As a result of the ongoing Russian-Ukrainian conflict, Canada imposed additional sanctions as against Russia and Ukraine on February 24 and 28, 2022. These sanctions are enacted under the Regulations Amending the Special Economic Measures (Russia) Regulations (“Russia Regulations”) and Regulations Amending the Special Economic Measures (Ukraine) Regulations (“Ukraine Regulations”). As a result of these additional sanctions, persons located in Canada and Canadians outside of Canada that have economic dealings with Russia or Ukraine may be significantly affected.
Expansion of List of Designated Persons and Entities
Since 2014, both the Russia Regulations and Ukraine Regulations have included an asset freeze and dealings prohibition. With some very limited exceptions, persons in Canada (regardless of nationality) and Canadians outside of Canada are prohibited from any involvement with designated persons or entities.
The recent amendments dramatically increase the list of designated persons and entities. For Russia, the designated persons increased from 120 to 520 individuals and from 71 to 103 entities. For Ukraine, the designated persons increased from 202 to 206 individuals and has maintained 42 entities.
Financial Sector Sanctions
The Russia Regulations continue to impose restrictions on some Russian entities operating in the financial sector. Most notably, Canada has imposed new sanctions as against the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation and the Ministry of Finance of the Russian Federation.
Expanded Geographical Sanctions in Ukraine
Canada’s previous sanctions against Ukraine included broad prohibitions on dealings with the Crimea Region. Last week’s amendments expanded geographic prohibitions to also include the Donetsk People’s Republic (“DNR Region”) and the Luhansk People’s Region (“LNR Region”). With very limited exceptions, there is a complete prohibition of business between any person in Canada or Canadians outside of Canada and these three regions.
Export Controls Relating to Russia
On February 24, 2022, Canada issued a Notice to Exporters and Brokers – Export and Brokering of items listed on the Export Control List and the Brokering Control List to Russia (“Notice”). The Notice expressly stated that “Canada will stop the issuance of new permits for the export and brokering of controlled goods and technology to Russia”, and that “only permits and applications related to specific end-uses such as medical supply and humanitarian needs may be considered for exception, on a case-by-case basis”.
Canada’s controlled goods are identified in the Export Control List (“ECL”). The ECL includes dual-use technology that may not, on its face, be easily identifiable as controlled. Any persons in Canada or Canadians outside of Canada that continue to do business with Russia must ensure that none of the goods or technology being exported to Russia are subject to the ECL.
Heightened Importance of Understanding and Monitoring Changes to Canadian Sanctions
Canada’s sanctions as against Russia and Ukraine are currently in flux. It is expected that those sanctions will continue to be expended over the upcoming weeks and months. This, in and of itself, creates additional business risk for those that maintain business with Russia or Ukraine.
Our team will continue to monitor the sanctions measures related to Russia and Ukraine, providing updates to keep clients informed about important developments affecting trade and services. 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.