44th Parl. 1st Sess.
May 31, 2023 02:00PM
Mr. Speaker, I am here today to talk about Bill C-42, an act to amend the Canada Business Corporations Act, to create a beneficial ownership registry to combat money laundering.
I have the honour today of sharing my time with my friend and colleague, the member for North Okanagan—Shuswap.
Canada has a big problem with money laundering, and nowhere is that more evident than in metro Vancouver where my community of Langley—Aldergrove is located. Now, this is well known around the world. People have given Canada's very accessible money laundering streams a special name. They call it “snow washing”.
Generally speaking, Canada is known to have a stable government and economy, and to be a safe place to invest, so honest people make assumptions that money coming from or going to Canadian-registered corporations must be legitimate, but sadly that is not always the case. We need to work hard to maintain that favourable impression that the world has of us. It is easy to ruin one's reputation. That is sadly what is happening.
According to a 2017 analysis by Transparency International, Canada is tied with South Korea for the weakest corporate transparency rules among G20 nations. That is why I welcome this legislation, Bill C-42, which is going to create a beneficial shareholder register so that crooks cannot hide behind a veil of secrecy, complexity and confusion. We want things to be transparent. We want to know who owns what.
B.C. has been taking the lead in building transparency rules to combat money laundering. In March 2019, in a report entitled “Combatting Money Laundering in BC Real Estate”, an expert panel appointed by the B.C. government had this to say about the problem of money laundering. It focuses on British Columbia, but of course it applies right across the country. It reads:
Money laundering significantly damages our society and causes ongoing harm, not limited to the real estate sector or other economic sectors. Money laundering is a contagious, corrupting influence on society...It facilitates other criminal activities, contributing in particular to drug trafficking and the violent crime and opioid deaths that result, as is sadly so evident in [British Columbia].
The report goes on to say that, given the secret nature of money laundering, it is very difficult to estimate how much damage it is doing to our economy, but they do estimate that somewhere around $50 billion in dirty money is pumped into our national economy every year. This activity is estimated at 5% of real estate prices in British Columbia, feeding into the housing unaffordability crisis.
The expert panel recommended several anti-money laundering tools, starting with implementing a land ownership transparency register, which is in effect at the moment in British Columbia. They were of the opinion that transparency in real estate would be the single most effective tool in the anti-money laundering arsenal, but they also acknowledge that money laundering touches on more than just real estate transactions.
I think it is informative to understand what money laundering is. It is effectively the process of making illegally gained proceeds appear to be legitimate. These proceeds can come from monstrous activities like fentanyl trafficking, for example, but sometimes it is much less nefarious than that. For example, it could be legally earned and obtained money which has been brought illegally into Canada by evading the originating country's arbitrary capital controls.
All of this activity is illegal. Actors become very creative in hiding their trails by creating layers of complexity, but it all follows the same basic process. It is usually done in three phases: first of all, placement; second, layering and third, integration.
Placement is the introduction of cash into the legitimate payment system. Layering is conducting multiple levels of complexity for no purpose other than to hide the paper trail. Integration is working the money back into the legal system. Money properly laundered, and I use the term loosely, can be very difficult to trace.
One of the layering tools that professionals like to use is secret trusts. This is where somebody owns something, but that is the front person. They are the registered owner, but they are not the real owner. They are holding it in trust for somebody who is working in the shadows. The real owner is invisible to law enforcement agencies.
Today we are talking about amendments to the Canada Business Corporations Act to create a share ownership transparency register to eliminate this layering tool that professionals like to use. How can this be beneficial? Let us take a look at what some provinces have done.
British Columbia is really taking the lead. It bears to note that every province in Canada has its own corporate registry, as there is a federal registry, so it is very important that the provinces and the federal government work together. There needs to be a pan-Canadian approach. Otherwise, we would be encouraging forum shopping among professional crooks. They are going to go to the province with the most relaxed and most permissive laws. I am happy to say that Bill C-42 at least attempts to tackle that.
