The International Investigations Review: Canada

Introduction

In Canada, corporate misconduct may attract criminal or regulatory liability. Criminal offences are provided for under Canada's Criminal Code and related federal statutes while regulatory offences are provided for under federal and provincial statutes regulating a wide variety of commercial and other activities. Unlike most criminal offences, regulatory offences are often 'strict liability' offences, meaning that an accused will be convicted upon proof of the unlawful act or omission, unless the accused establishes, on a balance of probabilities, that the accused took 'all reasonable care'.

Provincially employed Crown attorneys prosecute most federal criminal offences in Canada while the Public Prosecution Service of Canada (PPSC), the federal Crown, is primarily responsible for the prosecution of federal regulatory offences (and certain criminal offences). The prosecution of provincial regulatory offences is handled by provincial or municipal authorities, often including the staff of the regulatory authority mandated to oversee the industry or activity at issue.

Canada's police authorities are generally empowered to investigate both suspected criminal and regulatory offences arising from corporate misconduct. A variety of regulatory authorities are also empowered to investigate regulatory offences within their respective statutory mandates. Examples of such authorities include provincial securities regulators, tax authorities, authorities regulating public procurement, commissions intervening in matters of worker health and safety, privacy regulators, and industry-specific regulators. These regulatory authorities wield a range of administrative and criminal investigative powers, including the powers to compel the production of documents, conduct audits, and effect searches of corporate premises and seizures of files and electronic devices (subject to obtaining a search warrant).

Several regulatory authorities, including certain of those listed above, may, with or without judicial approval, summon a person to give evidence under oath in connection with an inquiry that pertains to the administration of their respective mandates. Under Canada's Competition Act, for example, a judge may order an oral examination, production, or written returns as part of an investigation by the Commissioner of Competition.

Many regulatory authorities also have the power to audit, inspect, and compel the production of documents. These powers generally include the ability to enter an establishment or building at any reasonable hour, use any computer or other property that is on the premises to access data, take a copy of books, registers or other documents, and require the disclosure of information. Such powers are subject to judicial oversight. The Canada Revenue Agency (CRA) may, for example, at all reasonable times, for any purpose related to the administration or enforcement of the Income Tax Act, inspect, audit or examine the books and records, other documents, and property of a taxpayer. The CRA may also, upon service of a notice, require that any person provide any information or documents within a reasonable time stipulated in the notice.

Regulatory and criminal investigative powers exercised against private persons are constrained by the Canadian Charter of Rights and Freedoms (the Charter), which protects civil liberties and ensures due process in criminal and regulatory proceedings. Relevant rights that are enjoyed by both natural and legal persons include the right against self-incrimination,2 the right to be secure against unreasonable search and seizure, and the right to be tried within a reasonable time.3 In the corporate context, the right against self-incrimination typically prevents law enforcement from compelling employees to submit to interviews.

In the landmark decision of R v. Jordan, the right to be tried within a reasonable time was interpreted to create a framework based on numerical ceilings beyond which a delay is presumptively unreasonable: 18 months for cases going to trial in provincial court and 30 months for cases going to trial in superior court or cases going to trial in provincial court after a preliminary inquiry. Delays attributable to the defence are subtracted from the ceiling. In the 2020 decision of Agence du revenu du Québec v. Morris, which involved tax-related charges, the Court of Quebec considered the Jordan principles in depth, and ultimately applied them to a white-collar prosecution. The Court decided that the net time calculated exceeded the 18-month presumptive ceiling and that the prosecution had infringed the right of the accused to be tried within a reasonable time. As a result, the Court ordered a stay of proceedings and charges. The Court held that, even in the context of a criminal case that involves considerable investigative work, 'the prosecution cannot claim that the complexity of a case is an exceptional circumstance that justifies exceeding the established ceiling where it has not adopted a prosecution plan allowing it to shorten delays as much as possible.'4

The protections afforded by the Charter, including the right against self-incrimination, are not absolute and may vary between the criminal and regulatory contexts. In certain circumstances a person may, for example, be compelled to answer questions or provide testimony. Canada's Customs Act provides that every person arriving in Canada must attend a customs office and answer any questions asked by a customs officer in the performance of their duties. In addition, pursuant to the Canada Evidence Act, a witness may be compelled to provide testimony in court; however, such testimony would then not be admissible against the witness in any criminal proceeding other than a prosecution for perjury.

