This appendix provides an overview of Canada’s sanctions legislation and the current measures that are in place. To illustrate how this legislation works in practice, a more detailed look at regimes against Iran, North Korea and Russia is provided. This appendix also looks at the Freezing Assets of Corrupt Foreign Officials Act and other legislation relating to global corruption and asset recovery.

A. The Special Economic Measures Act

The Special Economics Measures Act is enabling legislation that allows the Governor in Council to make orders and regulations restricting or prohibiting certain activities in relation to a foreign state, any person (individual or entity) in a foreign state or a national of that foreign state who does not normally reside in Canada, as well as to seize or freeze related property.[1] The Minister of Foreign Affairs is responsible for the administration and enforcement of the Act, and regulations made under it can be amended or revoked by Parliament.[2] The Act also makes it a criminal offence to willfully contravene or fail to comply with regulations made under the Act.[3]

Section 4(1) of the Act defines the two conditions under which regulations can be enacted:

• for the purpose of implementing a decision, resolution or recommendation of an international organization of states or association of states, of which Canada is a member, that calls on its members to take economic measures against a foreign state; or
• where the Governor in Council is of the opinion that a grave breach of international peace and security has occurred that has resulted or is likely to result in a serious international crisis.

All current sanctions regimes under the Special Economic Measures Act invoke the second of these conditions, the “grave breach” provision.

If either of these two conditions is met, the Governor in Council is authorized to order the freezing, seizure or sequestration of property, or to restrict or prohibit any activity listed in section 4(2) in relation to a designated target. Those activities fall under five categories:

• dealings in property;
• the import and export of goods;
• the transfer of technical data;
• the provision of financial services; and
• transportation – docking or landing of Canadian ships or aircraft in the targeted state as well as the passing, docking or landing of targeted ships or aircraft in Canada.

Where property located in Canada is ordered seized, frozen or sequestrated, the target property must be held by or on behalf of a foreign state, a person in that foreign state, or a national of that foreign state who does not reside in Canada.

Orders and regulations made under section 4 can also provide for exclusions to the restrictions put in place. Moreover, the Minister of Foreign Affairs can be authorized to issue permits allowing individuals or entities to engage in otherwise prohibited activities.[4]

1. Regulations

One of the challenges in understanding and monitoring sanctions in Canada is that all of the country-specific details are contained in regulations. In other words, it is the regulations that establish the sanctions “regimes” referred to in this report.

Regulations made under the Special Economic Measures Act not only set out the measures to be implemented, they also enact related administrative provisions. While these provisions vary, all current regulations contain certain elements in common, demonstrating a standard practice in the enactment of such measures.[5]

Regulations that target specific individuals and entities include a general provision, which sets out the criteria by which the Government of Canada determines who should be listed – generally either for being connected to prohibited activities or for holding a certain position within a government or group. The regulations also include one or more schedules listing the actual individuals and entities subject to the specified prohibitions and restrictions. Commonly, prohibitions placed on individuals and entities include a set of measures often referred to as ‘dealing prohibitions’ and ‘assets freezes.’[6] These prohibitions are generally accompanied by corresponding exclusions, for such things as transactions related to diplomatic missions, humanitarian operations or for activities necessary to fulfill contractual obligations entered into prior to the imposition of sanctions.

Regulations typically place a “duty to determine” on certain financial institutions, requiring them to ensure, on a continuing basis, that they do not possess or control property related to a designated individual or entity. There is also a general disclosure requirement on anyone in Canada with information regarding such property or related transactions, which must be reported to the Royal Canadian Mounted Police.

Individuals and entities designated under the regulations can apply in writing to the Minister of Foreign Affairs to have themselves removed from the relevant schedule. Where they do so, the Minister must determine if reasonable grounds exist to recommend removal to the Governor in Council and provide notice to the applicant of the decision taken.[7] New applications can be made where a “material change in circumstances” has occurred.[8]

2. Related Legislation

Sanctions regimes created by the Government of Canada utilize two other legislative frameworks in addition to the Special Economic Measures Act: the United Nations Act and the Export and Import Permits Act.[9] Those three pieces of legislation are often used in a complementary fashion, providing the Government of Canada with authority to enact a range of sanctions measures in response to international events.

