Canada-U.S. Blog Trade Lawyers Cyndee Todgham Cherniak and Susan K. Ross

What Should You Do When Canada Releases A New List of Persons Subject to Economic Sanctions and Asset Freezes?

Posted in Export Controls & Economic Sanctions, Exports

On September 22, 2017, Canada did something it has not done in a while – Canada imposed unilateral economic sanctions and asset freezes against 40 officials in the Venezuelan Maduro regime.  A new list of designated persons (Canada’s term for sanctioned persons) was publicly releases – the persons against whom the unilateral economic sanctions, trade restrictions and asset freezes would be imposed.  Canada does not have a consolidated list of designated persons – so, this is a brand new list to be reviewed, implemented and monitored.  Canada also has not released guidance to Canadian businesses setting out what is expected of them when a new list of designated persons is released – Canadian companies are just expected to know and get it right immediately.

Many Canadian companies (especially small and medium sized businesses) do not know what they should do or how they should start implementing the economic sanctions, trade restrictions and asset freezes.  We have put together a short list of recommendations (which does not cover every step required).

  1. Arrange an internal meeting and bring together of team of people within your organization to implement the required changes to your business activities necessary to implement the economic sanctions, trade restrictions and asset freezes. For example, bring is the person in charge of compliance, head of the sales department, the head of the purchasing department, legal department, someone for risk assessment and someone from human resources.  You may also wish to include someone from your IT department if computerized systems will need to be updated.
  2. Review the computer systems to determine if your sell any goods or services or provide technical data to the sanctioned country.  Yes, the economic sanctions, trade restrictions and asset freezes are against individuals – but all the individuals are from a particular country or are associated with a particular country.  Printout any list of names that you find as connected with the country (e.g., Venezuela).
  3. Check the list of names against the new list of designated persons and names in your system that closely resemble the names of designated persons – it is common for Canadian companies to misspell foreign names. Remove any names that are dissimilar from the list of designated persons and keep a list of matching and similar names (“Matched/Similar List of Names”).
  4. Review your customer lists for the Matched/Similar List of Names.  Take steps to stop doing business if you match a name to the designated persons list or a similar name. Inform the head of sales and the sales persons connected with the account that they can participate in no further business with the Matched/Similar Name.  However, be prepared to review any challenges by persons with the same or similar names.
  5. With respect to corporations who are customers/clients, check your records for a list of shareholders, directors, senior management, etc. Check the names of shareholders, directors and senior management against the new list of designated persons and identify names in your system that are the same as or closely resemble the names of designated persons. Take steps to stop doing business if you match a name to the designated persons list.  However, be prepared to review any challenges by persons with the same or similar names.
  6. With respect to partnerships who are customers/clients, check your records for a list of partners. Check the names of partners against the new list of designated persons and identify names in your system that are the same as or closely resemble the names of designated persons. Take steps to stop doing business if you match a name to the designated persons list.  However, be prepared to review any challenges by persons with the same or similar names.
  7. With respect to trusts who are customers/clients, check your records for a list of settlors and beneficiaries. Check the names of settlors and beneficiaries against the new list of designated persons and identify names in your system that are the same as or closely resemble the names of designated persons. Take steps to stop doing business if you match a name to the designated persons list.  However, be prepared to review any challenges by persons with the same or similar names.
  8. Check open purchase orders relating to the List of Names and any corporations, partnerships or trusts connected with the designated individuals (the “Expanded List of Names”). Check the new list of designated persons against the Expanded List of Names. Take steps to terminate the purchase order (that is not ship the goods or technical data or provide the services) if you match a name to the designated persons list.  However, be prepared to review any challenges by persons with the same or similar names.
  9. Check existing contracts relating to the Expanded List of Names. Check the new list of designated persons against the Expanded List of Names. Take steps to stop further activities under that contract if you match a name to the designated persons list.  However, be prepared to review any challenges by persons with the same or similar names.
  10. Check letters of credit and any financial arrangement relating to the Expanded List of Names. Check the new list of designated persons against the Expanded List of Names. Take steps to stop further issuance or credit or other financial dealing if you match a name to the designated persons list.  However, be prepared to review any challenges by persons with the same or similar names.
  11. If you hold property for clients (e.g., you are an investment portfolio manager), check for assets belonging to persons in the the Expanded List of Names. Take steps to stop any transfer of property to that individual, corporation, partnership or trust if you match a name to the designated persons list.  However, be prepared to review any challenges by persons with the same or similar names.
  12. Condominium corporations and real property management companies should for assets belonging to persons in the the Expanded List of Names. Take steps to stop any transfer of property to that individual, corporation, partnership or trust if you match a name to the designated persons list.  However, be prepared to review any challenges by persons with the same or similar names.
  13. If the designed persons are found in your computer systems (including corporations, partnerships and trusts associated with the designated persons), update for systems to flag those persons (and persons with similar names) so that you do not conduct any future business with those designated persons and that you freeze any existing assets.
  14. If the designed persons are not found in your computer systems (including corporations, partnerships and trusts associated with the designated persons), update for systems to flag designated persons (and persons with similar names) so that you do not conduct any business with any designated persons.
  15. Inform employees, agents, representatives, etc. that if they continue to do business with a designated person, they could cause the company to be subject to severe penalties and they may be subject to severe penalties under Canadian law.  Inform them that circumventing the sanctions could lead to their termination with the company. Opening a new account in the  name of a person not of the designated persons list in order to circumvent the computerized checks and balances should led to termination with cause.
  16. Update your End Use Certificates precedent. If you do not currently use End Use Certificates, consider implementing a process to require end-use certificates for transactions with persons in sanctioned countries.
  17. Update your Compliance Policies. If you do not currently do not have a Compliance Policy, consider preparing a Compliance Policy covering economic sanctions, export controls, trade restrictions and asset freezes.
  18. Update any online training or in-person training you provide to employees, agents, representatives or schedule a training session with employees, agents and representatives. If you do not currently do not have a training program, consider preparing a training program covering Canadian laws.
  19. If you have subsidiaries located in foreign jurisdictions (and in particular the region of the new sanctioned country), determine to what extent they are required to implement the new list of designated persons and repeat the above listed steps for each subsidiary.
  20. If this is all too much for you or you do not know how to get started, call a lawyer who knowledgeable about economic sanctions and internal compliance.

For more information or to arrange an export controls diagnostic, please contact Cyndee Todgham Cherniak at 416-307-4168 or at Cyndee@LexSage.com. If you would like assistance in managing the process, Heather Innes, formerly in-house counsel at a company with export controls processes, would be happy to assist. Please call Heather at 416-350-1234.