Economic sanctions

How BC law treats it

Sanctions are federal law and apply equally in British Columbia. The Special Economic Measures Act, SC 1992, c 17 allows Canada to impose its own sanctions in response to grave breaches of international peace, gross human rights violations or significant corruption. The United Nations Act, RSC 1985, c U-2 implements sanctions adopted by the UN Security Council. The Justice for Victims of Corrupt Foreign Officials Act, SC 2017, c 21 targets foreign officials responsible for human rights abuses or corruption. Each sanctions regime is set out in regulations that list designated persons and describe prohibited activities. Typical prohibitions include dealing in any property of a listed person, entering into transactions with them, providing financial services to them, and making goods available to them. Some regimes also ban specific imports, exports or services. Persons in Canada must report property they believe belongs to a listed person. Global Affairs Canada maintains the Consolidated Canadian Autonomous Sanctions List and can issue permits for otherwise prohibited activity. Wilful contravention is a criminal offence with fines and imprisonment. Separately, money services businesses, including dealers in virtual currency, must register with FINTRAC and meet client identification and reporting obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, SC 2000, c 17, which overlap with sanctions screening.

What it means for your business

Fintech platforms, crypto businesses, exporters and companies with foreign investors or customers must screen counterparties against Canadian sanctions lists. A single prohibited payment or transfer can lead to prosecution, frozen funds and banking relationships ending. Sanctions exposure is also a standard M&A due diligence item: a buyer inherits the target's history, and lenders and investors routinely require sanctions representations in financing documents. Example: A Vancouver crypto exchange onboards a new corporate customer. Its screening shows the customer's beneficial owner is a designated person under a Special Economic Measures Act regulation, so the exchange must refuse the transaction and report the property it holds.

Risks and common mistakes

Screening only the customer's name and not its beneficial owners and controllers. Assuming that compliance with US OFAC lists satisfies Canadian sanctions law. Failing to rescreen existing customers when new designations are added. Proceeding with a prohibited transaction before Global Affairs Canada has granted a permit. Leaving sanctions questions out of M&A due diligence and financing representations.