Listed terrorist group takes over energy infrastructure
The Security Council of the United Nations today called on its members not to engage in financial or commercial transactions with listed terrorist groups, in particular involving the sale of oil from Syria or Iraq that would involve the financing of terrorism.
Anti-terrorism and sanctions laws
In Canada, the relevant prohibitive legislation that applies to all persons, entities, trusts, partnerships, funds, firms, companies, foundations and joint ventures in Canada and all Canadians outside of Canada in respect of transactions involving Iran, Lebabon, Iraq, Syria and countries that trade in terrorist-controlled energy, is the United Nations Act and the Special Economic Measures Act. Although each regulation under those statues is slightly different, they generally prohibit providing funds to listed persons, terrorists or entities, or sanctioned persons or entities; dealing in their property, even indirectly; or providing any financial or other services, however indirectly.
Funds and entities must continually confirm presence of prohibited funds
Pursuant to the Criminal Code of Canada, on a continual basis, banks, trust companies, insurance companies, credit unions, investment firms and securities brokers must regularly and continually check their funds, accounts, holdings and other assets and property to ensure they do not have prohibited property (i.e., funds belonging to prohibited persons or entities, or that is controlled by or on behalf of prohibited persons or entities). If prohibited property is located, it must be immediately frozen.
Determining what is prohibited property and who indirectly controls it when dealing with beneficial ownership structures overseas is significantly legally complex, and failure to comply is an offence carrying a term of incarceration upon conviction of up to ten years.
OFAC applies to Canadian funds and entities with US connections
Compounding the complexity is the fact that US sanctions and anti-terrorism lists apply to many Canadian companies, funds, joint ventures, banks and persons who have ties to the US. A partnership incorporated or doing business in Canada that is “owned or controlled” by a company in the US, or a US shareholder or even a US person is subject to US sanctions laws. US courts have interpreted the phrase “owned or controlled” broadly (see the US appeal judgment of two Canadians who ran a company called Purolite who were indicted for sales to Cuba through a UK company that had a US branch, who later sued their law firm for sanctions advice over the precise issue of “owned or controlled”).
ISIS may earn $100 million per month on oil infrastructure
The move from the UN Security Council is in response to the Islamic State of Iraq and Syria (“ISIS“), taking over the pipelines, oilfields and critical infrastructures in Syria and Iraq and exporting oil. Taking over energy fields and infrastructure is important for terrorist groups because they need continual revenue streams to establish their own state and be in control of their own economy to continue the war and safeguard territories they have already overtaken by force.
As of today’s date, Iraqi officials have stated that the ISIS is earning $1 million per day in profits from Iraqi oil fields. And according to the US State Department, terrorists can bring in more than $12 million per month in one Iraqi city alone from extortion, imposed taxes and smuggling operations.