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opinion

Peter Dent is chairman and president of Transparency International Canada and partner at Deloitte LLP. Alesia Nahirny is executive director at Transparency International Canada.

Celebrities, dentists, politicians, government officials and criminals around the world woke up a couple of months ago to the prospect of their friends, clients, colleagues, voters and government authorities discovering the lengths to which they may have gone to conceal their wealth in offshore accounts and companies, based on the information contained in the Panama Papers.

While most Canadians might believe that such things happen in tropical destinations far from home, they would be mistaken. Canada is also an excellent place for foreigners to incorporate an anonymous shell company and hide their wealth from the prying eyes of the government.

A few weeks after this wakeup call, approximately 40 countries gathered at the Global Anti-Corruption Summit in London to make bold commitments in the fight against corruption. They committed to take steps to make it more difficult for their citizens to hide their wealth offshore, to ensure all pay their fair share of taxes and to stem the flow of the proceeds of crime across borders. While Canada was in attendance, represented by Minister of Public Safety Ralph Goodale, our commitments were anything but bold.

In the fall of 2015, Transparency International issued its assessment of Canada's beneficial ownership transparency, and we were found wanting. Canada was ranked as weak, behind countries such as Russia, Mexico and Saudi Arabia. The effect on ordinary Canadians is profound. The lack of action contributes to a continued heavier tax burden on those Canadians who do not attempt to evade their taxes and/or would not have the means to do so. In addition, in certain markets in Canada there is a growing realization that foreign money is driving up real estate prices. Canadian homes in certain cities are no longer places where people raise a family, but instead vacant areas used to park offshore cash. This is but one problem that a public centralized registry of companies would shed light upon.

We don't have to look beyond our own backyard to find a system in trouble. In Canada, we have made it easy for companies and individuals to register anonymous companies. According to a federal government risk assessment, Canadian companies are highly vulnerable to money laundering and terrorist financing because of their ability to conceal their true ("beneficial") owners. This is likely why Mossack Fonseca, the Panamanian-based law and corporate service provider at the heart of the recent scandal, promoted Canada as a good place to register anonymous companies. To give some context to the size of the problem, the most recent Global Financial Integrity report conservatively estimated that more than $1.1-trillion (U.S.) of illicit funds crossed borders in 2013, primarily moving from the developing world to the developed world. Among other things, these funds end up purchasing houses in Canadian cities such as Vancouver and Toronto.

One critical step to fight money laundering and tax fraud is to shed light on the problem and create a publicly accessible centralized registry of the true ("beneficial") owners of Canadian companies. The benefits of such a centralized public registry of the legal and beneficial owners of companies are diffuse: opportunities for public scrutiny; enhanced capacity to conduct investigations for law enforcement and other enforcement bodies (ie. securities commissions) in Canada and abroad; increased investor protections; and reduced costs for financial institutions to conduct due diligence.

Establishing a public registry will require federal and provincial governments to co-operate to centralize existing federal and provincial registries, each collecting and making public a wide variety of information that underpins Canada's complex, and often opaque, corporate landscape. The federal and provincial governments need to co-operate on this process. Given the flow of illicit foreign money reportedly coming into Canada, one would believe that such co-operation would be forthcoming.