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Canada is once again a laggard in the international fight against financial crime.

The United States is vowing to unmask kleptocrats and money launderers who hide behind anonymous shell companies, joining the United Kingdom, European Union members and numerous other countries that have already made similar commitments.

Congress recently passed the Corporate Transparency Act to establish a federal registry of beneficial ownership of U.S. corporations. Under the law, companies will be required to provide beneficial ownership information to the Financial Crimes Enforcement Network, an arm of the U.S. Department of the Treasury.

Beneficial ownership is a term that refers to a person or people who ultimately own and control a corporation. The Corporate Transparency Act defines a beneficial owner as anyone who holds a stake of at least 25 per cent or who has substantial control over the company. The legislation also introduces increased penalties and a new whistle-blower program.

“The Act that was recently passed by Congress gives us an enormously potent tool,” U.S. Treasury Secretary Janet Yellen told the Senate finance committee. “We will try to get it up and running as quickly as possible and devote ourselves to building that database so that we can address these issues. And we’ll be certainly looking to give this very high priority.”

The U.S. is making strides with its beneficial ownership registry as President Joe Biden steps up the fight against corruption at home and abroad, while the United Nations warns that illicit money flows threaten the global economic recovery from the COVID-19 pandemic.

Canada, by contrast, is still a dawdler among developed countries and is poised to catch more heat from the international community for its stalled progress on eliminating anonymous shell corporations. After all, it’s been nearly five years since the Financial Action Task Force, an intergovernmental body, scolded Canada for having “no appropriate mechanism” to ensure the collection of accurate beneficial ownership information.

Ottawa, which held a consultation early last year on creating a corporate beneficial ownership registry, has yet to unveil its plan. The forthcoming federal budget is an opportune time to provide an update.

“There’s a lot of scrutiny internationally about what we are going to do,” said James Cohen, executive director of Transparency International Canada, a non-governmental anti-corruption organization.

“We’ve got our neighbour next door about to take this issue by the horns and lead it, so we’ve got to show a little bit more initiative.”

Prime Minister Justin Trudeau has little choice but to take his cues from Washington. Mr. Biden is widely expected to pursue an anti-corruption agenda at his proposed global “summit for democracy” and at the UN General Assembly special session on corruption in June.

If Canada wants to be taken seriously by the Biden administration and other key allies, it can’t appear soft on financial crime. The U.S. State Department has already made it clear that it considers Canada a major money-laundering jurisdiction.

Even by Ottawa’s own reckoning, Canada has a big problem to solve. An estimated $45-billion to $113-billion is laundered here each year, according to a 2020 report by the Criminal Intelligence Service Canada. Moreover, 28 per cent of 176 organized crime groups involved in money laundering appear to use private-sector businesses to wash or stash dirty money.

Common tactics include mixing illicit funds with legal business proceeds, concocting phony invoices, paying employees in cash, using dirty money to make loans, utilizing corporate accounts to purchase assets such as real estate, and “the use of nominees and shell companies to distance transactions from beneficial owners,” the report added.

Now is the time for Ottawa to unshroud the owners of shell companies. But Canada shouldn’t simply copy the U.S. plan.

Unlike America, Canada should establish a beneficial ownership registry that’s free and accessible to the public because, as Mr. Cohen rightly points out, transparency deters crime.

Provinces also have a role to play to get a federal registry up and running. Some are making progress. Quebec, for instance, deserves kudos for tabling legislation to create a public registry of corporate beneficial ownership information.

British Columbia is moving ahead with its public registry of property owners and is planning a database of beneficial owners of private companies. New Brunswick is also promising to establish a corporate beneficial ownership registry. Some other provinces, though, are moving too slow.

“At a bare minimum, all levels of government should require beneficial ownership transparency from any companies seeking procurement or a licence or a permit,” Mr. Cohen said.

Of course, uncloaking the beneficial owners of shell companies is only one facet of Ottawa’s broader challenge to crack down on financial crime. After years of wishy-washy commitments, it’s time for the Trudeau government to take swift action.

For too many years, Canada earned a reputation for being an international haven for financial crime and for being the weakest link in the Five Eyes intelligence-sharing alliance (which also includes Australia, New Zealand, Britain and the U.S.).

Canada’s jejune routine is getting old. It’s only a matter of time before our allies tire of picking up our slack.

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