1.1 Describe your jurisdiction's sanctions regime.
Canada's economic sanctions regime is established under the Special Economic Measures Act ("SEMA"), the United Nations Act (the "UN Act") and the Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law) (the "Magnitsky Law"). Canada also has anti-terrorism laws under which sanctions may be imposed pursuant to the Criminal Code and a law for the freezing of assets of corrupt foreign officials, the Freezing Assets of Corrupt Foreign Officials Act ("FACFOA").
1.2 What are the relevant government agencies that administer or enforce the sanctions regime?
The Royal Canadian Mounted Police ("RCMP"), and in some cases the Canadian Border Services Agency, investigate potential criminal violations of Canadian economic sanctions laws. Global Affairs Canada, pursuant to authority granted to the Minister of Foreign Affairs, administers permit applications under SEMA, the UN Act, the Magnitsky Law and FACFOA. The Minister of Public Safety may authorise specified activities or transactions that would otherwise be prohibited under the Criminal Code.
2. LEGAL BASIS/SANCTIONS AUTHORITIES
2.1 What are the legal or administrative authorities for imposing sanctions?
Authority to impose sanctions is given to the Governor-in-Council (the federal executive government) under SEMA, the UN Act, the Magnitsky Law, FACFOA and the Criminal Code.
2.2 Does your jurisdiction implement United Nations sanctions? Describe that process. Are there any significant ways in which your jurisdiction fails to implement United Nations sanctions?
Canada implements UN sanctions under the authority of the UN Act. The Governor-in-Council is given authority by the UN Act to make such orders and regulations as appear to him to be necessary or expedient for enabling a measure decided by the Security Council of the United Nations, pursuant to Article 41 of the Charter of the United Nations, to be effectively applied in Canada.
2.3 Is your country a member of a regional body that issues sanctions? If so: (a) does your country implement those sanctions? Describe that process; and (b) are there any significant ways in which your country fails to implement these regional sanctions?
Canada does not implement sanctions of any regional bodies.
2.4 Does your jurisdiction maintain any lists of sanctioned individuals and entities? How are individuals and entities: a) added to those sanctions lists; and b) removed from those sanctions lists?
Canada has lists of sanctioned individuals and entities who are added or removed from such lists by way of regulation.
2.5 Is there a mechanism for an individual or entity to challenge its addition to a sanctions list?
Yes, but the mechanism varies. Regulations made under SEMA in respect of economic sanctions measures taken in relation to a particular jurisdiction provide for applications to the Minister of Foreign Affairs. The Magnitsky Law provides for applications to the Minster of Foreign Affairs. The Criminal Code provides a mechanism whereby a listed entity may apply to the Minister of Public Safety and then to a judge if not removed from the list by the Minister.
The UN Act does not provide for delisting as such (because in this case, Canada is implementing sanctions imposed by the United Nations), but it does allow a person whose name is the same as or similar to the name of a designated person, and who claims not to be that person, to apply to the Minister of Foreign Affairs for a certificate stating that they are not that designated person.
In the case of FACFOA, a mechanism is provided allowing persons to apply to the Minister of Foreign Affairs to be delisted on the basis that they are not a politically exposed foreign person or (in cases of mistaken identity) for a certificate stating that they are not a politically exposed foreign person who is subject to an order.
2.6 How does the public access those lists?
The lists of designated persons can be found at Government of Canada websites (for SEMA, FACFOA, the Magnitsky Law and Criminal Code designations) or at the United Nations website (for UN Act designations).
2.7 Does your jurisdiction maintain any comprehensive sanctions or embargoes against countries or regions?
Canada currently has comprehensive or close to comprehensive sanctions in respect of DPRK (North Korea) and the Crimea Region of Ukraine.
2.8 Does your jurisdiction maintain any other sanctions?
Canada currently (as of the time of writing this chapter) maintains sanctions in respect of the following jurisdictions: Central African Republic; Democratic Republic of the Congo; Eritrea; Iran; Iraq; Lebanon; Libya; Mali; Myanmar; Nicaragua; North Korea; Russia; Somalia; South Sudan; Sudan; Syria; Ukraine (linked to Russian violations of Ukraine's sovereignty and territorial integrity, and under FACFOA); Venezuela; Yemen; Zimbabwe; and Tunisia under FACFOA only.
Canada also maintains anti-terrorism sanctions against persons in other jurisdictions under the Criminal Code and the UN Act.
2.9 What is the process for lifting sanctions?
Sanctions are lifted by way of regulation made by the Governor-in-Council.
