The Justice for Victims of Corrupt Foreign Officials Act
On October 4, 2017, the House of Commons has unanimously voted to pass Bill S-226, the Justice for Victims of Corrupt Foreign Officials Act (the “Act”), that is commonly known as the Magnitsky law. The law is named after Sergey Magnitsky, a Moscow lawyer who uncovered a large tax fraud and was detained and died in a Moscow prison on November 16, 2009. Bill S-226 received Royal Assent on October 18, 2017.
The Act imposes various sanctions, including freezing of assets and travel bans, on foreign nationals responsible for gross violation of internationally recognized human rights and significant corruption. Among other things, the Act permits issuing orders against anyone in or outside Canada who are dealing, directly or indirectly, with the property or financial affairs of the foreign national that is the subject of an order or regulation under the Act.
On November 3, 2017, regulations under the Act were enforced combating the activities of 52 foreign nationals who are believed to have been engaged in gross human rights violations or significant corruption activities. The majority of the named individuals are the nationals of the Russian Federation, in addition to the nationals of Venezuela and South Sudan. The Russian government has not welcomed the law. It retaliated with its own list banning the entry of various Canadians into Russia. As part of the retaliatory measures, Russia’s officials stated that the government viewed the law as yet another attempt to exert pressure on Russia.
On October 31, 2017, the Government of Canada eliminated the facilitation payment exception from the Corruption of Foreign Public Officials Act (the “CFPOA”). The elimination of this exception was the final component of significant and high profile amendments to the CFPOA enacted over four years ago, which also:
- Expanded the jurisdiction for corruption offences based on nationality.
- Increased the maximum penalty for an individual convicted under the legislation to 14 years.
- Created a books and records offence.
- Provided the RCMP with exclusive authority to lay charges under the CFPOA.
The government delayed implementation of the provision of the 2013 amendments removing the facilitation payment exception from the CFPOA to provide companies with sufficient time to modify business practices and adapt their internal controls. Despite the length of notice, it is critical for companies conducting business abroad to be mindful of this major change to the legislation.
Government of Canada Launches Consultations
More than two years ago, in the context of its procurement modernization initiative designed to ensure that it was doing business with ethical suppliers, the Government of Canada introduced a government-wide “Integrity Regime”. The Government is now seeking to review whether its objectives have been achieved. On September 25, 2017, it launched a consultation to seek stakeholders’ views on its “Integrity Regime” and took the opportunity to seek the public’s opinion on a potential deferred prosecution agreement (DPA) regime as well. The Government has published a Discussion paper entitled “Expanding Canada’s Toolkit to Address Corporate Wrongdoing: the Deferred Prosecution Agreement Stream Discussion Guide in relation to the consultation process. Stakeholders may provide their responses and comments until November 17, 2017.
A DPA regime is like a diversion program that provides an alternative to criminal proceedings. Instead of going to trial, the prosecutor can make an oﬀer to the accused to hold off on criminal charges, while the person enters into a program designed to rehabilitate them. If the accused does not comply with the terms of the agreement, the prosecution is resumed. In Canada, diversion programs are currently made available to individuals only. A DPA regime is a diversion program made available to corporations. It is often – but not always – available only for speciﬁc oﬀences related to economic crimes.