Know the White Collar Laws Before Doing Business Abroad

Conducting business in another country can be an effective way to expand your company and boost its revenues. But before you indulge, you need to be clear on how the prospective country deals with internal fraud and white collar criminals.

Let’s take a look at Canada, where many U.S. companies do business. In that country, oversight and enforcement is somewhat fractured, split between provincial and territorial agencies as well as the federal government and its Criminal Code.

The country’s multi-agency system for market regulation and the enforcement of securities law involves nearly 50 agencies organized into six jurisdictional “pillars.” Many critics, including many in government positions, view the system as overly complex and badly resourced.

Whether or not Canada is lenient in its prosecution of white-collar crime — and given that there is no certainty your company would fall victim to such criminal activity — it is nevertheless prudent to take the following precautions before getting involved in an undertaking over the border:

Learn before you leap. Take time to understand the Canadian approach to white-collar crime law enforcement before committing investment capital. The information that you gather may not change your company’s investment decision, but it may help you prepare for future challenges. For example, take raising capital. If your business plan includes raising money, understand that there’s a certain level of skepticism among the Canadian public and the business community at large. Perceived inconsistent or inadequate enforcement of laws can significantly affect the confidence of potential investors in Canada and abroad.

Gather business intelligence. As with any new business venture, it’s important to know as much as possible about the participants. Consider enlisting the help of a qualified law firm to conduct detailed background checks on all Canadian executives that your company plans to hire or invest with. In general, Canadians explicitly trust more than their U.S. counterparts. Such trust may be well placed, but in the event that a potential employee or business partner has a checkered past, it is better to know before risking investment capital.

Learn what fraud looks like. Corporate fraud schemes often share many of the same characteristics, regardless of where they are committed. The differences fall in the area of enforcement and even investigation. A fraud specialist experienced in Canadian-based schemes can help your enterprise set up proactive defensive measures.

Get to know the locals. During the due diligence phase before investing, you will undoubtedly come across Canadian attorneys and accountants. Ask them questions about the business environment and gather intelligence about their firms’ capabilities. Getting to know local professionals can help you grasp the realities of doing business in Canada and gain insight on pitfalls to avoid. In addition, if possible, U.S.-based executives from your company should join Canadian civic and business-related organizations. This can help them build a level of trust among other members. Then, they are more likely to hear of potentially fraudulent business practices your business should be aware of or avoid.

One last step: If, for some reason your company were to become directly or indirectly linked to allegedly fraudulent activity, your staff members need to be prepared and have a plan outlining in detail how to respond. Set up a cross-divisional team of employees who will serve as first responders to the incident. The team should include representatives from legal, corporate communications, corporate security, audit and operations. Give each member defined roles and responsibilities that should be well-rehearsed in advance of an actual problem developing.

Canada’s Packaging and Labeling Law

Assuming your company is up to speed on white-collar laws and enforcement in Canada and has decided to start exporting there, it’s vital to understand Canada’s Consumer Packaging and Labelling Act and Regulations.

There are many regulations in that law. Canada, like the U.S., requires three mandatory statements on import labels:

1. A product identity declaration that states in both English and French either the product’s common or generic name, or defines the item in terms of function.

2. Product net quantity using the metric system and writing in French and English.

3. Dealer’s name and primary place of business. This can be in either French or English and displayed anywhere on the container except the bottom.

Additional rules apply when a prepackaged product is manufactured or produced outside of Canada.

Quebec province has additional language requirements, including that no text in any language can be more prominent than the French text.

As with many regulations, there are exceptions. The following products are exempt from all regulations under the packaging and labeling law:

• Drugs and medical devices.
• Commercial, industrial, or institutional use only products.
• Products sold exclusively to duty-free stores.
• Prepackaged textile articles.
• Replacement parts for consumer durables if not displayed to the consumer.
• Certain artistic supplies.

There are many other specific rules, so consult with your accountant or international business attorney for more information on these topics as well as other laws and regulatory requirements, ranging from expatriate employees and their taxes to government contracting.

Given the global nature of today’s economy, and the global threat of terrorism, be aware that U.S. law enforcement officials could launch an investigation of suspicious activities in Canada.

This article appeared in Walz Group’s June 12, 2023 issue of The Bottom Line e-newsletter, produced by Checkpoint Marketing. This content is for informational purposes only.