On September 5, 2008, the Government of Canada announced the implementation of economic sanctions against Zimbabwe. The Special Economic Measures (Zimbabwe) Regulations (the Regulations) came into effect on September 4, 2008, on the heels of preliminary steps taken by the Canadian government in June of this year regarding its relations with Zimbabwe. Although the official version of the Regulations will not be published until later this month, government representatives have circulated an unofficial version, upon which this update is based.
These Regulations prohibit companies in Canada, and Canadians outside of Canada, from dealing with property of and providing financial services to over 180 parties having connections to the government of Zimbabwe. They also prohibit the transfer to Zimbabwe of arms-related goods and services, as well as the provision of financial and technical assistance related to arms and related material.
Companies should be revising their export control and economic sanctions compliance programs and party/country screening procedures to include these new measures, and in particular, the specific targeted parties. Key elements of this new sanctions program are discussed below.
Assets Freeze in Respect of Designated Persons
The Regulations prohibit dealing either directly or indirectly with any property of a designated person. Property of a designated person includes funds derived or generated from property owned or controlled, either directly or indirectly, by that person. The asset freeze also prohibits making any property available, either directly or indirectly, to or for the benefit of that designated person.
Over 180 designated persons are listed in the Schedule to the Regulations. It is the responsibility of all persons doing business in Canada, and Canadians outside of Canada, to ensure that they have the most up-to-date list of designated persons. The list is currently located at http://www.dfait-maeci.gc.ca/trade/zimbabwe_list-en.asp.
The criteria used for composing the list is very broad, such that a person who seems an unlikely target of sanctions may nonetheless be considered a "designated person." For example, an individual may be added to the list simply by virtue of being a family member or associate of a former or current senior official of the Government of Zimbabwe, the Zimbabwe African National Union - Patriotic Front or a successor to either of the foregoing. With such broad criteria, one should always examine the list of designated persons before doing business with anyone in Zimbabwe, even if that person seems an unlikely target of Canadian sanctions.
Duty to Disclose to RCMP
Every person in Canada, and all Canadians outside of Canada, are required by the Regulations to disclose without delay to the Commissioner of the Royal Canadian Mounted Police the existence of any property within their possession or control that they have reason to believe is owned or controlled by a designated person or by an entity owned or controlled by a designated person. Immediate disclosure to the RCMP is also required for any information concerning a transaction or proposed transaction in respect of such property.
Prohibition on the Provision of Financial Services to Designated Persons
The Regulations prohibit Canadians and persons in Canada from entering into or facilitating, either directly or indirectly, any financial transaction related to property owned or controlled by a designated person. The Regulations also prohibit the provision of any financial or other related service made for the direct or indirect benefit of a designated person.
Financial Institutions Have an Ongoing Duty to Determine
The Regulations have identified a list of financial service firms that have an ongoing duty to determine whether they are in possession or control of property owned or controlled by, or on behalf of, a designated person. This list of entities includes, but is not limited to: banks, insurance companies, trust and loan companies, securities dealers, and credit unions.
Military Goods, Services and Technology Prohibitions
The Regulations prohibit the supply of arms and related material to Zimbabwe or to any person in Zimbabwe. Notably, this is not restricted to shipments from Canada or shipments of Canadian-origin goods, and includes shipments made by Canadian companies outside of Canada. The prohibition applies to any type of weapon, ammunition, military vehicle or military or paramilitary equipment, as well as the associated spare parts.
Owners and masters of Canadian vessels, and operators of aircrafts registered in Canada, are prohibited from carrying, causing to be carried, or permitting to be carried, arms and related material destined for Zimbabwe or for any person in Zimbabwe — regardless of where those weapons or related materials are situated.
The Regulations also ban the provision of technical assistance relating to the supply, sale, transfer or manufacture or use of arms and related material. Technical assistance is defined broadly as "any form of assistance, and includes instruction, training, consulting services, technical advice and the transferring or communicating of know-how or technical data."
The Regulations prohibit aircrafts registered in Zimbabwe from flying over or landing in Canada, except if necessary to safeguard human life.
Canadians and persons in Canada who wish to do business with Zimbabwe may be able to do so despite the restrictions and prohibitions contained in the Regulations. The Minister of Foreign Affairs has been given the authority to issue a permit to any Canadian or any person in Canada that would allow those persons to carry out a specified activity or transaction, or any class of activities or transactions, which would otherwise by prohibited by the Regulations.
Moreover, the Regulations exempt certain types of transactions. For example, although there is an export prohibition on military equipment, Canadians may nonetheless export non-lethal military equipment intended solely for humanitarian or protective use, and related to technical assistance and training.
Potential penalties for non-compliance with these Regulations are severe. Violation can result in imprisonment for up to five years and a fine of up to twenty-five thousand dollars. In addition to legal penalties, businesses will be wary of the significant negative publicity arising from doing business with rogue nations, organizations or individuals.
Building an Effective Trade Control Compliance System
It is essential that businesses operating in Canada have effective compliance and screening systems in place to ensure they are acting in conformity with these and other export control and economic sanctions programs. Your compliance system needs to raise a "red flag" and prompt further investigation whenever you are engaging in transactions directly or indirectly involving individuals or organizations from any of the following:
- Côte d'Ivoire
- Democratic Republic of the Congo
- North Korea
- Sierra Leone
- Al-Qaeda and Taliban
- Other Listed Terrorists and Terrorist Organizations