McCarthy Tétrault LLP / mccarthy.ca Economic Sanctions and Enforcement Compliance Focus on Canada: Deciphering the Interaction of Canadian Sanctions with US and EU Sanctions Regimes John W. Boscariol Washington, DC April 28, 2015

McCarthy Tétrault LLP / mccarthy.ca Growing Impact of Economic Sanctions ¬what’s driving this? ¬since 9/11, new emphasis of Canadian authorities on security (vs. government revenues) ¬more recently, increased penalties, enforcement by U.S. authorities ¬pressure from U.S. affiliates, suppliers and customers (and U.S. government) ¬but Canada now a “sanctions hawk” ¬Canadian companies are now more concerned than ever before about whom they deal with, where their products and technology end up, and who uses their services ¬financings, banking relationships, mergers and acquisitions 1 John W. Boscariol, International Trade and Investment Law

McCarthy Tétrault LLP / mccarthy.ca Canada’s Trade Controls ¬export and technology transfer controls ¬Export Control List & A Guide to Canada’s Export Controls ¬Area Control List (Belarus and North Korea) ¬domestic industrial security ¬Defence Production Act, Controlled Goods Program ¬economic sanctions ¬Special Economic Measures Act ¬United Nations Act ¬Criminal Code ¬Freezing Assets of Corrupt Foreign Officials Act ¬other trade control legislation ¬blocking orders (Cuba) ¬anti-boycott policy and discriminatory business practices laws ¬anti-bribery law (Corruption of Foreign Public Officials Act and FCPA ) ¬compliance convergence 2 John W. Boscariol, International Trade and Investment Law

McCarthy Tétrault LLP / mccarthy.ca Canada’s Economic Sanctions Regime ¬challenges ¬measures take effect immediately – no consultations ¬measures change often, in response to developing international events ¬measures are “layered” ¬multiple Canadian regulatory regimes ¬measures in the country in which you’re doing business ¬US extraterritorial measures 3 John W. Boscariol, International Trade and Investment Law

McCarthy Tétrault LLP / mccarthy.ca Canada’s Economic Sanctions Regime ¬United Nations Act ¬implementation of UN Security Council Resolutions ¬Special Economic Measures Act ¬impose economic sanctions absent or in addition to a UN Security Council Resolution ¬Freezing Assets of Corrupt Foreign Officials Act ¬politically exposed persons ¬Criminal Code – terrorist groups ¬Area Control List under Export and Import Permits Act ¬Belarus and North Korea 4 John W. Boscariol, International Trade and Investment Law

McCarthy Tétrault LLP / mccarthy.ca Canada’s Economic Sanctions Regime ¬ Special Economic Measures Act and United Nations Act key measures (depending upon the country program) ¬ ban on providing or acquiring goods, services, technology/data ¬ assets freezes – cannot deal with listed individuals, companies, organizations (“designated persons”) – includes facilitation ¬ ban on investment ¬ aircraft, shipping, transport restrictions ¬ travel bans ¬ sectoral measures ¬ monitoring and reporting obligations 5 John W. Boscariol, International Trade and Investment Law

McCarthy Tétrault LLP / mccarthy.ca Canada’s Economic Sanctions Regime ¬ generally apply to persons in Canada and Canadians outside of Canada ¬ permits generally available for anything that is prohibited under the sanctions measures ¬ apply to Economic Law Division of Department of Foreign Affairs, Trade and Development (DFATD) ¬ no general permits/licenses have been issued, although exemptions may be available ¬ grandfathering ¬ enforced by Canada Border Services Agency and Royal Canadian Mounted Police (RCMP) 6 John W. Boscariol, International Trade and Investment Law

McCarthy Tétrault LLP / mccarthy.ca Canada’s Economic Sanctions Regime ¬ consequences of non-compliance ¬ criminal penalties ¬ fines in an amount that is appropriate in the opinion of the Court ¬ up to 10 years imprisonment ¬ CBSA detention and seizure ¬ operational costs ¬ reputational costs 7 John W. Boscariol, International Trade and Investment Law