Moreover, as was confirmed by the Supreme Court of Canada in November 2020, not all of the rights guaranteed by the Charter are afforded to corporations. In Québec (Attorney General) v. 9147-0732 Québec inc, the Supreme Court held that corporations cannot claim the protection of Section 12 of the Charter, which provides that '[e]veryone has the right not to be subjected to any cruel and unusual treatment or punishment.' The Supreme Court's decision should not, however, be read to suggest that the state can freely inflict excessive and disproportionate treatment or punishment on corporations. Corporations can still challenge a punishment that does not abide by the sentencing principles prescribed by the Criminal Code unless they are ordered to pay a mandatory minimum fine. Moreover, other than in the context of criminal proceedings, excessive and disproportionate treatment stemming from government action could be a basis for administrative judicial review.

Conduct

i Self-reporting

The immunity and leniency programmes under the Competition Act are the only immunity programmes in Canada for self-reporting. These programmes apply to anticompetitive activities prohibited by the Competition Act, such as conspiracies and bid-rigging,5 and are considered by Canada's Competition Bureau to be powerful means of uncovering criminal anticompetitive conduct that otherwise would be difficult to detect.6

Under these programmes, the Competition Bureau may investigate any alleged wrongdoing and make recommendations to the PPSC to grant either immunity or leniency.7 Immunity is considered an extraordinary grant and results in the PPSC forgoing prosecution. It may be granted only to the first implicated party to come forward, in circumstances where the Bureau is unaware of an offence and the applicant is the first to disclose all of its elements or where the Bureau was aware of the offence but had not yet gathered sufficient evidence to refer it to the PPSC. Leniency applications involve a discretionary recommendation to reduce penalties to be imposed by the court upon conviction, and may be granted in more varied circumstances before the Bureau refers a matter to the PPSC.

In September 2018, in the wake of several significant prosecutorial defeats experienced by the Competition Bureau,8 the Bureau released a revised version of the programmes that imposes more onerous cooperation and disclosure obligations for applicants. Pursuant to the reforms, the Bureau can, for example, record witness interviews and require more comprehensive disclosures. The programmes also now include an 'interim' stage during which an applicant obtains only conditional immunity until the PPSC is satisfied that the applicant's cooperation is no longer required.9

The reforms to the programmes also eliminated automatic coverage for all directors, officers and employees of companies receiving immunity or leniency.10 As a result, individuals wishing to benefit from the programmes will need to demonstrate their knowledge of, or participation in, the alleged conduct and a willingness to cooperate with the Competition Bureau.

The reforms also altered the Bureau's approach to fine reductions under the leniency programme. Prior to the reforms, the scale of fine reduction was tied directly to the order in which applicants came forward. Thus, the first applicant would be eligible to receive a fine reduction of 50 per cent, the second would be eligible to receive a fine reduction of 30 per cent, and reductions for subsequent applicants would be determined on a case-by-case basis.11 Under the new leniency programme, fine reductions are linked to the value of the applicant's cooperation with the Competition Bureau, including a consideration of the timing of the application, speed of disclosure, and relevance of any evidence provided. A later applicant therefore may now receive a greater fine reduction if it provides more valuable evidence on a timely basis.

In March 2019, a new Commissioner of Competition was appointed in Canada for a five-year term.12 The new Commissioner previously served as the head of the Competition Bureau's Criminal Matters Branch and has taken an aggressive position concerning enforcement.

Although the Bureau's programmes have historically been among its most potent tools for detecting cartel offences, the number of immunity and leniency applications has declined significantly in recent years. For example, in the latest full fiscal year for which data is available (1 April 2020 through 30 March 2021), the Bureau received only four immunity applications and no leniency applications (as compared to 31 immunity and 12 leniency applications in 2015, and 20 immunity and 17 leniency applications in 2014). Between 1 April 2021 and 30 September 2021, one additional application for immunity was made, but no applications for leniency were received by the Bureau.

One of the main causes for the decline in applications is likely the reforms discussed above, which make participation less attractive by extending the time before a final decision on granting immunity is made, eliminating automatic coverage for directors, officers and employees, and making leniency credits (i.e., the reduction of fines) dependent on the Bureau's subjective assessment of the value of cooperation.

Another important factor is that grants of immunity or leniency do not protect parties from follow-on civil litigation for harm suffered as a result of their cartel conduct. Accordingly, participants in the programmes expose themselves to class actions for damages by private plaintiffs.

The incentive to participate is also diminished by the poor track record of the Bureau and PPSC in litigating contested cases, as there is no credible enforcement 'stick' to persuade parties that they are better off cooperating with the Bureau than defending themselves if a prosecution is commenced. There have been more than a few instances in which parties that pleaded guilty as part of the Bureau's leniency programme later saw other defendants who contested the charges win acquittals in court.

