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What makes companies registered in Canada attractive to those wanting to dodge taxes or launder money obtained from criminal activity is how easy it is to set up anonymous companies in this country.
Ottawa (1 May 2020) — In a submission to the federal government’s consultations on strengthening corporate beneficial ownership transparency in Canada, the National Union of Public and General Employees (NUPGE) has called for publicly accessible registries of the beneficial owners of companies registered in Canada.
Currently, information about who really controls companies registered in Canada (the beneficial owners) is kept secret. Even the police and other enforcement agencies are often unable to obtain it. Only companies with shares traded on stock exchanges are required to disclose who owns them, and those companies represent just a small percentage of the companies registered in Canada.
Publicly accessible registries of beneficial ownership would end that secrecy and make it easier to stop people using companies registered in Canada for tax avoidance, money laundering and funding terrorism.
Canadian registered companies being used as getaway cars
The use of companies registered in Canada for tax avoidance and money laundering has received international attention. There is even a specific term for using companies registered in Canada for money launder – “snow-washing.”
What makes companies registered in Canada attractive to those wanting to dodge taxes or launder money obtained from criminal activity is how easy it is to set up anonymous companies in this country. As Transparency International reported in 2016, “in Canada, more rigorous identity checks are done for individuals getting library cards than for those setting up companies.” Then, once companies are set-up, very little information is accessible to the public.
The use of shell companies to launder profits from fentanyl trafficking is just one example.
Federal government consultation on beneficial ownership
In response to growing public awareness of the problems caused by the secrecy around who owns companies registered in Canada, the federal government announced consultations on whether to set up a beneficial ownership registry. The federal government is moving towards recognizing that a beneficial ownership registry is needed, but appears reluctant to make such a registry accessible to the public.
NUPGE supports call for a public registry of beneficial owners
NUPGE’s submission to the federal consultations calls for a publicly accessible registry (or registries) of beneficial owners. This is the most effective way to make it harder for tax dodgers and money launderers to use companies registered in Canada to break the law.
Making registries of beneficial owners accessible to the public helps in several ways.
Much of the progress in responding to the issues of companies registered in Canada being used for money laundering or tax evasion has come about because of public scrutiny. The impact of the information leaked through the Panama Papers and Paradise Papers is a good example.
Public registries would also make it easier for financial institutions that are required by legislation to verify information about clients to prevent money laundering and the funding of terrorism.
NUPGE’s submission also made it clear that the fact there are separate federal, provincial and territorial corporate registries should not be a barrier to setting up a public registry or registries. In this day and age, it should be possible to link every registry in Canada so that information can be easily searched and used by enforcement agencies and civil society.
We can’t afford inaction on tax avoidance and money laundering
Responding to the COVID-19 pandemic is costly. It has shown that many of our public services need a significant increase in funding. The crisis caused by the pandemic has reduced government revenues.
When we are trying to pay the costs of the COVID-19 pandemic, and fund the services needed to reduce the chanceof a similar crisis occurring again, we cannot afford to let people hide money they obtained by breaking the law. A public beneficial ownership registry is an important first step to cracking down on wealthy tax dodgers and money launderers.