McCarthy Tétrault LLP / mccarthy.ca United Nations Act Regulations ¬targeted countries and groups 8 ¬ Al-Qaida and Taliban ¬ Côte d’Ivorie ¬ Democratic Republic of Congo ¬ Iran ¬ Sudan ¬ Yemen ¬ Central African Republic ¬ Lebanon ¬ Iraq ¬ Somalia ¬ Eritrea ¬ terrorists and terrorist organizations ¬ Liberia ¬ North Korea ¬ Libya John W. Boscariol, International Trade and Investment Law

McCarthy Tétrault LLP / mccarthy.ca Special Economic Measures Act Regulations ¬targeted countries ¬Iran ¬Syria ¬Burma ¬Zimbabwe ¬North Korea ¬Ukraine ¬Russia ¬South Sudan 9 John W. Boscariol, International Trade and Investment Law

McCarthy Tétrault LLP / mccarthy.ca Freezing Assets of Corrupt Foreign Officials Regulations ¬politically exposed persons ¬Egypt ¬Tunisia ¬Ukraine 10 John W. Boscariol, International Trade and Investment Law

McCarthy Tétrault LLP / mccarthy.ca Russia / Ukraine Economic Sanctions Measures ¬designated person restrictions – 273 entities and individuals ¬broad prohibition on range of activities ¬debt financing prohibition (30 or 90 days maturity) ¬equity financing prohibition ¬prohibitions against supply of listed goods or related financial, technical or other services for use in ¬offshore oil exploration or production at a depth greater than 500 meters; ¬oil exploration or production in the Arctic; or ¬shale oil exploration or production 11 John W. Boscariol, International Trade and Investment Law

McCarthy Tétrault LLP / mccarthy.ca Russia / Ukraine Economic Sanctions Measures ¬export control policy (DFATD Export Controls Division) ¬no permit if material benefit to Russian military ¬March 25, 2015 unanimous Parliamentary motion: ¬imposition of “sanctions against foreign nationals involved in the detention, torture and death of Sergei Magnitsky.” ¬government to “explore sanctions as appropriate against any foreign nationals responsible for violations of internationally recognized human rights in a foreign country, when authorities in that country are unable or unwilling to conduct a thorough, independent and objective investigation of the violations” 12 John W. Boscariol, International Trade and Investment Law

McCarthy Tétrault LLP / mccarthy.ca Iran Economic Sanctions Measures ¬UN Act regulations (2007 & 2010) ¬121 designated entities and individuals ¬military, nuclear ¬SEMA regulations ( ) ¬613 designated entities and individuals ¬oil & gas, mining, shipping ¬financial services ban ¬supply ban – “purposes of a business carried on in or operated from Iran” ¬sourcing ban ¬investment ban ¬technical data restrictions ¬Export and Import Permits Act (ECL) – US-origin goods and technology ¬extraterritorial US measures 13 John W. Boscariol, International Trade and Investment Law

McCarthy Tétrault LLP / mccarthy.ca Prosecutions Under Iran Economic Sanctions ¬R. v. Yadegari ¬July 6, 2010, first successful prosecution under the Iran sanctions regulations under United Nations Act ¬attempted shipment to Iran through Dubai dual-use pressure transducers ¬could be used in heating and cooling applications as well as in centrifuges for enriching uranium ¬Ontario provincial court judge found that Yadegari “knew or was wilfully blind that the transducers had the characteristics that made them embargoed” ¬also violations of Customs Act, Export and Import Permits Act, Nuclear Safety and Control Act, and Criminal Code ¬sentenced to 51 months imprisonment (slight reduction on appeal) 14 John W. Boscariol, International Trade and Investment Law

McCarthy Tétrault LLP / mccarthy.ca Prosecutions Under Iran Economic Sanctions ¬R. v. Lee Specialties Ltd. ¬first prosecution under Special Economic Measures Act ¬attempted shipment of 50 Viton O-rings to Iran ($15 total value) ¬although dual-use, these were prohibited goods listed on Schedule 2 to the Iran SEMA regulations ¬multiple changes in account and shipping addresses ¬detained by CBSA ¬guilty plea and $90,000 penal ty 15 John W. Boscariol, International Trade and Investment Law