If we are truly witnessing a permanent decline in the number of immunity and leniency applications, the Bureau can be expected to take measures to prevent any further erosion in its cartel enforcement capabilities. Apart from improving its litigation capabilities, these may include adopting new technologies to help identify potential cartel conduct or offering financial incentives for whistle-blowers to disclose cartel conduct.

ii Internal investigations

Businesses in Canada are expected to conduct an internal investigation when their internal risk management policies are triggered, when regulators or stakeholders request one, and when external factors make it reasonable to do so, such as when misconduct is alleged in the media.

If a business identifies misconduct, time is of the essence in responding. Appropriate corrective action should be taken swiftly to respond and prevent further or similar misconduct and violations of internal policies and procedures.

Regardless of whether an internal investigation is preemptive or reactive, businesses should create a work plan that sets out the scope of the investigation and provides guidelines with respect to recording and safeguarding information discovered.

When interviewing employees or business personnel in connection with an investigation, it is prudent for the business's counsel to make clear to the witness that they represent the business and are not acting on behalf of the employee. Employees should also be afforded the ability to seek and retain independent legal counsel for the interview and the duration of the investigation.

Depending on the context, when legal counsel is involved in an investigation, certain information or documents developed in connection with the investigation may be protected by the solicitor–client privilege, the litigation privilege, or both. Solicitor–client privilege protects communications made in furtherance of legal advice and litigation privilege protects documents created for the dominant purpose of anticipated or existing litigation. When third parties such as forensic accountants, actuaries or other subject matter experts are retained for purposes of an investigation, solicitor–client privilege may extend to communications between them and legal counsel if their role is essential to the solicitor–client relationship and the provision of legal advice.

Given that privileged materials are presumptively protected from compelled disclosure in litigation, these privileges may prove critical when sensitive information is uncovered or there is a risk of litigation arising in connection with an investigation. To benefit from potentially applicable privileges, businesses should carefully plan and execute internal investigations. Helpful practices may include having counsel manage and coordinate the investigation, documenting the investigative process and the investigation's findings to establish that the investigation was conducted to obtain legal advice or in anticipation of litigation, and appropriately labelling privileged documents.

iii Whistle-blowers

Unlike in the United States, Canada does not have a broad, generally applicable statutory scheme to protect whistle-blowers. As a result, whistle-blowers in the private sector generally have no protected status. Whistle-blower protection is, however, afforded by certain specific statutes. For example:

  1. The Canada Labour Code (the Code) protects from reprisals employees subject to the Code who testify in a proceeding or inquiry under Part II of the Code (Occupational Health & Safety), disclose information regarding work conditions that affect employees' health and safety, or have sought to enforce any provisions of Part II of the Code.13
  2. The Canadian Environmental Protection Act (EPA) protects from reprisals and permits to remain anonymous employees who provide the Minister of Environment and Climate Change with information regarding the commission or reasonable likelihood of the commission of an offence under the EPA. These protections do not extend to employees required under the EPA to report such information.14
  3. The Competition Act and the Personal Information Protection and Electronic Documents Act (PIPEDA) provide similar protections from reprisals to any person who, acting in good faith, notifies the Commissioner of Competition or the Privacy Commissioner, as the case may be, that they have reasonable grounds to believe that a person has committed or intends to commit an offence under the relevant statute. In such cases, the relevant Commissioner must also protect the confidentiality of the whistle-blower.15
  4. The Canadian Human Rights Act provides protections to any individual, whether or not an employee, who files a complaint or is the alleged victim in a complaint filed under the statute.16 Section 14.1 of the Canadian Human Rights Act states that it is a discriminatory practice for a person against whom a complaint is filed to retaliate or threaten retaliation against the individual who filed the complaint or the alleged victim.
  5. Article 425.1 of Canada's Criminal Code prohibits an employer from threatening or taking action against an employee to compel the employee to abstain from providing information to law enforcement respecting a federal or provincial offence committed by the employer or an officer, director or employee of the employer. Although not expressly stated in the Criminal Code, courts have interpreted Article 425.1 to protect employees only when they provide information to authorities after having exhausted available internal remedies.17 This reflects Canadian courts' general view that a failure to try to resolve matters internally is 'condemned by the courts . . . as prima facie disloyal and inappropriate conduct.'18 When charged as an indictable offence, violations of Article 425.1 can carry a maximum sentence of five years' imprisonment.

Organisations subject to whistle-blower provisions should develop internal policies and procedures to ensure that no retaliatory action is taken (or tolerated) against any person for providing good-faith information, in a disinterested way, internally or to government authorities, or for participating in any related proceedings. The confidentiality of the identity of whistle-blowers should also be guaranteed by internal policies.

