0. 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

1. 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

2. Canada’s Trade Controls2
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

3. 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

4. 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

5. Expanding CFPOA Enforcement5
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

6. Expanding CFPOA Enforcement6
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 : Proposed Framework for an OSC Whistleblower Program (February 2, 2015)
John W. Boscariol, International Trade and Investment Law, McCarthy Tétrault LLP / mccarthy.ca

7. Growing Impact of Economic Sanctions and Export Controls7
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

8. United Nations Act Regulations8
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

9. Special Economic Measures Act Regulations9
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

10. Freezing Assets of Corrupt Foreign Officials Regulations10
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

11. Key Issues in Interaction With US and Other Regimes11
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

12. Key Issues in Interaction With US and Other Regimes12
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

13. Key Issues in Interaction With US and Other Regimes13
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

14. Key Issues in Interaction With US and Other Regimes14
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

15. Key Issues in Interaction With US and Other Regimes15
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

16. Key Issues in Interaction With US and Other Regimes16
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

17. Implications for Compliance and Enforcement17
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

18. Anti-Corruption Challenges: Implementation18
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

19. What Is Our Risk? risk assessment factors include19
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 Direct Line:  LinkedIn: Twitter:
John W. Boscariol, International Trade and Investment Law, McCarthy Tétrault LLP / mccarthy.ca