The Intersection of Anti-Corruption and Export
Enforcement: Addressing the Importance of
Cross-Discipline Compliance
The Canadian Institute’s Practical Guide to Anti-Corruption
Compliance
June 23, 2015
John W. Boscariol
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Introduction
¬ overview of Canadian trade controls –
connections between anti-corruption and
sanctions/export controls
¬ impact of non-compliance
¬ expanding CFPOA enforcement
¬ economic sanctions and export controls
¬ interaction of Canadian and US regimes
John W. Boscariol, International Trade and Investment Law, McCarthy Tétrault LLP / mccarthy.ca
Canada’s Trade Controls
¬ export and technology transfer controls
¬ Export Control List & A Guide to Canada’s Export Controls
¬ Area Control List (Belarus and North Korea)
¬ domestic industrial security
¬ Defence Production Act, Controlled Goods Program
¬ economic sanctions
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Special Economic Measures Act
United Nations Act
Criminal Code
Freezing Assets of Corrupt Foreign Officials Act
¬ other trade control legislation
¬ blocking orders (Cuba)
¬ anti-boycott policy and discriminatory business practices laws
¬ anti-bribery law (Corruption of Foreign Public Officials Act and FCPA)
¬ compliance convergence
John W. Boscariol, International Trade and Investment Law, McCarthy Tétrault LLP / mccarthy.ca
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Why Should We Care About NonCompliance?
¬ consequences of non-compliance
¬ significant “hard costs” of non-compliance
¬ criminal penalties
¬ significant monetary fines
¬ forfeit proceeds
¬ imprisonment – 14 years
¬ operational costs
¬ internal investigation
¬ executive and employee resources
¬ external legal counsel and experts, forensic accountants
¬ probation costs
John W. Boscariol, International Trade and Investment Law, McCarthy Tétrault LLP / mccarthy.ca
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Why Should We Care About NonCompliance?
¬ hard costs can be eclipsed by
¬ reputational costs
¬ impact on share price (Niko Resources, SNC-Lavalin)
¬ intrinsic value of company as M&A target
¬ goodwill and reputation – attractiveness to potential business
partners
¬ possible debarment – Government of Canada (new Integrity
Framework), Export Development Canada, World Bank, United
Nations
¬ multi-million dollar class actions and shareholder derivative
claims
¬ US FCPA experience
John W. Boscariol, International Trade and Investment Law, McCarthy Tétrault LLP / mccarthy.ca
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Expanding CFPOA Enforcement
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four convictions
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Hydro Kleen (January 10, 2005) - $25,000 (plea)
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Niko Resources (June 11, 2011) - $9.5 million plus probation (plea)
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Griffiths Energy (January 25, 2013) - $10.35 million (plea)
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Nazir Karigar – Cryptometrics (August 15, 2013) – 3 yrs in jail (trial)
further charges laid, prosecution proceeding
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SNC Lavalin (Libya)
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7 SNC Lavalin ex-employees
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3 foreign nationals in connection with Cryptometrics (Karigar)
over 35 ongoing investigations
John W. Boscariol, International Trade and Investment Law, McCarthy Tétrault LLP / mccarthy.ca
Expanding CFPOA Enforcement
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focus on individuals – officers, directors, employees
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new enforcement opportunities from June 19, 2013 CFPOA amendments,
including
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nationality jurisdiction
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books and records offences – for purposes of bribery or concealing bribery
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increased jail time from 5 to 14 years
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planned removal of facilitation payment exemption
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PWGSC Integrity Framework (March 1, 2014)
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Enhanced Corporate Social Responsibility Strategy to Strengthen Canada’s
Extractive Sector Abroad (November 14, 2014)
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Extractive Sector Transparency Measures Act (December 16, 2014)
¬
rise of the whistleblower – OSC Staff Consultation Paper 15-401: Proposed
Framework for an OSC Whistleblower Program (February 2, 2015)
John W. Boscariol, International Trade and Investment Law, McCarthy Tétrault LLP / mccarthy.ca
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Growing Impact of Economic Sanctions
and Export Controls
¬ what’s driving this?
¬ since 9/11, new emphasis of Canadian authorities on security (vs.
government revenues)
¬ more recently, increased penalties, enforcement by U.S.
authorities
¬ pressure from U.S. affiliates, suppliers and customers (and U.S.
