Today, Canada expanded its economic sanctions measures in response to recent events in Ukraine and Russia. 11 additional parties, consisting of nine individuals and two companies were added to the list of "designated persons" under the Special Economic Measures (Russia) Regulations (Russia Sanctions Regulations). These new measures focus on close associates and advisors of Russian President Vladimir Putin. They also target two Russian banks – ExpoBank and RosEnergoBank. Another Russian bank, Bank Rossiya, is already subject to Canadian sanctions.
Also today, both the United States and European Union targeted an additional 24 and 15 parties respectively under their economic sanctions measures. Canada still maintains the longest list of sanctions parties under its Russia and Ukraine sanctions measures – it now identifies over 70 parties. Canadian firms doing business abroad or doing business with foreign companies should be carefully reviewing their activities and updating their due diligence and screening procedures to ensure continued compliance with Canadian and other applicable sanctions regimes.
Restrictions on Activities Involving Designated Persons
For our analysis of earlier Russia and Ukraine sanctions measures imposed by Canada, see Canada Imposes Economic Sanctions Against Former Ukrainian Regime: Is Russia Next? and New Canadian Economic Sanctions Measures Target Russian and Crimean Officials.
The revisions to the Russia Sanctions Regulations that add the nine individuals and two banks to the list of designated persons can be found here.
All companies and individuals in Canada and all Canadian companies and individuals outside Canada are prohibited from engaging in a wide range of activities involving designated persons. In the case of the Russia Sanctions Regulations, this includes prohibitions against:
- dealing in any property, wherever situated, held by or on behalf of a designated person;
- entering into or facilitating, directly or indirectly, any transaction related to such dealings;
- providing any financial or other related service in respect of such dealings;
- making any goods, wherever situated, available to a designated person; and
- providing any financial or related service to or for the benefit of a designated person.
Tips and Traps in Dealing with Designated Persons
Canadian companies doing business abroad, regardless of location, should keep in mind the following when considering the impact of these measures:
- because Canada, the United States and the EU do not have identical lists, screen transactions and ongoing business activity against all applicable lists and understand the application of each regime depending upon the jurisdiction of operations and nationalities involved;
- understand who owns or controls the entities you are doing business with abroad - they too should be screened against sanctions lists;
- the prohibitions apply regardless of where you are conducting business – e.g., business activities involving a company designated under the Russia Sanctions Regulations are prohibited even if they occur entirely outside of Russia, the Ukraine or the surrounding region;
- Canadian economic sanctions measures, including the Russia Sanctions Regulations, also prohibit doing anything that causes, assists or promotes, or is intended to cause, assist or promote, any of the restricted activities identified in the particular measure;
- federally and provincially regulated financial institutions and service companies are required 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;
- all persons in Canada and Canadian outside Canada are required
to immediately report to the RCMP if:
- you are in possession or control of property you have reason to believe is owned or controlled, directly or indirectly, by a designated person or by an entity owned or controlled by a designated person; or
- you have any information about a transaction or proposed transaction in respect of such property;
- there are various exemptions available for certain dealings with designated persons – e.g., in the case of the Russia Sanctions Regulations, there is an exemption for payments made by a designated person that are due under contracts entered into before the person became a designated person, provided that such payments are not made to or for the benefit of a designated person; and
- even if there is no exemption available, you may be able to obtain a permit to allow you to proceed - the sanctions measures under the Special Economic Measures Act allow for the Minister of Foreign Affairs to issue a permit for anything that is prohibited under the particular sanctions measure.
Trade Control Enforcement and Compliance
Today's additional designations by Canada, the United States and the EU, along with recently intensified enforcement efforts by the Canada Border Services Agency, the RCMP and authorities in other jurisdictions, highlight the need for careful due diligence in conducting business activities abroad.
At the present time, Canada imposes trade controls of varying degrees on activities involving the following countries (and over 2,000 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, Russia, Somalia, Sudan, Syria, Tunisia, Ukraine and Zimbabwe. Any involvement of these countries or any "designated person" in proposed transactions or other activities should raise a red flag for further investigation to ensure compliance with export and technology transfer controls and economic sanctions.
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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.