On April 11, 2023 the Canadian government unveiled amendments to the Special Economic Measures (Russia) Regulations (the "Russia Sanctions") and the Special Economic Measures (Belarus) Regulations (the "Belarus Sanctions"). These expanded sanctions were announced by Prime Minister Justin Trudeau at the same time as the government unveiled new aid being provided to Ukraine by Canada, and are part of Canada's comprehensive response to the illegal Russian invasion and occupation of Ukraine.
While these new sanctions were only announced on April 11, they went into force on the date they were registered, April 5, 2023.
Russia Sanctions
There are two elements to these latest amendments to the Russia Sanctions. The first is the listing of 14 additional individuals as Designated Persons. The Canadian government has identified these individuals as "financial elites" and "largely senior management at Russian companies that provide military services to Russia", including individuals with known ties to the Wagner Group. We note that the Wagner Group itself and its oligarch founder, Yevgeny Prigozhin, have been designated under the Russia Sanctions since February 24, 2022.
The second is the listing of 34 new entities as Designated Persons, described as "largely military technology and logistics companies." These entities generally fall into one of two categories: (1) entities linked to the Wagner Group; and (2) entities engaged in the aviation industry (airlines, maintenance companies, and manufacturers of high tech telecommunications equipment used in the industry).
A full list of the newly Designated Persons in the amendment to the Russia Sanctions can be found here.
The impact of these listings are far reaching. It is prohibited for persons in Canada or Canadians anywhere to have any dealings in property, wherever situated, that is owned, held or controlled by or on behalf of a Designated Person, enter into or facilitate any dealing related to such property, provide financial or related services in respect of a dealing in such property or to or for the benefit of a Designated Person, or make any goods available to a Designated Person.
Canadian companies as well as those with operations or other connections in Canada should review their dealings and update their sanctions screening protocols to ensure they are not engaged in any transactions involving any of these Designated Persons or their property. In particular, it is important to engage in through and complete due diligence to determine if there is control or ownership (direct or indirect) of any counterparties by one or more Designated Persons.
This is particularly important as the Canadian government, unlike its US, UK and EU counterparts, has not issued any official guidance on the meaning of "control" in this context or what level of Designated Person ownership in a non-listed entity is sufficient to trigger the application of prohibitions against dealings involving that entity. Based on recent Canadian jurisprudence on this question (see our client alert "Courts take on the "control question" under Canadian economic sanctions") and our experience in dealings with Global Affairs Canada on this question, it will be important to undertake a careful review of whether Designated Persons exercise de facto control over the property or dealings of the entity in question.
Unfortunately, there remains significant uncertainty on this point under Canadian sanctions laws, and in some cases it may be advisable to seek confirmation through the submission of a permit application to Global Affairs Canada.
Belarus Sanctions
The Canadian government has also amended the Belarus Sanctions "with the objective of closing gaps and limiting further sanctions evasion" by listing nine Belarussian financial institutions identified as "Russian and Belarussian-owned banks in Belarus". As noted above, the restrictions on dealings involving these Designated Persons or their property are significant.
The restrictions on transactions and facilitation are particularly important in the context of financial institutions. Global Affairs Canada has generally taken the view that the involvement of a Designated Person financial institution at any step in the transaction, even if only as an originating or intermediary bank for the movement of funds belonging to another party, can trigger the application of the sanctions prohibitions. It is therefore important to conduct comprehensive due diligence on all transactions to understand which financial institutions are involved and ensure that no party transmits any funds through or touching any sanctioned financial institutions.
A list of the newly added financial institutions can be found here.
Conclusions
As we have stated before, the situation in Ukraine continues to evolve and the Government of Canada has been one of the most strident supporters of Ukraine and opponents of the Russian regime. This is reflected in the broad prohibitions implemented under the Russia and Belarus Sanctions, measures that are often more aggressive than those of the United States, the United Kingdom, and the European Union. We anticipate that these amendments will not be the last, and that the list of Designated Persons and the scope of prohibited activities will continue to expand and must be monitored closely.
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