Ottawa deals a critical blow to criminals who hide dirty money. Now the provinces must step up


In the last federal budget, Ottawa announced essential tools to combat money laundering. The the biggest announcement aimed to accelerate the timeline for a business beneficial ownership registry by 2023. This date is significant as it is two years ahead of schedule and includes the participation of willing provinces and territories.

The federal government has also announcement a register of beneficial ownership properties, which would also involve discussions with the provinces; in addition, lenders granting mortgages will be required to comply with anti-money laundering regulations. Together, these announcements are a game-changer against money laundering in Canada, or “washing the snow“problem”, a term coined by Toronto Star investigative journalists describing how money is laundered in the country.

How bad is the snow problem in Canada? Criminal Intelligence Service Canada believes that $45 billion to $113 billion are laundered into our economy every year, with shell companies and Canadian properties being used to hide dirty money.

The true owner of a cannabis business may not be a person, but rather a limited partnership called British Columbia LP 1234, for example. Behind British Columbia LP 1234 could be another limited partnership, British Columbia LP 5678. Finally, behind that you may have the beneficial owner “Bob” – but who is Bob? Without a publicly available register of beneficial owners, it’s hard to know if Bob is a tax evader, a drug trafficker or a recently sanctioned Russian oligarch.

A register of beneficial owners is a business directory that lists information about the ultimate owners of companies and trust agreements. Nowadays, 106 countries in the world are committed to making these records publicly available, free and searchable to prevent criminals from abusing companies to launder money.

Incorporating a numbered company is not illegal, nor does it mean that the income from it is dirty. Yet the extent of numbered companies acquiring property in Canada raises red flags, and it’s not just a problem in cities like Vancouver. Between 2008 and 2018, our research found this $28.4 billion in properties were acquired through corporate entities in the Greater Toronto Area.

Otherwise, $10.4 billion in mortgages were issued to companies through private lenders who are not required to comply with Canadian anti-money laundering regulations. Our most recent search also shows that international business service providers have been promoting Canada as a safe haven to their clients for years and The advertisement Canadian Limited Partnerships as favorite vehicle to hide money to avoid tax.

Ottawa’s commitment to a publicly accessible beneficial ownership registry includes ensuring that provinces and territories can participate in a registry system. Since the vast majority of companies are registered in the provinces, Ottawa will have to come up with a plan that the provinces can follow. On Wednesday, the Cullen Commission of British Columbia published its final report recommend that the province create a publicly accessible registry. That’s why BC Finance Minister Selina Robinson is expected to signal to Ottawa that the province will gladly participate in a pan-Canadian central registry system.

Federal Finance Minister Chrystia Freeland meets regularly with her provincial counterparts and may strike a deal with the provinces to allow provincially registered companies to send beneficial ownership information directly to a central registry. To do this, Ottawa can make legislative changes to the Canada Business Corporations Act and provinces can reflect this same legislation in their own trade laws. In 2017, Ottawa used this same approach as a preliminary step to coordinate the collection of beneficial ownership information between provinces.

With a central registry, provinces would not have to spend resources upgrading their own business registries and provincial authorities could access the back-end of the registry for investigations. Provinces can also use the registry to track down provincial businesses (even properties) that may be owned or controlled by people on sanctions lists and derive substantial revenue from them. confiscation of assets.

Ottawa leading the design, staffing and maintenance of a registry would be practical for a number of reasons.

Without a publicly available register of beneficial owners, it’s hard to know if a company representative is a tax evader, drug dealer or recently sanctioned Russian oligarch, write @scaldron & @JamesCohen82. #bcpoli #CommissionCullen

First, it would be attractive to smaller provinces that may not have the resources to collect and review beneficial ownership information.

Second, Ottawa can begin work with willing provinces and eventually expand the registry to cover the entire country to ensure there are no weak spots that could be exploited by criminals.

And finally, companies with access to a free, searchable registry with verified data can reduce administrative costs to perform due diligence checks and improve compliance with federal regulations.

As G7 and G20 countries roll out public registries, Canada cannot be left behind due to its federated membership. A centralized corporate beneficial ownership registry that is publicly accessible, searchable, free and with verified data would send a strong signal to criminals and corrupt foreign officials that Canada is no longer a dumping ground for the world’s dirty money.

Now is the time for all the provinces to act.

Sasha Caldera is the Beneficial Ownership Transparency Campaign Manager at Publish What You Pay Canada.

James Cohen is the CEO of Transparency International Canada.

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