Baker McKenzie’s Canadian international trade and customs team is publishing a series of articles reviewing 2024 trade and customs compliance developments and looking ahead to 2025’s burgeoning issues. This article focuses on Canadian legislative and enforcement developments in Canada’s sanctions regime.
In 2024, the Government began to lay the foundation for significant changes to the enforcement architecture of Canada’s sanctions regime. In July 2024, the Government introduced amendments, some of which came into force in August 2024, establishing a strict-liability, or a “civil” sanctions enforcement regime under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) which applies to FINTRAC reporting entities and importers and exporters. The Government continued to align its sanctions designations with its G7 allies and to issue joint-guidance on sanctions evasion risks, and Canada’s sanctions regime began to mature with Global Affairs Canada’s first issuance of interpretive guidance. While designations and prohibitions expanded, permitting decisions by Global Affairs Canada remained opaque and lengthy processes. There were also a number of successful delisting applications and the federal court weighed-in on the Government’s discretion to list individuals.
In 2025, we expect to see continued amendments to existing regulations enacted under the Special Economic Measures Act (SEMA) and the Justice for Victims of Corrupt Foreign Officials Act (JVCFOA) and delisting of persons/entities; the adoption of new SEMA regulations to respond to past and present breaches of international peace and security; the possibility of the first application filed in a Canadian court to forfeit property owned by a designated person; further designations under Canada’s secondary sanctions authority; the coming into force of new reporting obligations for importers and exporters under the PCMLTFA, and enhanced enforcement focused on sanctions circumvention, specifically on high-risk products detailed in guidance issued by the G7/E5. We also expect that approvals on sanctions permit applications will remain rare.
For businesses seeking to comply with Canadian sanctions laws, this means:
- Ensuring due diligence measures consider the interpretive guidance issued by Global Affairs Canada and further guidance on red flags and high risk products for sanctions circumvention;
- Following new designations and the expansion of the prohibitions in existing regulations enacted under the SEMA and JVCFOA;
- Watching for the coming into force date of new reporting obligations for importers/exporters under the PCMLTFA and the publication of Customs Notices and Departmental Memoranda associated with same;
- Seeking permits to undertake activities otherwise prohibited by Canadian sanctions, while bracing for long wait times and the possibility that a permit application will be denied, or perhaps be irrelevant when issued; and
- Watching for additional sanctions issued under the Government’s secondary sanctions authority and the policy reasons for exercising this authority.
New Designations and Prohibitions
The list of individuals and entities designated under Canada’s unilateral sanctions legislation continues to grow. Regulations are not subject to the Parliamentary legislative process and are enacted and amended by way of an Order in Council. Regulations may be enacted overnight, with little notice and may come into force immediately with partial retroactive effect. Although Canada continues to implement sanctions in coordination with its allies, Canada has continued to implement unilateral sanctions measures, such as designated persons and entities, not otherwise sanctioned by its allies. In 2025, the Government has already designated additional persons/entities to sanctions enacted in relation to Sudan, Belarus and Russia and expanded the prohibitions targeting Russia, prohibiting the docking of certain ships affiliated with Russia’s “Shadow Fleet”.
Throughout 2024, the Government amended and established the following sanctions regulations under the SEMA:
- China (December)
- Venezuela (December)
- Russia (December, June 1 2, May, February 1 2)
- Belarus (April and August)
- Iran (March, April and September)
After breaking a five-year hiatus on designations under the JVCFOA in 2023, there were no further designations in 2024.
For the first time, the Government has enacted issue-based sanctions under the SEMA in relation to the Hamas terrorist attack against Israel on October 7 (Special Economic Measures (Hamas Terrorist Attacks) Regulations) and in relation to settlements in the West Bank (Special Economic Measures (Extremist Settler Violence) Regulations). Global Affairs Canada has re-organized its description of SEMA sanctions into country-based sanctions under the SEMA and the United Nations Act (UNA), individual sanctions under the JVCFOA, and issue-based sanctions, which includes terrorism. The Government has consolidated its background information on terrorism-based sanctions to include regulations enacted under the UNA (Regulations Implementing the United Nations Resolutions on the Taliban, ISIL (Da’esh) and Al-Qaida and the Suppression of Terrorism Regulations) and the Hamas Terrorist Attacks Regulations. See the new webpage here.
In additional to individual designations, in 2024 the Government slightly expanded the prohibitions under the Russia Regulations, which included adding goods to Schedule 7 to expand the prohibition on the export, sale, supply or shipment of certain weapons products and expanding the current prohibition on the import, purchase and acquisition of certain diamonds to align with Canada’s G7 commitments.
New Interpretive Sanctions Guidance Issued by Global Affairs Canada
At the end of March 2024, Global Affairs Canada quietly updated its list of “Frequently Asked Questions” regarding compliance with Canada’s sanctions regime. This recent update provides the most substantive interpretive guidance on Canadian sanctions provided by GAC to date.