Enforcement

i Corporate liability

Under Canadian law, a corporation may in certain circumstances be held civilly or criminally liable for the conduct of its employees.

Generally, a corporate entity may only be held criminally liable for the actions and intentions of its 'senior officers', meaning representatives who play an important role in the establishment of the organisation's policies or who are responsible for managing an important aspect of the organisation's activities, including the organisation's directors, chief executive officer and chief financial officer. Canadian courts take a broad view of the term 'senior officer' and have interpreted it to also include mid-level management.19

To convict a corporation of an offence requiring proof of fault (i.e., offences other than negligence), the prosecution must prove that one of the corporation's 'senior officers', acting within the scope of their authority: (1) was a party to the offence; (2) directed other representatives of the organisation to perform the offence; or (3) knowing that other representatives of the organisation are or are about to be a party to the offence, did not take all reasonable measures to stop them.

Aside from criminal liability, corporations may also face civil liability for the conduct of their employees or agents under the principle of vicarious liability. Vicarious liability in the common law provinces of Canada is part of tort law. A corporation may be held liable for an employee's or agent's conduct if the employee or agent was at the time acting within the scope of their employment. This will be presumed where the act was a wrongful act authorised by the corporate employer or where the employee used a wrongful and unauthorised method of doing some lawful act authorised by the employer. Thus, a corporate employer may be held liable even for acts that it has not authorised, provided they are so connected with acts that it has authorised that they may legitimately be regarded as modes of doing those authorised acts.

ii Penalties

Depending on the nature of their misconduct, corporations may face a variety of potential penalties, including fines, probation, forfeiture, disgorgement and debarment. In determining the appropriate penalty to impose, courts and regulatory authorities will consider the proportionality of the misconduct to the penalty, including in light of the gravity of the conduct and the responsibility of the party.

Integrity regimes in Canada disqualify private entities from contracting with public bodies in the event of unethical conduct. Multiple regimes exist throughout Canada at the federal, provincial and municipal levels.

Most notably, the Canadian Federal Integrity Regime (CFIR) applies to a large array of departments and agencies identified in the Financial Administration Act20 and to any other federal entity that voluntarily adopts it. Under the CFIR, suppliers are, for a period of 10 years, automatically ineligible to bid on contracts when they are determined to have been convicted, in the past three years, of certain offences, including bribery, forgery, fraud, falsification of books and documents, secret commissions and bid-rigging, or a similar offence in a foreign jurisdiction. An affiliate of an ineligible supplier is also ineligible if Public Services and Procurement Canada (PSPC) determines that it directed, influenced, authorised, assented to, acquiesced or participated in the offence. For certain offences, ineligibility can be reduced to five years through the conclusion of an administrative agreement.

In September 2018, new provisions of the Criminal Code also came into force allowing the Crown to enter into 'remediation agreements' – the Canadian equivalent of deferred prosecution agreements – with an organisation accused of certain offences.21 The effect of a remediation agreement is to stay criminal proceedings against the organisation without a guilty plea or conviction.

A remediation agreement can only be entered into for certain offences listed in the relevant schedule to the Criminal Code. These include fraud, municipal corruption, forgery, insider trading, falsification of books and documents, secret commissions, money laundering, and the bribery of foreign public officials. The listed offences do not include offences under the Competition Act.

The decision to enter into a remediation agreement is discretionary to the Crown. The prosecution may enter into negotiations for a remediation agreement if it believes that negotiating the agreement is in the public interest and appropriate in the circumstances. Remediation agreements are, however, ultimately subject to the approval of both the Attorney General and the court.

This alternative way of disposing with criminal prosecutions was not as well received as expected after it came into force. Despite broad support at the consultation stage from both members of the public and the legal community for the implementation of remediation agreements,22 only recently – nearly four years after the relevant provisions came into force – did a court approve a remediation agreement for the first time.

On 11 May 2022, the Superior Court of Quebec approved a remediation agreement entered with SNC-Lavalin pertaining to criminal charges laid in 2021 for forgery, fraud, fraud against the government, and conspiracy to commit these offences. These offences were allegedly committed in relation to the awarding of a contract for the 2002 refurbishment of the Jacques-Cartier Bridge in Montreal.23 The remediation agreement provides for total financial payments by SNC-Lavalin of C$29.5 million and for the appointment of an independent monitor for a three-year period.

Notably, the Canadian remediation agreement regime provides for reparations for harm done to victims and the community.24 In the case of SNC-Lavalin, the C$29.5 million in financial payments includes payments of C$3.49 million to SNC-Lavalin's co-contracting party, a Crown corporation, and a C$5.44 million compensatory surcharge to the provincial government.

