In response to the Ukraine crisis in Crimea, Canada initially implemented on January 28th, 2014, travel bans on certain individuals associated with the Crimean crisis. Since then, Canada has imposed a series of increasingly serious sanctions that target key Russian and former Ukrainian government officials. These measures include prohibitions on dealings in property and goods and assets freezes regarding identified persons. Canada has imposed these sanctions under the Special Economic Measures Act and the Freezing Assets of Corrupt Foreign Officials Act. Violations of the sanctions can result in severe criminal liability.
Special Economic Measures Regulations: Russia and Ukraine
On March 17th, 2014, the Canadian government implemented the Special Economic Measures (Russia) Regulations and the Special Economic Measures (Ukraine) Regulations (the "Regulations") under the Special Economic Measures Act (SEMA). Initially, the former listed seven high ranking Russian officials as the object of the sanctions, while the latter identified three former Ukrainian officials. The Regulations were implemented shortly after the measures implemented by the US and the EU, all of which target Russian officials for the first time since the commencement of the events in Ukraine. However, on March 19th, 2014, the Canadian government amended both of these Regulations to add 11 Russian and 6 Ukrainian officials respectively. The list of sanctioned Russian individuals was further amended on March 21st with the addition of 14 officials. Bank Rossiya (Aktsionerny Bank Russian Federation), Russia's 17th largest bank with assets of roughly $10 billion was also sanctioned.
Under the Regulations the Canadian government considers that there are reasonable grounds to believe that the "designated persons" are engaged in activities that directly or indirectly facilitate, support, provide funding for, or contribute to the deployment of Russian armed forces to Crimea. For the Ukraine Regulations specifically this also includes persons who have seized control of Ukrainian government and military entities in Crimea. The names are included in a schedule to the Regulations. In both cases, the names include associates and family members. Although not identified in the Regulations, these apply as well to entities owned or controlled by such designated persons or those acting on behalf of such persons or entities.
The Regulations prohibit persons (broadly defined to include companies, partnerships, funds and unincorporated associations) in Canada and Canadians abroad from dealing directly or indirectly with any property that is owned or controlled by one of the designated persons and making any goods available to such persons wherever the property or goods are situated. The Regulations also prohibit entering into or facilitating any financial transaction in respect of such property which the Canadian Office of the Superintendent of Financial Institutions has stated includes asset management, lending (including mortgage lending), and the provision of insurance. The Regulations also include a more general prohibition on providing any financial and related services to or for the benefit of such persons.
Notably, causing, assisting or promoting any of these prohibited activities is likewise prohibited. Some exemptions exist to these prohibitions. For example, payments made by or on behalf of designated persons pursuant to contracts entered to before their designation, provided the payment is not for their benefit. There are several others.
Further, the Regulations impose on Canadian-regulated financial institutions a duty to determine, on a continuing basis, if they are in possession or control of property owned or controlled by designated persons. The Office of the Superintendent of Financial Institutions Canada (OSFI), expects that searches of assets and client records are performed at a minimum on a weekly basis.
There is also a general duty to disclose without delay to the head of the Canadian police, the Commissioner of the Royal Canadian Mounted Police (RCMP) the existence of property in possession or control of a person if there is a reason to believe that that property is owned or controlled directly by a designated person. This notification obligation applies to all Canadians including those outside Canada. The duty to disclose also includes having information about a transaction or proposed transaction in respect of such property.
Freezing Assets of Corrupt Foreign Officials (Ukraine) Regulations
In addition to the above Regulations the Canadian government implemented the Freezing Assets of Corrupt Foreign Officials (Ukraine) Regulations on May 5th, 2014, under the Freezing Assets of Corrupt Foreign Officials Act. These Regulations, adopted at the request of Ukraine's Prosecutor General, were implemented against 18 former Ukrainian officials, identified under these Regulations as "politically exposed foreign persons," and include former Ukrainian President, Viktor Yanukovych, and his close associates.
These Regulations prohibit (i) dealing in any property, wherever situated, of a listed politically exposed foreign person; (ii) facilitating any financial transaction related to such a dealing; and (iii) providing financial services in respect of any property of a politically exposed foreign person. Further, the Freezing Assets of Corrupt Foreign Officials Act imposes a duty on all persons in Canada and Canadians abroad to determine and disclose whether they have property of such persons. As with the Russian and the Ukraine regulations under the Special Economic Measures Act, the Office of the Superintendent of Financial Institutions Canada (OSFI), expects that searches of assets and client records are performed at a minimum on a weekly basis.
Money Laundering and the Travel Ban
The Canadian Office of the Superintendent of the Financial Institutions has stated that the above-noted regulations do not displace the obligation on financial institutions in Canada, subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, to maintain due diligence obligations regarding the risk of possible money laundering in relation to Ukraine.
Finally, Canada is adding individuals to its travel ban list, which prevents any such individuals from entering Canada. Canada's Minister of Citizenship and Immigration has stated that Canada will not release the names of the individuals on the travel ban list.
The author acknowledges the research and drafting assistance of Sean Stephenson.