2.10 Does your jurisdiction have an export control regime that is distinct from sanctions?
Yes. Canada maintains an export control regime under the Export and Import Permits Act ("EIPA"). Additional export control measures also exist in relation to some economic sanctions imposed by Canada, including, for example, Iran and Russia.
2.11 Does your jurisdiction have blocking statutes or other restrictions that prohibit adherence to other jurisdictions' sanctions or embargoes?
Yes. In general terms, the 1992 Order issued under the Foreign Extraterritorial Measures Act prohibits Canadians from complying with the US embargo of Cuba, and requires Canadians to report certain directives and other communications in relation to the US Cuba embargo received from a person who is in a position to direct or influence the policies of the Canadian corporation in Canada.
2.12 Does your jurisdiction impose any prohibitions or threaten any sanctions consequences for transactions that do not have a connection to that jurisdiction (sometimes referred to as "secondary sanctions")?
In general, the restrictions in Canada's economic sanctions laws apply only to persons in Canada and Canadians outside of Canada. Such persons may be restricted from certain activity outside of Canada, including possibly, in some cases, facilitating certain transactions by persons not subject to Canadian jurisdiction.
Canada does not have a history of imposing sanctions on persons who are not subject to Canadian jurisdiction for acting contrary to Canada's economic sanctions regime.
3. IMPLEMENTATION OF SANCTIONS LAWS AND REGULATIONS
3.1 What parties and transactions are subject to your jurisdiction's sanctions laws and regulations? For example, do sanctions restrictions apply based on the nationality of the parties involved? Or the location where the transactions take place?
See question 2.12 above. The restrictions in Canada's economic sanctions laws apply only to persons in Canada and Canadians outside of Canada. Further, in the event of a prosecution, a criminal court must have subject matter jurisdiction which is determined based on whether there is, in the case of the alleged offence, a real and substantial connection to Canada.
3.2 Are parties required to block or freeze funds or other property that violate sanctions prohibitions?
Yes, in some cases. Prohibitions on dealing with listed persons that are set out in some sanctions programmes may effectively freeze funds. Some sanctions provisions require the reporting to the RCMP or, in some cases, the Canadian Security Intelligence Service of any property of a listed person or any transactions in relation to such property.
3.3 Are there licences available that would authorise activities otherwise prohibited by sanctions?
The Minister of Foreign Affairs can issue permits authorising activities that would otherwise be prohibited by economic sanctions made pursuant to SEMA, the Magnitsky Law or FACFOA. The Minister of Public Safety can issue permits in respect of Criminal Code anti-terrorism designations.
Because Canada is implementing United Nations Security Council resolutions under the UN Act, the power given to the Minister is to issue certificates authorising activity where the Security Council did not intend that the activity be prohibited, or if the Security Council or the Committee of the Security Council has approved the activity in advance or in certain other limited cases primarily involving hardship.
3.4 Are there any sanctions-related reporting requirements? When must reports be filed and what information must be reported?
In general, Canadian economic sanctions regulations require certain kinds of entities, including Canadian financial institutions, to determine on a continuing basis whether they are in possession or control of property owned, held or controlled by or on behalf of a listed person and to disclose without delay to a specified government entity:
- the existence of property in their possession or control that they have reason to believe is owned, held or controlled by or on behalf of a listed person; and
- any information about a transaction or proposed transaction in respect of property referred to in paragraph (a).
All other persons in Canada and Canadians outside of Canada do not in general have the duty to determine, but are in most cases subject to the reporting obligation.
3.5 How does the government convey its compliance expectations? Are certain entities required to maintain compliance programmes? What are the elements of a compliance programme required (or recommended) by the competent regulator(s)?
There is some limited guidance offered by Global Affairs Canada regarding economic sanctions at this link: https://www.international.gc.ca/world-monde/international_relations-relations_internationales/sanctions/faq.aspx?lang=eng.
Compliance with Canadian economic sanctions laws is becoming increasingly important as economic sanctions compliance is receiving heightened scrutiny in the context of M&A transactions and financings. Banks in particular have become extremely cautious, and many businesses have determined to strengthen their economic sanctions compliance activities.
4.1 Are there criminal penalties for violating economics sanctions laws and/or regulations?
Yes. Terms of imprisonment and fines may be imposed.