government)
¬ but Canada now a “sanctions hawk”
¬ Canadian companies are now more concerned than ever
before about whom they deal with, where their products and
technology end up, and who uses their services
¬ financings, banking relationships, mergers and acquisitions
John W. Boscariol, International Trade and Investment Law, McCarthy Tétrault LLP / mccarthy.ca
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United Nations Act Regulations
¬ targeted countries and groups
¬ Al-Qaida and Taliban
¬ Côte d’Ivorie
¬ Democratic Republic
of Congo
¬ Iran
¬ Sudan
¬ Yemen
¬ Central African Republic
¬ Lebanon
¬ Iraq
¬ Somalia
¬ Eritrea
¬ terrorists and terrorist
organizations
¬ Liberia
¬ North Korea
¬ Libya
John W. Boscariol, International Trade and Investment Law, McCarthy Tétrault LLP / mccarthy.ca
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Special Economic Measures Act Regulations
¬ targeted countries
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Iran
Syria
Burma
Zimbabwe
North Korea
Ukraine
Russia
South Sudan
John W. Boscariol, International Trade and Investment Law, McCarthy Tétrault LLP / mccarthy.ca
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Freezing Assets of Corrupt Foreign Officials
Regulations
¬ politically exposed persons
¬ Egypt
¬ Tunisia
¬ Ukraine
John W. Boscariol, International Trade and Investment Law, McCarthy Tétrault LLP / mccarthy.ca
Key Issues in Interaction With US and
Other Regimes
¬ screening against Canadian lists
¬ lists of over 2,000 designated persons – individuals, companies,
organizations
¬ Special Economic Measures Act regulations
¬ United Nations Act regulations
¬ Freezing Assets of Corrupt Foreign Officials Act regulations
¬ Criminal Code anti-terrorism provisions
¬ any involvement in the transaction – purchaser, ultimate
user, vendor, creditor, broker, service provider
¬ applies regardless of where Canadian company is doing
business
¬ applies to non-Canadians in Canada
John W. Boscariol, International Trade and Investment Law, McCarthy Tétrault LLP / mccarthy.ca
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Key Issues in Interaction With US and
Other Regimes
¬ Canadian measures may be broader than those of
the United States and other countries
¬ Russia / Ukraine – 273 designated persons
¬ Belarus, Burma, Libya, North Korea
¬ Iran
¬ importance of “home grown” compliance policies
John W. Boscariol, International Trade and Investment Law, McCarthy Tétrault LLP / mccarthy.ca
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Key Issues in Interaction With US and
Other Regimes
¬ Canadian measures can be in direct conflict with
those of the United States
¬ Foreign Extraterritorial Measures Act “blocking” order
in respect of US trade embargo of Cuba
¬ obligation to notify Canadian Attorney General of certain
communications
¬ prohibition against complying with certain U.S. trade
embargo measures
¬ criminal penalty exposure: up to $1.5 million and/or 5
years imprisonment
¬ provincial business discriminatory practices legislation
John W. Boscariol, International Trade and Investment Law, McCarthy Tétrault LLP / mccarthy.ca
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Key Issues in Interaction With US and
Other Regimes
¬ Canadian measures can be in direct conflict with
those of the United States
¬ Foreign Extraterritorial Measures Act “blocking” order
in respect of US trade embargo of Cuba
¬ there has never been a successful or an attempted
prosecution under the Canadian blocking order
¬ no case law or administrative or prosecutorial guidelines
¬ no guidance from the Canadian government
¬ numerous investigations - American Express, Eli-Lilly, Heinz,
Red Lobster, Wal-Mart and others
¬ Wal-Mart’s Cuban pajamas
¬ nationalistic sensitivities
John W. Boscariol, International Trade and Investment Law, McCarthy Tétrault LLP / mccarthy.ca
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Key Issues in Interaction With US and
Other Regimes
¬ Canadian measures can be in direct conflict with
those of the United States
¬ Canadian human rights / employment laws and
potential conflict with
¬ US controls under International Traffic in Arms
Regulations – Department of Defense Trade Controls
(US State)
¬ US Export Administration Regulations (CCL) Department of Commerce
John W. Boscariol, International Trade and Investment Law, McCarthy Tétrault LLP / mccarthy.ca
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Key Issues in Interaction With US and
Other Regimes
¬ significant differences in administration and
guidance on economic sanctions
¬ no FAQs, guidelines, rulings, opinions
¬ no consolidated lists
¬ no voluntary disclosure process
¬ no deferred or non-prosecution agreements
¬ reporting to DFATD (sanctions)
¬ mandatory for property of designated persons
¬ when DFATD becomes aware of potential
violation, immediate notification to RCMP
John W. Boscariol, International Trade and Investment Law, McCarthy Tétrault LLP / mccarthy.ca
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Implications for Compliance and
Enforcement
¬ internal compliance programs must be “home grown”
¬ training and internal communications
¬ screening process and providers
¬ coordination of internal investigations and
disclosures involving multiple jurisdictions
John W. Boscariol, International Trade and Investment Law, McCarthy Tétrault LLP / mccarthy.ca
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Anti-Corruption Challenges:
Implementation
¬ RCMP, courts, Crown emphasizing importance of
¬ having more than a paper policy
¬ risk assessment
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compliance policy
internal controls
transactional due diligence
evaluation and monitoring of third parties
¬ documented evidence of implementation
¬ applies to corruption of foreign and domestic officials
John W. Boscariol, International Trade and Investment Law, McCarthy Tétrault LLP / mccarthy.ca
What Is Our Risk?
¬ risk assessment factors include
¬ what are our government touch-points?
¬ in what countries are we active?
¬ to what extent do we use third parties?
¬ what are our existing compliance and ethics
policies?
¬ how do we compensate/incentivize employees?
John W. Boscariol, International Trade and Investment Law, McCarthy Tétrault LLP / mccarthy.ca
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John W. Boscariol
McCarthy Tétrault LLP
International Trade and Investment Law
www.mccarthy.ca
Direct Line: 416-601-7835
E-mail: jboscariol@mccarthy.ca
LinkedIn: www.linkedin.com/in/johnboscarioltradelaw
Twitter: www.twitter.com/tradelawyer
John W. Boscariol, International Trade and Investment Law, McCarthy Tétrault LLP / mccarthy.ca