The agreement also allowed SNC-Lavalin to avoid debarment, pursuant to the CFIR, and therefore allowed it to continue to deal and bid on public tenders with government bodies, a key source of business for SNC-Lavalin.

iii Compliance programmes

Internal policies and compliance programmes reflect an organisation's commitment to fostering a strong culture of ethics and compliance, and to deploying means to assist in the prevention of bribery, corruption, money laundering, anticompetitive practices, and other offences. Relevant policies can include, for example, an anti-corruption policy, compliance with competition or antitrust rules policy, ethics and compliance policy, and an anti-money laundering policy. These policies can significantly improve an organisation's compliance with applicable laws and prevent and mitigate the detrimental effects that potential investigations or charges can have on a business.

To be effective, policies should be regularly reviewed and updated to respond to changes that might occur in the organisation's business and culture and the evolution of forms of illegal practices and risks. It is also recommended that an organisation implement a formally signed acknowledgement for all new personnel indicating receipt of the organisation's code of ethics and internal policies and an agreement to comply therewith. All personnel with decision-making authority or in a position to influence business results should periodically (at least annually) certify, in writing, that they have reviewed the organisation's code of conduct, have complied with internal policies, and have communicated to the designated executive responsible for compliance any information they may have relating to a possible violation of internal policies.

While the obvious benefit of a robust compliance programme is the avoidance of potential misconduct, such a programme may also serve as evidence establishing a due diligence defence to a strict liability offence. This involves consideration of what a reasonable person would have done in the circumstances. The defence could be available if all reasonable steps were taken to avoid the offending conduct, including the implementation of a robust compliance programme and risk assessments.25 It may also be relevant to sentencing.

Effective implementation of a compliance programme may also be weighed as evidence that rebuts or weakens the factors used to establish civil vicarious liability. A compliance programme may, for example, outline the legitimate boundaries of authorised acts or scope of employment, provide strict ethical rules when dealing with vulnerable parties, and generally outline the legitimate purposes of the business.

iv Prosecution of individuals

Officers, directors and employees of a corporation can face criminal, regulatory or civil liability for corporate malfeasance they authorise, aid, abet or carry out. They may be found criminally liable for their conduct within the scope of their employment or for participating or facilitating corporate criminal conduct.

To avoid any potential conflicts of interest, individual directors, officers and employees are typically represented by separate and independent legal counsel during any criminal or regulatory investigation or proceedings. In such circumstances, it may be beneficial for a joint defence arrangement to be established to permit cooperation and coordination of defence strategies.

International

i Extraterritorial jurisdiction

Canada's jurisdiction to prosecute criminal offences is primarily territorial, and Canadian courts have held that Canada has territorial jurisdiction over an offence when there is a 'real and substantial link' between the offence and Canada.26 The assessment of whether a 'real and substantial link' exists can rest upon a variety of factors relating to the alleged offence, including Canada being the jurisdiction where the persons who participated in, benefited from, or were the directing minds of the alleged offence were situated; where the evidence, victims and witnesses are located; where the activities preparatory to the offence occurred; and where the unfair advantage or fruits of the offence were enjoyed.

In some cases, Canadian law has explicitly provided for Canada's jurisdiction to prosecute offences committed by Canadian nationals notwithstanding the lack of any territorial connection to Canada. This is most notably the case for offences under the Security of Information Act (SIA) and the Corruption of Foreign Public Officials Act (CFPOA).

The SIA addresses Canadian national security concerns and is designed to ensure that classified or protected information is safeguarded against unauthorised disclosure by persons bound to secrecy. Offences under the SIA include, for example, economic espionage and communicating safeguarded information to increase the capacity of a foreign entity or a terrorist group to harm Canadian interests.

The CFPOA is Canada's principal legislation aimed at combating the bribery of foreign public officials in connection with international business transactions. It is somewhat similar to the US Foreign Corrupt Practices Act and the UK Bribery Act. Under the CFPOA, it is a criminal offence to give or offer in the course of business an advantage or benefit to a foreign public official as consideration for an act or omission by the official, or to induce the official to use their position to influence any acts or decisions of their foreign state or public international organisation. The prohibition extends to legislators, judges, administrative officeholders, and employees of state boards, commissions and corporations performing duties on behalf of a foreign state. The CFPOA also creates accounting or 'books and records' offences, which include forging records to conceal or facilitate the bribery of a foreign public official.