The United Nations Act is the enabling legislation through which the Government of Canada gives effect to sanctions measures imposed by the UN Security Council, in fulfillment of its obligation under the Charter of the United Nations.[10] The United Nations Act allows the Governor in Council to enact regulations to implement UN sanctions and creates an offence for contravention.[11] Regulations made under the Act vary according to the Security Council regimes, but often contain provisions similar to those found in Special Economic Measures Act regulations.[12]

Unlike the Special Economic Measures Act, regulations made under the United Nations Act do not include schedules listing individuals and entities subject to sanctions; instead, the prescribed measures are automatically placed on all those designated by the UN Security Council and its subsidiary organs.[13] When the UN Security Council imposes sanctions, a committee is created to oversee their implementation, which generally has delegated authority to designate or delist individuals or entities based on the criteria set out in the relevant Security Council resolutions. Those UN committees are usually assisted by an expert panel or monitoring group.[14]

Under the Export and Import Permits Act, the Government of Canada maintains lists of goods for which it deems the imposition of import and export controls to be necessary. That includes the export of military goods and technology to “any destination where their use might be detrimental to the security of Canada.”[15] Global Affairs Canada may provide guidance to potential exporters regarding how this authority will be utilized in reference to specific countries, as is currently the case in regards to Iran.[16] Additionally, the government can control the export or transfer of goods and technology to specific countries through the Area Control List, which is established pursuant to the Act.[17] Residents of Canada who wish to export or transfer any goods or technology to countries listed on the Area Control List must receive a permit from the Minister of Foreign Affairs to do so, who must in turn consider whether the issuance of such a permit is contrary to the “safety or interests of the State” or the “peace, security or stability in any region of the world or within any country.”[18]

3. Canadian Sanctions Regimes

Canada currently has sanctions regimes targeting 20 states using one or a combination of the three Acts discussed above:

• Special Economic Measures Act (5): Burma, Russia, Syria, Ukraine and Zimbabwe;
• United Nations Act (10): Côte d’Ivoire, Democratic Republic of Congo, Iraq, Eritrea, Lebanon, Yemen, Liberia, Somalia, Central African Republic and Sudan;
• Special Economic Measures Act and United Nations Act (3): Iran, Libya and South Sudan;
• Special Economic Measures Act, United Nations Act and Export and Import Permits Act (1): North Korea; and
• Export and Import Permits Act (1): Belarus.[19]

In addition to these country-specific regimes, a transnational anti-terrorism sanctions regime exists under the United Nations Act and related provisions of the Criminal Code. The United Nations Al-Qaida and Taliban Regulations place dealings prohibitions and asset freezes on individuals and entities listed under the two terrorism-related UN sanctions regimes, while provisions in the Criminal Code authorize the Minister of Public Safety and Emergency Preparedness to maintain a list of entities related to terrorist activities, whose property is subject to restraint, seizure and forfeiture.[20]

Documents submitted to the Committee by Global Affairs Canada list 992 individuals and entities subject to asset freezes and dealings prohibitions under the Special Economic Measures Act, in addition to 12 Russian entities subject to restrictions on the provision of debt and equity financing.[21] The Consolidated United Nations Security Council Sanctions List, covering all sanctions regimes required by UN Security Council resolutions and which Canada implements through the United Nations Act, contains 640 individuals and 379 entities subject to restrictions or prohibitions.[22]

A more detailed look at the sanctions regimes targeting Russia, Iran and North Korea demonstrates how the Government of Canada has enacted sanctions regimes in the past decade using the legislative frameworks described above.

a. Russia Sanctions

In response to Russia’s violation of the territorial integrity of Ukraine, including the annexation of the Crimea region, Canada imposed sanctions against Russia and its allies in Ukraine on 17 March 2014 through two regulations made pursuant to the Special Economic Measures Act. The regulations invoked the “grave breach” provision under section 4(1)(b) of the Act.[23] The initial regulations – one targeting individuals in Russia, the other, individuals in Ukraine – passed dealings prohibitions and asset freezes on seven and three individuals, respectively.[24]

