Thank you for inviting the Canadian Bankers Association ("CBA") and the Royal Bank of Canada ("RBC") to appear this morning to participate in the Committee’s review of Canada’s sanction regime (the "Regime"). My name is Angelina Mason and I am the General Counsel and Senior Vice President, Legal & Risk with the CBA. I am joined today by Stephen Alsace, Global Head, Economic Sanctions with the Royal Bank of Canada.
Recent Developments – a Promising Foundation
Recent proposed legislative changes and federal budgetary commitments in the sanctions space highlight the federal government’s continued commitment to the laudable policy goals that drive the Regime – safeguarding of human rights, combatting significant corruption and preserving international peace and security.
Banks operating in Canada have invested heavily in their efforts to comply with, and thus enable, the evolving Regime. Our members work extensively with Global Affairs Canada (“GAC”) and the Royal Canadian Mounted Police (“RCMP”) to ensure broad compliance with sanctions requirements. They also have in place systems and procedures for managing sanctions risk and conduct active screening against sanctions lists.
The government provides valuable support for this work. We appreciate GAC’s Consolidated Canadian Autonomous Sanctions List, as well as the increasing willingness of GAC officials to engage with stakeholders, including our members, on sanctions matters, and perform public outreach. Further, the federal government’s announced investment of $76 million in GAC’s development of a devoted sanctions bureau and additional support to the RCMP is an important initial step towards ensuring the growing Regime is properly resourced to function effectively and efficiently.
Continued Evolution of the Regime
Given their role within the global financial system, our members have observed several ways in which Canada’s sanctions regime should continue to evolve. Primarily, as the Regime continues to evolve and become more complex (including the recent proposal of deemed control provisions that contain highly subjective elements in Bill C-47), there is a need for written, publicly available guidance.
This need is well understood. It was highlighted by this Committee’s 2017 report, as well as in the Senate Standing Committee on Foreign Affairs and International Trade’s recently published report detailing its review of the Regime (the "Senate Committee Report"). It is also common practice for sanctions authorities in other jurisdictions, such as the United Kingdom and the United States, and in other regulatory contexts within Canada.
To address this need and align with international and domestic best practices, we encourage GAC, to develop this written guidance in consultation with stakeholders. Guidance will provide clarity and transparency for stakeholders – especially those that lack or cannot afford access to expensive resources to support their activities – mitigating the operational and regulatory risks that may flow from regulatory opacity when doing business globally. It will also help to ensure the Sergei Magnitsky Law and SEMA are implemented as intended, and their desired policy goals are efficiently and effectively achieved.
Along with written guidance, and as endorsed by the Senate Committee Report, the government should also work to educate the Canadian public on the nature, rationale and impact of Canada’s sanction laws. In the current context, private sector entities, like our members, are often required to address the questions and concerns of their clients. To ensure the public receives accurate, up-to-date information, we suggest the federal government would be best placed to answer these questions, as our members, and other stakeholders, are still working to understand the impact of the law on their businesses.
There is also a current opportunity to improve the efficiency and effectiveness of sanctions reporting. More specifically, our members currently provide sanctions reports to various government agencies. The government’s recent proposed amendments in Bill C-47 to create additional reporting requirements to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) opens the door for meaningful engagement between the regulator and industry to refine reporting requirements to ensure they meet the policy intent of the legislative amendments.
Operationally, the permit system also requires the federal government’s attention. We understand that in other jurisdictions there are streamlined mechanisms for seeking permits or certificates to authorize certain specified activities or transactions that are otherwise prohibited. For example, the United States has provisions for general licenses that authorize particular types of transactions for a class of persons without the need to apply for a specific license. This general approach has not been used in Canada, although it is possible under the law. Given the lack of guidance and clarity in the law, we understand GAC has been flooded by permit applications. It appears this increased volume has created a backlog of applications, leaving Canadians waiting with unclear timelines for formal responses. These permits are not always sought by large corporations. Often, it is everyday Canadians seeking these permits, such as retail banking clients attempting to remit funds to family members in jurisdictions impacted by sanctions., We suggest GAC align with the approach taken in foreign jurisdictions. Further, we also recommend GAC hire additional resources to focus specifically on license applications, and ideally sets out a mandate to complete all license requests within a reasonable period (e.g., 30 days).
Finally, as the Senate Report recommends, sufficient investment in GAC’s sanctions bureau and other federal partners involved in the Regime is needed. We appreciate and support the federal government’s previous budgetary commitments to GAC and understand the government is considering providing additional government agencies with a role in the sanctions space. Given the complexity of the Regime, it is critical that any government department or agency involved in the Regime, including GAC, is properly resourced and that its staff receive extensive training on, and have sufficient knowledge of, this highly technical area of the law. This approach will help to ensure oversight is tailored to and reflects the uniqueness of the Regime; that it is not conflated with that of other legislative areas, such as Canada’s anti-money laundering and anti- terrorist financing laws; and that it helps to effectively and efficiently achieve the government’s core policy goals in this space.
Thank you, and we look forward to your questions.