British Columbia has implemented a requirement that all British Columbia-registered companies keep a beneficial owners register at their corporate records office. This is an early version of a beneficial shareholder register and it is a good start, but it is not enough, and that is recognized. It is not a very useful tool for law enforcement because it does not allow law enforcement agencies to work undercover. The register is not free. It is not publicly accessible. It is not centralized, and it is too bureaucratic. It is also too difficult for law enforcement agencies to use and therefore it needs to be amended.
I am happy to say that is in the works. By 2025, there should be a centralized register in British Columbia that is readily searchable by law enforcement agents without the police coming to the registered office and saying they want to see their corporate records, which gives too much notice to the crooks. Quebec and Ontario are following a trajectory similar to British Columbia's.
The United Kingdom is really taking the lead with its people with significant control register for all registered companies in that country. It is free, and it is publicly accessible, but so far it is presenting only mixed results in being an effective tool for law enforcement. Bill C-42 needs to go past second reading to go to committee, where it needs to be studied in detail. I hope that we would have witnesses coming from United Kingdom to tell us what is good about their system and what is lacking so we can learn from their successes and their mistakes.
Bill C-42 is the federal government's attempt to tackle money laundering, tax evasion and other illegal activity. The minister, in his speech when he introduced this legislation, said, “Simply put, increasing beneficial ownership transparency will enhance Canada's good international reputation as a safe, fair and competitive place to do business and provide even greater legitimacy to law-abiding Canadian businesses.” Those are all very laudable objectives, which I support.
This bill should go to committee where it could be studied in detail. I will be looking there for efficiencies and effectiveness, and how adaptable it would be so that provinces can adopt it as well. As I said, the solution needs to be pan-Canadian.
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Mr. Speaker, I concur with the member in that there are a number of issues related to money laundering and the impact it has on Canadian society, in many different ways. One could talk about that very strong criminal element and how it gets into our communities. Therefore, it is an issue that needs to be dealt with. I am glad to hear that the member is anxious to see the bill go to committee.
Does the member or the Conservative Party already have a sense at this time of some amendments they would be proposing, or are they going to wait until committee stage?
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Mr. Speaker, the member's question underlines how complicated it can be to tackle the problem of money laundering.
If I understand the question correctly, it relates to money coming into Canada from a foreign corporation that is registered, let us say, in Barbados, which maybe does not have the same transparency rules that we have. However, we have FINTRAC rules, so the money coming in would have to go into a bank, and if it were over a certain amount, the bank would be required to report it according to the FINTRAC rules. It is probably not enough, but we do have something, and this bill is another step in the right direction.
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Mr. Speaker, I listened with interest to my colleague. The issue with money laundering is severe in Canada. There is an international expression called “snow washing” because Canada is known as a jurisdiction to dump dirty money from the drug cartels, terror gangs, and all kinds of illicit activity. It can be moved through casinos to be cleaned. It is also being used to purchase real estate.
This issue is concerning. We know that, in 2018, there was $47 billion of illicit money snow washed in Canada, and it could have been as high as $100 billion, which has an impact on affordability. People cannot afford to buy in the real estate markets of Vancouver, Toronto or Montreal because they are being used as safe zones to hold money.
Does my hon. colleague think we should look at the impact of snow washing and using Canadian real estate as a zone to clean money that should actually be exposed as dirty money, given the fact that people cannot even afford to live in the cities they love?
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Mr. Speaker, I am thankful for the opportunity to engage in this debate.
The reason I find this so important is that I am from the beautiful province of British Columbia and from the city of Abbotsford, which is nestled between majestic Mount Baker, at 10,500 feet high, and, on the other side, the mighty Fraser River. We live in a wonderful community in a wonderful region of the country. However, one of the challenges we have had over the years is that Canada, and more specifically British Columbia, has become the locus, the very heart, of money laundering in our country.
