Too little too late? GAC quietly updates sanctions FAQs

On March 22, Global Affairs Canada (GAC) quietly updated its Frequently Asked Questions page about Canadian sanctions. The trade bar has regularly advocated for more guidance from GAC on Canadian sanctions laws over the last two years, especially on ambiguous provisions such as the deemed ownership provision, which can lead to different or uncertain interpretations. This lack of guidance exposes Canadian companies to risk and overcompliance, and is striking when compared to the much more robust guidance provided by the Office of Foreign Assets Control in the United States and Office of Financial Sanctions Implementation in the United Kingdom. 

The update adds four new sections to the FAQ guidance that discuss:

• what happens when a person is designated, and contains broad information about what restrictions are imposed on sanctioned persons. 
• when a prohibition takes effect. Scenarios described in this section clarify that a company that entered into a contract with a sanctioned entity prior to that entity being sanctioned may accept goods from the sanctioned entity that were paid for prior to the sanctions being imposed, but may not pay for goods delivered prior to the sanctions being imposed where payment is due after the sanctions take effect. 
• dealings with subsidiaries of designated companies. In 2023, the Canadian government implemented a broad and unclear “deemed ownership” rule. In the new FAQs, GAC has indicated a non-designated entity’s property is owned or controlled by a designated person where the sanctioned entity “is known to exercise considerable influence over its strategic decision-making” regardless of the sanctioned entity’s legal control over the non-designated entity. 
• dealing with entities or third parties that themselves deal with designated persons. This section clarifies that dealings with third parties of any nationality or located in any jurisdiction that facilitate a transaction with a designated person is prohibited, regardless of whether the third party itself is subject to Canadian sanctions.

The updated FAQs are not law, but they are indicative of GAC’s interpretation of sanctions. While the updated FAQs provide limited insight, they largely confirm GAC’s broad interpretation of the provisions. Most notably, GAC has taken the position that the facilitation offence provisions cover dealings with non-Canadian third parties that are themselves dealing with designated entities. That said, key ambiguities and questions remain, including on the deemed ownership provisions. Without further guidance, a conservative approach to the sanctions provisions is prudent.