Canada makes its first corporate prosecution for economic sanctions violations

By Christine Duhaime | April 24th, 2014

Although Canadian economic sanctions have been in place for years, until now Canada has never prosecuted any company for sanctions violations. That changed earlier this month when Lee Specialities Ltd., a Calgary based company, was charged with violating Canadian (and UN) economic sanctions by exporting goods to Iran that could be used for nuclear devices.

The RCMP investigated the company after customs officers at Calgary International Airport intercepted a shipment of Viton O-rings in May 2011 destined for Iran from the company.

Under the Special Economic Measures Act (“SEMA“), all Canadians, Canadian entities (including trusts, funds, partnerships and corporate entities) and persons in Canada are prohibited from certain activities in relation to Iran and Iranians, including providing goods, financial services or insurance, facilitating a transaction or dealing in real or personal property. They are also prohibited from exporting, selling, supplying or shipping goods to Iran or to certain persons in Iran, or from providing technical data related to petrochemicals, ships, gas, and arms. It is of course, also prohibited to invest in Iran or to provide financing or banking/correspondent relationship services for Iran or Iranian entities.

Banks, credit unions, trust companies, insurance companies, MSBs, certain Bitcoin businesses and securities dealers, fund managers and any type of seller of securities must determine on a continuing basis whether they have prohibited property of a designated Iranian person or entity in their possession or control (e.g., bank account, securities, funds, Bitcoin, insurance policy, derivatives, mortgages, lines of credit, credit cards, etc.) and if so, disclose it to the RCMP forthwith and take steps to freeze prohibited property.

Lee Specialties Ltd. allegedly said that the shipment of prohibited items was intended to be sent to Dubai, not Iran, but was for a corporate recipient that had the same or an identical name, and an Iranian address was used in error by its accounting people. It’s unclear how it obtained an Iranian address from which to process a P.O., create a shipping label and arrange for shipping to Iran and why it had the address of an Iranian company in its accounting system in any event, given the prohibitions set out in the sanctions regulations.

The company pleaded guilty under SEMA and was fined $90,000.

Share this Post:
  • Facebook
  • Twitter
  • LinkedIn
  • Print
  • email

Comments are closed.