4.2 Which government authorities are responsible for investigating and prosecuting criminal economic sanctions offences?
The RCMP has investigative authority over potential violations of Canadian economic sanctions laws. If the RCMP concludes that charges are merited, they may lay charges and will refer the matter to the Public Prosecution Service of Canada ("PPSC"). The PPSC is led by the Director of Public Prosecutions (the "DPP"). The DPP is responsible for initiating and conducting prosecutions on behalf of the federal Crown (Her Majesty the Queen), in whose name criminal prosecutions are brought. The DPP delegates this power and function to federal prosecutors who are appointed or retained for this purpose, and act as the DPP's agents when making a decision to prosecute.
The decision to prosecute is made on the basis of considering the following two questions, both of which must be determined in the affirmative:
- Is there is a reasonable prospect of conviction based on evidence that is likely to be available at trial?
- Would a prosecution best serve the public interest?
Appeals are available from convictions that are imposed following a trial. There have been very few prosecutions and no known appeals from convictions.
4.3 Is there both corporate and personal liability?
Yes. Organisations can be found guilty of an offence if a representative of the organisation, who plays an important role in the establishment of its policies or is responsible for managing an important aspect of the organisation's activities, and, acting within the scope of his or her authority, is a party to the offence or directs the work of other representatives of the organisation so that they do the act specified in the offence, or, knowing that a representative of the organisation is or is about to be a party to the offence, does not take all reasonable measures to stop them from doing so.
4.4 What are the maximum financial penalties applicable to individuals and legal entities convicted of criminal sanctions violations?
The maximum fine that can be imposed varies depending on the statute and whether the prosecutor proceeds by indictment or an information. In some cases, no maximum fine is specified, which allows the court to determine the amount of the fine without statutory restriction. In addition to fines, individuals may also be sentenced to imprisonment.
4.5 Are there other potential consequences?
Imprisonment can be ordered for individuals. The maximum term of imprisonment if the Crown proceeds by way of indictment is five years for persons convicted under SEMA and the Magnitsky Law, and 10 years for persons convicted under the UN Act. If the Crown proceeds by way of information, the maximum term of imprisonment is one year in each of SEMA, the Magnitsky Law and the UN Act.
4.6 Are there civil penalties for violating economics sanctions laws and/or regulations?
Canada does not have civil enforcement mechanisms for economic sanctions violations. Contraventions of the various elements of Canada's economic sanctions regime are criminal offences.
4.7 Which government authorities are responsible for investigating and enforcing civil economic sanctions violations?
This is not applicable in Canada.
4.8 Is there both corporate and personal liability?
This is not applicable in Canada.
4.9 What are the maximum financial penalties applicable to individuals and legal entities found to have violated economic sanctions?
This is not applicable in Canada.
4.10 Are there other potential consequences?
This is not applicable in Canada.
4.11 Describe the civil enforcement process, including the assessment of penalties. Are all resolutions by the competent authorities public?
This is not applicable in Canada.
4.12 Describe the appeal process. Have companies challenged penalty assessments in judicial proceedings?
This is not applicable in Canada.
4.13 Are criminal and civil enforcement only at the national level? Is there parallel state or local enforcement?
Criminal prosecutions in Canada take place in the criminal court system which is for the most part conducted in the Provincial or Superior Courts of individual provinces or territories.
4.14 What is the statute of limitations for economic sanctions violations?
There is no statute of limitations for economic sanctions violations.
5.1 If not outlined above, what additional economic sanctions-related measures are proposed or under consideration?
None are known at this time. However, Canada's economic sanctions programmes continually evolve as Canada's foreign policy stance evolves in relation to developments in other jurisdictions. It is reasonable to expect that Canada will likely enact more sanctions measures in pursuit of humanitarian goals in the future under the Magnitsky Law. If situations worsen in respect of relations with Russia, Iran and Venezuela, further economic sanctions could be imposed by Canada. It is notable that to date, Canada has not imposed economic sanctions in relation to China, notwithstanding potential humanitarian concerns and a relationship with China that is currently under severe strain, due in part to the detention of a Huawei employee on an extradition warrant in relation to alleged criminal activity in the United States related to US sanctions on Iran, and possible related detentions of Canadians in China and disruptions of Canadian trade in China. While continued forbearance by Canada is likely, this is not certain, particularly because Canada will have a new federal government after an election in October 2019 which may take a different stance towards China.
5.2 Please provide information for how to obtain relevant economic sanctions laws, regulations, administrative actions, and guidance from the Internet. Are the materials publicly available in English?
All sanctions materials are available at Government of Canada websites in English. A good place to start is at this link: https://international.gc.ca/world-monde/international_relations-relations_ internationales/sanctions/index.aspx?lang=eng.
This article was first published in the ICLG to: Sanctions 2020.
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.