The Russia regulations have since been amended 14 times, including twice in the first week after they were issued, and ten times in the first year.[25] Currently, 93 individuals and 53 entities are subject to dealings prohibitions and asset freezes, while 12 entities are subject to restrictions on the issuance of debt and equity. A prohibition on goods and any financial, technical or other services relating to oil exploration and production is also in place, covering offshore areas at a certain depth, the Arctic, and shale.[26]

The regulations targeting individuals and entities in Ukraine have been amended 12 times, including eight times in the first year.[27] The current regulations list 107 individuals and 39 entities for dealings prohibitions and asset freezes. There is also a prohibition on economic and financial transactions and activities in the Crimea region, including with respect to investment and exports.[28]

b. Iran Sanctions

In response to Iran’s nuclear program and the proliferation risks that had been identified by the International Atomic Energy Agency, the UN Security Council imposed a series of measures against Iran beginning in December 2006.[29] In accordance with its obligations, Canada passed corresponding regulations under the United Nations Act, imposing prohibitions related to the products cited, and individuals and entities listed by the resolution.[30] Canada expanded sanctions on Iran under the United Nations Act three times in response to new UN Security Council resolutions. By 2010, these measures had expanded the existing prohibitions considerably and had also imposed new prohibitions related to military equipment and ballistic missiles.[31]

After the Joint Comprehensive Plan of Action was agreed, the UN Security Council passed a resolution terminating existing sanctions measures while imposing new, lesser, measures in line with the agreement.[32] Current regulations under Canada’s United Nations Act implement the new prohibitions related to nuclear, military and ballistic missile products, as well as those which apply to the 23 individuals and 61 entities listed by the UN Security Council.[33]

Shortly after the final expansion of UN sanctions in 2010, Canada began imposing additional sanctions against Iran under the Special Economic Measures Act using the “grave breach” provision.[34] Building on the pre-existing sanctions under the United Nations Act, the regulations imposed prohibitions on an additional 42 individuals and 279 entities, while also expanding sectoral prohibitions to include oil and gas, and financial services.[35] Measures were significantly amended following the “implementation day” of the Joint Comprehensive Plan of Action, which led to the removal of sectoral prohibitions and a reduced list of targeted individuals (41) and entities (161).[36]

c. North Korea Sanctions

Canada’s sanctions on North Korea were initiated in 2006 following the imposition of UN sanctions in response to North Korea’s nuclear test conducted in violation of the Treaty on the Non-proliferation of Nuclear Weapons.[37] Canada implemented the UN measures through regulations made under the United Nations Act in November of 2006, imposing prohibitions related to military equipment, luxury goods and material for nuclear and ballistic missile programmes, in addition to prohibitions targeting designated individuals and entities.[38]

The UN Security Council modified and strengthened its measures in response to subsequent nuclear tests carried out by North Korea in 2009, 2013 and 2016.[39] Current regulations under the United Nations Act build on the previous measures, adding prohibitions related to financial services, natural resources, aviation fuel and transportation.[40] Restrictive measures are also imposed on the 39 individuals and 42 entities listed by the UN Security Council.[41]

Following the sinking of a South Korean naval ship – the Cheonan – by a North Korean submarine in 2010, the Area Control List under the Export and Import Permits Act was amended to include North Korea.[42] In response to the results of an international investigation, which documented North Korea’s role in the incident, Canada also imposed sanctions in 2011 under the Special Economic Measures Act through the invocation of the “grave breach” provision. Those measures, which are intended to “complement and expand upon” measures under the United Nations Act, currently impose blanket prohibitions on dealings in goods, property, financial services, technical assistance and transportation.[43]

B. The Freezing Assets of Corrupt Foreign Officials Act

The Freezing Assets of Corrupt Foreign Officials Act is similar in structure to the Special Economic Measures Act, though the scope of the authority granted is significantly narrower. The Act sets out the conditions under which the Governor in Council can enact orders and regulations to freeze or seize property and restrict or prohibit certain activities in reference to designated persons, and creates a criminal offence for contraventions of the Act.[44] Exclusion and permit authorities similar to those found in the Special Economic Measures Act, as well as duty to determine and disclosure provisions similar to those found in the Special Economic Measures Act regulations, are also included.[45]