In addition, several Canadian statutes necessarily have broad extraterritorial implications. For example, the government of Canada may impose a broad range of restrictions and prohibitions in respect of sanctioned countries and foreign nationals and concerning terrorist entities, including by virtue of the Special Economic Measures Act, the United Nations Act, the Criminal Code, and other statutes. These restrictions and prohibitions can include financial prohibitions, technical assistance prohibitions, export and import restrictions, asset freezes, arms embargoes, and prohibitions on dealing with designated entities and individuals linked to sanctioned countries. Disclosure and reporting obligations may also be imposed, either by the enabling statute or by regulations thereunder, on persons in Canada and Canadians outside Canada in respect of the property of designated persons that is in their possession or control and in respect of transactions involving such property.

Likewise, the Export and Import Permits Act (EIPA) regulates the export and transfer of goods and technology from Canada and the import of goods to Canada. Pursuant to the EIPA, the Governor in Council may establish several lists, the most relevant of which are:

  1. the Import Control List,27 comprising goods requiring an import permit from some or all jurisdictions (e.g., agricultural products, firearms, textiles and clothing, steel and aluminium);
  2. the Export Control List,28 compromising goods and technology requiring an export permit (e.g., firearms, military and strategic goods and technology, softwood lumber, and certain US-origin goods and technologies); and
  3. the Area Control List,29 which lists countries for which export permits are required to export or transfer any goods or technology (as at today, only North Korea).

ii International cooperation

The Canadian government cooperates with other countries in respect of the investigation, prosecution and enforcement of legal matters in a variety of ways.

The Mutual Legal Assistance in Criminal Matters Act gives Canada the legal authority to obtain court orders on behalf of countries that are parties to mutual legal assistance agreements with Canada. These include bilateral treaties and multilateral conventions containing provisions for mutual legal assistance. For example, Canada and other signatories of the United Nations Convention Against Corruption undertook, in accordance with the Convention, to afford one another the widest measure of mutual legal assistance in investigations, prosecutions and judicial proceedings in relation to the offences covered by the Convention.

More limited assistance is also provided to countries that are not party to a mutual legal assistance agreement with Canada. Under the Evidence Act, orders compelling witnesses to provide evidence (including by video-link) and to produce records can be issued at the request of a foreign state if the foreign state issues letters rogatory and the criminal matter for which the assistance is sought is pending before foreign courts. Canada can also execute non-treaty requests for assistance made by foreign police and prosecutors.

The Extradition Act provides Canada with a legal basis on which to extradite persons located in Canada, who are sought for extradition by one of Canada's 'extradition partners'. Extradition partners are those countries with which Canada has an extradition agreement (bilateral treaty or multilateral convention) or has entered into a case-specific agreement. Among other requirements, a person may be extradited from Canada only if the alleged criminal conduct in question, for which the extradition is requested, is recognised as a criminal offence by both countries. For extradition to proceed, three steps must be completed: (1) the Minister of Justice has to issue an authority to proceed, which is an authorisation to the Attorney General (the government of Canada's top attorney) to seek, on behalf of the extradition partner, an order of a court for the committal of a person; (2) a judge has to order the committal of the person; and (3) the Minister of Justice has to order that the person be surrendered to the extradition partner. Communications between states are privileged. All information related to an extradition request is therefore confidential and may not be released publicly by the government of Canada until an arrest is made further to an extradition warrant. Public information may thereafter be released on a case-by-case basis, subject to a publication ban.

Canada is also a Member State of the International Criminal Police Organization (Interpol), which is a global organisation of 194 Member States. Interpol enables Member States to share and access data on crimes and criminals. It also coordinates networks of law enforcement authorities and experts in relation to different categories of criminal activity.

iii Local law considerations

While Canadian authorities and law enforcement are generally receptive of and encourage international cooperation in their investigations, Canada does have privacy laws, a limited blocking statute, and certain bank confidentiality requirements that may restrict the transfer of certain information outside of Canada or of a particular province.

Canada has a number of privacy laws that govern the collection, use and disclosure of personal information in the public and private sectors. The federal Personal Information Protection and Electronic Documents Act (PIPEDA) applies in most provinces (including Ontario) and to federal works, undertakings and businesses (such as banks and telecommunications and transportation companies), while 'substantially similar' legislation in Quebec, Alberta and British Columbia governs personal information in those provinces.

Canadian privacy regulators have taken a relatively broad view of the extraterritorial application of Canada's privacy statutes and have brought enforcement actions against companies collecting the personal data of Canadian residents even in the absence of expansive Canadian operations or a physical establishment in Canada or the relevant province.

