44th Parl. 1st Sess.
April 28, 2023 10:00AM
- Apr/28/23 12:28:00 p.m.
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Mr. Speaker, I will not address the Broadcasting Act, because I am not sure that should be covered here or should be covered in a different bill, but I will address what the member talked about regarding lawyers' trust accounts. Lawyers' trust accounts are not held to the same standard as financial transactions. I remember that, in the financial industry, if $10,000 in cash came into one's account, one had to report that to FINTRAC authorities immediately. If one was at a brokerage, $1,000 of cash was actually the hurdle. Money laundering actually happens at places like currency exchanges, where people walk in with a thousand bucks and will exchange $999 and effectively do it that way. We do need to include the trust from lawyers in here. We will watch them fight it again in the Supreme Court, but making sure we bring them under the umbrella of what is acceptable for money-laundering mechanisms in Canada is very important.
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- Apr/28/23 12:28:59 p.m.
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Mr. Speaker, I thank my colleague for his very interesting speech. I think we share rather similar points of view on this bill.
His colleague from Sarnia—Lambton, who spoke before he did, brought up the Panama Papers scandal in her speech to illustrate the fact that the government is not doing enough.
I would like to remind the House of some of the figures from that scandal. While the government brags about how much it is doing, the Canada Revenue Agency has recovered less money than Revenu Québec has. By way of comparison, the United Kingdom recovered more than $317 million; Germany, $246 million; Spain, $209 million; France, $179 million; Australia, $173 million and Canada, $21 million. That is 10 times less than the others.
Does my colleague agree that the government needs to be doing a lot more?
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- Apr/28/23 12:30:00 p.m.
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Mr. Speaker, I thank my colleague for his good question.
He is right. The CRA's weakness internationally is appalling. Every other country in the world says that it has recovered more “dirty money”, as it is called, from the money laundering that is done in countries like Panama.
I am sure that the Canada Revenue Agency should be producing better results.
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- Apr/28/23 12:30:45 p.m.
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Mr. Speaker, I agree with the hon. member on the need to combat money laundering and tax evasion. On the disclosure norms, I think he mentioned the threshold of 10%. He seems to agree with that. My concern is this. Why should we have any threshold of any percentage before the names of the shareholders are made public? It is very easy to work around this owner threshold.
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- Apr/28/23 12:31:14 p.m.
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Mr. Speaker, we should have a beneficial owner threshold that actually says who controls these companies. A lot of them will be in separate nominated accounts that might have the same person behind them, but eventually we need to see our way to who those people are. As my colleague is, I think, alluding to, if there are 11 people owning 9% of a corporation, none of those has a full 10%. In that case, the beneficial ownership should be quite clear that it is the same entities that control that corporation. He is right; we should capture making sure we are talking about beneficial ownership of at least 10% or more. There comes a point in time when one is just a passive investor, but at 10%, one is actually a participant, in my opinion.
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Mr. Speaker, I will be sharing my time with the hon. member for Richmond Hill.
I rise to speak to Bill C-42, which would implement a public and searchable beneficial ownership registry of corporations governed under the Canada Business Corporations Act.
We have an issue with money laundering and terrorist financing. To deal with this, we need tools and mechanisms in Canada that are in line with international best practices. Creating a public and searchable registry would increase the transparency of beneficial owners of federally regulated Canadian corporations, which would increase corporate accountability and improve public trust in corporate institutions.
These measures would help protect Canadians against money laundering and terrorist financing, deter tax evasion and tax avoidance, and make sure Canada remains an attractive place to conduct business.
I will take a moment to mention what corporations are. Corporations exist basically to allow individuals to channel their capital for the benefit of making profits. The corporation, as we know, came into existence in the 1844 act in Britain, and the shareholders were granted limited liabilities in 1855. In 1866, the United States court declared that a corporation is a natural person. Basically, while the corporation channels the resources for investment in a commercial enterprise, it limits the liability of the person to the capital contributed.
I will quote from an article published in New Internationalist:
What is a corporation? Ambrose Bierce's Devil's Dictionary defines it as “an ingenious device for obtaining profit without individual responsibility”. It is a legal construct, a charter granted by the state to a group of investors to gather private funds for a specific purpose. Originally, charters were granted in the service of a public purpose, and could be revoked if this were not fulfilled. The relationship between state and corporation is a complex one. Over the past 400 years corporations have conquered territory and brought in resources for the state, breaking laws put in place to constrain them and gaining in power and privilege. History shows a repetitive cycle of corporations over-reaching, causing such social turmoil that the state is forced to rein them back in through regulation.
