At the end of March, Global Affairs Canada (GAC) quietly updated its list of “Frequently Asked Questions” regarding compliance with Canada’s sanctions regime. For years, basic FAQs have remained the sole source of interpretative guidance on the application of the Special Economic Measures Act (SEMA) the United Nations Act, the Justice for Victims of Corrupt Foreign Officials Act (JVCFOA) and the Freezing Assets of Corruption Foreign Officials Act.
Despite the growing complexity of provisions enacted under SEMA regulations, in particular the Special Economic Measures Russia Regulations and the Special Economic Measures Belarus Regulations, the FAQs remained high-level and provided general information on the application of Canada’s sanctions statutes. This recent update provides the most substantive interpretive guidance on Canadian sanctions provided by GAC to date.
The four new FAQs provide answers to the following questions:
- What happens when a person is designated?
- When does a prohibition apply?
- Can I deal with the subsidiaries of a designated company?
- Can I deal with an entity that deals with a designated person?
The FAQs provide an expansive interpretation of the broad “dealings prohibition” enacted under all SEMA regulations and other Canadian sanctions regulations and the FAQs provide some limited commentary on the availability of exceptions to the application of certain prohibitions. Examples are used to illustrate how newly enacted prohibitions may apply to pre-existing contracts where a financial benefit was previously provided.
Importantly, the FAQs provide the first guidance on Canada’s novel deeming provision under the SEMA and the JVCFOA (see our previous blog here). GAC’s interpretation of the third criterion of the deeming provision provides an even broader, and perhaps vaguer, interpretation by appearing to liken the ability to direct an entity’s activities with exercising “considerable influence over its strategic decision-making”. The FAQs also provide an expansive view of what constitutes “facilitation”, including the activities of Canadian persons dealing with designated persons through third-party intermediaries operating legally in their home jurisdiction.
Absent from the newly amended FAQs is guidance on how Canada may enact secondary sanctions using new authority under the SEMA to name non-nationals under country-specific regulations.
Businesses falling under the jurisdiction of Canadian sanctions legislation should review the new FAQs and determine whether their current compliance processes and procedures must be amended to reflect this new guidance. Additionally, where the FAQs differ from a previous interpretation of Canadian sanctions legislation, businesses should reach out to their legal counsel to obtain their view on the application of the guidance to past and current activities.