Just so Canadians understand what money laundering is, I will note that it is not benign activity engaged in by Canadians who want to avoid taxes or something like that. Money laundering is about taking the proceeds of crime, channelling them into what appears to be a legitimate business or a legitimate asset and trying to make those proceeds seem legitimate. It is a great way for criminals to hide the proceeds of crime. The last thing I believe Canadians want to do is aid and abet criminals to commit their crimes in our country, yet that is what has been happening for many years.
This legislation is not the be-all and end-all. Bill C-42 is simply a part of the solution. What it would do is establish a beneficial registry, an ownership registry, that would allow Canadians to see who actually owns the companies into which money might be directed from the proceeds of crime. This is not going to solve the whole problem of money laundering. Our police have their hands full in trying to track these criminals down, trying to identify the proceeds of crime and trying to get convictions.
Here is another problem. Money laundering has contributed significantly to the inflationary impacts on prices of land, real estate and homes that Canadians want to buy. These criminals know that if they can get money channelled into a house, it will be less likely for the police to identify that asset as being a proceed of crime. They also channel these proceeds of crime into legitimate businesses, like small and medium-sized enterprises. They channel this money into hard assets. They may be boats or expensive cars. At the end of the day, this costs Canadians big time.
There is another reason this is important to British Columbians. It was in British Columbia that the Cullen commission was established to investigate this very challenging problem to our criminal justice laws and to the broader issue of how much money laundering costs the average Canadian.
The Cullen commission made a long list of recommendations, most of which implicated the provincial government. It called upon the provincial government to act. However, there was one recommendation that stood out, which was that the federal government establish a pan-Canadian beneficial ownership registry for corporations. I believe Justice Cullen really intended for this to cover all companies in Canada. The problem is that the criminal justice law is federal law, so we as a Parliament have jurisdiction over it. Here is the problem: The large majority of Canadian companies are incorporated not at the federal level but at the provincial level, implicating every one of our 10 provinces and our territories.
How do we cobble together a pan-Canadian foreign ownership registry program with all of these different players at the table? The bill would, at least in the immediate term, establish a corporate beneficial ownership registry for federally incorporated companies, which is a good start. However, I believe the Cullen commission's intent was for the Liberal government to engage the provinces and territories to expand this to include the provincial regimes in federal legislation so that we can go after the money launderers in every corner of our country.
There is a reason this has come to our attention as lawmakers. Back in 2016, the Panama papers exposed how vulnerable Canada was to money laundering. Those papers made it clear that Canada was a laggard on the international stage when it came to addressing money laundering and interdicting the criminals who were taking proceeds of crime, filtering that money through legitimate enterprises and assets and then getting away with their crimes.
In 2017, it was the Liberal government's finance minister, Bill Morneau, who said we needed a beneficial registry to help combat money laundering in our market to determine the true source of funds and ownership in the acquisition of firms. He was right at that time, and that was 2017.
What happened in the intervening years? Nothing. From 2016 to 2023, we had eight years of inaction on the part of the Liberal government. This is pretty shocking, since the government, through its finance minister, at the very least had become aware that this was a very important issue for Canadians and nothing was done.
I will say that I am pleased that at least this has now come before us as Bill C-42, and it looks like we will see a beneficial ownership registry passed and implemented in our country. However, as the bill goes through committee review and comes back to the House, we are going to be asking a lot of questions. For example, how will this registry protect Canadians' privacy rights? We want to interdict criminals as they try to undertake their criminal enterprises, but we also want to make sure that the privacy of Canadians is protected.
I do not have great confidence that the government will actually protect our privacy, and here is why. We recently debated Bill C-27 in the House, which is all about privacy rights. We have been asking the government to actually include privacy as a fundamental right in Canada that Canadians can depend on. Sadly, Bill C-27 did not include that, so we have a right to be concerned.
We also want to ask who will have access to the information in the beneficial registry. Is it the police? Is it the ordinary citizen? It is business people? None of that is clarified in this legislation. We need to know that. Will the bill give law enforcement the necessary tools to combat money laundering and terrorist financing?
To conclude, I believe there is all-party agreement, so I am asking for unanimous consent to request a recorded vote on Bill C-42.
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