In addition, in September 2021, Quebec passed legislation overhauling the province's private sector privacy law, the Act Respecting the Protection of Personal Information in the Private Sector, transforming it into the most consumer-friendly privacy law in Canada. The amendments will be phased in over a three-year period, with most provisions set to take effect on 22 September 2023. The amended Act will impose important restrictions on the use and disclosure of personal information and grant individuals broader rights with respect to their data. Notably, as of September 2023, the Act will impose a new and potentially tasking analytical process for the transfer of personal information outside of Quebec, requiring enterprises to determine whether the information would, following the transfer, 'receive adequate protection, in particular in light of generally recognized principles regarding the protection of personal information', when taking into account the sensitivity of the information, the purposes for which it will be used, the protection measures that would apply to it, and the legal framework applicable in the jurisdiction to which the information is being transferred.

Canada also has a blocking statute, which was enacted in 1984 in an attempt to block the extraterritorial application of US anti-Cuba laws to Canadian corporations. Pursuant to the Foreign Extraterritorial Measures Act (FEMA), the Attorney General may prohibit or restrict persons in Canada from producing records, giving information or complying with a measure taken or proposed by a foreign state or tribunal, where such conduct is likely to adversely affect significant Canadian interests in relation to international trade or commerce involving a business carried on in Canada or otherwise infringe on Canada's sovereignty, jurisdiction or powers in relation to the enforcement of a foreign trade law. Although no prosecutions under FEMA have arisen, the potential penalties for non-compliance with orders issued under FEMA are not insignificant: corporations may face fines of up to C$1.5 million and individuals may face fines of up to C$150,000 and imprisonment for up to five years.

Finally, although Canada does not have a specific bank secrecy regime, banks collecting customer data in Canada are subject to piecemeal restrictions pursuant to PIPEDA, the common law duty of confidentiality, and the Canada Bank Act.

As noted above, PIPEDA generally protects and governs the collection, use and disclosure of personal information of individuals. PIPEDA applies to banks collecting personal information in Canada, including foreign banks with offices, branches and affiliates in Canada.

The common law duty to protect customer data covers all client data (including the data of corporate clients) obtained by a bank from any source, except for information that is or has become public, unless it is due to the fault of the bank. Canadian courts have, however, allowed banks to disclose customer data when the disclosure is required by law, which generally means pursuant to a court order or legislation.

The Bank Act does not prohibit disclosure of customer data outright but, like the common law duty, it protects customer data from disclosure in various circumstances. Banks subject to the Bank Act that violate its privacy requirements may face fines of up to C$5 million.

Year in review

The covid-19 pandemic has fomented uncertainty and risk for businesses for over two years, including an increase in fraud and misconduct, such as in relation to covid-19 economic stimulus efforts.

Canada's Competition Bureau – which enforces federal competition and consumer protection laws – publicly stated its efforts to remain vigilant against potentially harmful anticompetitive conduct by those who may seek to take advantage of consumers and businesses during these extraordinary times. As of July 2020, phishing schemes, identity fraud and merchandise scams accounted for 80 per cent of covid-19 related fraud reported to the Canadian Anti-Fraud Centre.30

The pandemic has also increased the propensity of dubious behaviour from businesses in equity markets. In numerous press releases, various Canadian regulators, including the Ontario Securities Commission, the Canadian Securities Administrators, and the Investment Industry Regulatory Organization of Canada have addressed the market volatility resulting from covid-19 and the possibility of aggressive short selling, market manipulation and stock promotions that exploit the fears and uncertainty of a covid-19 related recession.31

On 15 February 2022, the federal government of Canada also invoked for the first time the Emergencies Act32 in response to ongoing blockades and occupations arising in connection with the self-titled 'Freedom Convoy' protests against covid-19 vaccine mandates and restrictions. During the press conference announcing the Emergency Economic Measures Order33 (the Emergency Order), Canada's Deputy Prime Minister and Minister of Finance Chrystia Freeland acknowledged that the flow of funds to the blockades has highlighted that crowdfunding platforms and some of the payment service providers (PSPs) they use are not fully captured under Canada's Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA).34 Thus, as part of the Emergency Order, the federal government announced additional measures to temporarily broaden the scope of Canada's anti-money laundering regime to capture such platforms and providers in certain circumstances, in the context of the emergency. In those circumstances, platforms and providers were required to register with Canada's federal financial intelligence agency, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), and comply with its requirements. FINTRAC is party to several international task forces and groups, including the Egmont Group, that collaborate and exchange information to address money laundering.

Although the emergency measures adopted were revoked by proclamation on 23 February 2022, permanent amendments to the PCMLTFA implementing the measures specific to crowdfunding platforms and PSPs came into force on 5 April 2022, creating a robust regulatory framework around crowdfunding-related entities.

