44th Parl. 1st Sess.
June 19, 2023 11:00AM
Madam Speaker, I am rising today to speak to Bill C-42, which is the government's proposal for a beneficial ownership registry.
I would like to critique this registry, because this is an incredibly important issue. The fact of the matter is that Canada has become a haven for global money laundering. In fact, do not take it from me. Here is just some international reporting on Canada. In the New York Times, just a few months ago, on March 25, an article written by Ian Austen, the Times journalist who covers Canada, begins with the sentence, “Canada is such an attractive place for money laundering that there’s even a special name to describe the activity here: ‘snow washing’.”
The U.S. State Department, in 2019, designated Canada as a “major money laundering country”. In fact, I pulled up the State Department's report from March 2022, titled “International Narcotics Control Strategy Report”, volume 2. The report says, under “Canada”, that it is estimated that between “$36 billion [and] $91 billion is laundered annually in Canada”. Assuming those are U.S. dollars, that represents, roughly, between $50 billion and $120 billion a year that is laundered through this country. One hundred and twenty billion dollars a year is roughly 5% of our GDP. Five per cent of our GDP consists of money laundering.
That March 2022 report says, “Noted deficiencies include limited oversight of the domestic non-profit sector, gaps in [customer due diligence] responsibilities for [designated non-financial businesses and professions], and a lack of beneficial ownership transparency for trusts and similar legal mechanisms.” Therefore, not only has our status as a money-laundering haven and, by consequence, a sanctions-avoiding haven and a proceeds-of-international-crime haven become documented in The New York Times; it has also been noticed by the State Department.
It is not just internationally that it has been documented. In the province of British Columbia, there was a huge commission of inquiry into money laundering. Its final report was published in June 2022 by the Honourable Austin Cullen, who was the commissioner. The commission found that billions of dollars were being laundered through British Columbia companies, British Columbia real estate and British Columbia trusts, and that this was having a deleterious impact on people living in British Columbia. This report came out just last year, highlighting the problems with money laundering in just one province, which represents roughly 10% of Canada's population. It is clear that we have a problem with money laundering and that, by consequence, we also have a problem with becoming a destination for the proceeds of sanctions evasion and a destination for the proceeds of international criminal activity. The government introduced this legislation, in part, to try to respond to these very real concerns, but the problem with the legislation in front of us is that it is deeply flawed.
I asked the Library of Parliament to do some research on the number of federally incorporated entities in Canada. The information it provided for me was that, for the year 2020, the most recent year for which data have been provided, the number of CBCA corporations, federally incorporated entities, is 421,301. The problem is that there are some 4.3 million businesses in Canada, of which only roughly 10% are CBCA corporations.
Ninety per cent of businesses in Canada are incorporated under 10 different provincial statutes, of the ten different provinces, and these corporations and trusts would not be included in Bill C-42's beneficial ownership registry. The Liberal government would say that it is working with the provinces to encourage them to create a beneficial ownership registry. The problem is that one province, Alberta, has not made any moves to create one. The problem with the other provinces is that their beneficial ownership registries have major loopholes in them. The only beneficial ownership registry in the country that is worth the paper it is written on is that of the province of British Columbia. That proposed registry includes provincially incorporated entities, trusts and real estate; it is capturing all of that in its registry. As a result, that provincial registry, combined with the federal one, would include all companies in the province of British Columbia. The problem for the other nine provinces is that they are not including real estate, which the Cullen commission in British Columbia identified as a major asset through which money, international money in particular, is being laundered.
The registry in front of us would only be as good as the weakest link in the entire system, and at least eight of the 10 provinces are not including real estate in their beneficial ownership registry. As a result, people overseas trying to avoid sanctions enforcement and trying to launder the illicit proceeds of crime and terrorism would be able to use Canadian real estate in eight out of 10 provinces to continue to launder their money, just like the Cullen commission identified in the province of British Columbia. Those individuals overseas and outside of Canada who want to avoid sanctions or want to launder the illicit proceeds of their crimes or terrorism could do so through provinces where a beneficial ownership registry for provincially incorporated entities has yet to be proposed. It is clear that the proposed beneficial ownership registry that the government has put in front of us today would not solve the problem of Canada's status as a destination for snow washing, a destination for international money laundering.
