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

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 2 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 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 John W. Boscariol (jboscariol@mccarthy.ca)

Why Should We Care About Non-Compliance? 3 Why Should We Care About Non-Compliance? 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

Why Should We Care About Non-Compliance? 4 Why Should We Care About Non-Compliance? 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

Expanding CFPOA Enforcement 5 Expanding CFPOA Enforcement four convictions Hydro Kleen (January 10, 2005) - $25,000 (plea) Niko Resources (June 11, 2011) - $9.5 million plus probation (plea) Griffiths Energy (January 25, 2013) - $10.35 million (plea) Nazir Karigar – Cryptometrics (August 15, 2013) – 3 yrs in jail (trial) further charges laid, prosecution proceeding SNC Lavalin (Libya) 7 SNC Lavalin ex-employees 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 6 Expanding CFPOA Enforcement focus on individuals – officers, directors, employees new enforcement opportunities from June 19, 2013 CFPOA amendments, including nationality jurisdiction books and records offences – for purposes of bribery or concealing bribery increased jail time from 5 to 14 years planned removal of facilitation payment exemption PWGSC Integrity Framework (March 1, 2014) Enhanced Corporate Social Responsibility Strategy to Strengthen Canada’s Extractive Sector Abroad (November 14, 2014) 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

Growing Impact of Economic Sanctions and Export Controls 7 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 John W. Boscariol (jboscariol@mccarthy.ca)

United Nations Act Regulations 8 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 John W. Boscariol (jboscariol@mccarthy.ca)

Special Economic Measures Act Regulations 9 Special Economic Measures Act Regulations targeted countries Iran Syria Burma Zimbabwe North Korea Ukraine Russia South Sudan John W. Boscariol, International Trade and Investment Law, McCarthy Tétrault LLP / mccarthy.ca John W. Boscariol (jboscariol@mccarthy.ca)

Freezing Assets of Corrupt Foreign Officials Regulations 10 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 John W. Boscariol (jboscariol@mccarthy.ca)

Key Issues in Interaction With US and Other Regimes 11 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 John W. Boscariol (jboscariol@mccarthy.ca)

Key Issues in Interaction With US and Other Regimes 12 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 John W. Boscariol (jboscariol@mccarthy.ca)

Key Issues in Interaction With US and Other Regimes 13 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 John W. Boscariol (jboscariol@mccarthy.ca)

Key Issues in Interaction With US and Other Regimes 14 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 John W. Boscariol (jboscariol@mccarthy.ca)

Key Issues in Interaction With US and Other Regimes 15 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 John W. Boscariol (jboscariol@mccarthy.ca)

Key Issues in Interaction With US and Other Regimes 16 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 John W. Boscariol (jboscariol@mccarthy.ca)

Implications for Compliance and Enforcement 17 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 John W. Boscariol (jboscariol@mccarthy.ca)

Anti-Corruption Challenges: Implementation 18 Anti-Corruption Challenges: Implementation RCMP, courts, Crown emphasizing importance of having more than a paper policy risk assessment 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 19 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

20 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