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Will new federal corporate registry 'plug the hole' of money laundering?

Questions remain as to whether Canada's now-approved beneficial ownership registry will be sufficient enough for the public and law enforcement to oversee corporate malfeasance.
Brad Vis, member of Parliament for Mission-Matsqui-Fraser Canyon speaks to the act to form Canada's first public beneficial ownership registry.

B.C. members of Parliament were among the more vocal supporters of a newly passed bill to create the country’s first federal registry for beneficial ownership of corporations — considered integral to combatting white collar crime and money laundering.

The registry, passed Thursday under an amendment to the Canada Business Corporations Act, will compel companies to publicly publish key beneficial owners. It will begin with federally registered companies and is expected to incorporate provincial registries once created.

However, while lauded by proponents as a first step, the members noted the federal registry may not have the teeth necessary to take a bite out of money laundering — at least not yet.

Conservative members Tako van Popta (Langley-Aldergrove), Mel Arnold (North Okanagan-Shuswap) and Brad Vis (Mission-Matsqui-Fraser Canyon) all spoke favourably of the registry, with some exceptions, in the days leading up to the bill’s passage (C-42), pending Senate approval.

“Overall, we did get some good work done on this bill, but a lot more could have been done,” Vis told the House June 16.

Among the issues raised by Vis: the registry only captures those with a 25 per cent share or voting power in a company; public searchability is limited; access for law enforcement could be improved; and post office boxes can still be used as corporate addresses.

“Canada has a big problem with money laundering and nowhere is that more evident than in Vancouver,” said Popta in support of the registry.

But, said Popta, the registry needs to be a pan-Canadian approach, incorporating robust provincial registries, which do not yet exist except for in B.C. where such a registry is in the works, according to the provincial government in response to the June 2022 final report on Commission of Inquiry into Money Laundering in B.C.

Without every province signed on to the federal registry, “we will be encouraging a form shopping among crooks who will go to the province with the most relaxed and permissive laws,” said Popta.

Conservative MP Michael Chong suggested the registry, “would not plug the hole that has allowed this country to become such a haven and such a destination country for sanctions evasion, for the proceeds of crime, for the proceeds of terrorism and for money laundering in general…”

Chong suggested the biggest problem is that the registry is only “as strong as its weakest link,” noting Alberta has not made any moves to create its own registry.

And, said Chong, “the problem with the other provinces is that their beneficial ownership registries have major loopholes in them. The only beneficial ownership registry in the country that is worth the paper it is written on is that of the province of British Columbia.”

“That proposed registry includes provincially incorporated entities, trusts and real estate; it is capturing all of that in its registry,” explained Chong.

According to Chong, the federal government should have compelled all incorporated companies in Canada to join the federal registry.

“The problem is that there are some 4.3 million businesses in Canada, of which only roughly 10 per cent are CBCA (Canadian Business Corporations Act) corporations,” said Chong.

A coalition of anti-corruption non-profits lobbied for the registry, which aligns Canada with international norms, as more and more countries onboard their own, including the United States (non-public) and the European Union.

Publish What You Pay and Transparency International Canada were chief proponents.

Publish What You Pay campaign manager Sasha Caldera, a former resident of Richmond, said the concerns raised by Chong are valid but it is important to remember the registry is in its infancy and amendments are possible even after passage of the bill.

For example, Caldera suggests the 25 per cent threshold will likely be lowered within five years as other nations are expected to implement such changes.

Caldera said the registry got pushback from the business lobby, which cited administrative and privacy concerns.

The Canadian Bar Association raised concerns about identity theft, a matter Vis said he wanted to hear more about from the association, at committee.

And while Chong was also concerned the federal registry does not include vote- and share-owning trusts, Caldera said the language of the bill appears to address “arrangements” that result in direct or indirect control of a company.

Ultimately, said Caldera, “there is a lot of systemic gaps in Canada’s AML (anti-money laundering) regime but the beneficial ownership legislation is a good step, and just one step in the larger regulatory effort.

“Trusts aren’t regulated in Canada and this will be the next frontier,” he said.

Caldera also argues the federal approach to get provinces on board, as opposed to compelling them, will avoid “likely” constitutional court challenges.

Caldera suggested if one province were to remain an outlier in the federal registry it would come under intense scrutiny both from within Canada and with international organizations.

And, Caldera noted, while questions remain about the veracity of the registry, he noted one of those concerns, including his “core request,” was addressed in a last-minute amendment — raising penalties for lying or evading the registry.

Instead of a maximum fine of $5,000 and six months in prison, the new penalty is $100,000 and five years in prison.

Meanwhile, Arnold and NDP MP Gord Johns for Courtenay-Alberni raised the point that the registry should include other assets as well, such as fishing quotas, which remain an obscure entity shaping the West Coast fishing industry.

Chong said such a registry should also include real estate holdings.

“As a result, people overseas trying to avoid sanctions enforcement and trying to launder the illicit proceeds of crime and terrorism would be able to use Canadian real estate in eight out of 10 provinces to continue to launder their money, just like the Cullen commission identified in the province of British Columbia,” Chong told the House.

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