Now, corporations are being created for no other purpose than to evade or avoid taxes. Supreme courts around the world have ruled on the difference between tax avoidance and tax evasion, and mentioned that if there is any transaction followed by an individual or a corporation that does not have any impact or consequence other than to reduce or eliminate tax, the transaction can be declared null and void.
We need to take all steps to rein back and plug the loopholes that are exploited by individuals and corporations to avoid or evade paying their fair share of taxes.
In budget 2022, we committed to implementing a public and searchable registry of beneficial ownership information. The registry would cover corporations governed under the Canada Business Corporations Act and would be scalable to allow access to the beneficial ownership data held by provinces and territories that agree to participate. The objective of the registry is to provide relevant authorities with timely access to accurate and up-to-date information about the true controlling individuals of corporations in order to combat illegal activities, including money laundering, corruption and tax evasion.
Greater transparency would also improve corporate accountability more generally and thus help protect the public, improve trust in corporate institutions and ensure a well-functioning marketplace. As it currently stands, corporations are already obligated to compile some beneficial ownership information. Upon the entering into force of this new piece of legislation, corporations would need to collect additional information from their beneficial owners, like citizenship and residential address, and send the information in their register of individuals with significant control to Corporations Canada on an annual basis and within 15 days of the day on which a change is recorded in their register.
There are a couple of shortcomings in the current bill, which can be overcome. One is with respect to fully publicly disclosing the names and citizenship of shareholders or members of corporations. The fundamental question is this: Why should the public not be aware of who is investing in a corporation, including their citizenship being known? It is not the fundamental right of any individual that he or she can be a shareholder. It is a privilege offered by the state through various acts, so why should the public not be aware of individuals who are shareholders, including their citizenship?
I do understand the need for their privacy of information like the address of the shareholder, which is something that has been addressed, but there is no reason why the names and citizenship of the shareholders of any corporation should be kept from becoming public. Especially, we Canadians should be aware of foreign nationals investing in Canadian corporations; disclosing their citizenship is a must.
There is another solution, which is that the information may be disclosed only if a threshold of ownership is significant and exceeds a certain mark. For significant shareholding, the threshold is 25% in some jurisdictions and 10% in other jurisdictions. However, using a threshold to limit disclosure requirements creates a loophole that can easily be exploited. If the threshold is fixed at 25%, five people could form a corporation with 20% each or 11 people could form a corporation if the threshold is 10%.
On the positive side, through this bill, we have sought to limit administrative burden by leveraging existing intake and reporting mechanisms that federal corporations are already familiar with. For example, federal corporations are already required to update Corporations Canada within 15 days after a change of directors occurs and to file an annual return.
We have carefully considered domestic and international best practices in developing the proposed beneficial ownership registry regime, including the U.K. system. We also made sure the proposed model would meet and exceed the standards for beneficial ownership transparency maintained by the Financial Action Task Force, a global anti-money laundering and anti-terrorism financing body of which Canada is a founding member.
In closing, I want to reiterate that this is a good bill that is very much required. We have to bring Canadian standards in line with international best practices. However, there are certain shortcomings, which I think should and must be addressed at the committee stage. I am sure that with the co-operation of all parties in this House, this bill will get passed and will become legislation sooner rather than later.
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- Apr/28/23 12:41:28 p.m.
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Mr. Speaker, the member for Nepean raised two areas of amendment: on disclosure of information, such as citizenship, and on the significant interest threshold, which members on our side have raised during the debate today as well.
I would like the member's opinion about whether the Liberal Party is open to further amendments on the penalties for corporations and individuals. In some cases, penalties in the legislation go up to $200,000, but are as low as $5,000 in other cases for corporations. Would the member opposite be open to further amendments to ensure that people who seek to launder money in Canada and have a registered corporation at the federal level would be accountable to higher penalties?
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- Apr/28/23 12:42:27 p.m.
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Mr. Speaker, first on the question of disclosure of information, my understanding is that the bill does disclose citizenship and other details to various law enforcement agencies. However, my view is that citizenship information must be available to the public, too.
