Joy Thomas is president and CEO of Chartered Professional Accountants of Canada
International bodies are sounding the alarm on the increased risks of fraud, money laundering and other financial wrongdoing because of the pandemic and the related economic stimulus measures. The heightened risk of financial crimes makes it even more important to not lose focus on governments’ efforts to tackle money laundering in Canada.
Information on who owns, controls or ultimately benefits from any privately held corporation involved in potentially illegal activities is critical to uncovering and fighting financial crimes. Typically, criminals take the proceeds of crime and launder those “dirty” funds into legitimate assets, often concealing them in legal structures that do not identify who has control.
Approximately 70 per cent of money laundering cases in Canada involve corporations as the legal structures.
At the top of the anti-money laundering agenda is the work of federal, provincial and territorial governments to increase corporate transparency by identifying the beneficial owners of privately held companies while considering how to centralize that information and make it accessible. Recently, the federal government and the governments of Quebec and British Columbia each held consultations and issued discussion papers on the role that disclosure of beneficial-ownership information might play.
Accountants around the globe, as stakeholders in anti-money laundering regimes, have had first-hand experience of the rollout of beneficial-ownership registers and registries in many countries.
Chartered Professional Accountants of Canada, together with the International Federation of Accountants, have examined how various countries are complying with the international standards for transparency and three key findings emerged that are relevant for Canada’s discussions.
First, establishing a public beneficial-ownership registry does not immediately ensure that a country’s law enforcement and other agencies have access to accurate information in a timely manner. The case in point is the United Kingdom and its People with Significant Control Register. Unfortunately, the agency that manages this public register does not verify the information it receives at this time.
As a result, the situation benefits the “bad actors” who may either falsify information or simply not register. Accountants in the U.K. have been advised against solely relying on information in the register to investigate who are the beneficial owners of companies.
Second, in several jurisdictions, the move to a public registry has been a phased approach, starting with non-public centralized registries and then transitioning to public registries. This is the case in the European Union.
Third, verifying information and ensuring appropriate levels of access by the public and other stakeholders to manage privacy and other issues are key factors in a registry’s efficacy. EU member states are following a “tiered access” model, whereby law enforcement authorities have full access to the information on the beneficial owners and the public only has access to certain personal data.
Subject to requests for exemptions on the grounds of personal safety concerns, the publicly accessible data usually includes the beneficial owner’s first name, surname, month and year of birth, nationality, country of residence, and the nature and extent of the beneficial interest held or control exercised. Additionally, in some countries, accountants and lawyers who can demonstrate that access to registry information is required to conduct their due diligence obligations may be granted access to additional information.
The shift to require private companies to collect, maintain and make available beneficial ownership information is just under way in Canada. It is a compliance effort that should not be underestimated. The federal government amended the Canada Business Corporations Acts in late 2018, with changes in effect since June, 2019. Several provinces have passed similar legislation requiring the availability of beneficial ownership information within their jurisdictions to competent authorities. Ontario and Quebec are among those that have not yet passed new beneficial ownership requirements into law.
The next step that the governments are contemplating is determining how to improve the transparency of that information.
Judging from our international research, if beneficial-ownership information is verified and available on a timely basis to the competent authorities, then a centralized, tiered-access registry with that information would strengthen Canada’s anti-money laundering regime and support the pursuit of lawbreakers and their proceeds of crime.
Approaches to Beneficial Ownership Transparency: The Globe Framework and Views from the Accountancy Profession is available at: cpacanada.ca/beneficialownership.
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