What the government should have done is to have used the broad and deep criminal powers accorded to it in the Constitution, which courts in this country, through various rulings, have long upheld as being broad and deep, to create a national beneficial ownership registry that would have included all companies in Canada, whether they are incorporated under the Canada Business Corporations Act or whether they are incorporated under one of 10 provincial statutes. It should have included all trusts in Canada, whether they were incorporated federally or provincially, and it should have included the beneficial owners of all real estate, real property in Canada, in order to ensure that we start cracking down on those who would use our country as a haven for money laundering for the proceeds of terrorism or for the proceeds of crime. The Liberal government did not proceed down that path, so, once again, we would have implementation of a good idea from the government in a very flawed manner, as it has been with so many things that the government has made announcements about.
I will finish here. The beneficial ownership registry in front of the House today would not plug the hole that has allowed this country to become such a haven and such a destination country for sanctions evasion for the proceeds of crime, for the proceeds of terrorism and for money laundering in general that landed us, in March, on the front page of the New York Times, and in the State Department's assessment of global havens for money laundering.
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- Jun/19/23 6:48:15 p.m.
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Madam Speaker, in the research we did, only the Province of British Columbia, at the provincial level of government, is implementing a registry that will include provincially incorporated companies and provincially incorporated trusts, which will include real estate. Nova Scotia is the other province that has already implemented a separate beneficial ownership registry for real estate. None of the eight other provinces has any plans to implement a registry for real estate, and that is a problem because the Cullen commission highlighted the fact that significant international money laundering is being laundered through real estate in British Columbia, and, no doubt, is being laundered through real estate in other provinces, such as Ontario.
The system is only as strong as the weakest link, and the fact that eight out of 10 provinces do not have a beneficial ownership registry for real estate, and that one province has no beneficial ownership registry for provincially incorporated entities and trusts, means that the system would be ineffective. That is why the federal government should have proposed legislation that used the criminal power given to it in the Constitution to create a registry that mandated all companies in Canada, federally incorporated companies, provincially incorporated companies, all trusts and all real estate, be registered under a single system to start giving law enforcement the tools they need to crack down on money laundering, the proceeds of crime and the proceeds of terrorism.
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Madam Speaker, it is a pleasure to rise to speak about Bill C-42 today. It is an honour for me not only because I am speaking on behalf of the good people of Central Okanagan—Similkameen—Nicola but also because it also gives me a chance to recall some of my work as a member of the finance committee in 2017, where we did an extensive review of the money-laundering regime in Canada as it relates to not only money laundering but also to the financing of terrorism.
Let me give a quick shout-out to the former chair of that finance committee, the Hon. Wayne Easter, who basically said that we should travel to places like London and Washington as part of it. I was a member of Parliament who was quite skeptical of junkets in all their forms, but he told me that he thought it was important for the committee to do that, and some of the best testimony we received as a committee on how Canada is seen in the world with respect to things like money laundering was absolutely correct. I have to thank the Hon. Wayne Easter for those observations, because it really showed that Canada is an outlier, and for all the wrong reasons.
We have seen Transparency International talk year after year about how we are slowly becoming a country where money laundering has become a problem. We were once very respected under the Transparency International regime.
Those 2017 recommendations from the committee still stand. It was an all-party report. The Liberals, Conservatives, Bloc members and New Democrats participated in the report and came to many unanimous recommendations, partly as a result of those trips and experiences, because we saw very clearly that Canada had a lot to achieve.
Coming back to Bill C-42, there are a number of things missing from this legislation. For example, recommendation 10 from the 2017 report refers to a rule in the United States.