McCarthy Tétrault LLP / mccarthy.ca Burma Economic Sanctions Measures ¬Canada had most aggressive sanctions of any country ¬effective April 24, 2012 most Burma sanctions measures repealed ¬currently ¬44 entities and 38 individuals are designated persons ¬arms and related material embargo (including data transfers) 16 John W. Boscariol, International Trade and Investment Law

McCarthy Tétrault LLP / mccarthy.ca Key Issues in Interaction With US and Other Regimes ¬screening against Canadian lists ¬lists of over 2,000 designated persons – individuals, companies, organizations ¬Special Economic Measures Act regulations ¬United Nations Act regulations ¬Freezing Assets of Corrupt Foreign Officials Act regulations ¬Criminal Code anti-terrorism provisions ¬any involvement in the transaction – purchaser, ultimate user, vendor, creditor, broker, service provider ¬applies regardless of where Canadian company is doing business ¬applies to non-Canadians in Canada 17 John W. Boscariol, International Trade and Investment Law

McCarthy Tétrault LLP / mccarthy.ca Key Issues in Interaction With US and Other Regimes ¬Canadian measures may be broader than those of the United States and other countries ¬Russia / Ukraine – 273 designated persons ¬Belarus, Burma, Libya, North Korea ¬Iran ¬importance of “home grown” compliance policies 18 John W. Boscariol, International Trade and Investment Law

McCarthy Tétrault LLP / mccarthy.ca Key Issues in Interaction With US and Other Regimes ¬Canadian measures can be in direct conflict with those of the United States ¬Foreign Extraterritorial Measures Act “blocking” order in respect of US trade embargo of Cuba ¬obligation to notify Canadian Attorney General of certain communications ¬prohibition against complying with certain U.S. trade embargo measures ¬criminal penalty exposure: up to $1.5 million and/or 5 years imprisonment ¬provincial business discriminatory practices legislation 19 John W. Boscariol, International Trade and Investment Law

McCarthy Tétrault LLP / mccarthy.ca Key Issues in Interaction With US and Other Regimes ¬Canadian measures can be in direct conflict with those of the United States ¬Foreign Extraterritorial Measures Act “blocking” order in respect of US trade embargo of Cuba ¬there has never been a successful or an attempted prosecution under the Canadian blocking order ¬no case law or administrative or prosecutorial guidelines ¬no guidance from the Canadian government ¬numerous investigations - American Express, Eli-Lilly, Heinz, Red Lobster, Wal-Mart and others ¬Wal-Mart’s Cuban pajamas ¬nationalistic sensitivities 20 John W. Boscariol, International Trade and Investment Law

McCarthy Tétrault LLP / mccarthy.ca Key Issues in Interaction With US and Other Regimes ¬Canadian measures can be in direct conflict with those of the United States ¬Canadian human rights / employment laws and potential conflict with ¬US controls under International Traffic in Arms Regulations – Department of Defense Trade Controls (US State) ¬US Export Administration Regulations (CCL) - Department of Commerce 21 John W. Boscariol, International Trade and Investment Law

McCarthy Tétrault LLP / mccarthy.ca Key Issues in Interaction With US and Other Regimes ¬significant differences in administration and guidance on economic sanctions ¬no FAQs, guidelines, rulings, opinions ¬no consolidated lists ¬no voluntary disclosure process ¬no deferred or non-prosecution agreements ¬ reporting to DFATD ¬mandatory for property of designated persons ¬when DFATD becomes aware of potential violation, immediate notification to RCMP 22 John W. Boscariol, International Trade and Investment Law

McCarthy Tétrault LLP / mccarthy.ca Implications for Economic Sanctions Compliance and Enforcement ¬internal compliance programs must be “home grown” ¬training and internal communications ¬screening process and providers ¬coordination of internal investigations and disclosures involving multiple jurisdictions 23 John W. Boscariol, International Trade and Investment Law

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