The FAQs provide an expansive interpretation of the broad “dealings prohibition” enacted under all SEMA regulations and other Canadian sanctions regulations, provide some limited commentary on the availability of exceptions to the application of certain prohibitions, and provide the first guidance on Canada’s novel deeming provision under the SEMA and the JVCFOA (see our previous blog here).
We write about the updated guidance here. Whether Global Affairs Canada will continue to update the FAQs, or create “official” stand-alone guidance, to address further areas requiring interpretive guidance remains to be seen. The Canadian legal community has continually requested that further guidance is published, with the latest request formally made by way of a Canadian Bar Association resolution passed in February 2025.
New Civil Enforcement Regime for Sanctions Evasion/Circumvention
Canada is relying on its existing AML legislative framework under the PCMLTFA and its administrative agency, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) alongside the CBSA to establish a sanctions civil enforcement regime in the form of mandatory reporting on suspected sanctions evasion for prescribed entities, importers, exporters and those financing import/export transactions. Since August 19, 2024, defined “Reporting Entities”, regulated by FINTRAC have been required to report completed and attempted transactions where there are “reasonable grounds to suspect” a transaction is related to commission or attempted commission of a “sanctions evasion offence”. We write about these amendments here.
Additional reporting requirements on sanctions evasion will apply to importers and exporters and those financing import/export transactions under the PCMLTFA at a future date. While, this novel reporting obligation for importers and exporters was outlined in July 2024 proposed amendments to the PCMLTFA, there remained no information on how the reporting would occur. It was only on November 30, 2024, that the Department of Finance published draft regulations in Part 1 of the Canada Gazette, the “Proceeds of Crime (Money Laundering) and Terrorist Financing Reporting of Goods Regulations” (Reporting Regulations) for a 30-day comment period. The Reporting Regulations clarify that the required declaration must be filed at the time the imported /exported goods are reported under the Customs Act.
There are broad record keeping requirements that apply to: “any person or entity that imports or causes or arranges for goods to be imported,” including CSA importers, and those operating sufferance and bonded warehouses; “any person or entity that exports or that causes or arranges for such goods to be exported”; and certain producers, suppliers, distributors and consumers that transact with goods for commercial and not individual or personal use. These record keeping requirements align with existing obligations under the Customs Act: commercial, transport, customs and financial records must be kept for 6 years.
Failure to comply with the Reporting Regulations may result in the issuance of an administrative monetary penalty (AMP). Payment of an AMP deems the payor to have committed the alleged violation. AMPs are subject to review within 30-days of being served with a Notice of Violation. Upon review, the President of the CBSA must determine on the civil standard of a balance of probabilities whether the person committed the alleged violation. There is a further right of appeal to the Federal Court. Failure to request a review or pay the AMP within 30 days results in a deemed violation and creates liability to pay the prescribed penalty. Penalties may be reduced in cases where a person in receipt of a Notice of Violation makes disclosure of the relevant facts and there are no reasonable grounds to believe that a violation was intentional. In this case, penalties range from $1 to $500. This is a strict liability regime and no due diligence defence is available. In other words, undertaking sanctions screening and a robust sanctions compliance policy will not guard against an unintentional violation. When not making a disclosure, penalties will be determined as the FMV, the declared value of the goods, or the value of the financial transaction purporting to pay for imported/exported goods.
Delistings Under the Russia Regulations Gain Traction
Each country-specific SEMA regulation provides for a delisting mechanism, under which a designated person can make an application to the Minister of Foreign Affairs to remove their name from a particular sanctions regulation. In February and October 2024, five persons were delisted under the Russia Regulations:
- February: Alexandra Yurievna Buriko
- February: Olga Ayziman
- February: Alexandr Pavlovich Dushko
- February: Sergey Alexandrovich Maltsev
- October: Denis Valentinovich Kamyshev
The Government’s reasons for supporting the delistings are simple; the reasons acknowledge that individuals do not meet the criteria to be listed under the particular sanctions regulation. A number of judicial reviews filed in the Federal Court have followed unsuccessful delisting applications, with one significant decision being issued in August 2024 (now under appeal). In Makarov v. Canada (Foreign Affairs), 2024 FC 1234, the Federal Court dismissed an application for judicial review in relation to the Foreign Affairs Minister Mélanie Joly’s decision to not recommend delisting Viktorovich Makarov from Canada’s Russia Regulations. In finding that the Minister’s Decision is reasonable, the Federal Court discusses the deference owed to the Minister’s weighing and assessing of the facts, including that reliance on what are described as credible and probative news articles was reasonable.