On the question of imposing penalties, personally I am in favour of changing the penalties if they are too lenient. We have to make it worthwhile. Penalties for the people who break the law should be sufficiently high to cause at least some pain.
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Mr. Speaker, an agreement could not be reached under the provisions of Standing Orders 78(1) or 78(2) with respect to the second reading stage of Bill C-47, an act to implement certain provisions of the budget tabled in Parliament on March 28.
Under the provisions of Standing Order 78(3), I give notice that a minister of the Crown will propose at the next sitting a motion to allot a specific number of days or hours for the consideration and disposal of proceedings at the said stage.
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Mr. Speaker, I want to start by commenting on the time allocation that was just imposed on us.
I just want to remind my colleagues in the House that the Standing Committee on Finance is already doing a pre-study of Bill C-47. It is progressing very well. Work is moving forward. We are sitting until midnight. This allows my colleagues who want to speak to Bill C-47 to do so. There was no need for the government to impose time allocation. This infringes on the rights of members of Parliament in the House. It is shameful.
What does my hon. colleague think of this?
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I will remind members that there is a lot of latitude in debate, but we are meant to be speaking to Bill C-42 at this time.
That being said, I will allow the hon. member for Nepean to respond.
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Mr. Speaker, obviously the question is not part of Bill C-42 that we are debating.
I would like to take this opportunity to solicit the support of the Bloc Québécois to pass this important legislation that we are debating today.
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- Apr/28/23 12:45:02 p.m.
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Mr. Speaker, on the issue of money laundering, the impact on housing has been significant. In fact, in British Columbia, it has been indicated that it has contributed to inflating the cost of housing as much as 5%.
With this piece of legislation, could the member advise whether or not it would be effective in addressing the issue particularly on the land registry perspective?
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- Apr/28/23 12:45:37 p.m.
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Mr. Speaker, I am not aware that the land registry can be dealt with in this bill. I am not particularly sure, but I do agree with the sentiment expressed by the hon. member on the impact of corporations investing in real estate and driving up the prices unnaturally, causing a hardship for Canadians in owning a property.
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- Apr/28/23 12:46:07 p.m.
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Mr. Speaker, the federal government has been demonstrating very strong leadership by bringing forward the legislation. We get a sense of the support for the legislation and hope to see it pass. There is an obligation, if I can put it that way, for other jurisdictions in Canada, the provinces, in particular, to step up at the same time.
Ottawa is more than happy to assist in working with them where it is needed, but it is important that other jurisdictions also take action of sorts. I wonder if the member could provide his thoughts on the importance of that.
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- Apr/28/23 12:46:48 p.m.
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Mr. Speaker, my hon. colleague brought up a very important consideration. The nature of the Canadian system is that corporations can be set up under provincial jurisdiction. They do have certain limits on various things, like the threshold for disclosure of ownership. Through this bill, we have provided for the reporting mechanism to be streamlined, working with the provinces. On the other aspects of the bill, I hope that the provinces will step up and work with the federal government to have a uniform system in place in Canada.
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Mr. Speaker, today I rise to address the chamber on Bill C-42, which would amend the Canada Business Corporation Act, or CBCA, and make consequential changes to other statutes.
We are here to discuss this proposed legislation because a lack of beneficial ownership transparency is impairing Canada's ability to combat serious financial crimes, such as fraud, money laundering and tax evasion. It also limits our capacity to enforce domestic and international sanctions and to effectively trace and freeze financial assets. Finally, it is impacting the trust of Canadians and foreign investors in our marketplace.
Our inability to quickly and quietly identify a company's beneficial owner delays criminal investigations; denies law enforcement leads to potential suspects, witnesses and evidence; and impairs the identification and seizure of suspected proceeds of crime. It also reduces the ability of private businesses to protect themselves.
Bad actors have long used corporate vehicles to obscure the ownership and control of assets to the detriment of Canadians' and other's confidence in private businesses. A public beneficiary ownership registry would complement the existing tools of law enforcement, while facilitating the identification of changes of ownership without the risk of alerting the suspects of an ongoing investigation. In turn, this would help prevent the dissipation of criminal assets subject to investigation or freezing orders.