According to section 4 of the Freezing Assets of Corrupt Foreign Officials Act, orders and regulations can be enacted when a foreign state asserts in writing to the Government of Canada that a person has property which was misappropriated from the state or acquired “inappropriately by virtue of their office or a personal or business relationship,” and requests that the property be frozen. Additionally, the Governor in Council must be satisfied that:

• the person is a “politically exposed foreign person” related to the state in question;
• the state is experiencing “internal turmoil” or an “uncertain political situation”; and
• making the order would be in the “interest of international relations.”[46]

The Act defines a “politically exposed foreign person” as a current or former holder of one of the listed senior government positions or their close personal and business associates, including family members.[47]

In addition to the freezing or seizure of property, the Act allows for orders to restrict or prohibit related financial transactions as well as the provision of financial services.[48] Unless extended by the Governor in Council, orders cease to have effect five years after coming into force.[49]

The Act also provides an opportunity to apply for removal from an order or regulation. Persons subject to such measures can apply to the Minister of Foreign Affairs and the Minister must determine if reasonable grounds exist to recommend removal, but only on the basis that the applicant does not meet the definition of a “politically exposed foreign person.”[50]

1. Related Legislation

The Freezing Assets of Corrupt Foreign Officials Act is intended to implement temporary measures protecting assets believed to be the proceeds of foreign corruption so that the affected state can seek their eventual recovery under the Mutual Legal Assistance in Criminal Matters Act. The Mutual Legal Assistance in Criminal Matters Act implements the Government of Canada’s obligations under the mutual legal assistance treaties it has signed and allows Canadian authorities to provide assistance to foreign law enforcement agencies in the investigation and prosecution of crimes.[51] Where allowed for under the relevant treaty or administrative agreement, the Act provides the government with authority to enforce orders issued by a competent court in a foreign jurisdiction for the seizure, restraint or forfeiture of property in Canada.[52] For seizure or restraint of property, the Attorney General of Canada must be satisfied that the person has been charged with an offence in the foreign jurisdiction which would be an indictable offence had it been committed in Canada.[53] For forfeiture, a conviction not subject to appeal is required for the related offence, and the order must not meet any of the listed grounds for refusal.[54] Forfeited assets can only be returned to a foreign state under the terms of a bilateral sharing agreement, “which allows the Contracting Parties to share between themselves assets that have been forfeited as criminal proceeds or offence-related property.” Canada currently has 16 such asset sharing agreements in force.[55]

In addition, domestic criminal charges may be possible in relation to proceeds of foreign corruption located in Canada. Both the offences of laundering proceeds of crime, under s. 462.3(1) of the Criminal Code, and possession of property obtained by crime, under s. 354(1) of the Code, contain an extraterritorial provision. The law is applicable even if the crime in question was committed outside Canada so long as the underlying act would be considered an indictable offence had it been committed in Canada.[56] Where a conviction is obtained, the property could then be subject to forfeiture as domestic proceeds of crime.[57] The potential also exists for foreign states to seek the recovery of their misappropriated assets through civil court where allowed by the civil forfeiture laws in the province where the property is located.[58] The Freezing Assets of Corrupt Foreign Officials Act allows the Government of Canada to act quickly to preserve assets believed to be the proceeds of foreign corruption, while allowing time for these complementary legal actions to occur.

2. Regulations

Since it was introduced in 2011, two regulations have been enacted under the Freezing Assets of Corrupt Foreign Officials Act – one in relation to Egypt and Tunisia in March 2011 and one in relation to Ukraine in March 2014.[59] The Egypt and Tunisia regulations have been amended five times, initially listing 48 politically exposed foreign persons for Tunisia and 21 for Egypt.[60] In total, 123 such individuals from Tunisia and 148 from Egypt were listed over the course of subsequent amendments.[61] However, the current regulations list only eight politically exposed foreign persons for Tunisia and no longer applies to Egypt;[62] those regulations were extended for a further five years in March 2016.[63] To date, regulations for Ukraine have not been amended and currently list 18 individuals.[64]