Canada is ill-equipped to enforce escalating sanctions against rogue states such as Russia, Iran and North Korea because of insufficient staff and a near-total absence of regulatory culture.
Those are just some of the shocking findings contained in a recently published evaluation report of Global Affairs Canada’s sanctions operations for the period spanning 2018 to 2024.
Critically, the redacted document sheds light on the department’s struggles to keep pace with the “exponential increase” in economic sanctions imposed by the federal government since Russia invaded Ukraine in February of 2022.
The assessment exposes yawning gaps in Global Affairs Canada’s capacity to manage the government’s increased use of sanctions, while also revealing growing tensions between Ottawa and domestic companies in sectors such as financial services, retail, aviation and natural resources.
“While Canada is at times at the forefront of putting new sanctions into place, it is behind its like-minded allies in terms of the constraints of its regulatory process, the resources dedicated to the sanctions function, the publishing of essential guidance and the use of general permits to try to minimize unintended impacts on Canadians,” the report states.
These problems were aggravated by the previous Trudeau government, which regularly announced new sanctions to generate positive press despite knowing that Global Affairs Canada lacked the resources and know-how to enforce them.
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The government received at least three warnings about those limitations in recent years. Those included reports by the House of Commons standing committee on foreign affairs and international development in 2017 and 2024, along with a separate study by a Senate committee in 2023.
It is impossible to overstate the misalignment of the government’s sanctions policies with the department’s inability to adequately enforce those evolving economic restrictions.
Global Affairs Canada is the linchpin for the federal sanctions program. Responsible for implementation and oversight, the department works with partners, including the Canada Border Services Agency and the RCMP, on enforcement. It also provides guidance to the private sector and co-ordinates with allies, including the United States, Britain and the European Union, on pressing issues such as weakening the Kremlin’s war efforts in Ukraine.
“Subsequent to February 2022, the overall lack of a regulatory culture, in addition to complex and unexpected responsibilities, resulted in a sanctions regulatory program that was not fit for purpose,” the report states.
“The dramatic increase in sanctions highlighted the insufficient resources, lack of appropriate systems, and an inadequate understanding of the expectations and requirements of a regulatory program across the department.”
Of chief concern, the report added, are inadequate resources to handle the increasing workload involving sanctions implementation, processing delisting applications, providing advice to businesses and issuing special permits.
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The staffing shortages are worrisome. Although 14 full-time roles were originally planned for the sanctions division back in 2018, some of those jobs were left vacant, the report said.
Personnel constraints on the geographic desks that provide expertise on high-risk countries and regions are even worse.
For instance, the Eastern Europe and Eurasia Division geographic desk, which has a remit that includes Russia, had four full-time equivalent employees (FTEs) doing sanctions-related work in 2022, according to the report.
The geographic desk responsible for Iran, meanwhile, had 3½ FTEs. Only 2½ FTEs were conducting sanctions-related work involving North Korea and only one was earmarked for Venezuela.
Tight deadlines, meanwhile, impaired Global Affairs Canada’s ability to identify unintended consequences for certain economic sectors, the report added.
“Some significant bans impacted Canadian companies in unforeseen ways, such as the challenges in importing key fertilizer components needed for Canadian agriculture.”
The report also concluded that Global Affairs Canada was providing insufficient “interpretive guidance” to companies.
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This resulting information vacuum hampered the ability of businesses to comply with sanctions, but it also made it challenging for authorities to prove that some companies were deliberately breaking the rules.
(Businesses associated with the adult-entertainment industry are using Canadian payment service providers to transfer money overseas and circumvent sanctions imposed against Russia, The Globe and Mail reported in July, citing a separate financial intelligence report.)
“In the absence of guidance, there is also a risk that Canadian courts may independently interpret the regulations’ intent, which may not align with the government’s objectives,” the report added.
It also noted that financial institutions have been “particularly vocal in requesting guidance” on how to appropriately handle the financial assets of sanctioned individuals and entities.
That’s because some law-abiding Canadians are finding themselves unexpectedly caught in the sanctions dragnet. Some require special permits to receive child support, pension or tuition payments from blacklisted Russian banks.
“Due to this lack of guidance, financial institutions stopped a greater number of transactions than expected, which caused additional unintended impacts on Canadian clients.”
Geopolitical developments this week – including Poland’s invocation of NATO Treaty Article 4 and U.S. President Donald Trump’s increased coupling of sanctions and trade – underscore the urgency for Canada to solve these long-standing problems.
Perhaps the Carney government will muster the political will to fix this mess. Indeed, the forthcoming federal budget is an opportune time to get the job done.