44th Parl. 1st Sess.
April 28, 2023 10:00AM
Madam Speaker, it is my honour today to rise in the House to talk about Bill C-42. “Money laundering” is the short description. Canadians would be surprised to know that, aside from the soft reputation our country has on the international scene, Canada is increasingly known as a popular safe haven for criminals to launder and hide their money.
In 2022, Canada ranked 14th on Transparency International's corruption perceptions index, with a score of 74 out of 100. Canadians would be in their right minds to ask why our country's score is not higher, especially since this problem with lack of transparency has been known for a long time, for the past seven years, to be exact.
People will remember that, in 2016, the Panama papers leak exposed the fact that international criminals had been exploiting the gaps in Canada's corporate beneficial ownership regulatory scheme to engage in corrupt conduct through federally, provincially and territorially administered corporations.
That same year, the Financial Action Task Force, which acts as the world's international money-laundering watchdog, warned Canada that it was being used as a safe haven for money laundering and that a registry was needed to help identify and crack down on this activity. However, since then, under the current government, Canada has been slow to act, and when it did, it failed to go far enough. It took until 2018 for the Liberal government to begin introducing requirements to increase transparency around who exerts significant control over corporations and assets in this country. In 2021, the Financial Action Task Force indicated that Canada had made improvements but remained only partially compliant in five areas and wholly non-compliant in one. Laundered money was still able to find its way into our country with no questions asked.
Now, here we are in 2023, introducing measures that are long overdue to tackle a problem that should have been dealt with years ago by the government. Unfortunately for Canadians, while the Liberals were in no hurry to tackle the issue of money laundering throughout all those years, it has had a very real and devastating impact on a sector of our economy that affects everyone, one that keeps being mentioned extensively as of late. I am referring to the housing market.
Since the government took office, the price of a home in Canada has doubled, leaving citizens across the country to give up on the dream of home ownership. The situation is dire: Seven in 10 Canadians now believe owning a home is financially reserved for those who are wealthy. Part of this phenomenon of housing growing increasingly out of reach for Canadians is explained by criminals using real estate as a vehicle to launder their money in Canada. This is enabled by the fact that Canada's anti-money-laundering compliance regime is itself least compliant with international standards, when it comes to supervising real estate agents and identifying the buyers of property. For young Canadians looking to start a home and a family, this pushes prices up and puts their dreams of home ownership farther out of reach. Why is this? It is partly because they have to compete against criminals who wish to use real estate to hide their dirty money. It is supply and demand.
The situation is especially problematic in British Columbia. In 2018, the province launched the expert panel on money laundering in real estate. That panel estimated that, in B.C. alone, more than $7 billion in dirty money was laundered across the economy in 2018, and that up to $5.3 billion of that money was laundered through the real estate market, raising housing prices by an estimated 5%. It is no secret that housing is exceptionally unaffordable in cities like Vancouver, and criminal activity plays a non-negligible part in aggravating the situation.
The situation is so dire that the number of British Columbians moving to Alberta reached a 20-year high in 2021-22, and for most, the main reason was affordability. Alberta is proud of its strong economy. It is one that welcomes Canadians from across the country with open arms and offers opportunity and affordability to its citizens. However, due to the Liberals' weak approach to money laundering in Canada, the problem that plagued British Columbians is now following them across the Rocky Mountains. Calgary, the city I represent here in Parliament, is now also being used as a hub for the criminal network of money-laundering groups that has grown across Canada under the current government.
I knocked on a lot of doors during elections in Calgary Centre, and I knock on doors between elections. When I go into the large condos that have recently been developed, sometimes I will find a condo where half of the units are empty. Nobody lives there, yet they are all sold. There has been a lot of construction in Calgary, with a lot of vacant suites, yet there is no one living in these buildings. It is quite clear that it was foreign owners who bought those properties. Whether it is legitimate foreign ownership because people are actually moving their money out of where they live and want to make sure they have some safety elsewhere, or whether it is connected with the criminal element that has also increased the illicit activity of drug addiction in Calgary, is another question entirely. It is a mix between the two. That is something we need to address here, going forward.
My constituents are particularly concerned about it because of the effects it has across society, not just on the housing market; housing is only one part of the problem. The broader issue at hand is the fundamental question of who owns what in this country. Are Canadian assets held by hard-working and law-abiding Canadians or by criminals using them as a means to engage in offshore money laundering? As someone who worked in the financial industry for decades, I understand the importance of transparency and accountability, two things that are currently lacking when it comes to the ownership of assets in this country.
In last year’s budget, the government committed to finally implementing a national public registry by the end of 2023, ahead of the previously committed year, 2025, but this acceleration of the timeline in the Liberal agenda was not prompted by the housing affordability crisis and its heart-wrenching impact on Canadians. Rather, it was the public concern about the misuse of nominee and corporate ownership by Russian oligarchs that led to the acceleration of this timeline.
That is why I support this bill, but I also believe that it should be more ambitious in its reach right now, as opposed to when the next international crisis forces the government to act. The fact remains that we are perceived internationally as having weak laws to combat money laundering and the proceeds of crime. Our Five Eyes partners see us as a laggard on corporate transparency. This is why Conservatives not only support the additional measures being introduced by Bill C-42 but also call on the government to do a number of things.
I will interject here and talk about my experience. I acted in the financial industry for years. I actually represented a number of investors who had their money laundered through a bunch of different vehicles. That was a manipulation of the legal process by several parties involved. This happens all the time in Canada. The laws are set out now. I know that since 9/11 in 2001, the government tried to get more transparency through the legal mechanisms, the legal profession, to try to make sure they disclosed when they had transactions of $10,000 or more coming into their accounts. That was overturned by the Supreme Court of Canada in 2015. It ruled that, in fact, lawyers had the right to withhold that information from governments. What I have seen personally is that those lawyers give good advice on how to launder money through accounts in Canada, whether it is offshore accounts or whether it is Canadian “quasi-criminals”. It is hard to call them criminals until they have actually been convicted. That is the direct experience I have had.
There are things we need to do. Of course, we need to change the offences outlined in the bill and the existing offences under the Canada Business Corporations Act from summary convictions to Criminal Code offences, which would then rank money laundering on par with the most serious offences under the Criminal Code in Canada, as it should be. We also need to change the threshold for significant interest at which disclosure is required, from 25% control of shares to 10%. That is a threshold already used by the Ontario Securities Commission for public disclosure requirements. Reducing the currently suggested threshold would further reduce the ability of criminals to hide their activities.
We need to clarify the degree of back-end access to the registry of law enforcement, in relation to the proceeds of crime and money laundering. Under the bill right now, in its current form, law enforcement, as well as the Financial Transactions and Reports Analysis Centre, or FINTRAC, would require an affidavit to access all of the information contained in the registry.
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- Apr/28/23 12:27:09 p.m.
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Mr. Speaker, I was fascinated to hear the hon. member talk about some of the transactions between lawyers, because we know that transactions between lawyers' trust accounts are not captured by FINTRAC. Is he strongly in favour of changing that?
The other thing I would ask him to comment on is the beneficial ownership of broadcast outlets in Canada, because there are concerns about Chinese meddling. We have heard, at least anecdotally, that their control over radio and television and cable stations, if it is not ownership, is certainly something else. Is that also worth a closer look in connection with this bill?
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- 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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