No Advancements Under Canada’s Seizure and Forfeiture Mechanism
Canada introduced an asset forfeiture regime in June 2022 under the SEMA and the JVCFOA, which grants authority for the Government to seize and forfeit, and then dispose and redistribute assets owned, held or controlled by designated persons. To forfeit assets, the Government must first issue an Order in Council seizing the assets, followed by an application filed in a provincial court to forfeit the assets.
To date, the Government has issued two seizure orders: (1) an order targeting assets held at a Canadian bank with alleged ownership by Roman Abramovich (December 2022); and (2) an order targeting a Russian-registered cargo aircraft (June 2023) alleged to be owned by designated persons. The Government has yet to file a forfeiture application in a provincial court and the assets remain frozen. It remains to be seen whether the Government will bring a forfeiture application in 2025. In order to successfully forfeit the property seized, the Government must show that the property in question is the same property described in the Order in Council and that it is owned, held or controlled directly or indirectly by the person named in the Order in Council. A recent repeal and re-issuance of the June 2023 order (we write about it here) suggests that the Government may be readying itself to file a forfeiture application in respect of the cargo aircraft.
Secondary Sanctions
In June 2023, the SEMA was amended to expand the Government’s authority to prohibit activities with certain persons unrelated to a foreign state targeted by SEMA sanctions. In other words, the Government now has a secondary sanctions authority, which was first exercised in mid-February 2025. An Irish entity and a Danish entity were designated under the Special Economic Measures (Russia) Regulations. We write about the designations and what it means for compliance with Canadian sanctions going forward here. On the third anniversary of Russia’s initiation of its illegal war in Ukraine, Canada exercised its secondary sanctions authority again, by designating many Iranian and Chinese entities under the Special Economic Measures (Russia) Regulations. These designations are tied to allegations of facilitation/support of Russia’s illegal war in Ukraine, including the transport of military equipment, key technology, materials and electrical components to Russia and the increase in military cooperation between North Korea and Russia.
Enforcement Patterns
Despite public reporting by the news media on possible Canadian sanctions violations and enforcement by the United States Department of Justice against Canadians involved in attempted Russian sanctions evasion, there has been no public enforcement (e.g. no charges laid by the RCMP) of Canada’s unilateral sanctions regime throughout 2024. However, the Globe and Mail recently reported on sanctions enforcement statistics provided by the CBSA:
| CBSA Enforcement Actions | April 1, 2023 to March 31, 2024 | April 1, 2024 to February 2024 |
| Risk Assessments | 490,000 export transactions | 400,000 export transactions |
| Detention and Examination | 95 shipments | 152 shipments |
| Enforcement Actions | 32 | 31 |
| Value of Prevented Exports | CAD 3.2 million | CAD 2.6 million |
| Value of Russia-related Seizures | CAD 450,000 | CAD 580,000 |
These statistics suggest an uptick in enforcement by frontline CBSA officers, which may also suggest ongoing criminal investigations yet to be publicly announced. In August 2024, the CBSA also responded to reports regarding the presence of Canadian-origin technology on the Ukrainian battle field, stating that the CBSA’s Counter Proliferation Operations Section is largely responsible for monitoring compliance with Canadian export controls and provides risk assessments on export declarations, identifies those that may contravene Canada’s export controls, and makes referrals to the relevant ports of exit, recommending the interception, examination and detention of shipments.
Canada continues to coordinate with its allies to curb sanctions evasion and sanctions circumvention. As a member of the G7, Canada is a member of the newly established “Enforcement Coordination Mechanism“ tasked with bolstering compliance and enforcement of Canada’s sanctions measures. In September, Australia, Canada, New Zealand, the UK, and the US (collectively, the E5) concluded their second annual enforcement conference and released a joint statement highlighting the key steps taken to tackle Russian circumvention of export controls and sanctions. A week later, the G7 issued joint guidance on preventing Russian export control and sanctions evasion, which we write about here. The guidance aims to assist the industry in identifying evasion tactics and in complying with multilateral export controls and sanctions.
The guidance serves as a good resource for Canadian businesses with heightened sanctions compliance risks and includes a high-priority list of items that pose a risk of diversion to Russia, a list of red flag indicators, best practices to address red flags, and resources for screening tools and guidance documents to assist with due diligence efforts. Canadian businesses should update their compliance policies to address sanctions evasion risks and exporters should expect increased trade control verifications by the CBSA, especially for goods destined to known transshipment hubs.
Businesses must be mindful that violations of Canadian sanctions legislation may result in large fines and/or imprisonment and that liability extends to both organizations and individual employees. At this time, the Remediation Agreement regime (i.e., deferred prosecution agreements) available under Part XXII.1 of the Criminal Codedoes not extend to offences listed under Canadian sanctions or export controls legislation. Accordingly, businesses have less avenues to pursue a non-trial resolution in the event of a sanctions violation subject to criminal prosecution.
