On March 5, 2014, the federal government introduced targeted
economic sanctions against the representatives of the former
government of Ukraine by regulations made under the Freezing
Assets of Corrupt Foreign Officials Act (FACFOA). The Freezing Assets of Corrupt Foreign Officials
(Ukraine) Regulations (Ukraine Regulations) impose an asset
freeze in respect of the assets of senior officials of the former
Ukrainian government and their associates and family members who
are suspected to have misappropriated state funds or obtained
property inappropriately, and prohibit the provision of any
financial or other related services to such designated persons.
Although it was initially announced that these measures would be
introduced under the Special Economic Measures Act, the
Ukraine Regulations are enacted under FACFOA. They came into force
The Ukraine Regulations apply to every person in Canada and
every Canadian outside Canada and prohibit:
dealing, directly or indirectly, in any property, wherever
situated, of any designated person;
entering into or facilitating, directly or indirectly, any
financial transaction related to the property of any designated
providing financial services or other related services in
respect of any property of any designated person.
Regulated financial institutions are required under FACFOA to
determine, on a continuing basis, whether they are in possession or
control of property that they have reason to believe is the
property of a person designated by regulation. This requirement now
applies in respect of persons designated under the Ukraine
Regulations as well.
The Office of the Superintendent of Financial Institutions
(OSFI) has issued a notice reminding federally regulated financial
institutions that they are expected to search their customer
identify financial assets to which the asset freeze
identify prohibited financial transactions; and
ensure that financial services provided to designated persons
are blocked and reported to the Royal Canadian Mounted Police
In addition, OSFI indicated that it expects financial
institutions to search their records related to persons who own or
control, directly or indirectly, 25 per cent or more of clients
that are corporations and other entities in order to determine
whether they are dealing with a corporation or an entity that may
be owned or controlled by a person designated under the Ukraine
Regulations. OSFI expects these searches to be conducted on a
weekly basis or more frequently if necessary.
All businesses are required to disclose without delay to the
RCMP property reasonably believed to be that of a designated person
under the Ukraine Regulations, together with information about any
related transaction. Financial institutions are not required to
separately report their search results under the Ukraine
Regulations to their principal regulator.
Financial institutions and other entities that are subject to
the Proceeds of Crime (Money Laundering) and Terrorist
Financing Act will need to factor in the money-laundering
risks associated with the developments in Ukraine in their
risk-assessment processes. Such risk assessment should not be
limited to the designated list under the Ukraine Regulations.
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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