It states:
That the Government of Canada make it a criminal offence for an entity or individual to structure transactions in a manner designated to avoid reporting requirements. These provisions would be modelled on Title 31 of U.S. code section 5324.
What that means is that while this will capture some of the significant control of a particular corporation's holdings so that someone would be able to find out who had significant control of an asset, such as a piece of real estate, it operates only after the fact. Only then can law enforcement start to draw evidence together to link a particular group, such as organized crime or a terrorism group, with a group of accountants or business owners and lawyers, and through that web be able to trace exactly who is connected to whom and be able to start pulling on those threads.
The Americans have taken a much more proactive approach by making it a crime to help someone to structure their affairs to avoid transparency. This is quite important. While there are many measures in the Criminal Code, it is important that we look at Canada. One of the outcomes of the report is that the legal community is still not within the FINTRAC regime. While we have seen an expansion in recent years, I think partly because of our report regarding FINTRAC, we still do not see everything included, such as lawyers.
Members may ask why that is important. It is because they are the very professionals who structure those affairs so that the money can be laundered in Canada, so I think it is an area still worthy of investigation.
Let us go to the beneficial ownership registry itself. When we went to the United Kingdom, one of the things that struck me there is that it has this beneficial ownership registry online. It is free, and there is very limited information.
First of all, I do not think most Canadians will go to a beneficial ownership registry. There is always a temptation to see what one's neighbour owns and, of course, there could be some abuses that way, but essentially, the people who would be looking at this are law enforcement and Canada Revenue Agency employees working on files that are related to the matter of money laundering. It is absolutely critical that those law enforcement officials, people who are lawfully accessing it for investigate purposes, be able to do so quickly.
However, this registry would only carry just a sliver. Again, for the people at home saying that a beneficial registry sounds good to them, it would only be for those corporations that are registered under the Canada Business Corporations Act. As someone who has lived in British Columbia my whole life, I will say that, from speaking to many lawyers, I know that the bulk of solicitors' work is when they are processing real estate and updating the registry of which a company is kept, and most of that action happens provincially.
As my colleague from Wellington—Halton Hills recently said, this particular measure might offer some good points, but it is only as strong as the weakest link. If we have 10 different registries, we may end up in the tyranny of small differences.
We could take health care as an example. Not all health care information is delivered to the Public Health Agency of Canada in a uniform manner. We find that fax machines are still being used. If one province only gives information under certain forms, it is then very difficult to aggregate that to get a whole picture.
The government, just as it has done in previous agreements with provinces, comes to an agreement on principle, but when it comes time to do the work, unfortunately it does not seem to have a true consensus. I will just harken back to the Canada free trade agreement, which apparently all parties sided with. Half of it was exemptions. One may agree in principle with something, but when it comes to the operability of what comes out of something, it seems that the government is only looking for the big announcement. In this case, it is a beneficial ownership registry that would be transparent.
Again, if it is only a sliver of the activity and it does not necessarily create a uniformity of interoperable registries where everyone can funnel the same information and have aggregated information that is the same, meaning that it is always going have the same basics available, one is going to have that tyranny of small differences. When someone is looking for that information, the last thing we want to do is end up where we do not supply the information to law enforcement in a straight, one-stop shop.
I should also point out that in the U.K., the so-called transparency model has some caveats. When I was at committee, I asked officials about this, and they did say that for persons under 18, their information would not be shared, which probably is for the best, although I would ask how someone under the age of 18 would end up with significant control over a Canadian asset, but we will leave that for another time. Also, there would be exemptions on a case-by-case basis. In the U.K., politicians and celebrities are often taken off. This creates, just like all government systems, a system where someone who is working the registry is now making choices about who is included and who is not.
It is an honour for me to step forward here, and it was an honour to serve on the finance committee. This is an area where I think we can do more. As the Prime Minister likes to say, better is always possible. Unfortunately, we will just have to take what we can get today and hope that a new Conservative government would do the hard work with provinces so that we could really clamp down on money laundering.
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