The need for this type of registry has, by now, been well established, notably by public consultation held by the Government of Canada in 2020, as well as the Commission of Inquiry Into Money Laundering in British Columbia more recently. Such registries have, moreover, existed in the United Kingdom and many countries since 2016 and have proven a useful tool in deterring misuse of corporations for illicit financial activity by law enforcement, journalists and civil society.
In 2018, for example, Transparency International found that the then Czech prime minister was the sole beneficiary of two trust funds owning shares of a Czech conglomerate in receipt of EU subsidies. In a significant conflict of interest, Slovakia's public registry showed that the prime minister remained the ultimate owner of these trusts.
In 2019, the department responsible for the U.K. registry, the world pioneer, published a review of lessons learned so far. All law enforcement organizations the department spoke to had used the registry to inform criminal investigation, with most reporting using it at least weekly and noting the positive effect it had on their work. According to other resources, the U.K. registry was accessed more than two billion times a year.
More recently, the OpenLux investigation by journalists who had compiled and analyzed data from the Luxembourg's public beneficial ownership registry uncovered politically exposed persons, criminal organizations, an arms dealer and oligarchs linked to Luxembourg companies.
A beneficial ownership registry would also serve tax authorities here and abroad, who would be able to use the information to track and fix tax evasion and aggressive avoidance. The Panama papers, as well as other mass leaks, have shown that private players look for places with weak beneficial ownership transparency and then layer ownership of corporate entities across those jurisdictions to obscure personal ownership interests and income. The longer the chain of entities between the income and the beneficial owners, the harder the truth is to ascertain.
We should not underestimate the significant burden tax evasion and avoidance have on the Canadian economy. More generally, placing beneficial ownership information in an accessible registry would provide criminal and civil intelligence value, helping law enforcement and regulators stay abreast of evolving fraud cases, trends and ways corporations may facilitate these trends.
This awareness supports actionable intelligence to generate investigative leads. Certain government authorities may also have a bonafide interest in identifying the beneficial owner of the corporations they do business with, licence or oversee.
Making beneficial ownership information publicly available further supports good governance and trust. All businesses can check who they are doing business with by reviewing the registry of potential suppliers and customers, and businesses regulated for anti-money laundering purposes can consult the registry to support their due diligence.
Registries and the transparency they foster further serve as a deterrent to illicit actors. When reporting and disclosure requirements are tightened against a particular sector, product or service, prospective criminals will shift their tactics to find alternative ways of laundering funds. By depriving owners of their anonymity, registries will make Canada a less desirable jurisdiction to commit financial crime, forcing them to use more risky criminal vehicles or to go somewhere else entirely.
All in all, it is clear that the registry proposed by the bill would significantly improve Canada's ability to fight financial crime. It would help public authorities verify owners across corporate layers, help businesses better validate the identity of their trading partners, fight money laundering, fight tax aversion, and render more difficult the use of corporations for illicit activities. I hope all members of the House will join us in supporting the passage of this bill.
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Madam Speaker, I thank my hon. colleague for his very interesting speech. We obviously agree on Bill C‑42. With regard to the fight against tax havens, my colleague talked about the Panama papers scandal. Does he agree with me that, despite all the money that has been invested and all the laws that are in place to give us the power to intervene, Canada is still lagging behind other countries on this?
The Canada Revenue Agency recovered less money than Revenu Québec. Let us compare the numbers. The United Kingdom recovered $317 million, Germany recovered $246 million, Spain recovered $209 million, France recovered $179 million, Australia recovered $173 million, and Canada recovered $21 million. Is that acceptable?
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- Apr/28/23 12:55:22 p.m.
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Madam Speaker, naturally it is not that simple. However, all those tools that exist are still open to us, and we are hoping this bill will further strengthen the regime we have and allow us to increase our vigilance over those types of illicit activities.
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- Apr/28/23 12:55:49 p.m.
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Madam Speaker, one of the concerns I have with the bill is the ability of law enforcement agencies in Canada to use the information in a correct way to go after money launderers and those who would be committing crimes under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
I was pleased to see that the member for Richmond Hill referenced the Cullen commission in British Columbia. I wonder if the Liberals would be open to exploring at committee stage further clarifications as to the power of law enforcement to use this tool to get to the root of the criminals who are undertaking money laundering in Canada, denigrating our institutions, and as a result, Canadians losing faith in the ability of our law enforcement to combat these kinds of crimes.
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