On March 24, 2021, Canada’s Minister of Foreign Affairs announced new sanctions against 9 Russian officials under the Special Economic Measures (Russia) Regulations (Russia Regulations or Regulations)in response to “gross and systematic violations” of human rights in Russia. The sanctions come in response to the poisoning and prosecution of Kremlin critic Alexey Navalny, most prominent critic of Russian President Vladimir Putin. The Minister stated that “the Russian government has repeatedly shown its unwillingness to respect the basic rights of its own people and address concerns raised on multiple occasions by the international community.”
Who is targeted?
Those targeted under the Russian Regulations include:
- Aleksandr Vasilyevich Bortnikov, director of the Federal Security Service, Russia’s principal security and counterintelligence agency;
- Aleksandr Petrovich Kalashnikov, director of the Russian Penetentiary Service;
- Sergey Vladilenovich Kiriyenk, the first deputy chief of staff in the Putin administration;
- Igor Viktorovich Krasnov, Russia’s prosecutor general;
- Aleksey Yurievich Krivoruchko, a deputy minister of defence in Russia responsible for weapons and military equipment;
- Sergey Ivanovich Menyaio, the plenipotentiary representative of the President of the Russian Federation in the Siberian Federal District;
- Pavel Anatolyevich Popov, deputy minister of defence responsible for research;
- Andrey Veniaminovich Yarin, first deputy chief of staff of the Presidential Executive Office, and
- Viktor Vasilyevich Zolotov, current Director of the National Guard of Russia and a member of the Security Council of Russia.
In addition to being inadmissible to Canada under the Immigration and Refugee Protection Act, the Russia Regulations impose an asset freeze and dealings prohibition on designated persons listed in Schedule 1. These sanctions are equally applicable to both individuals and entities. Under the Russia Regulations, any Canadian outside Canada or any person in Canada is prohibited from:
- dealing in any property, regardless of its location, held by or on behalf of a listed person;
- directly or indirectly entering into or facilitating any transaction related to such a dealing;
- with respect to such a dealing providing any financial or other related services;
- making any goods from anywhere available to a listed person, and
- providing any financial or related service to, or for the benefit of, a listed person.
Financial and Energy Sectors
The Regulations also impose restrictions in connection with certain sectors, such as the financial and energy sectors. Specifically, with certain exceptions, in relation to persons listed in Schedule 2, the Regulations prohibit any person in Canada and Canadians abroad from dealing in new debt of longer than 30 days maturity. The prohibition increases to 90 days maturity in relation to persons listed in Schedule 3. In relation to persons listed in Schedule 2, the Regulations also prohibit any person in Canada or Canadians abroad from dealing in new securities.
Additionally, the Regulations also prohibit the export, sale, supply or shipping of goods listed in Schedule 4, to Russia or to any person in Russia for their use in offshore oil where the depth is greater than 500m, shale oil or Arctic oil exploration and production. This includes “a ban on the provision of any financial, technical or other services related to the goods subject to this prohibition.”
The Regulations provide some exceptions to the asset freeze and dealing prohibition on persons listed under Schedule 1.
Permits and Certificates
The Special Economic Measures Act under subsection 4(4), authorizes the Minister of Foreign Affairs to issue to any person in Canada or any Canadian outside Canada, a Special Economic Measures (Russia) Permit Authorization Order, to carry out a specified activity or transaction, or any class of activity or transaction, that is restricted or prohibited pursuant to the Regulations.
Taking precautions that will keep your business protected and compliant with the Canadian sanctions regime is extremely important. Businesses should mitigate the risk of corporate criminal liability by having a compliance program in place, including revised screening protocols for purposes of conducting due diligence prior to and throughout a commercial transaction.
The lawyers at Tereposky & DeRose have significant experience in the design and implementation of sanctions-related compliance programs, including policies, procedures, employee training, and internal control mechanisms. They also regularly assist both Canadian and international businesses, financial institutions, and individuals with internal investigations when “red flags” appear and provide advice on compliance in these areas. Where breaches have occurred, they have worked closely with their clients in making voluntary disclosures and in engaging with the ensuing investigations conducted by the RCMP and Global Affairs Canada.