Beneficial Ownership Transparency

Submitted By
Priya Sood

Create a centralized public registry of the beneficial owners for all companies operated, registered and traded in Canada.

 

A lack of transparency of company ownership and control helps those looking to hide their identity and launder corrupt money through the international financial system.  In Canada, investigations are frequently frustrated by the inability of financial intelligence units (FIU's) and law enforcement to identify the true owner of a company being used to hide or conceal criminal activity, particularly where this information is held offshore by companies incorporated outside Canada.

 

By requiring Canadian companies to provide this information to a central registry and/or provincial registries, there are additional benefits to tax authorities and law enforcement agencies in saving time and being able to investigate the ownership structure of a company without tipping off the company that they are under investigation.

 

Making this information publicly available has advantages in terms of public scrutiny, building public trust and ensuring investors, the market and other companies know better with whom they are doing business.

 

Canada currently ranks 70th in terms of ability to access information on companies, this is below Sri Lanka, El Salvador and Bahrain (http://compass.arachnys.com/rankings.html). Creating a public registry of the beneficial ownership of companies is one step towards providing Canadian law authorities, journalists, civil society organizations and others with important corporate information.

 

In its G8 action plan on transparency of corporations and trusts Canada has committed to implementing amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) that will improve customer due diligence measures, including those related to corporate and trust beneficial ownership information.

 

By including this commitment in Canada’s Action Plan 2.0, Canada will address two important grand challenges identified by the OGP: increasing public integrity and increasing corporate accountability.

Comments

Dennis Howlett, Canadians for Tax Fairness - July 31, 2014

We support action to improve beneficial ownership transparency in Canada. We are particularly interested in ways that Canadian governments (both federal and provincial) can ensure:
• Improved access to accurate and timely information for the pubic on beneficial ownership of corporations, including possibly through the establishment of a central repository of corporations incorporated under the Canada Business Corporations Act;
• Disclosure of ownership information regarding bearer shares and bearer share warrants; and
• Disclosure by nominee shareholders of information on the individuals for whom they are acting.

The Problem:
• Companies can easily hide their actual owner, it makes it that much easier to move and hide money or assets.
• This creates a safe haven for money laundering, tax evasion, sanction breaches, and corruption.
• It also enables other activities such as funding terrorism, hiding stolen goods, diverting government funds, and profiting off illegal activities.
• Canada currently ranks 70th in terms of ability to access information on companies, this is below Sri Lanka, El Salvador and Bahrain (http://compass.arachnys.com/rankings.html).
• In Canada, investigations are frequently frustrated by the inability of financial intelligence units (FIU's) and law enforcement to identify the true owner of a company being used to hide or conceal criminal activity, particularly where this information is held offshore by companies incorporated outside Canada.

How:
• Companies can be registered anonymously by listing another company as the owner and ensuring that company is registered somewhere where the information is not made public.
• Companies can also be legally registered in someone else’s name, even that of a stranger.
Solution:
• Create a centralized public registry of the beneficial ownership of all companies registered, operating, and traded in Canada in order to provide Canadian law authorities, journalists, civil society organizations and others with important corporate information.
• By requiring Canadian companies to provide this information to a central registry and/or provincial registries, there are additional benefits to tax authorities and law enforcement agencies in saving time and being able to investigate the ownership structure of a company without tipping off the company that they are under investigation.
• Making this information publicly available has the advantage of enabling public scrutiny, building public trust and ensuring investors, market actors and other entities are provided with greater transparency in their business dealings.

Jean Symes, Inter Pares - June 27, 2014

Such a registry would help immensely in Inter Pares' support of people in developing countries who are working to ensure they benefit from the extraction of their natural resources, and to hold companies to account. It would pay for itself in reduced law enforcement, and make it much harder for companies to avoid taxes in Canada and in other countries around the world.

Claire Woodside - June 19, 2014

Publish What You Pay has been actively campaigning in different jurisdictions around the world for the creation of public centralized registries of the beneficial owners of companies. The creation of a publicly available centralized register of the beneficial owners of companies has several important impacts:

1. Provide businesses with important information on their partners, investors, suppliers and customers.
2. Ensure that law enforcement and tax authorities, including those from outside Canada, have quick and guaranteed access to beneficial ownership information.
3. Allow citizens, journalists and others to hold companies to account.
4. Give financial institutions a good starting point when it comes to identifying their customers for anti-money laundering purposes.

The creation of a public registry is particularly important in the extractive sector, where evidence shows that shell companies have been frequently used to hide the identity of the company’s real owner, facilitating corruption and causing citizens of resource rich countries to lose out on revenue that could have been spent on education and health care. Recognizing this, the new Extractive Industries Transparency Initiative (EITI) standard recommends that implementing countries maintain a “a publicly available register of the beneficial owners of the corporate entities that bid for, operate or invest in extractive assets, including the identity of their beneficial owners and the level of ownership” (http://eiti.org/files/English_EITI%20STANDARD_11July_0.pdf).

The new EITI standard’s inclusion of a commitment to beneficial ownership is part of a growing international trend. In the UK’s most recent OGP Action Plan, they committed to “create a publicly accessible central registry of company beneficial ownership information.”

PWYP-Canada believes that the government of Canada should make a commitment to create a publicly available centralized registry of the beneficial owners of all companies registered, listed, and operating in Canada, both provincially and federally. Such a registry will not only help to greatly reduce law enforcement costs and increase conviction rates, but will enable greater corporate oversight by Canadian civil society organizations, government officials, parliamentarians, and journalists.