Finally, on 15 June 2022, the final report of the Commission of Inquiry into Money Laundering in British Columbia (the Cullen Commission) was publicly released.35 The report finds that the volume of money laundering in British Columbia is significant, partly as a result of decades-long systemic issues at the governmental, regulatory and policing levels. The report also states that British Columbia cannot currently rely on FINTRAC to produce timely, useful intelligence about money laundering. The report makes 101 recommendations, which notably include the creation of a dedicated provincial money laundering intelligence and investigation unit and the appointment of an independent anti-money laundering commissioner who would provide strategic oversight of the province's response to money laundering.

Conclusions and outlook

As businesses start to increase their capacity to pre-covid-19 levels, some may look to improve or accelerate their recovery through questionable conduct. As such, Canadian enforcement agencies have signalled an intention to focus on pandemic-related misconduct. Moreover, in its 2021 Federal Budget, the government of Canada allocated an additional C$304 million in funding to the Canadian Revenue Agency over five years for new and existing audit and cybersecurity programmes that will likely result in increased enforcement efforts. In its 2022 Federal Budget, the government of Canada also announced C$89.9 million in additional funding to FINTRAC over the next five years.

In addition, as advancements continue in data collection, processing and use, digital information sources have become ever-more prominent components of criminal and regulatory investigations. As such, the right against unreasonable search and seizure continues to develop in light of evolving information technologies and the shifting scope of informational privacy interests. For example, even where 'technological reality' deprives individuals and entities of exclusive control over their personal or corporate data, they may still reasonably expect such data to remain safe from regulatory search and seizure. Informational privacy rights in Canada are continuing to evolve and, as both technologies and investigations become more sophisticated, observers expect the Supreme Court of Canada to provide further guidance relating to these issues.

Footnotes

1 Léon H Moubayed and Corey Omer are partners at Davies Ward Phillips & Vineberg LLP. The authors wish to express their gratitude to Sarah Cormack, Jack Franklin, Anthony Piché and Sergio I Rodriguez for their valuable assistance.

2 R v. Henry, [2005] 3 SCR 609.

3 Hunter v. Southam Inc, [1984] 2 SCR 145 at 159; R v. Gomboc, [2010] 3 S.C.R. 211 at Paragraphs 17 and 75.

4 Agence du revenu du Québec v. Morris, 2020 QCCQ 4200 at Paragraph 127.

5 RSC 1985, c C-34, Sections 45, 47.

7 ibid.

10 ibid.

11 ibid.

13 RSC 1985, c.L-2, Section 147.

14 SC 1999, c 33, Section 16.

15 Competition Act, RSC 1985, c C-34, Sections 66.1(2), 66.2(1)(a); PIPEDA, SC 2000, c 5, Sections 27(2), 27.1(1)(a).

16 Canadian Human Rights Act, RSC 1985, c H-6, Section 14.1.

17 Anderson v. IMTT-Québec Inc., [2013] FCJ No. 346, Paragraph 44.

18 Merk v. IABSOI, Local 771, 2005 SCC 70, Paragraph 25.

19 R v. Pétroles Global inc., 2013 QCCS 4262.

20 RSC, 1985, c. F-11.

21 Criminal Code, Part XXII.1, Section 715.3 et seq.

22 Government of Canada, 'Expanding Canada's Toolkit to Address Corporate Wrongdoing' – What we heard, 22 February 2018; https://www.tpsgc-pwgsc.gc.ca/ci-if/ar-cw/documents/rapport-report-eng.pdf.

23 R v. SNC-Lavalin Inc., judgment dated 11 May 2022 (500-36-010199-225).

24 Criminal Code, Part XXII.1, Section 715.31(e).

26 Libman v. The Queen, [1985] 2 SCR 178.

27 Import Control List (CRC, c. 604).

28 Export Control List (SOR/89-202).

29 Area Control List (SOR/81-543).

30 FINTRAC, Special Bulletin on COVID-19: Trends in Money Laundering and Fraud (July 2020); https://www.fintrac-canafe.gc.ca/intel/operation/covid-eng.

31 Canadian Securities Administrators & Investment Industry Regulatory Organization of Canada, 'Joint statement by Canadian Securities Administrators and Investment Industry Regulatory Organization of Canada on recent volatility in Canadian equity markets' (9 April 2020), online.

32 Emergencies Act, RSC 1985, c 22 (4th Supp).

33 Emergency Economic Measures Order, SOR/2022-22.

34 Proceeds of Crime (Money Laundering) and Terrorist Financing Act, SC 2000, c 17.

35 Hon Austin F Cullen, Commission of Inquiry into Money Laundering in British Columbia: Final Report (15 June 2022); https://cullencommission.ca/com-rep/.

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