 2012, the Government of Canada announced it had expanded the range of sanctions in force against Syria and closed the Canadian embassy in Damascus. Syria first became subject to Canadian sanctions in May 2011, when Canada imposed targeted sanctions under the Special Economic Measures Act (SEMA) against certain members of the Syrian ruling regime in response to the government's violent suppression of opposition groups protesting for democratic reforms. The March 2012 amendment to the sanctions is notable in that it adds the Central Bank of Syria to the list of designated persons subject to a dealings prohibition and significantly broadens the financial services prohibition. Canada's Syrian sanctions now prohibit financial and other related services from being provided to or acquired from Syria or any Syrian, subject to several limited exemptions.

Designated Persons

The Special Economic Measures (Syria) Regulations (the Regulations) set out a list of "designated persons" and prohibit certain dealings with such persons. Canada's most recent amendment to the Regulations adds the Central Bank of Syria to the designated persons list. While Canada's initial sanctions limited the designated persons list to certain individuals and entities directly involved in the impugned political repression, the Canadian government has since significantly broadened the list's scope.

The designated persons list currently includes 39 entities ranging from state institutions such as the Central Bank of Syria and the military, to companies including the Commercial Bank of Syria, Syriatel and Al-Furat Petroleum Company. The list also includes 115 individuals, from Bashar al-Assad to various mid-level government and military officials. Designated persons are individuals (and their associates and family members) who are, or entities that are owned or controlled by, former or current senior officials of the Assad regime. The designated persons list is not static – it has steadily grown since May 2011 and is subject to further amendment.

Specific restrictions continue to apply to designated persons and their property. For example, subject to certain exceptions, the Regulations make it illegal for any person in Canada and for Canadians outside Canada to:

  • deal in any property wherever situated that is held by or on behalf of a designated person;
  • enter into or facilitate any transaction related to any such property;
  • provide any financial or related service in respect of such property; and
  • make any goods available to a designated person.

Prohibited Activities

Whereas the prohibitions listed in the initial sanctions were limited in scope, focusing primarily on designated persons and the petroleum industry, the newly amended sanctions are broad and affect almost all businesses with any connection to Syria. As noted above, as a result of the March 2012 amendment, it is now illegal to provide or acquire any financial or related service to or from, respectively, for the benefit of, or on the direction of, Syria or any person or entity in Syria, subject to limited exceptions.

Moreover, and again with certain exceptions, the Regulations prohibit any person in Canada and any Canadian outside Canada from:

  • importing, acquiring or shipping any goods exported or shipped from Syria;
  • making an investment or providing services related to making an investment in Syria; and
  • exporting, selling or shipping any telecommunications or monitoring equipment or knowledge to Syria or any person in Syria.

Exemptions from the Prohibitions

The exemptions from the prohibitions set out in the Regulations seek to limit the collateral harm of the economic sanctions. Among the listed exemptions are certain engagements pursuant to an agreement between the Government of Canada and Syria, certain goods or services provided through specific listed organizations for the purpose of providing humanitarian relief, certain loan repayments to Canadians in respect of loans entered into before March 5, 2012, certain financial services that are required to be provided or acquired further to a contract entered into before March 5, 2012, and certain financial services in respect of documented non-commercial remittances below C$40,000 sent to or from Syria or any person in Syria.

Implications for Canadian Businesses

The Regulations are binding on all Canadians in or outside Canada and on anyone else doing business from Canada. They prohibit any person in Canada or any Canadian outside Canada from doing anything that causes, assists or promotes any of the prohibited activities. This means that Canadians and Canadian businesses are responsible for:

  • determining that they are not in violation of the Regulations;
  • freezing assets or taking other necessary actions to ensure they do not engage in any prohibited activity; and
  • promptly disclosing to the Royal Canadian Mounted Police information regarding property in their possession believed to be owned or controlled by a designated person and any transactions related to such property.

In addition, the Regulations specifically obligate certain specified financial institutions, including Canadian branches of foreign banks and foreign insurance companies, to determine on a continuing basis whether they are in possession or control of property owned or controlled by or on behalf of a designated person.

Complying with Canada's Syrian Sanctions Regime

It is the responsibility of businesses to understand the requirements of the Regulations and to monitor their activities and relationships to ensure compliance therewith. Businesses – other than federally-regulated financial institutions – may wish to consider instituting screening mechanisms to flag potential business and financial relationships with designated persons and entities, and ensure they are not importing, exporting, investing, providing or acquiring services, or otherwise dealing in violation of the Regulations. Financial institutions will have to ensure that existing screening is extended to address these new prohibitions.

On account of the wide-ranging impact of the Canadian sanctions regime on Canadian financial institutions, the Office of the Superintendent of Financial Institutions published an instruction guide for financial institutions, entitled Designated Persons Listings and Sanctions Laws (the Guide). While it does not provide information on all aspects of compliance with sanctions legislation, the Guide provides a useful overview of compliance procedures related to the "duty to determine" and reporting requirements that arise when Canadians possess or deal with the property of designated persons. And while the Guide is targeted at federally regulated financial institutions, it nonetheless provides information that may be useful to a variety of Canadian businesses.

The penalties for non-compliance with Canadian sanctions legislation are severe. Every person who wilfully contravenes or fails to comply with the Regulations is either (a) guilty of a summary offence for which the penalty is a fine not exceeding C$25,000 and/or one year of imprisonment, or (b) guilty of an indictable offence and liable for imprisonment for up to five years. Those committing indictable offences are also liable to fines that are without monetary limit.

Companies doing business in Canada should note that the Regulations that constitute Canada's Syrian sanctions regime are dynamic, the pace of change is rapid, and compliance with the sanctions regimes of other countries does not guarantee compliance with Canada's sanctions regime. As such, prudence warrants that in-house counsel and officers of Canadian businesses familiarize themselves with the content of the Regulations and amendments, as well as the provisions of SEMA and its other regulations, and ensure that they are comfortable with the measures necessary for compliance.

Previous Blakes Bulletins discussing Canadian sanctions legislation are listed below.

August 2011: Canadian Sanctions Against North Korea and Syria Expanded

June 2011: Syrian Sanctions and Greater Ministerial Discretion Mean Increased Complexity for Exporters

April 2011: Update on Canadian Sanctions Laws

May 2009: Canadian Sanctions Legislation – How It Impacts Your Business

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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