Effective March 17, 2014, and in conjunction with its allies in the European Union and the United States, Canada imposed economic sanctions on 24 Russian and Ukrainian officials and one entity, all considered to bear responsibility for the ongoing crisis in Ukraine, and specifically in Crimea. These steps were taken in addition to Canada’s earlier measures targeting 18 former leaders of Ukraine and their associates and family members (see Canada Imposes Economic Sanctions Against Former Ukrainian Regime: Is Russia Next?).
Canadian companies should be ensuring that their trade control compliance programs and screening procedures are updated to reflect these latest developments. Companies doing business with or in Russia, Ukraine or the surrounding region should also be undertaking enhanced due diligence in respect of their transactions and other activities to ensure that any direct or indirect involvement of these newly targeted individuals and entities is detected and addressed.
Implementation Under the Special Economic Measures Act
Unlike the March 5, 2014 sanctions imposed against former Ukrainian regime officials and their family members and associates under the Freezing Assets of Corrupt Foreign Officials Act, these latest measures were issued under the Special Economic Measures Act.
The Special Economic Measures (Ukraine) Regulations establish a list of designated persons considered to be engaging in activities that directly or indirectly facilitate or support the deployment of Russian armed forces in Crimea or the seizing of control of Ukrainian government and military entities in Crimea, and can include their associates, family members and entities owned or controlled by them. At the present time, there are 17 individuals and one entity (the Russian Unity Party) listed as designated persons.
The Special Economic Measures (Russia) Regulations also provide for a list of designated persons, in this case focusing on persons in Russia that directly or indirectly facilitate, support, provide funding for or contribute to the deployment of Russian armed forces to Crimea. This regulation identifies seven Russian government officials as designated persons. Notably, Russian President Vladimir Putin is not on the list.
Persons in Canada and Canadians outside of Canada are prohibited from engaging in a range of activities directly or indirectly involving these designated entities and individuals. These include:
- dealing in any property, wherever situated, held by them or on their behalf;
- entering into or facilitating, directly or indirectly, any transaction related such dealings;
- providing any financial or other related service in respect of such dealings;
- making any goods, wherever situated, available to them; or
- providing any financial or financial-related service to or for their benefit.
Doing anything that causes, assists or promotes these activities is also prohibited under the regulations.
There are a number of exemptions set out in the regulations, including a grandfathering provision which allows for payments made by or on behalf of designated persons that are due under contracts entered into before they became designated persons provided that such payments are not made for the benefit of designated persons. Further, permits may be issued by the Minister of Foreign Affairs for any activity that is prohibited by these measures.
Both the Ukrainian and Russian regulations require that reports be made without delay to the Commissioner of the Royal Canadian Mounted Police of the existence of property in your possession that you have reason to believe is property of a listed person and of information about any actual or proposed transaction regarding such property.
Further, federally and provincially regulated financial institutions and financial services companies are required to determine on a continuing basis whether they are in possession or control of listed persons’ property. For federally regulated financial institutions, the Office of the Superintendent of Financial Institutions has noted that it expects customer records to be searched at least on a weekly basis and more often if necessary.
Canadian Trade Controls
At the present time, Canada imposes trade controls of varying degrees on activities involving the following countries (and in many cases, 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 listed person in transactions or other activities should raise a red flag for further investigation to ensure compliance with economic sanctions and export and technology transfer controls.