Do you have a compliance program?
Last month, Robbins & Myers Belgium S.A., a subsidiary of a U.S. company, pleaded guilty to violating U.S. sanctions and export control regulations and agreed to pay fines and penalties of $1.6 million relating to exports to Syria of U.S. origin oil extraction equipment. The prosecution stands as a stark reminder that the U.S. applies its sanctions and export control laws extraterritorially to subsidiaries of U.S. companies, as well as to non U.S. businesses who re-export U.S. origin goods.
Compliance with U.S. law is only one issue that needs to be addressed by Canadian companies when attempting to comply with increasingly complex sanctions and export controls laws. All Canadian companies who do business abroad need to be aware of their compliance obligations – even if they do not physically export goods from Canada. In the past several years, the Canadian Government has put in place economic sanctions that restrict Canadian companies from engaging in transactions with a broad range of countries and entities/individuals. Without a compliance program that includes some form of screening, Canadian companies that transact with foreign entities risk violating these frequently changing laws. Canadian authorities are becoming more aggressive with enforcement. The first prosecution under Canada’s Special Economic Measures Act occurred this year when an Alberta company was fined for exporting restricted goods to Iran.
Canadian companies that export goods and technologies abroad must comply with Canada’s Export and Import Permits Act, which establishes the Export Control List. The List is not limited to military technologies, but rather includes a broad range of commercial “dual use” goods, such as hardware and software using encryption, UAVs, optical sensors, and testing equipment. Item 5400 of the Export Control List imposes a restriction on the export of U.S. origin goods, from a Canadian law perspective. Other laws restrict or control the export of specialized goods.
Having a robust export controls and sanctions program that considers all applicable laws mitigates the risk of non-compliance and also can serve to mitigate penalties in the event that an instance of non-compliance is detected, or discovered and reported. In the current enforcement environment, this is a basic aspect of legal compliance that companies overlook at their peril.